Things to Watch Out for When Outsourcing Systems to Overseas Offshore Development Vendors

Offshore development has become a go-to strategy for businesses aiming to reduce costs while gaining access to a global pool of skilled developers. Countries such as India, Indonesia, and Vietnam are increasingly popular due to their competitive labor rates and growing tech ecosystems. However, while offshore development offers significant benefits, it also introduces unique challenges that must be carefully managed.

In this comprehensive guide, we will explore the advantages and drawbacks of offshore development, provide essential preparation steps, share best practices for managing offshore teams, and offer insights into post-development operations. Whether you’re a business leader or project manager, this guide will help you make informed decisions and ensure successful collaboration with overseas partners.

 

 

Advantages and Disadvantages of Offshore Development

Before diving into the implementation process, it’s important to understand both the benefits and potential risks associated with offshore development.

Offshore development refers to outsourcing software or system development to overseas teams. Many companies choose to work with development teams in countries with lower labor costs—such as India, Indonesia, and Vietnam—in order to reduce expenses and improve scalability.

While offshore development offers several advantages, it also comes with certain drawbacks and risks. In this section, we’ll take a closer look at both the benefits and potential challenges involved.

Benefits of Offshore Development

1. Significant Cost SavingsOne of the most compelling reasons companies opt for offshore development is the opportunity for substantial cost reduction. By partnering with teams in countries with lower labor costs, companies can cut development expenses by 30% to 70% compared to hiring locally.For example, a software engineer in a high-cost country might earn around $4,000 per month, whereas a similarly skilled engineer in Vietnam could cost approximately $1,300 per month.
2. Access to a Larger Talent Pool
   Many developed countries face shortages of skilled developers. Offshore development provides access to a broader and more diverse talent pool. Countries like India and Vietnam have strong technical education systems and are producing increasing numbers of highly skilled engineers ready to work on international projects.
3. Scalable Development TeamsOffshore development allows for greater flexibility in team size. Whether scaling up for a large project or adjusting resources based on demand, offshore vendors can quickly adapt to changing needs.For instance, if you need to add 10 engineers urgently, local hiring may take several months, whereas an offshore team could fill the gap within weeks.
4. Affordable Access to Specialized Skills
   Hiring experts in niche technologies—such as artificial intelligence, blockchain, or cloud computing—can be expensive domestically. Offshore development offers a cost-effective way to access these specialized skills without compromising on quality.

 

Disadvantages of Offshore Development

Despite its many benefits, offshore development comes with certain challenges that must be addressed proactively.

1. Communication Challenges
   Differences in language and culture can lead to misunderstandings. Specifications may not be fully understood due to nuances in communication, and there may be uncertainty about whether instructions have been correctly interpreted.
   • Specifications not being fully understood due to language nuances
   • Uncertainty about whether the offshore team truly understands instructions, even if they say “yes”
   • Difficulty conveying subtle details through email or chat

   Solutions:

   • Create clear, concise, and unambiguous documentation
   • Hold regular online meetings to minimize misunderstandings
   • Assign a project manager or liaison to bridge communication between teams
2. Quality Control Issues
   Offshore teams may not be familiar with your country’s development standards or expectations, which can result in lower code quality at the outset.Solutions:
   • Strengthen code review and testing processes
   • Define clear quality standards, including coding guidelines and test specifications
   • Start with a small trial project to assess the offshore team’s quality level
3. Security Risks
   Outsourcing development overseas involves sharing sensitive data, which can raise concerns about data leaks or misuse. Potential risks include:
   • Accidental data leaks
   • Intellectual property theft or unauthorized use
   • Poor data handling after a developer leaves the project

   Solutions:

   • Sign non-disclosure agreements (NDAs) with offshore partners
   • Use secure VPNs or cloud environments to control data access
   • Limit access to sensitive code or data strictly to essential personnel
4. Hidden or Unexpected Costs
   While offshore development may seem cheaper initially, additional costs can arise such as:
   • Extra fees due to changes in project scope or specifications
   • Rework or debugging to meet quality standards
   • Increased time and effort required for project management on your side

   Solutions:

