IT - nCube

Providers of offshore IT services have long since proven their worth. The flexibility of this solution helps organizations reduce overhead and switch to more cost-effective resources when drastic cutbacks are required. If you’re still weighing the positives and negatives of this approach, this post aims to complement your vision of the topic and help you understand if it’s suitable for your business.

Before we dive into the pros and cons of IT offshore outsourcing, let’s define it. In this approach, you delegate your software development activities to vendors of offshore IT services located overseas or in a location at a significant distance from your headquarters. For instance, we at nCube provide offshore IT staffing in regions such as Central and Eastern Europe (Poland, Ukraine, Romania, the Baltics), Western Asia (Armenia, Azerbaijan, Georgia), and Latin America (Brazil, Argentina, Mexico). These countries have a strong potential to become centers of software development excellence for EU and North American companies due to various reasons:

Large talent pools with a wide range of tech skills: Over 2 million software engineers;
Skilled software engineering teams at reasonable rates;
Strong focus on high-quality STEM education;
Effective communications and alignment with Western business approaches;
Partial or full workday overlap with North American and EU time zones.

Thanks to these reasons, offshore IT staffing as an approach to expanding internal tech units is quite popular these days. According to Statista, in 2024, the market of offshore IT services will reach 512.47 billion dollars in revenue.

Below is a brief overview of the strengths and weaknesses of this approach.

Now let’s go over the pros and cons of IT offshore outsourcing in more detail.

Pros of offshore IT services:

Cost reduction

The high cost of in-house software development is the main reason prompting businesses to delegate their software development tasks to overseas providers. As Accelerance reports, businesses can save from 40% to 70% of overall costs by partnering with offshore IT services. Not only are the rates of software engineers lower in offshore regions but also overseas facilities let you cut back on team administration, retention, and IT infrastructure expenses.

Access to a wide range of tech skills

Many EU and North American companies struggle to find developers adept at popular programming languages (Java, JavaScript, Python, PHP, etc) and in-demand technologies (IoT, AI/ML, Blockchain, etc) alike. When weighing the pros and cons of IT offshore outsourcing, the shortage of local skilled technologists is a significant argument in favor of offshore IT staffing. Such offshoring regions as Central & Eastern Europe and Latin America boast large pools of quality tech skills (over 2 million software developers combined), which makes them ideal destinations for offshore IT staffing.

Scaling up and down easily

In the ever-evolving market, offshore IT services offer a high level of agility that companies need to adapt quickly. It’s a fact that offshore facilities are easy to scale. So, when your project requires more skills, chances are you can build a full-blown team within several weeks thanks to vast networks of software engineers. On the other hand, when you need to disband or reduce your unit, providers of offshore IT staffing can do it on short notice.

Speeding up your current project

Providers of offshore IT staffing can help free up your core team from routine tasks. Unlike the outsourcing model, where a team takes on a project and develops it from the ground up, offshore developers can step in at any stage of the project and bring it up to speed quickly. On the other hand, offshore development squads require a great deal of involvement on your part. Although it acts as an autonomous unit, your offshore team will follow your lead and interact with you directly.

Disadvantages of offshore IT staffing

When it comes to the pros and cons of IT offshore outsourcing, it’s worth reviewing the following negatives that can potentially impede cooperation with your offshore unit.

Time difference

In this day and age, remote collaboration is the norm. However, it can be hard to establish efficient communications among team members located in different time zones. With this in mind, many companies choose to stick to in-house teams.

Yet, there’s another way to look at the time zone challenge – an offshore development model comes with a unique overlapping coverage. In a 24-hour timeline, your internal and offshore team will dedicate 8 hours per day each, which equals 16 hours of work done in a day.

A laborious management process

While your offshore squad will be fully dedicated to achieving your goals, you’ll be deeply involved in the software development process. From team formation to managing your offshore unit, the client of offshore IT services is responsible for team management, setting up workflows, and communications. The provider typically covers employee retention, HR processes, overhead, IT infrastructure, but the project’s outcome is always the client’s responsibility.

