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“Considering offshore development but not sure which country to choose?”
“Want to know which offshore development country suits your company?”
“Looking for the most popular offshore development countries in Japan?”
For those who have such interests, this article will clearly explain the key points in selecting an offshore development country.
Offshore development varies significantly in characteristics and costs depending on the country. When selecting an outsourcing destination, it is crucial to understand not only each company's strengths and features but also the trends and conditions of each country.
This article introduces recent trends in offshore development, a ranking of popular countries, and the characteristics of the top seven countries.
Akira Shimazoe
CEO of Solashi Japan LLC. Engaged in the development and operation of internal systems at Suntory. Founded Yper Inc., serving as CTO and CPO, contributing to product launch and growth.
Current Trends and Developments in Offshore Development
Offshore development initially spread as a cost-saving measure. However, in recent years, it has increasingly been utilized as a means to secure resources.
The driving force behind this shift is the shortage of IT professionals in Japan. With the advancement of DX (Digital Transformation), investments in IT and security needs have surged, further increasing the demand for IT talent.
The issue of IT talent shortage has been a longstanding concern, with supply failing to keep up with demand.
According to a 2022 IPA survey, over 85% of IT companies reported experiencing a shortage of IT personnel.
Among them, approximately 32% of companies reported a "significant shortage," an increase of about 7% compared to the previous year.
(Reference: Survey on Digital Era Skill Transformation (2022) – IPA)
As a solution to this situation, offshore development is now gaining attention for securing resources. Let's take a closer look at two notable trends.
Growing Interest Among Large Companies
According to the "Offshore Development White Paper 2023" published by Offshore Development.com, there is a growing interest in offshore development among companies with larger employee scales.
Offshore Development.com is a matching platform operated by TechnoDigital Inc.
(Source: Offshore Development White Paper 2023 – Offshore Development.com)
The chart above shows data from the "Offshore Development White Paper 2023," indicating the distribution of companies consulting about offshore development projects on Offshore Development.com in 2022.
At first glance, it may appear that offshore development is more active among small companies, as those with fewer than 100 employees make up over 60% of the total.
However, according to statistics from the Ministry of Internal Affairs and Communications and the Ministry of Economy, Trade, and Industry, companies with fewer than 100 employees account for over 90% of all businesses in Japan. Companies with larger employee numbers are relatively few.
Considering the proportion of companies by size, larger companies are more actively engaged in offshore development. Companies with over 1,000 employees account for 26%.
(Reference: 2021 Economic Census – Ministry of Internal Affairs and Communications, Ministry of Economy, Trade, and Industry)
Notably, companies with over 5,001 employees account for 14% of the total.
According to the report, this figure represents a significant increase from 7% in 2022.
Large companies are rapidly increasing their interest in offshore development, highlighting a clear sense of resource shortage.
(Reference: Offshore Development White Paper 2023 – Offshore Development.com)
The above figure is a graph recorded in the "Offshore Development White Paper (2023 Edition)".
This graph shows the ratio of company attributes (vendors and end-users) that have inquired about offshore development.
When utilizing offshore development, companies that request development for their own services are referred to as "end-users." In contrast, "vendors" are companies that outsource development for projects they have received from clients.
It is easy to imagine cases where a company lacks sufficient in-house development resources and outsources the work to another development company.
Looking at the graph, end-users account for 67%, while vendors make up 33%, meaning that most inquiries come from end-users. This suggests that many companies are looking to reduce costs by outsourcing their service development overseas.
On the other hand, it is noted that the proportion of inquiries from vendors has increased from 25% to 33% compared to the previous year. Vendors mainly utilize offshore development to supplement their lack of internal resources.
Therefore, it can be expected that the increasing shortage of IT talent in the domestic market has led to a rise in offshore development utilization.
Related article: "What Are Development Resources? Causes of Shortages, Impacts, and Future Measures Explained"
Top 7 Most Popular Offshore Development Countries
Here are the rankings and characteristics of offshore development destinations. The following are the top 7 countries published in the "Offshore Development White Paper (2023 Edition)".
- 1st Place | Vietnam (48%)
- 2nd Place | Philippines (21%)
- 3rd Place | India (13%)
- 4th Place | Bangladesh (8%)
- 5th Place | China (4%), Myanmar (4%)
- 6th Place | Ukraine (2%)
※ However, "No preference" accounted for 64.8% of the total
(Reference: Offshore Development White Paper (2023 Edition) │ Offshore Development.com)
Here, we will explain the characteristics, culture, suitable clients, and market prices of the top 7 countries.
1st Place | Vietnam
According to the "Offshore Development White Paper (2023 Edition)", Vietnam accounts for nearly half of the offshore development market.
Vietnam is widely known as a cost-effective offshore development destination in Southeast Asia.
Thanks to government policies promoting IT education, Vietnam has a large pool of engineers. Additionally, the country has a strong track record with Japanese companies, making it one of the easiest offshore development destinations to work with.
The average monthly developer cost in Vietnam is generally around 400,000 yen. Although the exchange rate fluctuation affects pricing, Vietnam remains a cost-competitive choice compared to other countries.
Vietnam is recommended for companies that want to secure talent at a lower cost while maintaining high-quality system development.
For more details on Vietnam as an offshore development destination, check out "8 Reasons Why Vietnam Is the Best Choice for Offshore Development and How to Choose a Good Company".
2nd Place | Philippines
The Philippines is popular as an offshore development destination not only for Japan but also for Western countries due to its high proficiency in English.
