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What is offshore development? What can I do to avoid failure?

Offshore Development
Offshore Development

There are roughly two ways to develop applications and software in a company: “in-house development” and “outsourcing”.
Even in Japan, many companies mainly develop by outsourcing, but did you know that this outsourcing also has a development style called ” offshore development “?

Many domestic companies are incorporating offshore development into system development because it can significantly reduce development costs.
Here, we will explain in detail the basic information and merits of such offshore development. Please refer to this content so that you will not fail in offshore development.

 

table of contents

  • 1. What is offshore development?
  • 2. What country can you ask for development?
  • 3. Benefits of offshore development
  • 4. Disadvantages and solutions for offshore development
  • 5. Which should I choose, lab-type development or contract development (contract development)?
  • 6. What is the difference between offshore development and nearshore development?
  • 7. How to choose the best country for offshore development?

What is offshore development?

Type of outsourcing
name detail
Offshore development Development method to outsource to overseas companies and local corporations
Lab-type development Development method to secure a dedicated team at external (mainly overseas) bases
Contract development (contract development) How to ask an outside company to complete and deliver the system

Offshore is simply a term that refers to “outsourcing to overseas companies and local corporations.”

As the meaning suggests, offshore development refers to “requesting an overseas company or local subsidiary to develop a system.” Since there are many companies responsible for system development not only in Japan but also overseas, there are even companies that handle most of the development projects in offshore development. Various countries can request offshore, but the more “countries that are focusing on IT and taking measures to increase the number of engineers”, the more aggressively they are accepting offshore development.

In addition, offshore development is further subdivided into two types: “lab-type development” and “contract development (contract development)”. We will discuss these features and how to select them in detail in a later section.

 

What country can you ask for development?

China, India, and Vietnam are particularly popular countries that request offshore development. These countries have relatively low labor costs, and offshore development has been attracting attention as a means to meet the need for “cost reduction”, but the need has changed in recent years. More and more companies are outsourcing overseas for high technology, not just because they want to keep costs down.

To give a simple feature by country, China, which has a large total population, has an order of magnitude more IT engineers. Furthermore, since the time difference with Japan is as small as one hour, there is an advantage that it is easy to communicate in real-time. In addition, India has many excellent engineers. We have a history of offshore development, so you can ask for development with confidence. Furthermore, in recent years, Vietnam has been attracting attention. The big advantage is that labor costs are lower than in China and India. Moreover, because the country strongly promotes IT education, there are many excellent engineers, and the fact that there are many pro-Japanese families is also a popular factor.

Offshore development has been a popular development method even before Reiwa because of its many advantages. The demand for offshore development in modern Japan is increasing. In addition to the countries listed above, you can request offshore development from various countries such as the Philippines and Singapore.

 

Benefits of offshore development

Advantages and disadvantages of offshore development
merit Demerit
Easy to reduce development costs Difficult to communicate with engineers
Easy to secure excellent engineers Difficult to manage progress and solve problems
Easy to complete the system in a short period Difficult to train local managers

What are the advantages and disadvantages of such offshore development? Below, we will discuss in detail both the advantages and disadvantages of offshore development.

 

● Easy to reduce development costs

As I mentioned a little in the overview section, the number one advantage in offshore development is probably “excellent in cost”. Development costs vary depending on the country and company, but overseas, labor costs are often cheaper than Japanese engineers, and it is easy to reduce development costs. Development costs tend to rise for larger systems, so reducing costs is a nice benefit for companies considering system development.

 

● Easy to secure excellent engineers

Even in the present age of Reiwa, Japan lacks IT human resources. The fewer human resources, the better the engineer, the higher the labor cost. However, countries such as Vietnam and the Philippines where offshore development is active have abundant IT human resources, and their technical capabilities are comparable to Japanese engineers. Offshore development is the best way to get cheap and talented engineers.

 

● Easy to complete the system in a short time

As mentioned earlier, offshore development has the advantage that it is easy to secure excellent engineers. Due to the excellent number and quality of engineers, it is easy to reduce the development time. Offshore development is also very effective in focusing on delivery time.

