Ramp-up Your Tech Team: Complete Guide to Offshore Software Developers in 2024 for the U.S. Companies

The need for quality tech teams is paramount in today's tech-savvy business environment, but building such teams in the USA can be time-consuming and expensive; thus, the natural move is to look for the best country to offshore IT in search of reasonable development costs and equal quality.

 Simultaneously, it's essential to recognize that there has been a profound shift in the global paradigm. In recent years, we grappled with a pandemic, triggering an initial period of lockdown and economic crisis, followed by a surge and rapid expansion of technology companies. Subsequent years unveiled significant geopolitical events and dramas, discussions about the potential atrophy of globalization (as opposed to Fukuyama's 'end of history'), inflation, a decrease in investments – including within the Tech sector, notably in startups – and economic pessimism in many areas. However, the dynamics and nature of change vary in different countries and parts of the world.

For American companies, this situation necessitates exploring operational models that optimize costs without compromising quality. In this context, as observed in prior periods, the well-established practice of offshoring comes into play once again. As always, contemplating the utilization of opportunities in other countries requires a solution that aligns with our company's needs. But today, accounting for the prevailing realities and substantial changes occurring across various global regions is critical.

This article aims to provide a comprehensive guide to IT offshoring in 2024, offering insights into the various cooperation models and attractive IT offshoring markets. We will delve into the details, pros and cons, and most importantly, guide CEOs and CTOs through decision-making at the spark of a new, uneven world.

What is offshore software development: essence and types

In the tech and IT industry, offshoring signifies moving business functions or services to a different country to reap offshore software development benefits like:

• accessing scalable pools of talented software developers,
• acquiring high-quality talent,
• reducing team turnover and attrition,
• optimizing costs.

This approach allows companies to tap into global resources and differences in time zones, while simultaneously achieving economic efficiency.

Offshoring in IT can be broadly classified into 2 categories of offshoring: build internally vs use other company.

The first involves building your team, which may include hiring or recruiting internally, with or without establishing a branch.

The second category involves outsourcing services to a specialized company that provides body leasing, staff augmentation, or end-to-end project delivery.

Investopedia explains that offshoring is an effective strategy businesses employ to decrease operational expenses by transferring tasks to regions where they can be completed more affordably and proficiently.

Let's have a look at each of the services you, as a CTO and CEO, might consider.

Types of IT offshoring

Offshore IT recruitment

Offshore IT recruitment refers to the process of sourcing, interviewing, and hiring IT professionals from countries other than the home country, typically where labor costs are lower, or the quality talent pool is broader, to support or enhance a company's technological capabilities.

When it comes to Offshore IT Recruitment, you have two viable options.

The first option involves directly hiring top specialists from other countries on your own. This can be challenging and time-consuming, as you need to navigate the complexities of local market conditions, legislation, and business environment.On the other hand, you can choose to partner with IT Recruitment Agencies specializing in offshoring. A recruitment agency should comprehensively understand the offshoring country's local market, legislation, and business environment. Top recruiting firms offer the flexibility to ramp up or slow down the recruitment process as per your needs, providing a streamlined solution for building your offshore tech team.

Offshore IT Staff augmentation

Offshore IT Staff Augmentation is a strategic business model where you add skilled external talent to your in-house team based in another country, thereby enhancing your business capacity without incurring the costs and liabilities of full-time in-house employees.

IT Staff Augmentation allows a vendor to supplement your existing team with specific roles and skills that are necessary for your operation. This model grants you more control over your team's operations, as you can directly manage the offshore team members just as you would with your in-house team. In this case, the vendor takes responsibility for recruitment and administration tasks (for example, payroll, benefits, compliance with local labor laws, and freeing up your time and resources).

A pragmatic approach to offshoring in technology sectors is to adopt a hybrid model. This model combines offshore IT staff augmentation with recruitment services. That's why take this as a must-have requirement for your potential future tech talent acquisition partner.

Offshore IT branch and subsidiary

An IT Branch and Subsidiary is essentially an autonomous division of your company, functioning independently in an offshore location and governed by the same business principles and objectives set forth by your organization.

