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Top 7 Reasons Tech Companies Use Offshoring

Why Companies Use Offshoring | TurnKey

The U.S. and Western European markets for software engineers presents a real struggle for startups and high growth companies. The shortage of qualified engineers means that the ones who are available command sky-high rates. As a result, startups are often forced to look for alternatives that can offer the same level of productivity at lower wages.


One option is to offshore development to countries where labor costs, taxes, and costs of living are lower. According to Deloitte, global spending on offshoring could hit $731 billion in 2023, and tech services make up 72% of all global offshoring contract values (ISG). In this article, we dive into the reasons for offshoring software development to other countries and why tech companies use offshoring to combat the challenges they face when hiring development talent locally.

What Is Offshoring and How Does It Work?

Offshoring is the process of hiring software developers from outside of the U.S. or Western Europe.  These developers are typically highly specialized and come from offshore locations where labor costs are lower. 

 

In short, Western companies use offshoring in order to do what they can’t do in their home country – hire software engineers who have the necessary skills at more affordable rates. Offshoring solutions can be a great way to save money on product development, as you can often get more bang for your buck when hiring overseas talent. Additionally, offshoring can help you scale your product development efforts, as you can build larger teams of specialized developers.

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Why Do Companies Use Offshoring?

Here are the seven key reasons you’ll hear CIOs and CTOs give when asked why they offshore:

#1. Cost Optimization

There’s no denying that when it comes to software development, cost is a deciding factor for many startups. After all, even a small team built locally can cost hundreds of thousands of dollars to keep running. Recruitment fees, hardware, office rent, workplace expenses, software licensing, salaries, and taxes can all take a toll on the bottom line if they’re not carefully controlled.

 

Fortunately, offshoring solutions can be an effective way to keep costs down. When you transfer your development needs offshore, you don’t have to worry about many of the fixed costs associated with maintaining an in-house team. Plus, you’ll have access to a wider pool of talent and expertise, which can help you get your product off the ground more quickly and efficiently.

 

According to Gartner, only 35% of surveyed organizations deploy consistent cost optimization frameworks across different functions. That means you can outperform competitors if you start now!

What are you waiting for? We can get started building your All Star offshore team today.

Call TurnKey now!

#2. Zero Administrative Hassle

One of the perceived barriers to creating an offshore development team is the administrative headaches involved with trying to set up a foreign entity.  But this is actually not a problem when you partner with a high quality offshore development firm (like TurnKey!). 

 

Offshore partners take care of all the bureaucratic hassles, from legal and tax compliance to payroll and benefits administration. And the best (like TurnKey!) also provide expert retention services to help you keep your best employees on board. This means you get all the upside of going offshore (great talent, lower costs and more) with none of the potential downside (legal risk, administrative paperwork, etc.).

#3. Wide Talent Pool

You have been trying to fill your U.S.-based positions for months, but the talent pool in the U.S. just isn’t cutting it. The candidates you’ve interviewed don’t have the skills you need, or they lack the dedication to your product or they are asking for too much money (and/or free dry cleaning). It’s super frustrating, and it’s holding your software development efforts back. Sounds familiar? Time for offshoring!

 

When you offshore, you gain access to a much broader set of talent from around the globe. You are no longer looking for a needle in a haystack; you can look for many needles in a haystack–a much easier proposition!

Moreover, startups can no longer afford to overlook talented developers from around the world. In order to stay competitive, they must be willing to tap into a global pool of top-tier experts. So – if you’re looking for the best of the best, offshoring is the way to go.

#4. Total Control

There are many benefits to offshoring, but one of the most important is that it delivers dedicated developers that are committed to your team and your product. They understand your timeline and work hard to meet your deadlines. They are a true extension of your home team.  (Not that offshoring is different than outsourcing, which caters to companies that have short-term or project-based needs.)

 

With today’s technology, it is easy to communicate with and manage offshore hires from anywhere in the world. This allows you to have full control over what your team is working on and when they are working on it.  In other words – from a workflow perspective – hiring and managing a developer that lives in Kiev is really not all that different from hiring and managing a developer that lives in Kansas City.

 

But since you have a fully dedicated team, you also need to retain your developers to keep your development efforts humming over time. This is why we here at TurnKey take a proactive approach to identifying and addressing any issues that might arise. We conduct regular interviews with each member of your team, asking about their work experience, their goals, and any concerns they might have. We then report back key findings to you, so that you always have a real-time pulse on your team.

 

By taking this proactive approach, we can quickly identify and address any issues before they become problems. As a result, you can be confident that your team is always operating at its best–and you never lose an ounce of control.

If you're looking for a cost-effective way to build a high performing offshore team, you’ve come to the right place.

Call TurnKey today!

#5. Faster Speed to Market

Technology companies use offshoring to help them scale their development team much more quickly than they can do on their own. 

By sourcing software teams offshore, tech leaders can have access to experienced software engineers in a matter of weeks, rather than months. This not only saves time but also reduces the risk of product roadmap delays and cost overruns. In addition, offshore development companies like TurnKey typically provide a wide variety of custom-recruited developers to choose from, so software leaders can be sure to find the right team for their products.

