Let’s say you’re building a fintech app and you outsource development to a low-cost offshore company because they are the cheapest option.
They will most likely lack expertise in the relevant financial regulations and they’ll make mistakes that will take tens of thousands of dollars to fix.
You need to be on the lookout for red flags like:
Lack of transparency
Vague portfolios and case studies
Unrealistic promises
No long-term clients
Also, make a checklist of your non-negotiables: the technical skills you need, industry knowledge, cultural fit, and clear communication, for example.
Use this as a filter during your search.
And remember, you should be looking for a long-term partnership, not just a transactional one.
How to choose the right offshore software development company
Focus on value over cost – Don’t just go for the cheapest option. You should be looking for a long-term, strategic partner rather than cheap developers spitting out subpar code.
Do your due diligence before hiring – Research their portfolio and case studies, request client references, evaluate past projects, and read their reviews.
Conduct technical interviews – Assess the team’s skills and problem-solving capabilities with technical interviews so the developers you hire actually match project needs.
Setting unclear goals and requirements
Benjamin Franklin once said: “If you fail to plan, you’re planning to fail”.
And nowhere is that more true than in software development.
The stats prove it, too – 37% of projects fail because of unclear requirements, so you can’t afford to get this wrong.
If you want an e-commerce platform, you can’t just go to a vendor and tell them: “Build a user-friendly shopping website.”
You’ll end up blowing your budget on something that doesn’t meet your expectations and will take months to fix.
So, before you hire an offshore team, do internal workshops to finalize your goals and initial requirements.
You’ll do that together with the company you hire – but, the better prepared you are, the easier that job will be.
And that’s key to a successful project.
How to set clear goals and requirements
Use the SMART goals framework – Make your goals Specific, Measurable, Achievable, Relevant, and Time-bound to avoid ambiguity.
Be clear and concise – Make sure your requirements are clear, concise, and easily understood. Avoid excessive technical jargon and use simple language.
Regularly review and update requirements – Requirements often change mid-development. Make sure to regularly review and update them to avoid scope creep.
Not accounting for cultural and language barriers
Cultural and language barriers can quickly become a problem in offshore software development projects.
And if you don’t acknowledge and mitigate them, they can derail the entire project.
In fact, 60% of outsourced projects fail because of a bad cultural fit.
There’s a couple of reasons for this:
Different work styles – In some cultures, teams prefer hierarchical decision-making, while others favor a collaborative approach.
Indirect communication – Some cultures avoid directly saying “no,” leading to ambiguity and mistaking politeness for agreement.
Language nuances – Even if you share a language with the vendor, regional phrases or idioms can lead to confusion.
The first thing you can do to tackle this is standardizing workflows and processes across your in-house and offshore teams.
This will minimize potential misunderstandings and make sure everyone is on the same page from the start.
Also, encourage open communication and build an inclusive work environment.
That’s key to successfully managing these differences and
How to minimize cultural and language barriers
Encourage open communication – Open communication will build trust and reduce misunderstandings, even if there are significant cultural differences and language barriers.
Use simple language – Don’t use idioms and slang your offshore team might be unfamiliar with to avoid misunderstandings.
Create an inclusive work environment – If you build an inclusive work environment and culture where everyone feels valued, you’ll minimize the impact of cultural differences.
Choosing the wrong outsourcing model
Choosing the wrong outsourcing model is one of the biggest mistakes you can make in offshore development.
At best, it can mess up your timeline and cause an unnecessary delay while you sort it out.
And at worst, it can cause the entire project to fail.
But, what do we mean exactly when we say the wrong outsourcing model?
Dedicated team vs. staff augmentation vs. project-based model: overview
Category
Dedicated team
Staff augmentation
Project-based model
Best for
Long-term, complex projects that need ongoing work
Quickly scaling internal teams for big projects or to cover skill gaps
One-off or well-defined projects with a clear scope
Client involvement
Medium, the client manages the project while the vendor manages the team
High, the client directly manages the staff they hire
Low, the vendor manages the project from end-to-end
Flexibility
Moderate to high, can take time to adjust to changes in team size or structure
Highly flexible, team members can be added or removed easily
Low, changes are difficult once the project starts
Duration
Long-term, the team works exclusively for the client
Short to medium-term, based on project needs
Short to medium-term, ends once the project is completed
Risk level
Low, the team understands your processes
Low, clients have full control over the process
Medium to high, especially if the scope is unclear
If you’ve hired the right company, though, pivoting to a different model here shouldn’t be too much of a problem.
The bigger issue is if you choose the wrong pricing model between the fixed price and time and materials model.
Here’s a quick comparison between the two:
Time and materials
Flexible
Best for bigger projects
Projects divided into separate tasks
Client has control over the process
Fixed price
Best for smaller projects
Inflexible
Lots of paperwork
Changes cost extra
The fixed price model is a good fit for projects with well-defined requirements.
But, if the scope changes mid-development, you’ll have to separately renegotiate every change to the original contract’s scope.
This can mean weeks of delays while the team stays idle and much higher costs in the long run.
So, you need to make sure you get this right from the start.
