7 Hidden Costs of Offshore Software Development

Reading Time: 5 minutes

Do you want to outsource your software development project? You’re probably looking for a custom solution that tackles your specific business needs affordably. If you’re looking for the most cost-effective solution, you may be considering outsourcing your software development to a team from another country.

Offshore software development is where you hire an overseas team to develop software remotely. It refers to outsourcing to a country that’s in another time zone. According to HackerRank, some of the countries people outsource to include China, Russia, Poland, Ukraine and India among others.

Offshore software development appeals to many people due to the upfront cost. After all, why hire someone in California for $150 an hour, while someone in India can do the same thing for you at $50 an hour?


7 Hidden Costs


Hiring someone abroad may seem cheaper upfront. However, it is not a great long-term plan. Here are seven reasons why:


1. Poor or Slow Communication

It’s harder to communicate with an offshore development team due to time differences and language barriers.

This can significantly slow down the speed of doing business. A huge time difference may make it difficult to communicate in real time on a daily basis. Thus, your project may not allow for quick decisions and alterations.

If your groundbreaking business software takes too long, this set back will cause frustration and lost money. You can easily be overtaken by a competitor just because you were too slow in your software development process.

On the other hand, it’s good to find out soon if an idea is not viable. You wouldn’t want to work on mobile apps or web applications for 12 months only to figure out that it’s not working. This is why proper communication is imperative for a successful, timely project.


2. Cost of Documenting Requirements

An offshore software development team usually requires very detailed, technical instructions. If you are not a developer yourself, getting these documents in order will incur a cost of its own. An onshore team would not require this level of detailed instruction.

Unlike with an onshore team, an offshore team can’t just go off of a description of your problem and desired software solution, along with some UI design requests. Oftentimes, their software solutions end up being too technical, without much user experience factored in. This can result in a need to redo the software onshore.


3. Traveling Costs Can Add Up

The average time it takes for typical software development is 4.5 months. Let’s say you want to have monthly onsite visits with an Indian development center, for example, with two representatives from your company during this time. The cost, time, and business impact can be huge.

But you can get a representative to come over to the US, right? This can be cheaper but will still have a cost and time impact. Here’s an example:

You get an engagement manager to come, spend time in the US, and learn all about your business before starting the development process. You may have them stay for a month to prepare them for thorough custom software development.

This may help your business. However, it will be expensive to take care of their airfare, lodging, food and labor costs. Whether you’re traveling out, or your experts are traveling in, the travel costs can really add up.


4. Cultural and Legal Risk Factors

When you involve two different countries that have different languages, cultures, politics and legal frameworks, you invite unique challenges. Here are some hidden costs you may want to think about:

  • What happens in case of legal issues?
  • Will currency fluctuations make the entire cost of the project way higher than projected?
  • Trade wars happen. What if the US limits trade with that country?
  • Will the project fail if one of the lead developers resigns, gets terminally ill or dies?
  • Can a single natural disaster affecting the offshore software development company wipe out your entire investment?
  • Are you sure your intellectual property is protected by the laws in the developer’s country?


Cultural challenges can be costly. American developers are known for speaking up. They can offer a suggestion that’s totally different from what’s in the client’s brief, based on their expertise.

Indian programmers may have a point to offer, but then decide against it so as to deliver “according to what the client wants”. Fixing an error that wasn’t previously mentioned can be costly. And you definitely don’t want to be slapped by some unprecedented legal issue that will set you back millions of dollars.


5. Increased Costs of Project Management

If you want to outsource at a massive scale, then you must factor in a percentage of the cost to vendor selection. Costs involved here include documenting requirements, issuing RFPs, evaluating responses, negotiating a contract and legal fees.

You may need to hire a full-time project manager and other consultants to work on this. Extra costs can come from hiring an outsourcing adviser. Keep in mind that it may take months to get the right software development partner.


6. The Cost of Unexpected Errors

There are offshore developers who will give you excellent services at a lower rate. However, it’s not always that easy to find the right fit.

Quality control can be difficult if you don’t know your team well. The way projects are handled in the US may be different from how they are in your target country. The web development company may be using recent graduates or inexperienced developers who haven’t gotten their feet wet yet.

Your business needs are unique. Just because an offshore company has worked for someone else doesn’t mean it will work for you. If you’re unable to synchronize your software needs and business practices with the offshore developer, it may result in a poor final product.

Fixing such errors may cost more than getting the work done right the first time.


7. Expensive Infrastructure Challenges

IT is a fast-moving sector. Core infrastructure keeps getting upgraded. New software and hardware may be available in only the US and a few countries at first.

A reputable offshore company may have powerful infrastructure. However, they may not always have what’s needed for your unique situation. You may need much more than just the basic infrastructure, like servers, operating systems, enterprise applications and databases.

You can have infrastructure challenges at different scales. For example, you may prefer to make payments using a processor that’s not available in Ukraine. You may want to use communication and project management software that’s not available yet in India.

Costs of using alternatives may add up if not properly addressed.

Outsourcing Locally is the Cost-Effective Solution


These issues may affect the success of your project. Distance, communication and cultural challenges may make your project drag for way longer than it should. And all these challenges to offshore software development services come with hidden cost implications.

To avoid all these, get a reputable local developer, such as Baytech, a full stack development company. Here, you share the same time zone, law, and culture. You have better control over the software development progress and can mitigate unexpected costs. You’re also assured that your intellectual property is well governed by US laws.

Baytech Consulting is a local software company that delivers high quality software solutions for visionary and successful businesses in South California.