Establishing an offshore IT branch or subsidiary warrants consideration for its numerous advantages. One compelling reason is the potential to develop a tech center that serves as a magnet for future software developers, IT security specialists, DevOps, and other tech talents. This presence in the local tech scene can boost your company's reputation, attracting top-tier professionals. Legal compliance is another driving factor, especially in regions like the European Union, where having a local base is an essential advantage for doing business.

Furthermore, the opportunity to access funding, grants, and other incentives unique to the offshore location can significantly benefit your operation. However, every market has unique characteristics, and setting up a branch involves navigating through unfamiliar red tape. Partnering with a local agency can ease this process, guiding you through local procedures and requirements and helping you avoid potential pitfalls.

Offshore IT outsourcing

Offshore IT outsourcing involves contracting an external company in a foreign country to perform specific IT functions traditionally performed in-house. This approach is frequently used for end-to-end projects, where the outsourced company takes full responsibility and complete control of the development process, from the initial planning stages to the final product delivery. While you get the desired results, you do not control the process nor build in-house know-how, and you are exposed to risks associated with issues such as data security and intellectual property infringement.

However, this model can be beneficial for particular project types, especially when rapid scaling, cost-efficiency, or access to specific expertise is a priority. It's crucial to conduct a thorough risk-benefit analysis and choose a reliable outsourcing partner to ensure a successful offshoring experience.

When to hire offshore developers

"Too many CEOs, not enough engineers" - the U.S. IT sector drama.

Are you experiencing the common dilemma, "Too many CEOs, not enough engineers"?

You know it, we understand it from conversations with your peers and media like CNBC, Forbes, and Computer World, but let's characterize engineers and tech market in the US:

1. High level of investment in technology: U.S. companies invest heavily in technology, fueling demand for IT professionals.
2. The U.S. IT sector has an ever-increasing demand for IT experts due to the rapid digital transformation across industries.
3. U.S. IT specialists are some of the highest-paid professionals globally in recognition of their skills and expertise.
4. Areas like Silicon Valley, Seattle, and New York are globally recognized tech hubs attracting top IT talents. They suck out engineers like a high-performing vacuum cleaner.
5. U.S. IT professionals often work on large-scale, high-impact projects.
6. The U.S. IT sector is known for its innovation and is home to tech giants like Google, Apple, and Microsoft; yup, it takes a lot of work to compete with those companies.
7. The U.S. has a vibrant tech startup scene, providing exciting opportunities for IT professionals. There is an excellent chance that you represent one, so you know what the entrepreneurial market looks like.
8. High specialization: Many IT roles in the U.S. require highly specialized skills or knowledge in a particular technology or industry.

These eight points reflect the day-to-day realities and challenges CEOs and CTOs in U.S. firms grapple with in the IT landscape.

Let's have a look at the personal, intercompany challenges you face:

You need to fill a highly specialized or critical technical role

Securing roles in high-demand areas like security, data science, machine learning, or quantum information theory can feel like finding a million-dollar bill - extraordinarily rare and valuable. With technology evolving rapidly, these coveted specialists are in short supply and high demand, presenting a significant challenge for U.S. companies seeking to fill these critical positions.

You have a lot of positions to fill

Launching a new project, developing a new product, or rewriting legacy code often requires a substantial increase in tech manpower. This necessity to ramp up the tech team can create a daunting task for any company, especially when we consider the difficulty of not only finding, but also retaining an individual engineer. Imagine the magnitude of this challenge when this demand expands to an entire group of engineers.

There's been high turnover for the role

Experiencing high turnover rates in key tech roles can feel akin to battling an endless tide, where your efforts are thwarted by constant attrition. The cyclical process of recruitment and onboarding becomes a daunting, time-consuming endeavor. This persistent instability not only interrupts project timelines but also inflates costs and undercuts your team's overall morale and productivity.

You can't seem to fill the vacancy

The hunt for the right expertise can often feel like a quest for a mission impossible. The lack of available talent in the market and the inability to fill vacancies, especially those requiring highly specialized skills or experience, can create a significant bottleneck, stalling projects and impacting overall company performance.

You are short on time

An impending investment round closure, increasing investor expectations, seizing market opportunities, and overcoming active competition necessitate swift action. Therefore, it's imperative to act fast and make timely, strategic decisions including offshoring your IT needs.