 

These are the attractions of offshore development. Not only is the cost low, but the quality is high and the delivery time is short, so you can be convinced that the number of companies using it in Japan is increasing. However, it should be kept in mind that the advantages of offshore mentioned above are “just a guide” because strengths and weaknesses are depending on the requesting company.

 

Disadvantages and solutions for offshore development

At first glance, it is offshore development with only advantages, but some disadvantages occur when requesting overseas. For example, when outsourcing overseas, physical distance, time difference, language difference, etc. are issues. It is undeniable that due to physical distances and differences in language, accurate communication may not be possible and recognition may be inconsistent. In addition, time differences can make progress management difficult in some countries.

I mentioned earlier that in offshore development, physical distance, time difference, language difference, etc. are issues, but there is a solution. First of all, it is important to clearly and concretely present the desired conditions at the meeting, which is the pre-development stage. In addition to not being able to have face-to-face meetings, there are differences in language, so we have to convey the conditions as specifically as possible. Furthermore, to avoid delivery delays, it can be said that one of the measures is to secure enough development days in advance.

 

Which should you choose between lab-type development and contract development (contract development)?

As introduced in the overview section, offshore development contract types can be broadly divided into lab contracts and contract contracts. If you want to succeed in offshore development, you should know about lab contracts and contracts.

Lab-type development is a contact form in which a contract is made for a certain period (half a year or one year) and the minimum amount of work to be ordered is guaranteed. Since you can create a dedicated team and proceed with development, you can secure excellent human resources for each team. Also, if it is within the contract period, you can respond to sudden cases. In that case, there is no need to make an estimate. If you want to secure engineers for a certain period, we recommend lab-type development.

On the other hand, contract development (contract development) is a form of concluding a contract on the condition that the system is completed. Unlike lab-type development, it is not possible to secure a team, but if the purpose is “I do not expect to secure engineers” or “I want you to make XX by the deadline”, contract development is suitable. Whether it should be a contract or a lab contract depends on the system development policy, so it is a good idea to consider it in advance.

 

What is the difference between offshore development and nearshore development?

What is Nearshoring Development?
Overview Outsourcing to local companies or outsourcing to
nearby companies and businesses
merit Easy communication with engineers Easy
to manage progress Easy
to avoid disaster risk
Demerit Difficult to secure engineers Difficultly
to select suppliers

A term similar to offshore development is a development method called “nearshore development.”

The main difference is that while offshore outsourcing, nearshore is used to refer to outsourcing to a local company (or a nearby company). Nearshore development is outsourced to domestic companies, so there is no need to worry about the “difficulty of communication” due to language differences as in offshore. If you place importance on “easiness of communication” with company personnel and engineers, you may consider nearshore development.

On the other hand, nearshore development tends to be inferior in cost compared to offshore because it is ordered from domestic companies. If you would like to know more about the features and benefits of Nearshoring development, please refer to the following page.

■ What is nearshore development? Is there any difference from offshore development?

 

How to choose the best country for offshore development?

Finally, for those who have the question, “Which country should I ask for offshore development after all?”, Let me explain how to request offshore development. In conclusion, it is not recommended to search for offshore development by “country”.

This is because the national character differs from country to country, but the “development projects that we are good at,” “programming languages ​​that we can handle,” and “request fees” vary from company to company. If you request with some kind of judgment, such as “let’s ask a Vietnamese company” or “let’s make a good product in the Philippines”, there is a possibility that the desired system will not be completed.

Therefore, let’s select system development after comparing and considering “company” instead of “country”. Since the order navigation publishes the development projects and achievements that each company is good at in the database, it is possible to easily compare and examine the companies that suit the purpose.

In order navigation, we have many development companies that provide high technology at a low cost through offshore development. There are many system companies that Japanese companies can rest assured that Japanese staff will handle sales counters and upstream processes, and engineers at overseas bases will be responsible for development. Many companies have the advantage of being able to communicate smoothly, and we can introduce development companies that meet your needs.

If you ever want to know about similar things, check out the Facebook page Maga Techs

 

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