   • Define detailed project requirements upfront and minimize mid-project changes
   • Clearly outline contract terms, including conditions for additional costs
   • Factor in internal resource time (like project managers) when budgeting
5. Time Zone Differences
   Working across different time zones can slow down communication and delay decision-making.Solutions:
   • Schedule key meetings during overlapping working hours for both teams
   • Use asynchronous communication methods effectively
   • Rely on project management tools like Slack, Notion, or Trello to ensure smooth workflow and updates

 

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Preparations to Make Before Starting Offshore Development

Proper preparation is crucial to the success of any offshore development project. Without clear goals, realistic timelines, and the right partner, projects are at risk of miscommunication, delays, and budget overruns.

Below is a detailed breakdown of what you should prepare before outsourcing development offshore:

1. Define Your Project Goals and Requirements Clearly

(1) Clarify Your Objective and End Goal

• What are you building? (e.g., Web system, mobile app, API, etc.)
• Why are you building it? (e.g., market launch, business process improvement, service expansion)
• What deliverables do you expect? (e.g., working prototype, complete product)

Example:
“To improve internal operations, we plan to develop a sales management system that centralizes and organizes all sales data.”

(2) Organize Functional Requirements

• Separate Must-Have features from Nice-to-Have features.
• Provide layout drafts or wireframes.
• Define expected performance and security standards clearly.

Example:
“After logging in, users should see a dashboard that displays real-time sales data.”

2. Set a Budget and Timeline

(1) Establish a Clear Budget

Understand cost estimates by country:

• India: $15–$50/hour
• Vietnam: $20–$40/hour
• Indonesia: $10–$30/hour

Break down your cost structure:

• Initial development (design, development, testing)
• Ongoing operations and maintenance
• Extra costs (feature changes, scope adjustments)

(2) Define a Timeline

• Decide your overall development timeframe (e.g., 3 months)
• Set milestones to track progress in phases
• Include buffer time to mitigate delays

Example Schedule:

• Month 1: Finalize requirements and design
• Month 2: Development and first demo
• Month 3: Testing, revisions, and delivery

3. Choose the Right Offshore Development Partner

(1) Review Their Track Record

• Check portfolios of past development projects
• Read client reviews on platforms like Google Reviews or Clutch
• Confirm experience working with international (especially Western or Japanese) clients

(2) Assess the Team’s Skills and Structure

• Do they have a dedicated Project Manager (PM)?
• Are they fluent in English or your preferred language?
• Are they skilled in the technologies you need (e.g., Python, React, AWS)?

(3) Understand Their Workflow and Contract Type

• What is their development approach? (Dedicated team, agile, waterfall, etc.)
• What contract model do they use?
  • Time & Material: Flexible, charged by hours worked; requires cost monitoring
  • Fixed Price: Deliverable-based; less flexible with scope changes

4. Prepare Communication and Management Framework

(1) Decide on Language and Communication Tools

• Will communication be in English or another language?
• Choose tools: Slack, Microsoft Teams, WhatsApp, etc.
• Set meeting frequency: Weekly check-ins, or daily standups?

Example:
“We will hold 30-minute weekly Zoom meetings to review progress.”

(2) Select Project Management Tools

• Task management: Jira, Trello, Notion
• Document sharing: Google Drive, Confluence
• Version control: GitHub, GitLab
• Progress tracking: Asana, ClickUp

5. Prepare Clear Specifications and Design Documents

A clear specification is the key to successful offshore collaboration.

(1) Create a Specification Document

Include:

• Feature list
• UI/UX designs or wireframes
• Data flow diagrams (e.g., ER diagrams)
• API specs (endpoints, request/response format)

Example:
“Login API: POST /api/auth/login → Response: {token: 'xxxxx'}”

(2) Define Rules for Scope or Requirement Changes

• Minor changes: Adjust during weekly meetings
• Major changes: May result in extra costs or delivery delays

6. Set Up Security Measures

(1) Handling Confidential Information

• Sign NDAs (Non-Disclosure Agreements)
• Control access using tools like VPNs and IAM (Identity and Access Management)

(2) Manage Code and Data Properly

• Maintain Git repositories under your own organization
• Restrict database access
• Use anonymized or dummy data during development