For CEOs and CTOs in the U.S., the decision to offshore IT services often comes as a strategic response to all mentioned internal and external pressures. Offshoring emerges as a compelling solution, especially aligning perfectly with the prevalent trend of flexible remote work arrangements in the U.S. IT sector. When you meet on Zoom or Meets, why not meet tech talents from Poland :).

Advantages of IT/tech offshoring

Offshoring IT and Tech teams can bring strategic advantages, especially for US-based firms and their CEOs and CTOs. Here are five key benefits:

1. Access to Wider Talent Pool: Offshoring paves the way to a larger, global talent pool, providing access to specialized skill sets that might be scarce domestically, particularly in emerging technologies.
2. Cost Efficiency: By offshoring, companies can leverage different economic conditions, including lower costs and operational expenses. The savings are from 10% to even 70%, depending on the skills required and the market.
3. Speedy Talent Acquisition: Offshoring often allows for a faster recruitment process, enabling companies to rapidly onboard skilled IT professionals as per project needs.
4. Increased Competitiveness: Gaining access to cutting-edge skills and valuable expertise within budget constraints through offshoring can significantly increase a company's competitiveness in the increasingly digital global market.
5. High-Quality Standards: Offshoring, particularly to regions with a strong IT infrastructure, ensures adherence to global quality standards, resulting in superior work and code.

Disadvantages of tech offshoring

While offshoring offers many advantages, there are potential drawbacks that CEOs and CTOs must consider to ensure a successful international collaboration.

Lack of day-to-day control

A common disadvantage of tech offshoring is the lack of day-to-day control over your IT team, which might lead to potential misalignment with your business goals. However, this concern largely becomes irrelevant when companies are already accustomed to remote work models. Nevertheless, successfully navigating this challenge calls for the development of new management skills and patterns, such as adopting clear communication protocols and using collaborative tools effectively.

Different time zones

Differing time zones within your offshore IT team can present challenges for impromptu meetings, which can hamper immediate decision-making. In some regions this problem does not occur (LATAM) or is eliminated if employees are willing to work during American business hours (numerous countries in Europe).

However, if differences in working hours occur, and especially if they are significant, then, this necessitates more strategic planning and robust project management to ensure smooth coordination and timely execution of tasks. Careful scheduling, clear communication, and a suitable set of collaboration tools are crucial to overcome this geographical hurdle and maintain productivity.

Limited personal contact

Offshoring IT and tech teams means limited personal contact, which can impact team dynamics and cohesion. In the wake of the COVID-19 pandemic, we have seen a shift towards remote collaborations, redefining work norms drastically. However, many companies that transition back to on-site work, recognizing the irreplaceable value of frequent in-person interactions among team members, see Elon Musk's companies.

Considering that, you can choose an offshoring market with convenient logistics for you and your team to fly occasionally.

Security challenges

Security challenges are a significant aspect that cannot be ignored in the realm of offshoring. As data breaches and cyber threats continue to escalate, ensuring the security of sensitive data when collaborating with an offshore IT team is paramount. Therefore, partnering with a country that emphasizes strong data protection laws, and is based on a rule of law environment, can serve as a strategic move for companies looking to offshore their software development.

Country assessment: which is best for your IT offshoring needs?

As a US-based SME or startup, you find yourself at a crossroads, with myriad directions of IT offshoring to explore, each with its unique set of advantages and challenges, specializations, business environments, and cultural settings. The choice you make must be informed by the specific needs and goals of your company. Whether you're seeking to establish a center for routine IT tasks and basic coding, or your focus is on developing complex, high-end solutions involving Machine Learning and stringent security measures, the offshoring destination should align with these expectations. Furthermore, in today's geopolitical climate, the stability of your chosen offshoring country has become increasingly critical. In the following sections, we aim to provide you with a comprehensive toolset to help assess the most suitable IT offshoring market for your distinct needs.

Geopolitical situation

The current geopolitical landscape presents an increasing number of nations, such as Iran, Russia, and China, challenging the US's long-held position as a global superpower. Economic war between the U.S. and China, military tensions in Southeast Asia, the Israeli-Palestinian conflict, and Russia's aggression toward Ukraine, to name a few.

Others like Brazil, India, South Africa, and Turkey are emerging as significant players asserting their independence and shaping global events. These countries expand their influence in their respective regional spheres but also are increasingly divergent from traditional U.S. policies.