Communication barriers

Offshoring is a multicultural concept, given that the team members will have diverse communication patterns, as they typically stem from different cultures and backgrounds. That being said, offshore IT services should facilitate providing developers with in-depth language proficiency and a track record of being a part of offshore development projects.

Intellectual Property

Letting providers of offshore IT services handle your operations can pose IP risks. Thus, it’s a good practice to implement security standards and strategies on your side rather than relying solely on your offshoring partner, even if they’ve signed a Non-Disclosure Agreement.

Popular destinations for IT offshore outsourcing

One of the major offshore software development benefits is the ability for companies to select among a variety of IT hubs and find developers who perfectly match their competence needs, rates, experience, ability to work in a distributed environment, and other relevant aspects. Let’s take a look at destinations that reign supreme in IT offshore outsourcing.

Central and Eastern Europe (CEE)

CEE offers good value for money, which is why it is recognized globally as one of the best hotspots for IT offshore outsourcing. The primary beneficiaries of this region are North American companies that rely on the strong IT potential of Poland, Ukraine, the Czech Republic, Hungary, Bulgaria, and Romania, which collectively have around 1 million software developers.

Skills: The region is home to skilled developers with expertise spanning various industries. When it comes to programming languages, the region is a solid repository of JavaScript (front-end and back-end), Java, PHP, Python, Ruby, Android, iOS, and AI/ML talent. CEE is also a good place to hire experts in such sectors as Finance/Banking, Healthcare, Security, Gaming, Automotive, and other industries.

Time zone: A significant offshore software development benefit of CEE is an ample time window for real-time collaboration. This makes it an ideal spot to build a nearshore unit if you’re located in Western Europe and the UK, ensuring complete alignment between your remote and internal team members when working on your project. When it comes to offshore outsourcing, despite differences in time zones, there are usually a few hours of overlapping work time.

Cost: The cost of IT offshore outsourcing in CEE varies from $21 to $118 per hour, excluding vendor fees, as per Accelerance. To find more affordable rates, Ukraine, Moldova, Romania, and Bulgaria are good options, while the Czech Republic, Hungary, and Poland have higher costs of living, which can affect pricing.

Latin America (LATAM)

LATAM is the go-place region for many companies in times of after-Covid belt-tightening. LATAM’s top IT offshoring/nearshoring destinations include Brazil, Argentina, and Mexico, with an estimated pool of one million IT experts. Brazil alone accounts for half of this talent repository. If you’re a tech leader looking for outsourcing opportunities, let’s explore what LATAM has to offer.

Skills: LATAM’s IT labor market is thriving, with a strong IT sector, startup culture, and new tech education initiatives. Brazil, Argentina, and Mexico rank high in tech and innovation skills according to various reports (Coursera’s Global Skill Report, Global Innovation Index, SkillValue Ranking, etc.) Argentine developers are skilled in computer programming, mobile dev, and Cloud computing, while Mexican developers excel in data analysis, mobile development, and Python/C++ skills. Brazilian developers play strong in cloud computing, data management, and software programming, specializing in languages like JavaScript, HTML, SQL, Java, Node.js, and Python.

Time zone: If you’re located in the USA, LATAM is a true gem when it comes to synchronizing remote and in-house teams. Mexico shares the same time zone as the USA, offering up to 8 hours of overlap, while Brazil and Argentina are in the EST time zone, providing up to 7-5 hours of shared regular work hours with businesses in the US, which is more beneficial than software offshoring.

Costs: The hourly rates for nearshore outsourcing to Latin America are comparable to those in CEE, typically ranging from $28 to $105 per hour, excluding vendor fees. However, it’s worth noting that Brazil tends to have higher rates than Mexico and Argentina, according to Clutch’s data on developer rates.

When it comes to IT offshore outsourcing, it would be remiss not to acknowledge the significant role of Asian countries as a talent powerhouse that has dominated the outsourcing market for decades, primarily due to their cost-effectiveness. But offshoring there can be a double-edged sword, with high chances of compromising between the price and quality. Therefore, in the 2010s, global tech leaders began exploring alternative outsourcing hubs in Eastern Europe and later in LATAM.