With a young average population and a wealth of friendly talent accustomed to working in foreign companies, the Philippines stands out for its human resources.
The average monthly cost for developers is around 300,000 yen, which is relatively reasonable. It is recommended for companies that want to communicate quickly using English.
Due to these characteristics, Filipino development companies are widely used for system development in English-speaking countries and multinational development projects.
3rd Place | India
India is well-known as an IT powerhouse with a strong focus on IT education.
With a large population, India has a high number of skilled engineers. However, due to its high level of technical expertise, the average monthly cost is somewhat higher, around 500,000 yen.
While there are few engineers in India who can speak Japanese, outsourcing is possible through bridge SEs or interpreters.
As an IT powerhouse, India offers a wide range of expertise, making it ideal for large-scale projects or those requiring advanced skills.
4th Place | Bangladesh
Bangladesh, with a population of around 170 million as of 2022, is a growing hub for IT development.
The country boasts a young average population and a fresh talent pool. Additionally, government policies such as tax exemptions for the IT industry have led to significant growth in the IT sector in recent years.
The average monthly cost for developers is around 450,000 yen, which is average for the region. There are few Japanese-speaking personnel, and incorporating Japanese language requirements can lead to higher costs.
5th Place | Myanmar
Myanmar is known for its diligent people and good compatibility with Japanese, making it a popular offshore development destination due to ease of project management.
Additionally, Myanmar has been focusing on Japanese language education, making it possible to receive Japanese-language services at a relatively cost-effective rate.
The average monthly cost is around 270,000 yen, making it suitable for companies that want to keep their offshore development costs low.
6th Place | China
China, long a popular offshore destination for Japan, maintains a strong position tied with Myanmar in 5th place on the rankings.
Chinese offshore companies, known as an IT powerhouse, are attractive for their advanced technical skills.
However, when actually outsourcing, it is important to understand the cultural differences and ensure clear communication to avoid misunderstandings.
For example, differences in awareness of responsibility could lead to potential disadvantages. It is important to clarify responsibilities at each stage and situation to avoid issues like "he said, she said."
The average monthly cost in China is around 500,000 yen. With the rise in GDP, costs are increasing, especially in coastal areas.
7th Place | Ukraine
Ukraine, which ranked as a popular destination in 2023, has few Japanese speakers, but communication in English is possible.
Ukraine has many highly skilled engineers and has made remarkable growth in the IT sector. However, there may be concerns about country risk due to Russia's invasion of Ukraine.
However, many IT companies have moved their development teams to Western Ukraine or abroad, where the damage is less. It is advisable to assess the situation carefully before proceeding.
For more detailed information on the costs in each country, please refer to the “Offshore Development Costs | Price Ranges by Country and Cost-Reducing Methods” page.
Two Key Points When Choosing an Offshore Development Country
Here are some important points to consider when choosing an offshore development country.
- Select a country with minimal time difference from Japan
- Be mindful of country risks
Select a Country with Minimal Time Difference from Japan
When outsourcing development, choosing a country with minimal time difference from Japan makes communication easier.
In fact, in the popular country ranking mentioned earlier, Southeast Asian countries, which are geographically closer to Japan, occupy the top spots. This shows that these countries are central to Japan’s offshore development.
Although it is still possible to outsource to countries with time differences, it is expected that communication will take more time, which could make smooth project progression more difficult.
It is recommended to keep the time difference to a level where you can get responses during your business hours. Ideally, a time difference of 2-3 hours from Japan would be preferable.
＜Time Difference with Each Offshore Development Country＞
| Country | Time Difference from Japan |
| Vietnam | 2 hours |
| Philippines | 1 hour |
| India | 3.5 hours |
| Bangladesh | 3 hours |
| China | 1 hour |
| Myanmar | 2.5 hours |
| Ukraine | 7 hours |
Be Mindful of Country Risks
When choosing an offshore development country, be aware of country risks. Country risk refers to potential risks arising from the political and economic situations or natural disasters in a given country.
Especially when choosing developing or emerging countries, it is important to take into account the risk of project delays due to unstable conditions.
For Offshore Development, Choose Vietnam’s Popular System Company "Solashi"
If you are looking for offshore development, we recommend the system development company "Solashi Co., Ltd" in the popular country of Vietnam.
We have multiple Japanese PMs with experience in handling business startups and projects.
Our team consists of members who are well-versed in IT project management and system development technologies, and we can handle a wide range of projects, including B2B and B2C.
Our Japanese-speaking bridge SEs will support development, translating your detailed requirements and instructions to local engineers. This ensures smooth communication without language barriers.
For cost-effective and smooth offshore development, please feel free to contact "Solashi Co., Ltd" for your inquiries.
Akira Shimazoe
Representative of Solashi Japan LLC. Born in April 1989 in Fukuoka Prefecture. Graduated from the Graduate School of Information and Mathematical Sciences at Osaka Prefecture University. Joined Suntory System Technology Co., Ltd., an IT subsidiary of Suntory Holdings, in 2014. Broadly responsible for the development, operation, and implementation of vending machine delivery management, efficiency improvements, and sales management systems. Founded Yper Inc. in 2017, serving as CTO and CPO. Contributed to the launch and growth of the app-linked delivery bag "OKIPPA." Selected for Toyo Keizai's prestigious "Amazing Venture 100" and Forbes' "Forbes 30 Under 30 Asia 2019."