7. Establish Rules for Testing and Delivery

(1) Define the Scope of Testing

• Unit testing: Handled by the development team
• Integration testing: Collaborate with the client
• User testing: Simulate real-world usage scenarios

(2) Clarify the Delivery Format

• Delivery of code (via GitHub, ZIP file, etc.)
• Delivery of documentation (spec sheets, user manuals)
• Support terms (e.g., “1-month free post-launch support”)

 

 

What to Mind While Managing Offshore Development

Offshore development can be highly successful if properly managed during the development phase. Being aware of key points during development helps minimize risks such as delays, quality issues, and communication gaps.

1. Strengthen Communication

In offshore development, differences in language and culture can make communication challenging. To avoid misunderstandings or misalignment, ensure the following:

(1) Regular Progress Check-ins

• Conduct daily stand-up meetings (short progress updates)
• Hold weekly meetings to share updates and challenges
• Review key milestones (e.g., sprint reviews every 2 weeks)
  Example: Hold a 15-minute daily stand-up every morning at 10 AM via Zoom to confirm each member’s progress and issues.

(2) Prevent Miscommunication

• Use bullet points instead of long paragraphs for instructions
• Share visual references (e.g., UI designs or wireframes)
• Communicate any spec changes immediately via Jira or Slack

NG (Don’t): “Just build this feature as we discussed last time.”
OK (Do): “The specifications for this feature are listed below. If anything is unclear, we’ll go over it in tomorrow’s meeting.”

2. Visualize Development Progress

It’s difficult to track progress in real-time in offshore projects, so visualization is key.

(1) Use Task Management Tools

• Tools like Jira, Trello, ClickUp, or Asana help clarify task ownership
• Track task status with categories like “To Do,” “In Progress,” and “Done”

(2) Manage Source Code via Git

• Use GitHub/GitLab/Bitbucket and review pull requests regularly
• Define a branching strategy (e.g., main, develop, feature branches)
• Conduct code reviews to ensure quality
  Example: Review pull requests every Wednesday and Friday.

(3) Conduct KPT Retrospectives

• K (Keep): What went well
• P (Problem): What didn’t
• T (Try): What to try next time
  Example: Hold a KPT meeting every Friday to discuss improvements.

 

3. Ensure Strict Quality Management

Quality standards often differ from those in Japan, so build a system for quality assurance in advance.

(1) Define Code Review Rules

• Don’t allow pull requests to be merged without review
• Require unit tests
• Use static analysis tools like ESLint, SonarQube, etc.

(2) Emphasize the Importance of Testing

• Unit Tests – for individual features
• Integration Tests – for combined features
• End-to-End (E2E) Tests – simulate user behavior
  Example: “Features can only be merged after passing E2E testing.”

 

4. Manage Specification Changes

Frequent changes can lead to delays and increased costs, so manage changes with clear rules.

(1) Set Rules for Handling Changes

• Minor changes → PM decides and updates task management tools
• Major changes → Reassess delivery date and cost
• All requests should be documented in Jira or Notion

(2) Analyze Impact Immediately

• How changes affect timeline
• Estimate additional costs
• Re-evaluate priorities

NG (Don’t): “Just make a quick change mid-development.”
OK (Do): “Let’s analyze the impact on timeline and cost before applying the change.”

5. Strengthen Security Measures

Managing confidential information securely is essential in offshore development.

(1) Restrict Data Access

• Use dummy data instead of live production data
• Strictly manage permissions (e.g., using AWS IAM)
• Enforce VPN-only access

(2) Confirm NDA Compliance

• Ensure all team members have signed an NDA
• Clearly define data handling rules (especially for personal data)
  Example: “Only use masked test data in development, not production data.

 

6. Final Delivery Checklist

Before final delivery, conduct thorough quality checks.

(1) User Acceptance Testing (UAT)

• Ensure all features meet requirements
• Confirm there are no critical bugs
• Check for security issues

(2) Submit Documentation

• API specifications
• System architecture design
• User manuals
• Documentation for development and deployment environments
  Example: “Deliverables should include demo videos and manuals upon submission.”

