The Pros and Cons of IT Offshore Outsourcing

February 20, 2025

Offshore outsourcing is a strategic method for your business to reduce costs and improve competitiveness. In the IT industry, it’s a commonly used practice to engage skilled foreign engineers to boost efficiency and flexibility on a project.

In this article, we’ll dive into the basics of IT offshore outsourcing, including a look at the advantages and challenges associated with it. We’ll also share some tips for successful implementation.

Offshore outsourcing refers to the entrusting of certain tasks to an external provider in a different country. The key draw is the ability to secure skilled personnel at a lower cost who can handle IT-related work and software and app development.

It’s common for American or European businesses to outsource development to Asian destinations, like in India or the Philippines. These countries provide high quality development resources at a reduced cost.

2-1. Cost Reduction

The greatest benefit of offshore outsourcing is cost reduction.

Many offshoring destinations have lower labor costs compared to places in Europe or America. This helps reduce the overall cost of development. For example, in the US, the average salary of an IT engineer is around US$100,000. Compare this to in India, where it is around US$20,000 to US$30,000. With such a difference, companies can secure more development resources while maintaining the same budget.

2-2. Skilled Labor

Destinations like India and the Philippines have high quality education programs which are producing talented IT professionals. Thanks to this, there is a pool of skilled, in-demand labor which may not be readily available in your local area.

2-3. New Technology and Expertise

Working with an offshore team can improve the level of technical expertise at your company through exposure to new technologies and knowledge. For example, cooperating with external engineers who have knowledge of AI, machine learning, or blockchain will allow your business to quickly get up to speed with the latest technologies.

3-1. Language and Cultural Barriers

One of the biggest hurdles associated with offshore outsourcing is the communication challenges that come with language and cultural differences. Miscommunication and mismatched expectations can have significant negative effects on projects. For example, differences in language may prevent nuances of instructions from being accurately conveyed, and cultural backgrounds may lead to differing perceptions of how work should be approached.

However, there are several measures which can be taken to address these issues. First, it is important to have frequent communication through regular progress meetings. Also, the use of video calls allows participants to catch nonverbal cues, which can contribute greatly to successful communication.

In addition, having a bilingual project manager or an interpreter on hand is a good idea. Keeping proper documentation and creating clear specifications and requirements which don’t use vague terminology will also help to avoid misunderstandings.

3-2. Quality Control

Because of the physical distance involved in offshore outsourcing, monitoring progress and quality in real time becomes a greater challenge. If quality standards are not written in detail, the deliverables you receive may not meet your expectations. The offshore developers might have a different skillset or working style and a different idea for standard of quality. It’s important to have clear quality control processes in place to address this. Make sure to establish quality control guidelines early on in a project.

Also, potential problems can be caught early through the regular use of sprint reviews and midterm progress reviews. Finally, when selecting your offshoring team, always check the track record and what kind of evaluation the provider received on previous projects.

3-3. Time Differences

The time difference with the offshore destination can also impact business — especially if something is needed on short notice or if real-time feedback is required. To address this, good time management is vital. Make use of overlapping daytime hours to hold meetings and to schedule important tasks. This will help improve the efficiency of your communications.

Also, project management software can enable you to monitor progress in real time. Finally, for times when an immediate response is required, set up rules in advance which dictate what to do in the event of an emergency.

Recently, in addition to India and China, offshoring destinations like Vietnam, Myanmar, and Bangladesh are rapidly growing in popularity.

These countries are pursuing government-incentivized IT education programs and English education, while also having lower labor costs. The addition of these countries to the labor pool is helping to make global projects even easier.

Vietnam is the site of many offshore outsourcing operations, and its IT infrastructure is developing quickly. Similarly, Myanmar and Bangladesh are also expected to become key offshore outsourcing destinations as they are experiencing rapid growth in the IT industry and have young working populations.

Offshore outsourcing provides many benefits to companies: reduced costs, increased technical expertise, and access to talent. However, successful use of offshore outsourcing requires measures to be put in place to counter the associated challenges.

Choosing the right partner in countries like Vietnam, Myanmar, or Bangladesh and understanding the unique circumstances in each country will help guide your future projects to success.

We hope the points brought up in this article will be of use when considering offshore outsourcing for your business. In upcoming posts, we will go into greater detail about specific offshoring destinations.

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