What are the benefits of offshore software development services?
In this article, we will show the various benefits which can get by working with providers in India and how to avoid pitfalls.
Here some of the best benefits:
- Additional software developers: In countries like the USA or regions like Central Europe (Germany, Netherlands, etc.) there is a lack of software developers. Everyone (large organizations, medium-sized companies, and small business owners and even one-man-armies) want to build their digital strategy, by having more processes in the web or in software. IT services providers in those places and IT departments have a hard time finding enough people to build these applications. Places like India have enough developers to meet the demand and can extend the team.
- Lower cost: The hourly and daily rates are usually lower and are around 15 to 60 US Dollar per hour. In Europe, these rates can be as high as 60 to 150 US Dollar and more per hour. Hiring full-time developers (dedicated developers, through companies like YUHIRO, can reduce your costs even more).
- Lower overhead: If you hire locally you will need to comply with complicated labor laws, taxes you need to deduct, office space, management, etc. All of which is usually covered by the company offering offshore outsourcing services.
- Less office space needed: Just imagine you created an office with 5 workplaces. Now you want to hire a sixth person. Where would you put that person? You would have to move to another location, which can handle more than 6, preferably which can house around 10 people. When you outsource to an IT services provider in India, you can stay in the same office and have additional people (just in another location, which makes not much difference in software development).
- Focus on development: When you work on software, you want to focus on software creation/ programming, not on all the preliminary things, mentioned in the previous points in this post.
Some things you might need to consider to benefit from offshore outsourcing:
If you really want to benefit from this outsourcing model, you need to consider a few important points. Unless you want to get in line with all the people want “CHEAP, CHEAP, CHEAP, FAST, FAST, FAST, HIGH QUALITY, HIGH QUALITY, HIGH QUALITY, IN SHORT TIME, IN SHORT TIME, IN SHORT TIME” and wonder why they are not successful with the Indian development team.
- Think long term: No one will commit their resources, like time, money, quality developer hours, time to communicate, investment in infrastructure, if the engagement is for 2 weeks or something like that time frame. Would you do it? No. So only if you think long term, like building, for example, a one developer team in India, and then moving on from there, you can be successful. A few things will happen if you think long term:
- IT Service provider will invest in infrastructure: A computer, internet bandwidth, additional office space, additional management efforts, and more will be provided by the offshore outsourcing company sees, that it is a long term engagement.
- IT company will invest in the best people: If the IT company in South Asia sees that you are looking at the long term engagement they will be ready to give you their best IT personnel. This might not be the case if it is a 1 months project. In short term projects, they tend to put junior developers with less than one year to maximum two years of experience. If you go long term, then the company will provide highly skilled, multi-year experiences programmers at a very reasonable rate.
- They will invest in the relationship: In the long term engagements, everything changes. Even how people interact with you, how the outsourcing company acts within their own office, and so on. People will become close partners, instead of loosely connected people, who share no interest in common goals.
- Bet on trust, integrity, and honesty: If all sides in the equation, client, outsourcing company, developers, etc. are working with high values, then the collaboration will get stronger each day. If everyone says the truth and does the right things at all times then there will be a positive cycle, which enforces itself.
- Find the right price: True, the idea of offshore outsourcing is to save money. But you should also be ready to pay the right price, which conforms with the market rates. Paying below the existing market rates is not a good idea. Suppose you hire a freelancer in Western Europe. If you want to have a decent quality you need to pay at least 100 Euro an hour. Pay less, and you will see that there will be some issue, like a) it is only a side job for that person, and your project has no priority to them b) it is a student or some other person with a lower experience level c) the freelancer will not be interested to work for you really, in the slightest problems, like extended effort to implement the project and he/ she will not support you anymore, d) or some other major fault. It is not different in India, there is the right price for the right company size. Here some rates:
- Dedicated Developers: If you want to hire full time dedicated developers, then it will cost you around 1500 to 5000 US Dollar per month. Depending on the skill level, technology and years of experience of the IT personnel.
- Hourly rates: The hourly rate will be around 25 to 50 US Dollar per hour if you work on a project base.
Some pitfalls you need to avoid
There are some major mistakes you can make. Here some of them:
- Going for the cheapest option: In this case, companies ask around 10 to 20 companies and select the one with the cheapest offer with the best conditions. Ever wonder why these companies offer these terms? Yes, only to find customers like you, who they will milk for a few months, only to easily find the next customer who falls into the honey pot.
- Going for the fastest option: A service provider promises to provide the best developers, who can immediately start and can deliver in a very short time frame. Avoid these at all cost. Everyone who is successful in software development will explain to you, that there is a time to set up things, find the right people to work on the project, plan the programming tasks and deliver high quality, for example by properly testing the software.
- Highest quality at the lowest price: Never expect this. Not in your home country, not in other countries. If you want a low-quality output, pay a low price, if you want to get a medium quality, then pay a medium price. And if you want to get a high quality, pay a high price (in terms of money 🙂 ) (Note: A high-quality output at a low price is possible in India, if you go for something like the Dedicated Developer Model, which I offer at my company).
There are sooo many sad faces when it comes to making experiences with offshore outsourcing. They will things like “Does not work”, “No quality”, “Not honest”, etc. Mainly because they fell into one of the traps of offshore outsourcing.
Just know this: There around 3 to 5 million! software developers in India, only in the USA there might be more. These millions of programmers work mostly successful and for many years in their jobs. Including for companies like Google, Amazon, Pepsi and many more.
So ask yourself: Why are they and other smaller companies successful with offshore outsourcing?
Answer: Because there is a certain way how to approach this, some of which are outlined in this post.
What is your experience with IT outsourcing?
The author: Sascha Thattil works at Software-Developer-India.com which is a part of the YUHIRO Group. YUHIRO is a German-Indian enterprise which provides programmers to IT companies, agencies, and IT departments.