This complex global situation underscores the importance of evaluating potential offshoring destinations' stability and global standing as a critical aspect of your strategic decision-making process.

The political stability of a country

Political stability within a particular country is paramount when considering your offshoring destination. This is because political instability can lead to unpredictable changes in laws and regulations, or even to mass protests, riots, and wars which can disrupt business operations. Edge cases may lead to social unrest, resulting in a volatile environment, which is not conducive to business continuity.

Moreover, understanding the general goals of the political class in a given country provides insights into the direction in which the country is headed. For instance, a political class that prioritizes the U.S. and Western orientation, in general, will not experience sudden changes after elections or ruling power changes.

Time zones

Time zones play a critical role in offshore software development, influencing communication and project management strategies and as already mentioned above, sometimes might be a pain in the neck. Companies must consider the time difference between the home office and the offshoring destination. Close time zones facilitate easier collaboration and real-time communication. However, significantly different time zones may require adopting a follow-the-sun model, where work continues 24 hours a day as one team hands off tasks to another in a different time zone. This model can boost productivity by ensuring round-the-clock progress, but it also demands robust coordination and communication strategies to be effective.

In conclusion, assessing potential offshoring destinations requires a multifaceted approach encompassing various significant factors. While this list isn't exhaustive, it serves as a solid foundation for decision-making. By evaluating potential markets through these nine factors, businesses can make data-driven, fully informed, and confident decisions about offshoring.

English proficiency

Excellent English proficiency is vital when conducting business and offshoring your IT operations. This translates into efficient coordination, faster problem-solving, and better results. The EF English Proficiency Index (EF EPI) is a key tool for evaluating a country's English proficiency. This index provides a comprehensive ranking of countries by the English skills of their inhabitants.

In addition, when you and your team travel to the offshore site, the ability to freely communicate, conduct business, and engage with the local culture significantly enhances the experience. This is generally easier in an environment where English is widely spoken.

Cultural fit & communication patterns

CEOs and CTOs in U.S. who are used to environments with straightforward and open communication should remember that communication styles can vary greatly from one country to another. Understanding these differences and appropriately managing them is crucial to the success of offshoring IT operations.

Misunderstandings due to differing communication patterns can lead to potential problems and conflicts, impacting the efficiency and productivity of the offshore team. It's vital to select an offshoring destination where the cultural fit aligns with your organization's values, work ethics, and communication style.

IT skills and quality of professionals

In evaluating professionals' IT skills and quality for offshoring destinations, the best solution is to consider independent surveys and programming competitions that offer insightful data. In the first case, a well-cited example would be HackerRank's 2016 analysis or SkillValue’s report based on +550 technical assessments: ‘Where to find the best developers in 2019?’ (you may download the report here.) Both studies provide a ranking of developers' skills by country. In the second case, the results of the International Olympiad in Informatics (IOI), the International Collegiate Programming Contest (ICPC), or other major contests are worth analyzing. The Competitive Programming Hall Of Fame project presents the history of international championships in competitive programming, where you may find results by country.  Such competitions and hackathons, organized by various institutions worldwide, frequently yield similar rankings, reflecting the countries' significant emphasis on nurturing exemplary IT skills.

These results, to a great extent, mirror the educational systems in these countries, which are often structured to foster STEM (Science, Technology, Engineering, and Mathematics) fields. By focusing on these areas, countries are able to cultivate a generation of highly skilled IT professionals, making them attractive offshoring destinations. It's also essential to consider the education system in a potential offshoring destination beyond these competitions.

Ease of doing business and security

What works seamlessly in the U.S. may not necessarily translate well to other countries. Renowned for its business-friendly environment, the U.S. is often hailed as one of the easiest countries to conduct business according to the World Bank's Ease of Doing Business index. However, it's vital to note that not every offshoring destination mirrors the U.S. in this respect. The regulatory landscape varies significantly across countries and regions, with some grappling with high levels of bureaucracy and others offering a more streamlined, business-friendly environment.

In addition, the virtual and physical security level is another crucial factor to weigh in. Data security is paramount in the realm of IT and software development, and offshoring necessitates stringent data protection measures.

It is, therefore, crucial to thoroughly analyze data from reputable sources, such as the World Bank and others, when considering offshoring destinations.

