Offshore Development
Outsourcing of software development to teams in distant countries with significantly lower labour costs, e.g. India, Vietnam or the Philippines.
Offshore development has been a common way to reduce software development costs for decades. Countries like India, Vietnam and the Philippines offer large talent pools at much lower hourly rates. The savings come with challenges: time zones, cultural differences and communication barriers can endanger projects if not managed professionally.
What is Offshore Development?
Offshore development means outsourcing software development to partners or teams in geographically distant countries, typically with a time difference of 4–12 hours. The best-known locations are India (largest IT outsourcing market), Vietnam (strong growth, especially for mobile and web), the Philippines (English-speaking) and China (close to hardware). Hourly rates range from about €15–50 depending on country and seniority, i.e. 50–80% below German rates. Models range from project-based outsourcing to dedicated teams and own Offshore Development Centres.
How does Offshore Development work?
Offshore projects are usually run in three models: project-based (a defined project is handed to the offshore partner), dedicated team (a fixed team works exclusively for the client), or Offshore Development Centre (own subsidiary). Success depends on detailed specifications, overlapping working hours (at least 2–3 hours), async communication culture and an experienced project manager as a bridge between cultures.
Practical Examples
Large German e-commerce company: 30-person dev team in India maintains and extends the legacy system while the German team builds new products.
SaaS startup: Three senior developers in Vietnam build the backend while the founding team in Berlin focuses on product and sales.
Enterprise IT: Offshore Development Centre in the Philippines for first- and second-level support and test automation around the clock.
Mid-size company: Project-based offshore engagement to build a mobile app with fixed budget and timeline.
Typical Use Cases
Cost reduction: Significant savings on standard development and maintenance
24/7 operation: Follow-the-sun model for support and development
Large projects: Quick ramp-up of large teams for time-critical projects
Specialisation: Access to specific tech skills (e.g. Java enterprise, mainframe)
Legacy maintenance: Outsourcing maintenance to free the local team for innovation
Advantages and Disadvantages
Advantages
- Major cost savings: 50–80% lower hourly rates than in DACH
- Large talent pool: Millions of developers in countries like India and Vietnam
- Fast scaling: Large teams can be built in weeks
- Follow-the-sun: Time zones enable 24/7 development and support
- Focus: Local team can concentrate on core competencies and innovation
Disadvantages
- Time zones: 4–12 hours difference make synchronous communication difficult
- Cultural differences: Different work culture and communication can cause misunderstandings
- Quality variance: Quality varies between providers and needs strict QA
- Data protection: Non-EU countries require extra measures for GDPR compliance
Frequently Asked Questions about Offshore Development
What does offshore development cost per hour?
How do you minimise risks in offshore projects?
Offshore or nearshore – when which?
Related Terms
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