 

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Important Points to Note for Post-Development Operations

Even after the completion and delivery of offshore development projects, improper operations and maintenance can lead to issues such as system failures, security vulnerabilities, and user attrition. In offshore development in particular, it is crucial to clarify the post-delivery support structure once the development team disengages from the project.

1. Clearly Define the Scope of Maintenance and Contract Terms

(1) Establish a Clear Maintenance Agreement

To ensure smooth ongoing operations, it is essential to set up a maintenance agreement with the development company beforehand. The agreement should clearly define:

Checklist:

• Free support period (e.g., 1–3 months of free bug fixes after delivery)
• Scope of coverage
  • Does it include minor fixes like UI or text updates?
  • Are feature enhancements covered, or will that require a separate contract?
• Response time
  • How quickly will critical issues be addressed? (Specify in SLA)
• Contract period
  • Fixed-term contract (e.g., 1 year) or monthly support plan?

(2) Define a Service Level Agreement (SLA)

Quick response to system issues is critical in operations. Agreeing on an SLA (Service Level Agreement) with the development partner ensures faster issue resolution.

Example SLA Response Times:

• Critical issue (system down): Response within 2 hours
• Moderate issue (specific feature failure): Resolution within 24 hours
• Minor bug: Response within 3 business days

 

2. Prepare for Incident Response and Troubleshooting

(1) Set Up Logging and Monitoring Systems

To quickly identify the root cause when issues arise, implement robust logging and monitoring systems.

Best Practices:

• Capture server logs (e.g., AWS CloudWatch, Datadog)
• Monitor error logs in real time (e.g., Sentry, ELK Stack)
• Set up alert systems to detect anomalies (e.g., server downtime notifications)

(2) Document Troubleshooting Procedures

To avoid delays during system issues, maintain comprehensive documentation for troubleshooting.

Recommended Contents:

• Historical incidents and how they were resolved
• Steps for restoring server and database backups
• How to check logs effectively
• Escalation and communication flow during incidents

3. Source Code Management and Handover

(1) Manage Source Code Properly

After development ends, it’s vital that the client or internal team takes over source code management. Offshore developers may leave the project, so this handover must be organized.

Recommended Actions:

• Use version control systems like GitHub, GitLab, or Bitbucket
• Document code (API specifications, database design docs)
• Set up automated deployment pipelines (e.g., GitHub Actions, Jenkins)

(2) Handover to Maintenance Team

Before the offshore team disengages, ensure knowledge transfer to the in-house or third-party maintenance team.

Key Points for Handover:

• Organize and share developer documentation
• Clarify how to set up staging/test environments
• Share troubleshooting guides and procedures

4. Implement Strong Security Measures

(1) Protect User Data and Sensitive Information

To prevent data breaches, security measures should be embedded in both the infrastructure and application layers.

Essential Security Practices:

• Encrypt sensitive data (e.g., AES, SSL/TLS)
• Enforce strict access control (e.g., IAM, role-based permissions)
• Enable two-factor authentication (2FA)
• Separate development and production environments

(2) Conduct Regular Security Audits

Even a running system can have emerging vulnerabilities. Routine audits and patch management are crucial.

Security Checklist:

• Schedule regular penetration tests
• Disable unused API endpoints
• Update outdated libraries and dependencies

5. Optimize System Performance

(1) Run Load Tests Regularly

As user traffic grows, performance degradation becomes a risk. Perform regular load testing to ensure the system can handle demand.

Performance Metrics to Monitor:

• Response time during high concurrent usage
• Server CPU and memory utilization
• Database query performance and indexing

(2) Use Caching to Improve Speed

To improve response times and reduce server load, implement effective caching strategies.

Examples:

• Use CDN (e.g., Cloudflare, AWS CloudFront) for static content
• Utilize Redis or Memcached for database query caching
• Enable browser caching for faster frontend load times

6. Regular Updates and Managing Technical Debt

Even after development, you must manage technical debt and keep the system updated to maintain long-term health.

(1) Monitor and Address Technical Debt

Refactor inefficient or outdated code to ensure scalability and maintainability.