Your reliable offshore IT staffing provider | nCube

As a company that provides offshore IT staffing, we strive to help you make the most of offshore IT services. Here’s what our approach includes:

A full dedication approach

We aim to strengthen your in-house unit with fully dedicated resources. The engineers we source for you will join your team on a full-time basis, working for you 5 days/40 hours per week. In our approach, engineers will follow your engineering practices and communication patterns as well as adopt your company culture. This way, your offshore team becomes a part of your organization, supplementing your home-based squad.

A customized team formation process

Each client is unique, so we will dive into our network to find candidates that fully match your requirements when it comes to tech skills, company culture fit, English, and other competencies. We are always ready to go the extra mile when it comes to meeting your offshore IT staffing needs.

No intermediaries between you and your team

With us, you will work with and communicate with your offshore team members directly, retaining full control over the provided team. Our approach assumes you will assign tasks and manage the software development process as you see fit.

Only skilled software engineers

As a provider of offshore IT services in Central & Eastern Europe and LATAM, we offer you the opportunity to add best-in-class talent to your team. All developers you’ll meet have undergone our internal screening process, including tech skills, company fit, and English tests. On top of that, the market in our targeted offshore locations is studded with quality engineers with experience working at offshore IT services for EU, UK, and North American companies, which guarantees excellent English skills and domain experience.

Let’s connect to discuss the pros and cons of IT offshore outsourcing for your organization and how nCube can help you build your offshore unit.

Large talent pools with a wide range of tech skills: Over 2 million software engineers;
Skilled software engineering teams at reasonable rates;
Strong focus on high-quality STEM education;
Effective communications and alignment with Western business approaches;
Partial or full workday overlap with North American and EU time zones.

Thanks to these reasons, offshore IT staffing as an approach to expanding internal tech units is quite popular these days. According to Statista, in 2021, the market of offshore IT services reached 413 billion dollars in revenue. Let’s go over the pros and cons of IT offshore outsourcing in more detail.

Pros of offshore IT services:

Cost reduction

Access to a wide range of tech skills

Scaling up and down easily

In the ever-evolving market, offshore IT services offer a high level of agility companies need to adapt quickly. It’s a fact that offshore facilities are easy to scale. So, when your project requires more skills, chances are you can build a full-blown team within several weeks thanks to vast networks of software engineers. On the other hand, when you need to disband or reduce your unit, providers of offshore IT staffing can do it on short notice. Thanks to this, the team reduction doesn’t incur additional expenses.

Speeding up your current project

Continuous coding collaboration

IT offshoring helps companies incorporate the concept of continuous software development. When an engineer completes their work in one time zone, their colleague in a different time zone picks up the slack and continues the development process. This practice guarantees an uninterrupted workflow that transcends geographical boundaries and time zone differences. Besides that, this approach is convenient for a non-stop maintenance process.

Disadvantages of offshore IT staffing

When it comes to the pros and cons of IT offshore outsourcing, it’s worth reviewing the following negatives that can potentially impede cooperation with your offshore unit.

Time difference

A laborious management process

Communication barriers

Intellectual Property

Popular destinations for IT offshore outsourcing

Central and Eastern Europe (CEE)

CEE offers good value for money, which is why it is recognized globally as one of the best hotspots for IT offshore outsourcing. The primary beneficiary of this region includes North American companies looking that rely on the strong IT potential of Poland, Ukraine, the Czech Republic, Hungary, Bulgaria, and Romania, which collectively have around 1 million software developers.

Skills: The region is home to skilled developers with expertise spanning a wide range of industries. When it comes to programming languages, the region is a solid repository of JavaScript (front-end and back-end), Java, PHP, Python, Ruby, Android, iOS, and AI/ML talent. CEE is also a good place to hire experts in such sectors as Finance/Banking, Healthcare, Security, Gaming, Automotive, and other industries.

