Working with an offshore team is a growing global trend, especially in the IT industry. More and more US and Western European companies are allocating some of their processes to other regions – like India, China, Southeast Asia, Latin America, and Eastern Europe. The main reason is pretty straightforward – cost savings. While there are many other advantages, cutting down expenses certainly tops the list, as labor costs in the industry are among the highest in the world.
So, in an attempt to not price out customers, many software companies and e-commerce business owners opt for offshore teams. There are many advantages of offshore development teams. Yet, you have to watch out for some challenging situations.
In this article, we will explain what offshore teams are, mention the pros and cons of hiring offshore developers, and give you some tips and tricks on how to manage an offshore development team.
1. What is Offshore Software Development?
Before we start the article, we need to explain what an offshore software team is. An offshore team is a group of people who work for your company from another country. They usually live in a different time zone. You can either hire a whole offshore development team that can work as a B2B partner, or you can hire employees that will work full-time for your business.
Offshore software development teams are great options for all sorts of businesses.
Let’s say you have a software development company located in the US. You hire a partner in Eastern Europe to whom you can delegate part of your tasks.
But what are the pros and cons of offshore teams? Let’s find out.
2. Advantages and Disadvantages of Offshore Teams
2.1. Advantages of Offshore Teams
Offshore software development teams provide a quality cover for your in-house developers. Offshore developers cannot fully replace your employees. Yet, they can be a quite handy acquisition for short- and long-term projects – either as a cover or as the main team working behind a project.
Cost-effectiveness
As we have already mentioned, companies hire offshore development teams because of their value for money. Let’s see which are the main areas of cost savings:
- Hourly rates – it goes without saying that offshore teams from developing countries would cost much less than their Western counterparts. In some cases, there might be up to 2-3 times difference in pay rates alone.
- Equipment – software development is one of the most hardware-demanding activities. A standard laptop for programming can cost you in the excess of $2,000.
- Utility bills – this is another area you can save a lot of money from. Offshore teams can reduce your utility expenses – like renting office space, electricity, fast internet speeds, etc.
- Benefits – probably the most underestimated factor that can save you the most, in the long run, are employee benefits – like social security, insurance costs, taxes, etc.
Availability
Working with offshore teams is a breath of fresh air, especially in summer when people are taking holidays. Offshore developers can successfully replace people who are going on holiday or have taken a few days off because of illness. Not only that, remote teams can add depth to your team – they can work during your closed hours. Thus, you can progress on projects faster.
Scalability
Working with offshore partners (especially offshore software development companies) can scale your business. Since your business partners are software agencies, they can easily assign people to your projects when you need them the most, and then release them during non-busy periods.
Quality and experience
Offshore development teams can deliver tremendous quality and bring their many years of valuable experience. While hiring boutique agencies can be costly, they have no real alternative in the West, since most experts are already happily “married” to their jobs at tech giants and automotive brands.
Wide talent pool
If you work with offshore teams, you get access to a wide, global talent pool where you can choose between top experts or a value-for-money balance.
2.2. Disadvantages of Offshore Teams
While offshore teams offer great perks, it’s not perfect. There are areas which could be quite tricky, that’s why you need to pay more attention.
Time Zones differences
Having an offshore partner or numerous offshore partners can lead to difficulties in synchronous communication. Collaboration becomes much more difficult, as colleagues can hardly cooperate. While some are preparing for the start of the working day, others are preparing for shutting down their computers.
Quality compromise
Attractive prices all seem to be great on the surface but if the final product is a letdown, then all the benefits of working with an offshore team are useless.
Cultural and Language differences
The success of many projects comes down to communication. However, people around the world have different working habits. For example, Latin American software development teams are highly skilled but have some language barrier issues. Asian offshore developers are very friendly and accept demands lightly but they work better with strict guidelines. Eastern Europeans, on the other hand, are very proactive – they can offer you solutions but they typically don’t receive criticism well.
Global challenges
Political situations have always played their part in choosing an offshore partner. Let’s say you have an offshore development team in Ukraine or Russia. Due to the political situation there, there might be potential problems when executing the tasks, since, during war times, no one can guarantee prompt execution.
3. Key Aspects of working with an Offshore Development Team
Working with an offshore development team isn’t the same as working with an in-house team. We have already discussed some potential obstacles that you can face. Let’s see how what is needed from your organization, in order to succeed with remote teams.
Organization
Without good organization, you have little chance of long-term success. Organization starts from the very top, on the very first day. Every person involved in the project needs to know what is involved, who is doing what, the roles and responsibilities, the timelines, and the requirements. With offshore teams, you simply can’t be as hands-on as you can with a centralized office team. For this reason, your organization must be clear and well managed or the schedule will quickly drift off-track.
