What is Offshoring? Definition and Benefits

Saigon Technology
5 min readMar 31, 2024
What is Offshoring? Definition and Benefits

Offshoring is a strategic practice involving moving specific business operations or functions to other countries. This approach offers tons of benefits for businesses.

This article will highlight all the benefits you can get from offshore services. So join us and decide if this strategy is suitable for your business!

What Is Offshoring Definition?

Let us define offshoring first! Offshoring means a business strategy where a company relocates certain operational or service-related activities to a distant country.

There are many offshoring examples around us. In the context of software development, offshoring means that you hire a team from another country to build your software instead of doing it in-house.

By offshoring, companies can reduce costs and access a larger pool of talent worldwide. However, it’s challenging to coordinate with a team in a different time zone and deal with cultural differences.

How Does Offshoring Work?

After discovering what is offshoring, let’s see how it works! In this manner, the company chooses an offshore location and recruits a team of software developers there. These developers then perform the same tasks as the company’s local employees would have done.

Once the offshore development team is chosen, they start working on the software development projects. They also collaborate with the other teams of the service provider when needed to achieve the desired results.

By offshoring, the company can continue its business functions. Yet, the offshore team takes over the software development responsibilities.

How does offshoring work

6 Benefits of Offshoring

By partnering with advanced vendors, companies can achieve 30 to 70% reductions for offshored functions. These partnerships also lead to annual productivity improvements. So how can offshore do that?

  • Lower Cost

Offshoring to developing countries helps companies save money because they often offer lower labor costs. So remember to check the software development rates when choosing your partner.

Moreover, by hiring software developers from offshore locations, you can reduce expenses on operational costs and salaries. Then, you will have more resources to invest in your core business activities.

  • Continuous Business Operations

When offshoring, you have teams that work in different time zones. It means your business activities keep going around the clock, even when your local team is unavailable.

For example, your offshore partner can work on software development projects while your company is asleep. This continuous workflow enhances customer service.

  • Improved Control

Another benefit of offshoring is the improved control. Rather than outsourcing your software development solutions to a service provider, you can establish your own offshoring team. Then, provide training and instructions based on your requirements.

  • Scalability

Scaling up a company is expensive and challenging. But with offshoring, you can easily scale your business operations.

For example, let’s say you need to develop a mobile application. By offshoring, you can rapidly onboard additional developers from the offshore team. These developers, with extensive expertise in mobile app development, can integrate with your in-house team.

The offshore team helps you cost-effectively scale your development capabilities. They don’t have to go through the time-consuming process of hiring. Instead, you can benefit from their ability to leverage the already skilled offshore developers.

  • Greater Availability

Offshoring software development can significantly enhance support for companies operating in different time zones.

Consider a software company in the USA that offers a software-as-a-service (SaaS) product for global customers. The diverse time zones of their customers make them struggle to provide round-the-clock customer service.

So, the company decides to offshore its customer support operations to a Vietnamese software development company to address this challenge.

This way, they can offer 24/7 customer service. Then, they don’t have to pay for the high costs when running a support team in the USA during those hours.

Moreover, the Vietnamese government has set an ambitious target to build a talent pool of 1.3 million IT professionals by 2025. So don’t worry about their resources.

  • Access to Overseas Market

Offshoring software development to other countries gives you access to overseas markets. Your offshore partner offers local expertise and conducts market research. They handle these tasks well because of their experience in establishing business networks.

Additionally, the offshore team can access and mitigate business risks when entering new markets. Then, you can tap into the local market with potential customer base expansion.

6 benefits of offshoring

Types of Offshore Services

Companies can choose to move their services or products to other countries based on their needs, budget, business activities, and more.

1. Production Offshoring

When you set up your manufacturing operations in another country and then import the finished products back to sell them in your country, it’s production offshoring.

For example, a clothing company based in Canada wants to reduce manufacturing costs. Hence, it decides to offshore production to a country in Southeast Asia.

So by offshoring, the company can take advantage of the low labor costs in these areas. The strong textile industry and a skilled workforce in garment manufacturing are also big benefits.

2. Service Offshoring

Service offshoring occurs when you establish your company’s operations in other countries to handle various service-related tasks.

A software company may choose to move its research and development team to a country with highly skilled developers. This approach allows it to benefit from the expertise of the local workforce. It can also reduce expenses compared to hiring staff domestically.

Offshoring Considerations

The benefits of offshoring are appealing. However, you still need to consider both the offshoring pros and cons before choosing your partner:

  • Time zone and language differences

Working across different time zones may cause project delays. To deal with this, you should create schedules that consider possible delays.

Moreover, there may be problems with understanding each other due to language differences. So, consider hiring a translator to prevent mistakes or delays.

  • Loss of control

Some companies worry about losing control when offshoring. Yet, in reality, most decision-making still remains in the company’s original country.

  • Social expectations

Before moving a part of your business offshore, it’s crucial to research. You need to understand the social and cultural aspects of the employees in that location.

Plus, always respect and meet the needs of offshore employees. It’s the best way to ensure their satisfaction and fulfillment in their work.

Ultimately, offshoring presents numerous benefits for businesses, including cost savings, access to global talent, and market expansion.

Regarding offshore software development services, Saigon Technology stands out as an ideal option. Our expertise and experience ensure top-notch solutions tailored to your needs.

So, don’t hesitate to contact us now for a free consultation. It’s time to unlock the full potential of offshoring for your business.

Source: https://saigontechnology.com/blog/what-is-offshoring