Focus Areas:

• Update outdated libraries or frameworks
• Refactor “spaghetti code” for clarity and efficiency
• Reassess early compromises made during development

(2) Keep Operating Systems and Libraries Up to Date

Apply updates not only to the application but also to its infrastructure.

Ongoing Maintenance:

• Regular OS and library updates
• Database version upgrades
• Timely security patch application

 

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10 years of development experience in Indonesia – Timedoor

Timedoor is a software development company based in Indonesia, and for over 10 years, we have been developing websites and mobile applications mainly for Japanese companies. Taking advantage of our location in Bali, we provide high-quality and cost-effective offshore development services.

One of our key features is having Japanese staff stationed on-site, which facilitates smooth communication between clients and engineers, ensuring smooth project progress. We are also capable of flexible team organization, assigning the most suitable personnel for each project. From recruitment to training, we provide consistent support to build a development system that meets the client’s needs.

We are also cost-competitive, with developer monthly rates ranging from approximately $1,300 to $2,000 USD. Since we can handle a wide range of technical fields from frontend to backend, please feel free to consult us if you are considering development.

For inquiries, please contact us here.

 

 

 

 

Summary

Offshore development offers numerous benefits such as cost reduction, easier access to skilled talent, and improved scalability. On the other hand, challenges like communication difficulties due to language and cultural differences, quality control issues, and security risks cannot be overlooked.

The key to success lies in thorough preparation, selecting the right development partner, and maintaining proper project and quality management. By clearly defining specifications and maintaining regular communication, the project can proceed smoothly. When used effectively, offshore development can significantly accelerate a company’s growth.

 

Glossary of Terms Used in This Article

• Offshore Development: The practice of outsourcing software or system development to overseas teams.
• Scalability: The ability of a system or team to expand and adapt flexibly to increased demands or growth.
• Communication Gap: Difficulty in mutual understanding caused by differences in language or culture.
• Quality Control: Management techniques used to ensure the developed software meets consistent quality standards.
• NDA (Non-Disclosure Agreement): A legal agreement to prevent the sharing of confidential information with third parties.
• SLA (Service Level Agreement): A contract that outlines the expected support levels and response times between a client and a development company.
• VPN (Virtual Private Network): A technology that provides an encrypted communication path to enhance security.
• CI/CD (Continuous Integration and Continuous Deployment): A development approach that automates software building, testing, and releasing to ensure efficient and continuous delivery.

 

 

FAQ

Q1. What size of company is best suited for offshore development?
Offshore development is not only suitable for large corporations but also for small and medium-sized enterprises (SMEs) and startups. It is particularly effective for companies looking to reduce development costs while utilizing advanced technology.

Q2. How can we increase the success rate of offshore development?
To ensure success, it’s important to follow these key points: clearly define specifications by creating a detailed specification document, choose a reliable development partner by checking their past performance, maintain regular communication through weekly meetings, strengthen quality control with thorough code reviews and testing, and implement security measures such as signing NDAs and restricting data access.

Q3. How much does offshore development cost?
Costs vary depending on the country and the scope of development. General estimates are: India ($15–$50/hour), Vietnam ($20–$40/hour), and Indonesia ($10–$30/hour). Compared to domestic development, companies can expect cost savings of approximately 30%–70%.

Q4. How can we prevent communication issues?
To overcome communication challenges caused by language and cultural differences, it is effective to choose a development team that can communicate in Japanese, create concise yet detailed specification documents, hold regular online meetings to check progress, use chat tools like Slack or Microsoft Teams, and utilize asynchronous communication methods such as Notion or Google Docs.

Q5. How can we minimize security risks?
To ensure security, the following measures are essential: sign NDAs (Non-Disclosure Agreements), carefully manage access permissions using VPNs and IAM systems, separate development and production environments, encrypt data using SSL/TLS, and conduct regular security audits.

Q6. How should we respond to specification changes?
When changes to the specifications occur, analyze their impact on schedule and costs, clearly communicate the changes to the development team using detailed explanations or diagrams, agree in advance on any additional costs or timeline adjustments, and use task management tools such as Jira or Trello to manage the changes.

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