Offshore Development Benefits | Differences from Outsourcing

The terms “offshore” and “outsourcing” are commonly found in business news and articles, but what exactly? It’s about how to outsource your business to other companies. Many people often think that offshore and outsourcing are the same, but they are not. Now, let’s SotaTek differentiates offshore development and outsourcing as well as the advantages of offshore development.

What is “Offshore” and “Outsourcing”?

Outsourcing is defined as “outsourcing the business to another company”.

In other words, regardless of whether the business is outsourced domestically or overseas, simply outsourcing to other companies can be called outsourcing.

However, on the other hand, offshore is defined as “a company outsourcing its operations to other companies or subsidiaries overseas,” which means that the outsourcing company maybe another company or its own subsidiary. It is called offshore development in the IT industry and is to outsource software development.

Up until now, companies in developed countries like Japan, USA, and Europe have tended to develop software using the domestic outsourcing companies, but recently, due to the lack of high-skilled manpower, Japan can outsource its business to overseas companies, especially Southeast Asian companies increasing.

It is easy to outsource the development to another domestic company in those countries. Nevertheless, why are companies in developed countries willing to outsource to overseas companies? Offshore development should have advantages that outsourcing does not have.

Benefits of offshore development

• First, the development cost is low. The problems facing the US or Europe and Japan IT companies are the lack of excellent IT engineers and the rising prices of IT engineers. On the other hand, many countries overseas have excellent IT engineers and labor costs are cheaper than the domestic market. Therefore, those companies can significantly reduce the cost of software development by ordering their own development work to overseas companies. In particular, companies doing offshore development in Vietnam can reduce system development costs by 40%.
• Second: secured by the resource of excellent engineers
  The second advantage is that the resource excellent engineers can be secured. Due to the declining birthrate and aging population, the labor shortage is becoming more serious in developed countries, and the supply of engineers necessary for the IT industry cannot keep up. Therefore, it is very difficult for IT companies to secure excellent human resources. On the other hand, overseas countries are rich in human resources and can meet the demands of developed companies. Among them, Vietnam’s IT engineers are evaluated to be young, serious, and dynamic. By doing offshore development for companies such as Vietnam, it is easy to attract excellent human resources and succeed in developing higher quality systems.
• The third advantage is that system development time can be shortened. Offshore development allows us to hire many engineers with low labor costs instead of hiring high-cost engineers. Therefore, many engineers work on development at the same time. As a result, you can save time in getting your software service to your satisfaction.

Offshore development trends in Vietnam

Due to the merit of offshore development that domestic outsourcing does not have, IT companies from developed countries are more likely to expand overseas such as Southeast Asia. Among them, Vietnam is a developing country and has achieved remarkable growth, and is attracting attention as an attractive contractor. Vietnam has expanded its offshore development activities and is working to meet the needs of oversea customers. I think there will be a new trend in offshore development in Vietnam in the future.

If you want to think seriously about offshore development, talk to me

Teddy Nguyen: thanh.nguyen@sotatek.com

SotaTek: https://sotatek.com/

SotaTek Japan: https://sotatek.jp/