Offshoring 101: A Winning Playbook
Why is Offshoring worth considering?
A better question might be, why WOULDN’T you want to engage in Offshoring? It’s a win/win in our book (and it can be in yours, too).
When you decide to hire an offshore team, you are opening the door to a massive talent pool at affordable prices due to the lower cost of living and tax rates in countries where Offshoring is popular. Offshoring is trending, kid. Get in fashion.
Today, the number of emerging technology companies is increasing significantly—and so is the demand for software development specialists. The market in the US presents a struggle; there’s a shortage of qualified software engineers, and the sky-high rates of available ones sends businesses running towards other options.
They (and you) want incredible talent who can deliver productivity and performance on budget and on your timeline. That’s where Offshoring comes to the rescue.
So, let’s dive into all things Offshoring:
What is Offshoring and why do software companies hire offshore?
When you choose Offshoring, you’re creating another arm of your company that can do some of your heavy lifting. Your team is likely in Eastern Europe or Latin America, which means you’re getting high quality talent at a lower rate because those countries have lower costs of living and tax rates are favorable.
Don’t confuse Offshoring with Outsourcing. Offshoring is the one you bring home to Mom and then marry. It’s a long-term relationship and that partner really gets to know you. Outsourcing is a shorter gig that covers a project or specialty task, but doesn’t stick around for an anniversary. Both have their place, but here we’re focused on wedding bells, if you will.
The main reason companies go offshore is the desire to cut down expenses and, at the same time, preserve stable growth. When you hire through TurnKey, your dedicated development team performs their work under your brand and supervision, and they are dedicated to your product.
What are the benefits of Offshoring?
Software development Offshoring creates multiple benefits for organizations. Here are some of the ones with the most razzle dazzle.
Offshoring allows companies to save significant costs, thanks to:
- a cheaper recruitment process
- lower software engineers’ rates because of a lower cost of living and tax rates
- no need to purchase new IT infrastructure
Another benefit? You’re getting some serious bang for your buck. Read on.
Access to the best talent
Organizations often find it difficult to hire experienced software developers with all the required tech skills in the United States. It’s no wonder, considering how quickly technology is developing in the US—everyone is working at it, and it shows. But that means when you need someone with innovative specialty experience, you’re going to look for a long, long time. Tapping into an offshore model will help you find exactly who you need abroad.
Offshoring with TurnKey means that you remain the boss for your remote team. You manage the offshore team, you determine timelines and deadlines, and you oversee productivity. And with TurnKey, all developers are fully dedicated to your project, immersing into your culture, and giving you every benefit of their mad tech skills.
We can’t speak for other firms, but we’re pretty sure (okay, we’re 1000% positive) that Offshoring with them doesn’t give you the control you deserve. Just saying.
When you’re in the US, but part of your team is in Ukraine or Brazil, for example, you become a 24/7 workhorse. You wake up to a full inbox, completed assignments, and met deadlines. Your company is the software development equivalent of the city that never sleeps.
Expansion and scalability
With an offshore model, instead of your internal resources being spread too thin, they’re ready to help you expand your business. And when you’re ready to scale your team, you can do it in two countries—easily and on budget. Boom!
Since software engineers’ rates are much lower abroad, your company will enjoy expanded gross margins with Offshoring. The cost of living in popular offshore destinations like Eastern European or Latin American countries leads to a lower cost of production, a boost in productivity, and increased profits.
What are the limitations of Offshoring?
It depends on how you look at it, but if we’re being honest, it’s not all gravy. Here are a few drawbacks to consider:
- Time zone differences. While rocking around the clock is stellar, sometimes the time zone difference can be a challenge. You might experience a tough time syncing your teams, or get bummed out by missed communication. Those are tough ones, but not Mount Everest tough—especially when you work with us. TurnKey works with incredibly talented offshore software developers in Eastern Europe, but we also have an equally impressive talent pool in Latin America where time zones can be more convenient for US-based companies. Time zone issue: Handled.
- Language barrier. To state the obvious, people who live and work in other countries often speak other languages. The good news is that the countries in which TurnKey works—and the software developers within them—have a high level of understanding of the English language. Bonus: We offer all of the talent you’ll hire continuing education so they (and you) can benefit from increasing their English-speaking skills.
- Cultural barrier. Another note from Captain Obvious: People who live in other countries, often subscribe to different cultural norms. We not only work with the offshore teams you hire to immerse them into your culture (so they can communicate appropriately with your in-house teams), we bring them up to speed on your unique work style, expectations, and overall vibe. They’ll truly begin to feel like the team you’ve always had under one roof—connected and culturally savvy.
What are the risks and challenges of Offshoring?
Here are the top three risks (and how TurnKey turns them into rewards):
- Employee retention.TurnKey works with incredibly talented offshore software developers in Eastern Europe, but we also have an equally impressive talent pool in Latin America where time zones can be more convenient for US-based companies. Time zone issue: Handled.
- Risk of information leakage.Legal rules and technical provisions can vary from country to country. Of course, every company who decides to use Offshoring as a solution should take additional measures to ensure data security and avoid potential data leaks. You could hire local lawyers or pay for a professional consultation to address this challenge. Or you can hire TurnKey—handling international regulations and security is just part of what we do all day, every day.