Location & market opportunities

The offshoring destination is like real estate, its quite about location, location and location. Its impact on logistical convenience and proximity to other attractive markets can play a pivotal role in the smooth execution of your business operations. Connectivity of the country shall be important to your future business travels.

The presence of numerous business events, tech fairs, and conferences within this region represents a wealth of networking opportunities. This, in turn, opens up avenues for collaborations, partnerships, and sales leads.

Lastly, choosing an offshoring destination that aligns with your company's expansion plans can serve as a strategic launchpad for your business, enabling you to tap into surrounding markets with relative ease. So look closely at your offshoring destination if their neighbors are attractive to your business.

Cost, taxation, and government incentives

When considering offshoring, it is vital to look beyond the simple cost of services. While competitive pricing might be the primary factor driving outsourcing decisions, building an in-house remote team requires a more comprehensive financial assessment. This includes evaluating the taxation system. 

Even if you don’t create a legal entity in a given country, taxes decide about net salaries of people working there. 

While if you decide to create a subsidiary, taxes, government incentives, and the level of bureaucracy in the potential offshore location are crucial. 

Taxation affects the net cost of operations and can significantly alter the financial feasibility of offshoring if not accounted for properly.

Government incentives, such as tax breaks or subsidies, can make a location more attractive, providing financial relief to businesses and encouraging foreign investment.

Furthermore, a country with a high level of bureaucracy may slow down processes, potentially increasing costs. Therefore, a thorough financial analysis is imperative to make an informed decision about your offshoring destination.

Top regions and countries to offshore IT and tech teams

Let's delve into the specifics of four prominent countries leading the offshoring movement in their respective regions: Poland, Argentina, India, and Vietnam. These countries have each carved a niche in the global IT offshoring market, have their own characteristics and perhaps our exploration will pique your interest in offshoring your tech to one of them.

Europe: Poland

Poland, located in Central Europe, is emerging as a significant player in the IT offshoring market. With a population of over 38 million, it offers a large, highly educated workforce, particularly in STEM fields. The country's strong emphasis on education, especially in technical disciplines, results in a pool of skilled IT professionals. Poland's time zone alignment with Western Europe and cultural proximity to Western business practices make it an attractive destination for U.S. companies. The cost of labor in Poland is competitive compared to Western Europe, although higher than in some Asian countries. The country's growing IT infrastructure, government support for the tech sector, and membership in the European Union add to its appeal as a stable and accessible offshoring destination.

South America: Argentina

Argentina, in South America, stands out in the Latin American IT offshoring landscape. With a population of around 45 million, it boasts a significant number of English-speaking IT professionals. The country is known for its strong educational system, particularly in technical and engineering fields. Argentina's time zone is closely aligned with North American business hours, facilitating real-time collaboration. The cost of labor is relatively low, making it a cost-effective option for IT offshoring. However, economic volatility and currency fluctuations can be challenges. Argentina's IT sector is known for its creativity and innovation, and the government has implemented policies to encourage the growth of the tech industry, which can be beneficial for US-based companies looking for stable and innovative offshoring partners.

South Asia: India

India, with a population exceeding 1.3 billion, is a global powerhouse in IT offshoring. It offers a vast pool of technical talent, with millions of English-speaking IT professionals. The country's emphasis on STEM education produces a large number of graduates each year, catering to the growing demands of the IT industry. India's time zone difference with the U.S. allows for round-the-clock operations, advantageous for continuous development and support. The cost of labor in India is among the lowest in the world, making it highly attractive for cost savings. However, cultural differences and distance can pose challenges in communication and management. India's established IT infrastructure and the presence of numerous global IT firms underscore its status as a leading offshoring destination.

South-East Asia: Vietnam

Vietnam, in Southeast Asia, is a rising star in the IT offshoring sector. With a population of over 97 million, it has a young, dynamic workforce, with a growing emphasis on STEM education. The government's focus on IT development and favorable policies have led to significant growth in its tech sector. Labor costs in Vietnam are highly competitive, even when compared to other Asian countries. The country's burgeoning IT infrastructure and increasing proficiency in English are notable. However, Vietnam's time zone difference and emerging status in the IT sector can present challenges in terms of experience and scalability. For U.S. companies, Vietnam offers a cost-effective alternative with a rapidly developing IT landscape, which is particularly attractive for startups and companies looking for agile and innovative offshoring solutions. 

