Offshore Software Development Team Instead Of Outsourcing: Why?

The idea of building an offshore software development team is not new. However, it is undeniable that the strategy has become much more popular in recent years. 

In fact, many tech startups and IT-specialized companies now prefer to expand their own tech team overseas instead of outsourcing. But why?

Building Offshore Software Development Team Vs Outsourcing: What’s The Difference?

Simply put, outsourcing means firms are relying on a third-party service provider when it comes to create, develop and maintain their software project. On the other hand, building offshore tech teams indicates that firms are ready to scale up their in-house IT department overseas.

Firms often mix up these two as outsourcing can also be done offshore. However, this is where the similarity ends. In fact, a new trend has taken shape in recent years where firms are moving from outsourcing to building their own offshore software development team instead.

Why Businesses Are Moving From Outsourcing To Offshore In-house Tech Team

Higher Costs In The Long Term 

Outsourcing software development may seem cost-effective at first as businesses don’t need to pay for monthly operational overheads, set up costs, internal training expenses, and capital expenditures. However, that only works for short-term projects with everything to be done often in less than 1 year. 

However, when an outsourcing vendor is expected to build, manage and maintain software for the long term with updates required frequently throughout the year, the expense, especially unforeseen hidden costs, quickly spirals out of control. Anything not covered in the contracts can be the basis for future additional charges.

As a result, many organizations now prefer building their own offshore tech team as a more sustainable software development solution.

Lower Quality Control

Most outsourcing companies work on the relationship between cost and time. And sometimes, there will be a compromise in the quality of work so they can deliver your project on time. Hence, the project is more likely to have fallen short of expectations from a financial and/or service delivery perspective. 

Coupled with the fact that software development is mind-numbly complex, businesses are at a much higher risk of losing their quality control and have to pay extra for product adjustments, improvements, or even re-development from scratch.

And while choosing a reputable outsourcing vendor can help minimize the risk, they are still far from ideal as compared to having an in-house tech team overseas instead. 

Security Risk

For startups, their intellectual property, and their idea, are everything. So outsourcing can be an adventurous move leading to weighty confidential data exposure as everything is not kept internally. Other properties like software architectures, business plans, etc. also may need to be shared with the outsourcing vendors which only amps up the risk.

Additionally, it can potentially break the organization’s reputation and bring harm to its clients. The hacking incident of Wipro, the Indian IT outsourcing vendor, is a good example. In 2019, their data and computer systems got hacked by a group of hackers, resulting in the data breach of several Wipro’s clients.

Other Benefits Of Building An Offshore Tech Team Instead Of Outsourcing

Growing In-house Expertise

A firm may want to strategically grow its in-house service capabilities but struggle to tap into the local tech talent pool, especially in Singapore where developer salary is among the most expensive across the globe. Or they are growing tech startups that need to strengthen the in-house core team for future expansion without burning all the budget. 

Additionally, companies also need to retain their in-house knowledge of skills with a detailed understanding of the standards, tools, and processes executed. This can not be done by outsourcing as the vendor’s tech team will move on to working for the other client’s projects.

In other words, building up an offshore software tech team allows companies to perform the in-house functions with the required proficiency that was not achievable through outsourcing.

Market Expansion

Expanding a business overseas is a great way to gain access to new customers and can lead to tremendous growth for a company. But there is a catch. It can be extremely difficult to venture into a new market. 

Firms will need to plan everything carefully to avoid pitfalls and ensure that their expansion proceeds smoothly with the highest chance of succeeding. This is where building offshore tech teams come in. By expanding their tech operation first, companies can gain valuable insights such as work culture, legal process, office setup, and more. 

The strategy is much easier to execute while also cheaper as the foundation preparation for full-fledged market expansion in the future. 

The Bottom Line

Outsourcing is a good business strategy for companies that prefer to take advantage of outside help to drive cost reduction while still being able to complete tech projects in the short term. 

However, when it comes to sustainable software development where long-term prospects, in-house expertise, and future growth are crucial, building your own tech team overseas is the recommended solution. 

If you are interested in how to reach tech talents and build up an offshore tech team in Vietnam, do contact us for further in-depth consultation.