Offshore vs In-house Development: Which is more suitable for startups?

OCT 21,2022
Thao Nguyen

Despite being the most critical asset for any new startup, talented software developers are difficult to find. Outsourcing enables businesses to find the most outstanding IT talent globally, shorten the product development cycle, and gain a competitive advantage over their competitors.

This article will discover more about offshore development and how to hire offshore developers to bring your ideas to reality.

Offshore Development vs. In-house: Which one to choose?

Building the best team for your startup often means dealing with red tape, geographic limitations, budget restrictions, and lengthy recruitment and onboarding process. So, before you choose to go this route, you have to answer these questions:

  • What is the development budget?

Funding is the primary factor you should consider if deciding on in-house software development. Stable cash flow guarantees you will have enough money to pay salaries offer hefty bonuses and upgrade your developer’s skills. If the team has everything they need for comfortable work, their motivation and engagement will likely remain high.

  • What expertise does the project require?

Identifying which skills you need to stay competitive in one of your top priorities for a startup founder. Try to frame your workforce’s competencies in terms of a one-year horizon because professionals with specific technical, analytical, and soft skills are often pretty scarce on the local market.

  • When do you want to deliver the product?

Assembling the team is the first step to ensuring quick product time to market. Hiring high-quality software developers is a challenging and time-consuming task. Usually, there are not enough tech experts locally to do it ad hoc.

Partnering with an offshore development company takes these issues off the table. The external vendor does the same thing you do for your customers. They fix your business pain points.

Benefits of Offshore Developers vs. In-house Team

Cost Optimization

Hiring an internal team costs a lot more than just paying salaries. Your responsibility is also for office rent, utility bills, payroll taxes, health insurance, retirement savings plans, and vacation and medical leave reimbursement. The total wage package is usually 1.25 to 1.4 times the employee’s salary.

You might find outsourcing more financially worthwhile by combining the cost of office infrastructure, administrative tasks, and hiring expenses.

Flexible Schedule

You can hire programmers overseas only for one project. You may also outsource specific activities like web development, tech support, ongoing maintenance, or hosting. Their workload depends on your business needs and not the labor standards. Assigning forty working hours one week and five the next is okay.

You only pay the outsourcing developers for the work done. On the other hand, direct employees must get a fixed salary even if you don’t have enough work to keep them busy. Creating a new app feature, waiting for the next task, or doing something else makes no difference.

Accelerated Work

Outsourcing allows you to jumpstart the development process. Instead of spending time on employee training and team bonding, you get a ready-to-go team with prior software development experience in the required field.

You can also source individual experts to fill the company’s tech expertise gap and complement the existing engineering team.

Offshore developers are up to the job from day one, so they may deliver the project much faster than the internal team would ever do. And the sooner the product enters the market, the better it is for your startup progress.

Business Expansion

Rewarding growth strategy includes adding new resources, like finances, workforce, and technology, and streamlining your company activities. This entails focusing on core business functions and delegating minor assignments and supporting processes to external service providers.

It lets you prioritize value-added tasks and free your IT unit from mundane work. This way, your project team will have more time to do what you hired them to do.

Quick Setup

Startups are born in a highly competitive environment. The Silicon Valley ecosystem is buzzing with newcomers, and you must be imaginative to win the race for talent. Solid experience in IT recruitment is a must if you want to have a chance in this highly competitive market.

To stay in the game, you hire accomplished HR specialists or source your tech workforce overseas. Cooperation with an offshore development company allows you to quickly build a reliable essential talent pipeline and bring your innovations to the world.

How to Hire Offshore Software Developers: Checklist for Startup Founders

✔Establish the budget

Funding is one of the top concerns for newly-minted startups. That’s why it’s essential to plan your expenses, including the infrastructure cost, developers’ salaries, and operating expenditures in advance.

✔Choose the outsourcing destination 

Check information about top-ranking offshore development countries to see which one would be the best fit in terms of geographic and cultural proximity.

✔Define your collaboration model

Depending on the scope of your budget and knowledge of remote management tools, you can hire freelancers, partner with an outsourcing company, or open your R&D center.

✔Shortlist potential candidates

Sift through the resumes and portfolios of preferred applicants to try and find the best tech talent you think would fit your project.

✔Test the prospect’s expertise

Whether you work with individual contractors, software development agencies, or local tech consultants, always check if they have a proven track record. Conduct interviews with developers, ask questions about their workflow, check their tech skills, and contact their previous clients if possible.