Organizing everything is your key to long-term success. Especially if you’re just starting off. Every person from your team should be aware of what is to come. Who will onboard the offshore team, who will be the project manager from their side, and who will be the point of contact from yours? You should also get information from your offshore agency partner (or employees) about their work schedule. Then, you should match it with yours, and write the scope of work.
Communication
Communication is a two-way street. If you would like to succeed with your project, then you should be transparent – if you have internal issues, report them proactively. Communicate the deliverables. If there is something that concerns you, share it. Be honest but always polite and professional – you cannot lose your temper when exchanging messages and chatting with your offshore partners.
Trust and Empowerment
Your job is to make good research, pick the right offshore development team, and provide accurate milestones. From then on, all you need to do is monitor the project’s progress, and act upon it if something goes wrong. Micromanaging offshore teams is counterproductive. In fact, it deteriorates the relationship between the assignor and assignee. Long-term partnerships are built on trust and empowerment.
4. How to Manage an Offshore Development Team?
Managing an offshore development team can be easy as a breeze for companies with experience in contracting offshore developers. It might not be the same for first-timers.
Tip #1: Choose the Right team
There is a ton of options to choose from. Competition in the industry is fierce and you have a good chance of finding the perfect offshore development team for your needs – or the worst nightmare. A good idea is to make in-depth research and look for many things:
- Customer Reviews – a good indicator of how well the agency is doing. You will never find negative reviews on the agencies’ personal websites, but you can easily identify if there are complaints at places such as Clutch and G2.
- Case Studies – case studies on the website can show expertise in solving different problems.
- Main areas of business – offshore development teams can be a niche or focus on many areas of software development.
- Location – a lot of questions regarding your offshore programmers will be answered when you check their location, like price tier, culture, etc.
Of course, when you have narrowed your list, you can start contacting companies. Ask them specific questions regarding your projects and demand prompt answers. Do not fall for vague explanations. Your offshore development team has to perform tasks on a similar if not better level than your in-house developers.
Tip #2: Set the rules from the start
Negotiation is not all about money. The best way to have a successful relationship with your offshore team is to be very clear right from the start in terms of your relationship and how you deal with each other.
Define the roles and responsibilities of each side, including the main Points of Contact from each side. Agree on the tools that will be used for communication and collaboration, the tools for tracking work progress and the management processes for meetings, etc. Of course, you need to set all payment details upfront – like payment schedules and prices.
Clarity works for all parties, be open-minded in the negotiation and listen to the advice or recommendations. Defining the rules at this stage will help guide the project, but it will also help build a relationship of respect and trust.
Tip #3: Define your long-term vision and Scope of Work
Share the vision of the project with the team and explain what are the expected results. This is not a secret and if you really want to foster a team environment, everybody should feel like they are part of your organization, not just a part of a project (or bits of a project).
You also need to agree with the team on the Scope of the Work (SoW) to be carried out. Give a full and comprehensive explanation of the project, clarify any details, answer any questions and work with the team on defining and breaking down tasks, milestones, and deadlines. Listen to the team’s input, make suggestions, show willingness and come to an understanding.
While this is a key process in any project, with an offshore team it is also a key foundation stone in setting out how the relationship will work, how the communication will flow, and how you can expect to work together. Once both parties agree on the roadmap, then you can start working on the contract.
Tip #4: Create guidelines
In addition to the previously negotiated “relationship rules,” it is best to create a series of manuals or guidelines for different elements of the project. The idea is to have an easily accessible document available to all members of all parties that sets out the best work practices and the expected standards of work, communication, and even behavior.
You should aim to create the guidelines as straightforwardly as possible. Do not use vague terms. Replace them with clear instructions that cannot lead to misinterpretation. Having everything written with clear and concise instructions will help you in the first place, then the project management from your offshore development team, and then the developers.
Tip #5: Work on Communication
A vital area of all business, and one that should never be underestimated. Communication with your offshore team is absolutely fundamental and the easier you can make it, the better for everybody involved.
- Tools
The Internet is full of communication tools. However, this doesn’t have to be a one-tool-fits-all – it rarely is. What is important is that you choose the right tools for the right type of communication, synchronous or asynchronous, written or video, recorded or live, individual or group. Look into the features of the tools, and see which ones benefit you the most. And remember – tools that are easier to use will be the tools that are most frequently used.
- Response time
Every single channel should have a set response time. For example, it’s widely accepted that emails have one business day accepted response time. For a direct message, it gets to 1 business hour. If things get urgent, you can get to the phone and call the Point of Contact from your offshore team.