Latin America (LATAM)

Your reliable offshore IT staffing provider | nCube

As a company that provides offshore IT staffing, we strive to help you make the most of offshore IT services. Here’s what our approach includes:

A full dedication approach

A customized team formation process

No intermediaries between you and your team

Only skilled software engineers

Let’s connect to discuss the pros and cons of IT offshore outsourcing for your organization and how nCube can help you build your offshore unit.

Changes in global markets and advances in technology have changed how offshore information technology companies work. While the geographic location is an essential consideration in other industries, organizations in the IT industry are much more open to a multi-location structure and hiring offshore developers. That means IT companies can capitalize on the strengths of each of their sites.

During its early years, companies considered IT offshoring to take advantage of lower overhead and potential growth. However, as technology took over the world, more and more organizations began to increase their investments in IT. Eventually, hiring offshore developers became a viable option.

The last decade brought significant changes to how businesses used and consumed IT products and resources. The advent of cloud technology improved global communication, and even the increased interconnection of global cultures have significantly changed IT offshoring work.

In this article, we will take a look at our findings on the current state of IT offshoring and outsourcing, including recent trends, driving forces, and what changed in the past years

Outsourcing vs. offshore developers

You may be asking companies to use offshoring to do what? Well, back in the early years of offshoring and outsourcing, the two business processes are easily separated. However, as globalization and internationalization permeated practically every industry, various concepts have begun to float around, blurring the line between the two.

Traditionally, offshoring refers to the organization’s movement of its activities abroad. On the other hand, outsourcing means moving activities to an offshore developers provider, regardless of its location.

However, recent decades have changed these definitions drastically. Companies that use offshore developers have combined all or parts of business offshoring and outsourcing processes to become interchangeable. That gave way to concepts such as multi-sourcing, offshore outsourcing, nearshoring, offshore IT companies, offshore software development, selective sourcing, and more.

To simplify, we define offshoring and outsourcing as providing administrative services in locations abroad, whether through an in-house department or a third-party service provider. Companies often have teams worldwide, usually combining internal teams working remotely and offshore developers hired through outsourcing entities. Hence, we will use offshoring to refer to all the concepts described above from this point on.

The current state of offshore information technology and related industries

Offshoring is not a modern phenomenon. Each generation has different motives attributed to market demands, technological advancements, and cultural intermingling.

In the past, offshoring was centered around goods. Organizations take advantage of affordable production costs and efficient distribution networks. For example, Sweden has long been known to be a popular offshoring destination for organizations in the shipbuilding, textile, and manufacturing industries in Europe.

However, modern-day offshoring efforts are driven by offshore information technology rather than goods. Thus, there was a noticeable shift in the driving forces between the late ’80s and early ’90s, which continues to this day.

First, and obviously, such low costs drive companies to consider offshore software development to maximize their profits. Second, countries outside the United States are beginning to develop their own offshore IT companies. These budding markets are perfect grounds where established companies can take new roots before prices go up. Lastly, unique factors such as excellent yet affordable infrastructure, advanced technologies, similar culture, language, and other special competencies drive companies to relate some parts of their organization, specifically the offshore information technology units.

The global state of offshore IT companies

Global Offshoring Market

Closely related to IT services are business processes that are commonly outsourced to BPO’s abroad. So much so that entire BPO industries have developed in India, the Philippines, and most Eastern Europe. As such, global offshore software development expenses have steadily increased throughout the years.

Since 2000, the influx of organizations entering new locations has pushed offshore information technology to new heights.

Global Market of Outsourced Services

However, 2016 recorded the worst market report with only $76.9 billion, the lowest in a decade. The primary motivation of the decreasing market was the effort to cut costs and focus on core business processes. This means more organizations are spending more on new solutions through IT services than on offshore developers.

Reasons for Offshoring by NCube

The trends in offshore IT companies had exciting effects on the IT industry. In 2018, business process outsourcing had a much smaller market share than information technology offshoring. The BPO industry only contributed $23.6 billion compared to the offshore information technology’s $62 billion offshoring revenue.