#6. 24/7 Software Development

With an offshore software development team in a different time zone, you can keep your product development efforts moving forward 24/7. You can work on your product during the day, and hand it off to your offshore team at night. They can then work on it while you sleep, and hand it back to you in the morning.

 

This way, you can always have folks working on building great software, and you’ll never have to worry about losing momentum. Moreover, this provides a competitive advantage, since you will be shipping high quality code at a much faster rate than your peer group.

#7 Greater Flexibility

Another reason companies use offshoring is that it frees up resources that can be redirected towards research and development activities for new product implementation or improving existing ones without sacrificing quality or customer experience.

 

Having an offshore team to lighten the load can give your in-house group the breathing room they need to be more productive and take on new features. Or maybe your internal team is simply feeling overwhelmed by too much work. 

 

Regardless, offshoring solutions can solve for all these objectives.  In fact, you might even be inspired to expand your roadmap when you see how much your team can accomplish with a little help from offshore talent.  Let the flexibility that offshoring provides work for you!

Companies use offshoring in order to do what | TurnKey

Why Do Companies Choose TurnKey for their Offshore Software Development Needs?

Looking for an offshore software development partner that can help you build a fully dedicated team of amazing software developers? You’ve come to the right place!

 

TurnKey custom recruits your team so that you get the best possible talent that is handpicked entirely around YOUR software development needs.  

 

But wait there’s more!  In addition to handpicked talent, there are even more reasons for offshoring with TurnKey:

  • Speed of recruitment. Our recruiting bandwidth allows us to hire exceptional software developers quickly. It only take about 30 days to find and hire a developer in PHP, Java, .NET, Python, Go, Node.js, React, or any other technology you need to accomplish your roadmap.
  • Salary transparency. At TurnKey, we are committed to being transparent about all salaries, fees, and expenses. We want our clients to be informed and have all the information they need to make the best decisions for their software development efforts. We give you our expertise and keep lines of communication open and honest. (How many partners can you say that about?)
  • Dramatically lower churn rate. Since we offer opportunities for improvement, a range of incentives, and culture-matched positions, our developers stick around. Indeed, TurnKey has a 50% better retention rate than the industry average; in other words, our methods work! Moreover, we also have easy-to-pick bonus plans for those clients that also want to provide additional cash incentives or equity plans that track with performance.
  • White glove customer service. We are based in Silicon Valley, which means that while your development team may be global, you’ll always have someone local to call at any time should the need arise. And with TurnKey, you can be confident that nothing will ever be lost in translation.
  • Deep industry expertise. TurnKey’s wide range of industry experience allows us to always find the perfect candidates for your open positions. We know what to look for and how to find the best fit for your organization.

We custom recruit the Top 3% of talent across all the key positions you may need as you scale.

Call TurnKey today!

FAQ

What's the purpose of offshoring software development?

The purpose of offshoring is to reduce labor costs by hiring software development in countries with lower wages and tax structures, and to gain access to a broader pool of development talent than can be found locally. By doing so, startups and high growth companies can save on labor-related expenses, accelerate their product development efforts, and enjoy greater flexibility.

What is offshoring and why might companies practice it?

Offshoring is the process of moving software development to another country. There are several reasons why companies might choose to offshore their development operations. One key reason is to take advantage of lower labor costs in other countries. Another is to tap into a broader talent pool, thus making it easier to find and hire developers.  Offshoring also provides more flexibility since it allows a company to scale their development team up and down as business needs change or evolve.

Google has been one of the most innovative companies of the 21st century, and a large part of its success can be attributed to its offshore development team. While they do have a large in-house team as well, they have also relied heavily on offshore contractors to help them advance and innovate. In 2018, the total number of Google contractors outnumbered their in-house developers, according to a Bloomberg report.

 

For example, in 2020, Google made a major acquisition to confirm its position as a leading provider of cloud-based services. The company acquired CloudSimple, a Ukrainian company that provides a secure, high-performance, and a dedicated environment to develop a VMware migration solution, which enabled them to offer an even more comprehensive suite of cloud-based services to its customers.

 

The acquisition of CloudSimple is just one example of how Google is constantly innovating and expanding its portfolio of cloud-based services and offshore workforce. This commitment to providing the best possible services to its customers is what has made Google a leader in the cloud computing industry.

Why do startups engage in offshoring?

Hiring offshore developers is a great way for startups to scale their software development operations in a cost-effective, high-quality, and expeditious manner.  By leveraging the expertise found in a global talent pool, startups can save significant money while also accelerating their speed to market. In addition, offshore developers are often able to meet or exceed the productivity and quality levels of their domestic counterparts.

Why do companies use offshoring in developing countries?

Developing countries offer a variety of advantages to companies that offshore their software development. Salaries are typically lower in these countries, which can result in significant savings. Additionally, developing countries often have a large pool of skilled workers who have niche expertise and applied experience. This combination of factors makes developing countries an attractive option for tech startups.

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Daria Spizheva

Technology and software development expert and author

I believe the key to creating greater technical knowledge is simplifying software development into concepts everyone can understand. By breaking software development down into simple words, we can create a common language that everyone can use to communicate their ideas.

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