But don’t abuse urgency. If you shoot your bullets too quickly, the chances are no one will pay attention when you really need immediate assistance.
- Follow Up
Communication is a two-way street, as we mentioned before. After each contact with your offshore team, make sure you follow up with an email and ask for a confirmation from the other side to ensure your message is understood.
- Skills
Communication skills are critical for dealing with offshore development teams. The point of contact from your company should ensure they get to know the offshore company and identify which is the most efficient channel to pass information. Non-native speakers often prefer written communication over verbal one, as it gives them more time to translate the message and think of an answer.
Other than observing, your PoC should find a “common language” with the offshore development partners. All the messages should be clear and professional – do not bring sensitive topics like politics, religion, etc.
Tip #6: Find suitable collaboration tools
Collaboration tools are the bread and butter of effective work with offshore teams and often go hand in hand with communication tools. However, you need to make sure your offshore team has experience working with some of the apps. While you may have your personal preference, if your partners haven’t worked before with some app, they might have issues entering data correctly. It’s needless to say that it will reflect you, too.
Tools like ClickUp, Basecamp, and Trello have become widely popular, but there is a whole ton of other task management apps out there. These tools enable you to see progress, share and work on files together, plan and e-meet, add comments, and edit. They can also be valuable for tracking worked hours, work done, time spent on tasks, project data, and analysis of all kinds. These tools can give a remote manager a detailed picture of where the project is at the moment and where it is heading.
Tip #7: Build a Relationship
Building a relationship is crucial when you want to get things done. When we talk about B2B relationships, this is critical. Trust, working conditions, feedback, and mutual respect are must-haves.
- Trust
People work with offshore development agencies because they can trust their expertise. It would be best if you treated your offshore teams as partners rather than subordinates. Offshore software development companies work best with guidelines and instructions. Remember, they are contractors, not employees. Giving them orders and demanding them go “your way” will harm the relationship.
You need to listen to their professional opinion – if you have done your homework, your partners have already worked on many similar projects. They might know things you don’t. Trusting your offshore team early will pay off soon.
- Improve Conditions
Good managers are always looking at how they can make things better. In standard in-house conditions, this is relatively easy. Fortunately, there is a way to make offshore teams more welcomed. You can start by giving them more freedom – you can let them decide how things will happen as long as it happens according to your guideline.
If your offshore team is hired for multiple projects, you can bond better if you do things you would do with your in-house specialists: like giving a day off for a Birthday, providing branded hoodies and T-shirts, sweets, etc. You can also mention standout performers in your employee newsletter.
- Understanding
Showing understanding is an often undervalued management technique. You can get better results if you keep calm, cool, and collected. Managers who show more compassion, honesty, and respect achieve greater results.
Whether the business relationship is short- or long-term, people will be more productive if you treat them well and understand their issues.
- Feedback
You should regularly provide feedback throughout the project – regardless if it is positive or negative. However, for it to be helpful, it should be explanatory. Phrases like ‘Amazing,’ ‘Great,’ ‘Terrible,’ etc., mean nothing. Your developers should know why you like or you don’t like their work.
When delivering feedback, there are two rules you should never break: you should only judge the work (not the person), and you should provide negative feedback personally (in a video chat).
Tip #8: Think long-term
Hiring offshore teams is like hiring employees – you should always prioritize long-term goals before short-term benefits. If you work with niche agencies that specialize in one area, they might be helpful for one or two tasks. But if you look into the perspective, you can drive more revenue with a partner to whom you can assign many projects.
So, if you’re yet to start your journey with offshore development teams, just add “long-term value” as a part of your checklist. You won’t regret it.
FAQ
What is the difference between offshoring and onshoring?
Offshoring is when you assign your tasks to a partner located in a different country. Onshoring is when you trust your projects to another company located in the same country.
Should you hire an offshore development company or a freelancer?
For one-off assignments and small projects, hiring freelancers is a better deal. It’s less documentation, and labor is cheaper. Offshore agencies, however, can provide a scaling solution and are more viable options for long-term partnerships, especially for sizeable projects.
Is offshoring the same as outsourcing?
There are two main differences. The first one is that outsourced teams are self-managed. You only provide the guidelines. Offshoring teams are fully controlled by your management teams. The second difference is the purpose – outsourcing focuses primarily on the financial benefits, while offshoring aims at finding talent.
Final Words
Learning how to hire and manage an offshore development team is not an easy task. Many businesses fail several times before finding the right partner, and we’re not going to lie – you can also have the same fate.
But we can assure you that once you find the right offshore agency for your needs, every unsuccessful attempt will become a distant memory in no time, and you’ll reap the benefits of a fruitful mutually-pleasing partnership.