The 2017 report of the most outsourced and offshored services of IT leaders worldwide reflects this trend as well. Software application development took the top spot at 64 percent. Similarly, IT functions dominate the top offshored services in the last few years.

Offshored IT Functions Worldwide

Interestingly, there is a rising trend in the IT offshoring business in recent years. Between 2017 and 2018, there is a slight drop in allotted budgets for offshore software development. Even with large companies increasing their total expenditures, medium and small companies are turning to cloud technology, which is much more affordable.

Offshoring of Total IT Budget

Again, this recent trend seems to reflect the prediction during 2016 when cloud technology is taking off rapidly and set to disrupt the global market.

Offshore developers: training and opportunities

With the move from exclusively outsourcing from the labor force to offshoring IT services, offshore developers have become the top export of most outsourcing countries. In the above graph, access to intellectual capital is one of the driving forces of offshore IT companies.

The skill level and prices are top priorities in hiring offshore teams. Eastern Europe and the surrounding regions are known to be excellent sources of top offshore developers in the West. Russia, Ukraine, and Poland are leading the pack with exceptional offshore developers who possess business knowledge and communication.

Additionally, Latin America is a favorable region for companies that do not want to deal with severe time differences. Brazil is becoming a leading country for offshore developers specialized in Ruby, which is always in demand.

Hire software

Finally, Asia has always been a hotbed of offshore software development with BPO’s and offshore IT organizations targeting countries like India and China even during the early years of outsourcing. Even with significant language barriers, more and more businesses are considering relocation in this region due to affordable business operation costs. Also, more and more countries are emerging in the IT sector and offshoring markets such as Pakistan, the Philippines, Thailand, and more.

Offshore developers: opportunities

Offshoring Opportunities

As with recent innovations in communication, cloud technology, and infrastructure, we do not see IT offshoring slowing down any time soon. As more areas become viable offshore developers’ pools of IT skills, companies are beginning to look at countries beyond offshore software development.
Organizations are beginning to realize the advantages of hiring offshore developers. Even small and medium-sized companies are looking at IT solutions developed by offshore developers and IT professionals outside their location.
Just like the difference between offshoring and outsourcing, geographical limitations are blurred, allowing organizations to set up offshore software development units across the world. Let’s take a look at one of the rising IT talent sources in Europe: Ukraine.

Offshoring spotlight: Ukrainian offshore developers

In recent years, Ukraine has been one of the top countries as the primary destinations of IT offshoring companies. As a result, the country is poised to compete with India and China in offshore developers’ availability and training in information technology.
Our observation in the last five years showed an increase of about 20 percent in human capital in the Ukrainian offshore IT companies. Since 2011, the IT sector has doubled with more fresh talents coming in every year.
Nowadays, more and more companies have offshore developers across Europe, just like nCube. With offices in both London and Kyiv, the company is able to take advantage of top-quality talent and high-profile clients across the region. The organization comprises senior offshore developers and Master’s degree holders, with 70% certified senior offshore developers. That reflects the country’s top-notch training in IT and related professional consultants.

nCube’s remote teams are experts in Java, Go, Javascript, Python, and .NET, which are the most in-demand programming languages right now. Organizations inside and outside Europe can build a remote team of offshore developers to create custom software for their specific needs.

Along with expertise in offshore software development, the company is also delving into emerging industries like blockchain and Internet-of-Things. As exemplified by nCube, Ukrainian offshore developers are becoming leaders in bleeding-edge technology.

Offshore IT companies: Final Thoughts

IT offshoring will continue to shift as new technologies emerge. Regardless of the current trends, we see an ever-expanding industry ripe with many opportunities for both businesses and the workforce. Organizations are no longer limited by their locations. In the future, we expect to see a further redefinition of offshore IT companies and outsourcing processes as the industry continues to snowball.

Nearshore IT engagements allow businesses to fill in positions with strong tech talent at a reasonable cost. Staff augmentation vendors in Ukraine usually have in-house recruitment teams, and so do we at NCube, a software development outstaffing company. Here are some recruitment insights for those who want to weave Ukrainian developers into their development teams.