How to choose the right outsourcing model
Define project scope before deciding – Clearly outline your project’s requirements, timeline, and deliverables to find the most compatible outsourcing model.
Discuss risks and potential changes upfront – Address possible scope changes, budget adjustments, and challenges with your vendor early to prevent surprises down the road.
Balance cost and flexibility – Time-and-materials is usually more expensive but allows adjustments, while fixed-price is more cost-effective but rigid. Decide what matters more for your project.
Poor time management
Delays are a major problem in software development – 70% of projects aren’t delivered on time.
Now, there’s a bunch of reasons for this, ranging from poor processes to scope creep.
But, poor time management is right up there. And it’s an especially huge risk in offshore projects.
Let’s say you’re based in California and you hire an offshore team from Poland – they’ll be 7 hours ahead of you.
And if you don’t take time management seriously, this can cause problems.
Good time management is proactive and not reactive. You’ll need to account for time zone differences from the get-go.
Make sure to schedule at least 2-4 hours of overlap and invest in solid project management.
That will solve most of your problems and help make your project a success.
How to manage time well
Rotate meeting times – Rotating meeting times will ensure neither team is unfairly disadvantaged and minimize the impact of time zone differences.
Encourage flexible working hours – Flexible working hours will increase the overlap between your in-house and offshore teams, which will improve collaboration.
Use asynchronous communication tools – Asynchronous communication tools like Slack are key to keeping everyone up to date regardless of time zone.
Neglecting data security
In offshore software development, data security is often treated as an afterthought.
Neglecting it can lead to breaches, financial losses, and huge reputational damage. So, ignoring security is a gamble you can’t afford.
And with cybercrime on the rise, it’s even riskier. In 2024 alone, cybercrime cost businesses $9.22 billion and that number is expected to grow even further in the coming years.
But, that’s big-picture stuff that’s hard to wrap your head around.
When you zoom in, the risks become much clearer. In 2024, the average cost of a data breach reached $4.88 million, the highest total ever.
And that’s not all. Some 60% of companies that suffer a data breach end up going out of business.
Neglecting data security comes with serious consequences.
So, you need to do your due diligence when choosing your offshore development partner and make it a priority.
How to ensure data security
Have clear data handling policies – Define processes for accessing, sharing, and storing sensitive data.Well-documented policies reduce risks and set expectations.
Make sure the company you hire has relevant certifications – Look for certifications like ISO/IEC 27001 to ensure your offshore development team follows standardized and rigorous security procedures.
Implement access controls – Limit access to sensitive data and information to authorized personnel only to minimize the risk of breaches.
Unrealistic budgeting
Unrealistic budgeting is one of the quickest ways to derail an offshore software development project.
When budgets aren’t realistic, projects either stall or have to compromise on quality.
Here are some common budgeting mistakes you need to look out for:
Ignoring hidden costs – Expenses like post-launch support or knowledge transfer are often overlooked and they can add up quickly.
Underestimating changes – Changes during development are almost inevitable, but too many budgets don’t include buffers to account for them.
Focusing only on hourly rates – Low hourly rates are appealing but often hide inefficiencies and quality issues, which increase costs in the long run.
So, what can you do to set a realistic budget?
Start with a detailed project plan that includes all potential costs.
Then, ask your offshore partner for a transparent pricing structure and verify it includes post-launch support and maintenance.
That’s the best way to avoid unpleasant surprises down the line.
How to set realistic budgets
Account for hidden costs – Include a buffer for hidden costs, like scope creep and potential delays, in your budget plan to avoid nasty surprises down the line.
Have contingency funds – Reserve 10-20% of your total budget to cover unexpected expenses without impacting your main budget.
Regularly review spending – Do regular financial reviews and audits to keep your spending on track.
Offshore software development mistakes: FAQs
To find and hire an offshore software development team, you need to:
Define your goals and requirements first
Choose the collaboration model you need
Search and shortlist offshore software development companies
Review their case studies and previous work
Sign a contract and kick-off the project
Project timelines depend on a number of factors like:
Project scope
Project complexity
Team size
Timelines can range from 2-4 months for simple apps while complex, enterprise-scale projects can take 9 months to over a year to build.
You should discuss a realistic timeline upfront and include buffer time for unforeseen delays.
To successfully manage your offshore development team, you need to:
Set clear project milestones and deliverables
Set up clear communication channels
Plan for time zone differences
Looking for a reliable offshore development company?
Do you want a trusty and dependable offshore development partner but can’t seem to find the right fit?
Well, you’re in the right place.
We’re a full-service, high-caliber software development company and we’ll gladly jump at the chance to tackle your project, no matter how complex.
If you want to learn more, feel free to reach out and our team will get back to you as soon as possible to discuss your needs in more detail.
Marko started DECODE with co-founders Peter and Mario, and a decade later, leads the company as CEO. His role is now almost entirely centred around business strategy, though his extensive background in software engineering makes sure he sees the future of the company from every angle.
A graduate of the University of Zagreb’s Faculty of Electrical Engineering and Computing, he’s fascinated by the architecture of mobile apps and reactive programming, and a strong believer in life-long learning. Always ready for action. Or an impromptu skiing trip.
