Onshore vs. Offshore Software Development: Navigating the Decision

Posted on: November 25th, 2014 - Written by: John Blomberg

If you have any sort of software development needs, chances are good that you’ve at least considered the possibility of outsourcing this work to offshore companies. Here at INSite, we’re admittedly biased toward onshore development, since it’s our area of expertise—but we’d like to take some time in this article to discuss the pros and cons of both approaches and maybe help you determine what’s best for your business.

Offshore development is exactly what it sounds like: development work that happens in a country other than where your business is based. In recent years many jobs have been sent offshore, and multiple companies have opted to send work that deals with software, mobile apps, and enterprise development overseas. Why is this?

Reasons for sending development work offshore:

COST:

This is by far the biggest reason many companies decide to outsource work to offshore locations. Quoted hourly rates are often significantly less for offshore companies, and this is undoubtedly appealing, as everyone wants to reduce expenditures. In addition, outsourcing in general can generate substantial cost savings because companies then do not have to pay benefit packages for full-time employees.

NEED:

Sometimes companies get into a bind with mission-critical software development; they may need immediate help to either create a brand new solution or modify an existing one. Outsourcing the fix for time-sensitive needs to offshore partners is touted as a way to keep the business moving forward without extensive cost and a huge in-house time investment.

So what are some risks of both onshore and offshore development work? Let’s take a look:

RISKS OF ONSHORE SOFTWARE DEVELOPMENT:

  • Higher upfront costs overall. Because the work is done onshore, most often in a first-world country, upfront quoted costs are higher. This is a barrier for some companies who may be looking for the least expensive option.
  • Less round-the-clock working. When you’re working with an offshore company in another time zone, work is often done while you’re sleeping—you can wake up with completed work waiting for your review and approval.
  • Higher costs for single, long-term projects. Every onshore company has bills to pay, and it’s likely that their overhead is higher than their offshore counterparts. For an onshore development company to accept and tackle a single, long-term project, it must charge enough to make it worth its while—and this amount will certainly be more than an offshore group would charge.

RISKS OF OFFSHORE SOFTWARE DEVELOPMENT:

  • Language barriers. Significant language barriers mean that project specs must be tightly defined from the very beginning, and even when they are, misunderstandings can still occur. Extra care (and time) must be taken to reduce miscommunication due to language differences.
  • Lack of practical experience. Sometimes offshore companies, especially smaller ones, do not have the practical experience necessary to take a development project from conception to completion. This can lead to completed projects that are not deployable or that do not function as envisioned.
  • Higher long-term costs and delayed deployment. Due to the two risks listed above, costs incurred when using an offshore company can actually soar higher than when using an onshore group, even with the onshore group’s higher upfront costs. When specific tasks take longer to complete and must be redone multiple times, cost and turnaround time are both obviously affected in a negative way.

At the end of the day, we feel that offshore development works best when it’s utilized specifically by large companies for long-term projects. But that call is really up to you, and it all boils down to this question:

What is best for your specific business need right now?

If you thoughtfully weigh the pros and cons of offshore versus onshore development while pinpointing your specific software needs, you’ll be well on your way to making a solid, well-informed decision.

We’ll leave you with some wise words from outsourcing advisor Andy Sealock writing for InformationWeek:

“Decisions about outsourcing and offshoring are rarely simple or quick, and they won’t get easier as CIOs get more options from SaaS and cloud. But don’t lose sight of the real question: What’s the optimum mix for this business need?”

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