Where can I hire Ukrainian software engineers?

With nearly 95K out of 220 00 software engineers (according to the Ukraine region), this platform is considered to be one of the best recruitment channels. The only drawback of this channel is the stiff competition among recruiters, which makes recruiters push their search outside of it.

Djinni

The best resource for an anonymous job search in the Ukrainian market. Candidates describe their experience and let companies send them vacancies. Great place to engage talent with various technical skills.

Specialized developer websites

It’s easy to find developers using developer community websites. Except for the well-known GitHub, Ukrainian developers can be engaged through Dou.ua. With 150K users monthly, it’s one of the biggest communities for IT specialists.

Channels in Telegram, Facebook

Particularly, private groups where engineers share their ideas and generally search for like-minded people. However, one needs to get an invitation from a member to access the group.

Recruitment-specific tools

Amazing Hiring and X-Ray allow you to find and connect with developers and create a whole database of tech talent.

Developer conferences and events

Although of a lower priority in the recruiter’s toolbox – you can meet the finest tech minds at events, even in the role of a speaker. Great place to meet seniors and domain experts.

Tinder

A controversial but effective channel as proven by recruiters in Lviv, one of the biggest IT hubs in Ukraine. This city boasts a large number of IT specialists working in the city center, so it’s easy to target the audience. Recruiters often initiate communication in English to test the language proficiency from the get-go.

Which positions are the most difficult to fill?

Ukraine is a true repository of technology talent, so finding good developers for junior and middle-level developers will only take 1-2 weeks. However, when it comes to senior positions and domains like data science, AI, DevOps where the competition is stiff, it’s really tough to find an expert on short notice. Plus, the requirements for such positions are much higher, so it may take a few months.

Easy: Trainee or Junior level, common tech stack like Java or Python, web or mobile developers, UX/UI designers.
Difficult: Starting from senior+ level, DevOps or Cloud experts, Data Scientist, AI Architects.

How often do developers reject an offer?

Not too often. In Ukraine developers are indeed spoilt for choice – there is an ongoing competition among companies for tech minds. Some developers use the offers as a level for getting promoted in their current job. It’s important to identify and weed out those who are likely to act this way during the first stages of the recruitment process. Thus, the percentage of such is lower than one of those who reject the offer after working several weeks on the client’s project. The reasons vary – from failed expectations concerning the tech stack to not fitting the company’s culture.

What about employee retention?

In our experience, 2 years and longer, given that the developer’s career ambitions are sustained and they like the project. More often, the initial hires stay throughout the project. If a developer joined at the beginning, there is a 70% chance of them staying till the finish. There are also other factors that should be considered on the side of the vendor: office location, motivation, and generally keeping up with what other companies may offer.

What requirements complicate the candidate searching process?

Time shifts with the USA. The geographic location leaves a small number of cross-over hours to be in synch with US teams, especially with teams from California. It’s practically impossible to set up a large team that would work early morning or night shifts.
Languages proficiency. While most developers master English at a decent level, tech specialists with knowledge of other languages, be it German, French, or Japanese, are hard to come by.
Working more than 8 hours per day. Ukrainian developers are not likely to take work home as they value the work-life balance.

What requirements don’t create speed bumps?

Remote vs. office-based work. Ukrainians welcome home offices and will be glad to be a part of a remote-first culture. Many developers have rich experience working with freelance projects.
Traveling. Business trips are on the wish list of the majority of developers in Ukraine. Therefore, onsite training and team visits are always welcomed.
Minor time shifts. In our experience, developers don’t mind shifting the start of the working day to noon.
Staying online all the time. Ukrainian developers, for the most part, treat the projects with a due sense of ownership and respond to messages after hours and on weekends.

In conclusion

We are hopeful that the information above will be useful for creating a remote technology team in Ukraine. If you face a challenge, let’s schedule a meeting with our recruitment team lead Maria who will gladly share some insights with you.