✔Sign the contract

An explicit business agreement is the foundation of successful, long-term cooperation. It must cover data protection rules, warranty clauses, software requirement specifications, and a section on code ownership.

You should also sign a statement of work and a non-disclosure agreement to avoid data leakage.

✔Meet your remote team

Initiate a welcome call to get acquainted with your engineers or visit them in person to build trust and facilitate team bonding.

Best Destinations to Hire Offshore Developers

Selecting the right outsourcing location is one of the top concerns of startup founders who want to hire remote developers. You can find great IT professionals anywhere if you keep an open mind and see that what people do elsewhere in the world isn’t much different from what you are used to at home.

An excellent range of offshore destinations can boast a developed market with advanced infrastructure, accomplished tech companies, and a favorable legal environment. The leading regions in offshore development services are Eastern Europe, Latin America, and Asia.

Apart from obvious perks, such as a reasonable price-quality ratio and vast talent pool, each location has other characteristics you can benefit from.

Eastern Europe

  • The most popular IT hubs in Eastern Europe are Ukraine, Poland, Belarus, and Romania.
  • The software development market in the region grows five times faster than the global average.
  • 470+ world-renowned IT service providers collectively generate $5B in annual revenue.
  • The region houses 700K tech professionals specializing in e-commerce, fintech, education, health, and telecom.
  • The main clients of Eastern European vendors come from the United States and EU countries.

Latin America

  • Brazil, Mexico, Colombia, and Chile are among the top 25 business-friendly countries according to the Kearney Global Services Location Index.
  • Argentina and Brazil have a lead in the number of regional programmers.
  • Local tech hubs are popular outsourcing destinations for North American IT companies. Most of the time, they are located within the same time zone.
  • Latin America ranks high in the number of fully small companies, with employees 1.8 times more likely to work remotely than the global average.

Asia

  • Asia accounts for the biggest number of prominent offshore development destinations, including India, China, the Philippines, Vietnam and Indonesia.
  • India is the largest developer population center worldwide, with 5M employees in the IT and outsourcing industry.
  • STEM disciplines are the key focus areas in schools and universities, which in China alone amounts to 4.7M IT experts joining the labor market every year.
  • Due to the rising number of partnerships between businesses and tech service providers, Asia is expected to become the fastest-growing IT outsourcing market in the next six years.

Hire Offshore Software Developers with MELISOFT

MELISOFT is the Vietnam-based tech consulting service provider which connects businesses across the globe with seasoned software developers. We have helped over 300 companies hire, manage, and retain their remote development teams in Ukraine.

We build dedicated teams enabling clients across the globe to leverage top-notch technologies delivered by experienced software engineers. Our service model covers:

Build a dedicated team of back-end and front-end developers, designers, and project managers who will handle the full cycle of product development.

Hire remote developers who can bring additional expertise and fresh perspective to your internal software development team.

Open your own offshore development center and enjoy working with top-notch professionals who share your corporate values.

Our recruitment specialists have the extensive market knowledge to meet the needs of businesses of different sizes. If you want to grow your startup with brilliant tech experts, Melisoft  is the perfect partner for you.

  • Control over the development progress, promote active cooperation between team members, and gain footing in a foreign market.
  • Opening your own R&D center will require the same actions you would take if you decided to go a conventional office route.
  • To build your offshore startup you need to source a number of different professionals, from HR and administrative staff to software engineers and QA testers.

You will also have to take care of office premises, employee workstations, data protection and physical security of your assets.

Unlike other outsourcing options, with ODC the remote programmers will be your direct employees, which means higher team commitment and active engagement.

Additionally, the offshore developers will work under the same brand as your head office and adhere to the same corporate policies and work ethics as your in-house employees would.

Though establishing an R&D center is quite similar to hiring a domestic team, the process has a huge upside. This model allows you to overcome geographical and financial constraints imposed by your local tech market.

Relocating your business operations to an offshoring destination fosters easier talent acquisition, even when it comes to programmers with narrow and rare expertise.

In conclusion

Moreover, with ODC you can bring innovations to the world without fear that high development costs may dry up your funds halfway through the project.

Apart from the benefits, building your own ODC center may give rise to certain difficulties. For one thing, starting a business abroad often requires opening a legal entity in that country and understanding the local tax system.

You will also need to have at least basic native language proficiency to hunt for great tech talent via local job search websites, which usually don’t have an English version.

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