- Legal and tax complications.All countries have their own labor rules and tax policies, and that area needs to be navigated when Offshoring becomes part of your business plan. Many companies struggle to learn about the existing legal labor acts and how to pay taxes correctly. Thankfully, when you work with TurnKey, you won’t worry about legal nuance or local taxes. We’ll do that for you—we deal with all administrative costs like legal services, tax preparation, payroll, etc. You could hire local lawyers or pay for a professional consultation to address this challenge. Or you can hire TurnKey—handling international regulations and security is just part of what we do all day, every day.
What are the different kinds of Offshoring?
Remember, Outsourcing is a short-term relationship. It can be done offshore, but it doesn’t last. Offshoring is what we’ve been discussing above.
And YOURshoring is what we should be discussing—it’s how TurnKey makes Offshoring all yours.
Here’s a little compare and contrast chart for you to enjoy. We think you’ll come out of it with YOURshoring firmly on top.
No control of the team. You don’t have much control over this team or process. You hand over a project and they deliver (you hope).
Partial control of your team. Your organization has no direct control over the offshore team, schedule, culture, and payroll.
Full control of your team. You have a fully dedicated team that satisfies your project needs—and you have full control over all processes.
Project-based. After completing your project or achieving other business goals, the date is over and they move on to the next relationship.
Long-term solution, but... You’ve got this team for the long haul, but is it the team you want? Do they know your culture, speak your language, or adhere to your work style? Want to be sure? Read on.
Long-term solution. YOURshoring scales your team, builds camaraderie between the home base and the outfield, and gives you a speciality team you can rely on to build your product.
Talent is king. When you hire someone to handle a project, you’re relying on them to stay focused long enough to deliver. But they might bounce to whatever shiny thing comes along next.
Talent is off the bench. Many offshore firms will provide you with whoever is available. Might not be what you need exactly but you kind of take what you get. Ick.
You are king and your team is custom-recruited. Your company will get the right fit to meet your project needs or business goals. We carefully source talent per your instruction and need. Hand, meet glove.
One and done. Your outsourced team has no emotional connection with your product or customers.
High turnover of staff. Your offshore team might be good at the work, but they’re not worried about really engaging with your teams, your product, or your vibe.
Retention-focused. TurnKey offers a unique talent retention program aiming to reduce churn. We provide employees with professional development opportunities and make them feel like they’re a vital part of a team (because they are!).
No transparency. As you have no control over your outsource team, you don’t know anything about its productivity, focus, or payroll.
Limited transparency. You have more visibility here, but it’s still foggy. You likely won’t have a way to measure productivity, which means you also don’t have an idea of how to motivate or celebrate.
Full transparency. You see it all: you decide what to pay, how to motivate, when to increase, etc.
The Outsiders. Your outsourcing team is just that: on the outside. They’ll do your job and hopefully do it well, but they’re not your colleagues.
Partial integration. Unless they’re with TurnKey, your offshore team considers themselves employees of an offshore company. So, they are loyal to it, not you.
Fully integrated. We’ll work together to embed the YOURshore team into your organization. You get loyal, dedicated, skilled teams.
Which partners and countries should you choose?
When choosing the right offshore partner and where your teams should be based, you have to consider many different factors, like the approach to customer service, common understanding of business goals, access to best-in-class talent, employee retention, or cost.
We’ve been there as SaaS entrepreneurs. It’s why we created TurnKey and why we want every company to enjoy the competitive advantage that YOURshoring brings. Our experience tells us that we need to look at Latin America and Eastern Europe. Shall we?
- Latin America. The top countries (where TurnKey also has operations) are Brazil, Mexico, and Colombia because of the high level of professional tech skills, appropriate knowledge of English, and convenient time zones (these are referred to as Nearshoring because of their proximity to the US). Surprised by Mexico being on the list? Don’t be. They’ve made gigantic tech strides over the last several years and will continue to do so.
- Eastern Europe. This region, especially countries like Ukraine, Poland, and Romania, are ideal options for companies aiming to scale their processes. They offer qualified offshore software developers at relatively low rates. In Poland, for example, there are over 300,000 engineers and other IT specialists (it’s about 25% of the entire talent in Eastern Europe). Ukraine boasts a vast talent pool, low taxes, and affordable developers’ rates, and is well-known for its high-quality software development talent. Ukraine provides strong STEM education and has numerous tech universities and software development hubs. Bonus: Almost 85% of software engineers in Ukraine have at least an intermediate level of English.
Some final thoughts
Break free, people. Offshoring allows you to work beyond geographical limitations to scale, save costs, and work around the clock. Every risk becomes a reward when you partner with a reliable firm like TurnKey. Don’t you want to be part of a winning solution? We thought so. Talk to you soon.
Offshoring stands for transferring business activities or the entire production process to another country. The primary goals of Offshoring are to access a new labor market full of experienced tech specialists while reducing software development costs.
Imagine a U.S.-based startup that just raised a $20m Series A or B round. They need to scale their engineering team but struggle to find great (and affordable) talent locally. So they look offshore to tap into the vast pools of high quality talent available globally.
Offshoring Research and Development (R&D) enables innovative companies to use foreign knowledge resources. That helps them improve their innovation performance and gain a required competitive advantage. Businesses prefer R&D Offshoring because of lower expenses and stable growth rates.
Often, people use these terms interchangeably, although they have different meanings.
- Outsourcing means contracting external organizations or specialists to perform development activities on a project or short-term basis.
Offshoring means hiring experienced developers overseas to act as an extension of your product development team.