What Are the Cost Components Of Offshore Software Development?

Software development is something that you can never understand properly. The biggest challenge that companies face is, finding a company to which they can outsource their development work.

Now, there are so many development companies in every country that it gets really hard to decide. Earlier, the choices were less because the internet was not used as it should be.

But, now people have become smart, they list their companies on the web, they check their websites, these websites have their portfolios too. This is not it, they also have the details through which anyone can contact them. What does that mean? It means that even if you are sitting in the USA and you think that a company in South Korea can provide you with the services you need, you can contact them. There are no boundaries when it comes to software development, or for that fact, any kind of development. This has a lot of advantages for both a development company and the outsourcing company. In this article, we will go through the points that will help us understand a lot of things about offshore software development and the cost components related to it.

The IT market is booming, and organizations need development services every few months. Though, it is not possible for all organizations to hire software development agencies from their own country. Hiring a custom software development company in the USA can be very expensive. This cost can be reduced if the organizations find a developer or development company in India or anything Asian country. The cost in other regions might be low, and the quality is also not compromised. The only challenge is to find a company that is trustable. Let’s first understand what offshore development is.

What Is Offshore Development?

It is important to understand what the term offshore development exactly means. Most people are not aware of the fact that they can also outsource their development projects outside their country. This is the reason why they end up spending a lot more than they should have. And outsourcing your development project to a company that is not situated in your country doesn’t mean that the quality will be compromised. It just means that you may have to pay a little bit extra attention while you are selecting them and when they are doing the work. Other things, it is all their headache. You don’t need to worry about how they are going to develop your software if you have done your research about their past projects properly. It is important to know how genuine the projects that are listed on the website of the company are. You need to do cross-checking of every detail before you get into a contract with them. Unless they are very reputed and are known around the world, finding a good company without putting in errors is tough. This works even if you are finding a company in the same country as yours.

How Offshore Development Works?

If we look at the process, then we need to start from the basics. The first step to get any new project developed by an Offshore development company is hiring. Hiring a company that matches your requirement, your budget and can understand things just the way you think. It is really important that you find a company whose vision matches yours. Because if your visions don’t match, there can be conflicts related to the project at later stages. This won’t be good for the project and organizations that are involved in the contract. Your organization will have to face delay. The development company might lose their motivation when they feel their views are being neglected. There are many things that can go wrong; hence, it is better to go with a company that can understand your business as you do.

There are chances that you can find developers or development companies who charge three times less than the companies you have in your country. Make sure you are alert from anything that looks like a scam, some company working for a cost that is too less might turn out to be a fraud. Do your homework before you get onto the final discussion with them. Keep your focus on the quality they can deliver and not the cost that they charge for; this will clear out a lot of problems for you.

An offshore software or web application development team is responsible for doing the following activities:

  • Planning
  • Development Of Software
  • Testing each component to make sure that everything is running as per expectations
  • Maintaining the software even after the development process is completed
  • Communicating timely about every update

These are few things that offshore development companies take care of. If you can find the best of the companies out there, you can be assured that your project will turn out great. It is all about your research and the dedication of the development company.

Pros And Cons Of Offshore Development

Just like every other thing in this world, Offshore application development also has its own Pros and Cons. Even if you hire the best web development company in the world, they would also have some of these Pros and some Cons. Let’s have a look at them and read about them in some more detail.


  • Cost-effective

Cost is one of the biggest things that organizations are scared about. The too-high cost can disturb their financial plans. That is one of the reasons why they switch to offshore development. Going offshore for the software development project gives more scope of finding a good company that is within their budget. There are a lot of companies in the world that are providing great services at very reasonable costs. Yes, the efforts that it takes to reach them is something that scares most organizations. Even if money is time for your organization, going with a good offshore company can still save you a lot of money.

One more reason why hiring an offshore company will save is that you will save on recurring payments like Salary, and subscription costs for the premium tools that they will be using. This is something that reduces the total cost of development by a great margin.