Country vs country comparison

We have prepared for you a comparative snapshot that should facilitate your decision-making process.

Please consider an informative table that summarizes key ranking metrics that stem from the following sources:

Political Stability Score, based on reports and graphs prepared by Eurasia Group, a political risk and management consulting company. 

Time Zone Difference, is an important consideration for offshoring, as it can play a crucial role in synchronization and seamless communication between the onshore and offshore teams.  

The IP Index, developed by the U.S. Chamber of Commerce Global Innovation Policy Center, provides a comprehensive measure of a country's environment for intellectual property rights, including the legal and political framework, protections for patents, copyrights, trademarks, and more. 

The Ease of Doing Business Index, prepared by the World Bank, offers crucial insights into the regulatory environment of a country, helping businesses identify the most conducive markets for offshoring software development. 

The EF EPI (English Proficiency Index) Rank is prepared by Education First, a leading international education company, to provide an objective measure of English language proficiency in non-native English-speaking countries, thereby aiding businesses in making informed offshoring decisions. 

Moody's country credit rank is a crucial metric prepared by Moody's Corporation, a renowned rating agency, designed to assess a nation's creditworthiness and fiscal stability, thereby providing insight to businesses looking to offshore their operations in a risk-mitigated manner.

The S&P Country Credit Rank is a crucial metric prepared by the globally recognized rating agency, Standard & Poor's (S&P), designed to assess a country's creditworthiness and fiscal stability. This offers key insight to businesses, especially those in IT looking to offshore their operations, by providing a reliable measure of economic risk associated with conducting business in a particular country.Please see here what is the description of the Credit rating and investigate more data HERE.

Criteria for selecting a great vendor for your IT offshoring needs

Having armed yourself with an understanding of offshoring, its types, potential cooperation models, and the respective strengths of dominant tech offshoring superpowers, you're now ready for the critical task of assessing your future business partner. This is the firm that you'll collaborate within recruitment, staff augmentation, setting up a branch, or pursuing other outsourcing models. Careful evaluation of these factors will help ensure that your selected partner infuses your offshoring venture with efficiency, quality, and a shared vision for success.

Flexibility of cooperation models

Your chosen vendor should be able to accommodate diverse cooperation models, be recruitment and headhunting, team augmentation, a dedicated team, supporting your or representing locally when setting up a physical IT branch. This flexibility allows you to choose a model that best fits your needs and can adapt as your business evolves.

References and portfolio

Assess the vendor's credibility by looking at their reference letters and portfolio. Client testimonials, case studies, and a history of successful projects in your domain provide valuable insights into the vendor's capabilities and reliability.

Global and local expertise

Your vendor should have both global and local expertise. Understand their proven experience in serving international customers and their knowledge of the local market. This dual expertise ensures effective cross-border collaboration and a robust understanding of local resources and regulations.

Communication

Effective communication is a cornerstone of any successful partnership. Your vendor should communicate clearly and efficiently, understand your needs, provide regular updates, and be available for discussions.

Cultural compatibility

Finally, cultural compatibility is vital in an offshoring partnership. The vendor should respect and understand your company's culture, values, and work ethics. This compatibility fosters a smooth and harmonious working relationship, promoting mutual growth and success.

Winged IT - the best talent supply partner in Poland

We are a Polish Tech Recruitment, Outstaffing, and Consulting Company providing services in the most flexible model up to your needs.

We help customers get the best tech talents from Poland to work for them with the help of IT recruitment and headhunting, staff augmentation, body leasing, headhunting, branch creation and softlanding services, so they can run their software projects and reduce budgets.

Since 2017, we helped over 100 clients from 4 continents to find the best and most affordable tech talents. We deliver candidates from Central and Eastern Europe, ready to work remotely from Poland or relocate to your country.

Among the many companies offering similar services, we stand out primarily by focusing on cooperation with international clients worldwide. We know precisely the needs and challenges of companies willing to recruit brilliant Polish Tech candidates and have broad experience in delivering ALL required solutions.

• Flexible cooperation models
• IT Recruitment
• IT Staff Augmentation
• Soft landing: Creating an inhouse remote team (without a legal entity creation) or branch in Poland
• Guarantees
• Try and hire
• No upfront costs