  • Organizations Can Pay Attention To Core Activities

Your organization should not be an IT-centric organization if you are looking for software development companies offshore. In this situation, your organization can relax by providing all the struggles related to desktop or SaaS software development to another company in the world.

When the development project is being handled by a company that has expertise in it, you can be free. You can focus on the core business activities and get more in time. While your application is being developed, you can develop your business as well. If you are certain that you can scale up to some level, make sure that you ask the development company to leave the scope for customization in the application. Scaling up is the need of the hour. The competition is getting really tough and the one who grows is the one who wins.

  • You Can Hire Experts

Experts are people who have total command over something. For example, you have outsourced your project to a PWA development company. There would be one or two experts in that company who would know everything related to PWA. Now, if you go out to hire an expert for your company's in-house team, it would cost you more than what you will pay to the company for the entire project. This is said in reference to the cost of hiring, training, on-boarding, and their salary included with the salary of other developers.

On the other hand, when you hire an outsourcing company, all that cost is on their shoulders. You need not worry about money, their requirements, or anything else. Getting an expert to work on your project can’t be easier than this.

  • You Get Better Talent To Work On Your Project

Along with experts, you get the best web/software/app developers too. These companies hire people who have great skills, who understand what the requirements of the industry are. They also keep providing them training so that they are well aware of every new trend and technology. Doing so for an in-house developers team would be a lot of struggle. Outsourcing companies make sure that they put their best developers on the front. They do have some developers who are in the training phase but they are not used to lead the project parts. Those people help and that too when asked by their seniors. Companies make sure that they never keep the skills of their developers outdated. If the developers that they have in their team are not skilled according to the current times, even the best web development company will suffer.

  • Faster

The development is faster because these people have to keep working around the clock. They have to meet the deadlines so that they can start with new projects. If they take too long to finish just one project, they will have to face loss somewhere. Faster development provides the clients more time to market. Developers in the company understand what has to be used in a particular app. Most applications have a lot of similar parts, and their codes are already stored in libraries so that the next time the developer just has to customize them according to the client's needs. Be it website development services or software development services, all of that can be done much faster.


  • Needs Regular Management

The development of the project might end, but the management goes on forever. There are so many details in software that only the development company can understand. To keep everything in check, either you can sign another deal just for maintenance or keep some developers in-house. Make sure you hire the developers during or before the development starts so they can understand what the project is about. It is something that is not affordable for most companies. Even though the cost of maintenance is not too high, it still is a recurring cost. Software needs to be managed every month, and there can be issues related to the database related to the server. All these issues need solutions instantly. This results in additional costs for the companies.

  • Time-Zone Differences

When you hire a traditional or SaaS software development agency from some other continent, you know the time-zone problem would occur. This is one of the reasons why most companies don’t prefer offshore software development. There can be great miscommunication because of this one reason.Companies will have to put in a lot of effort to keep track of everything. Taking feedback, having discussions, everything will need extra effort. One of the teams would have to lose their sleep. Mostly, it is the offshore company because they are the ones who have taken up the project.

  • Hidden Charges

There are many charges that are not revealed. Because the regions/countries/continents can be different, there are some taxes or some things that are added to the bill afterward. This is something that can disturb the budget of the companies. It is one of those things that make organizations stay away from offshore software development. Be it desktop or web application development, anything can contain hidden charges. This is something that you might avoid by good research as well. There are development companies that provide final estimates before the project is started, and they stick to it.

  • Data Related Risks

The data can be stolen by the company. There are so many companies who are doing these types of ill deeds. They are making it tough for the good ones in the business. But, it is impossible to know which company can steal your data and which can’t. To be assured that if someone does that, you get the worth of your data, and they get punished, sign an agreement. Make sure they state that they are never going to share any data of the company even after the completion of the project.

Risks Related To Offshore Software Development

Just like in-house software development, offshore software development also has some critical risks. Therefore, before making any kind of business deals, owners must lookout for the following risks:

  • Data Privacy

Privacy must be the topmost priority of any organization. For the same, one needs to find a reputed company with decent work history and genuine clients. One must read the security policies very minutely before signing an NDA with the offshore development company.

  • Mis-Communication

Mis-communication can be a major factor in the failure of any project. This generally happens due to lack of face-to-face communication, not having a common language for delivering messages, change in time zones, geographical barriers, or cultural differences. It is important to understand what both sides have to say in order to make a project successful.

  • Quality-Related Risk

A very important thing to notice is the variation in rates of different offshore development companies. This may or may not directly relate to quality. If a trusted company is capable of making the technical requirements true and is willing to follow the project documentation, there is no issue in setting up a contract with them even if they are charging less. “You get what you pay for” does not apply to the software engineering department. It only depends on the type and ability of the company and its employees.

  • Management Related Risk

Managing a remote team may be difficult. While on the other hand, some people find it easier to manage teams online. Before choosing one, the company must dig a survey which the employees will be able to handle what kind of team to avoid management-related risks later.

Major Cost Components Of Offshore Software Development

“Cost components” is a term used by organizations to refer to the divided costs paid for every aspect of the development process. While there are plenty of cost components of offshore software development, some of the major points are as follows:

  1. Cost Of Hiring

Cost of hiring is defined as the cost at which employees are allocated for a particular project. This is generally decided through an agreement involving two parties regarding the management and financial matters of the project. The cost differs from company to company depending upon the recruiting budget, potential deployment, resources, and other influential factors.

  1. Cost Of Development

Cost of development consists of all the costs spent on the project including construction, development as well as the final touches. Cost varies for different development types such as app development, software engineering, or web development. It also varies on the basis of project size, the scope of work, complexity of the project.

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  1. Cost Of Project Management

The cost to manage a project is a big part of the total cost. Project managers take a huge salary and they also put in a lot of effort. The companies have to make sure that they get everything that they need in order to keep everything on track. They are the ones who manage the records, who convey the updates to the clients and take feedback and give it to the team. If required to travel, they are the ones who move on-site. A custom software development company has to pay a great amount of money to their project managers. They are also the ones who get the most work done.

  1. Cost Of Testing And Q/A

Testing and Quality assurance is really important. Companies don’t want to compromise with the quality of their software, which is also very important if they want to stay in the market for a long time. There are no alternatives to quality, and testing is an important part of quality assurance. Testing is a team activity and a lot of testers are involved, other Q/A analysts are involved too. The cost of testing and quality assurance has to be incurred compulsorily by the website development services.

  1. Cost Of Maintenance

Maintenance is an activity that keeps on going forever until the client uses the software. This is why the cost becomes recurring. It can also be fixed according to the requirements of the client. There are some companies that can charge per maintenance basis, which means that you have to pay only when you call them for maintenance of your software. Then there are other companies that handle the complete management and maintain your software round the year. They charge per year or per quarter for that. Even the best web development company would charge you maintenance charges for the website they have developed. This is because maintenance is an activity that takes effort and resources.

  1. Miscellaneous Costs

There are many things that keep on coming, like the cost of premium products or the cost that is incurred on electricity and devices. These costs don’t take a major part individually, but collectively, they make a good share. This is why it is important to tell your offshore partners to keep the miscellaneous costs less. Most development companies play in their bill with misc. Costs some extra money from their clients. This in many ways, is not good for their reputation. Be it a PWA development company or an android development company, all of them have some fixed misc. Costs, but they don’t go too much.

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In this era of development, offshore outsourcing helps companies to experience the advantage of their competition with other companies. It is a challenging but interesting approach for software development and also saves a lot of money as far as the quality is concerned. All the things that are mentioned in this article about offshore development may change with time. This is why developers need to keep checking the latest updates. The development market is really volatile, things change really fast and the ones who want to be successful have to stay aware of everything in the market. The total cost of offshore development is subjective to every organization that takes the web application development services.