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Due to rising labor costs in Japan and a shortage of IT personnel, offshore development—where business systems and web services are outsourced overseas—has become increasingly popular. The market size is also expanding.
The main outsourcing destinations are China, India, Indonesia, and Vietnam, where skilled IT professionals can be hired at a lower cost compared to Japan.
However, offshore development has its pitfalls, and projects can fail if schedule, quality, and cost management are not properly handled.
In this article, we introduce common offshore development failures and their causes from the unique perspective of Solashi, which has been supporting offshore development in Vietnam.
We also explain key points to consider and how to choose the right partner company, so be sure to use this as a reference.
Supervisor Profile
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.
Three Common Offshore Development Failures
The following are three common offshore development failures:
- Low-quality final product
- Missed deadlines
- Budget overruns
Let's examine each case in detail.
Low-Quality Final Product
One of the most common offshore development failures is receiving a final product that is of lower quality than expected.
Issues may include systems or applications that do not function correctly, poor performance, or frequent bugs.
Specific cases include:
- Essential features were not implemented
- Display issues (e.g., layout inconsistencies)
- Insufficient testing leading to numerous errors
- Developed according to foreign specifications and did not work on Japanese devices
In Japan, even if something is not explicitly stated in the specifications, the development team may make adjustments on their own initiative. However, offshore development teams typically follow specifications strictly.
Such issues often arise not only due to the skill level of the engineers but also due to communication gaps between the client and the development team.
As a countermeasure, detailed documentation and frequent communication are essential to prevent errors.
Missed Deadlines
In offshore development, projects often do not proceed according to schedule, resulting in delays.
Some outsourcing countries have a more flexible sense of time than Japan and may not strictly adhere to deadlines.
Additionally, factors such as national holidays and frequent staff turnover can disrupt project schedules.
To avoid delays, rigorous project and schedule management is crucial.
Budget Overruns
While cost savings are a key advantage of offshore development, unexpected expenses can arise.
Common causes of budget overruns include:
- Specification changes mid-development, extending the timeline
- Multiple revisions required for quality assurance
Economic and political factors in outsourcing countries can also impact project costs.
Careful budget planning and schedule management are necessary to mitigate these risks.
Six Reasons Offshore Development Fails
Why does offshore development frequently fail? Here are six key reasons:
- Communication issues
- Inadequate management structure
- Unclear requirements and specifications
- Lack of understanding of the development team’s culture
- Insufficient research on the development company
- Economic and currency fluctuations
Communication Issues
One of the biggest challenges in offshore development is communication gaps between the client and the development team.
Language differences are a major barrier, as English or the local language is often used for communication.
Bridge system engineers (Bridge SEs) are typically assigned to facilitate communication, but nuances may still be lost in translation.
Verifying the language proficiency of the Bridge SE or project manager beforehand can help ensure smoother communication.
Except for certain countries and industries, labor costs are rising. In just one year, from 2022 to 2023, the monthly labor cost for programmers in Bangladesh increased by 48.90%.
Many companies may consider offshore development to reduce costs. However, in recent years, not only have labor costs increased, but the depreciation of the Japanese yen has also progressed.
As a result, development costs may exceed the budget and become higher than expected. Depending on the development country and implementation period, developing domestically in Japan may be more cost-effective.
To flexibly respond to such economic conditions and exchange rate fluctuations, it is important to stay informed about overseas economic trends and set a budget with sufficient margin.
8 Key Points to Avoid Failure in Offshore Development
While there are many cases of failure in offshore development, you can minimize risks by keeping key points in mind. Here, we introduce eight important points to ensure success in offshore development.
Choose a Development Partner that Matches Your Company
The most crucial factor in successfully executing offshore development is selecting the right development partner for your company.
Choose a reliable partner company based on selection criteria such as track record, areas of expertise, engineer skill levels, and whether they offer Japanese language support.
Specifically, consider the following points:
- Experience in offshore development in the target country
- Past projects similar to the one you wish to outsource
- Quality management system
- Japanese language proficiency of staff and engineers
- IT skills of engineers
- Handling of issues when problems arise
- Level of support for maintenance and consulting
- Accuracy of document translation
More details can be checked on the company's website. If you find a company of interest, consider contacting them directly.
The selection process for offshore development partners is also explained in the section "How to Avoid Mistakes When Choosing an Offshore Development Company."
Additionally, please refer to "How to Choose an Offshore Development Company? 4 Selection Steps and Tips to Avoid Failure."
Clarify the Schedule and Specifications Before Development
By clarifying specifications before development, aligning expectations on workload and schedule, and documenting everything, you can reduce risks of misalignment in expectations and schedule changes.
It is also helpful to provide concrete materials such as reference applications, systems, and images in advance to effectively communicate your project vision.
Such measures are particularly effective in fixed-price contracts, one of the contract types used in offshore development.
A fixed-price contract is an agreement where a project is completed and delivered based on predetermined deadlines and workload. It is suitable for projects with well-defined specifications and a need for stable, long-term development.
If the specifications are not yet finalized, choose a company that supports agile development.
Agile development is a method that iterates through small functional cycles from requirement definition to planning, design, implementation, testing, and maintenance.
Compared to traditional "waterfall development," it offers faster and more flexible development.
Since it does not require setting all specifications in detail before development, the initial workload is relatively low.
Solashi Co., Ltd supports agile development.
Startups and new business ventures often prefer to release a prototype first and then improve quality and expand functionality.
By utilizing web frameworks for rapid prototyping and leveraging skilled engineers, we achieve both quality and speed in development.
If you are interested in agile development or considering launching a new service or system, feel free to contact us.
Provide Clear and Specific Instructions
Among Japanese colleagues, implicit understanding often works.
However, in offshore development, foreign engineers require explicit instructions. Keep in mind that your instructions will be translated, so aim to be clear and concise.
Ambiguous instructions common in Japanese companies, such as "do it properly," "handle it well," or "as usual," can cause confusion. Always specify the "What, When, Who, How" (5W1H) when giving instructions.
(Source: Offshore Development White Paper (2023 Edition) │ Offshore Development.com)
Vietnam is geographically close to Japan and is actively developing its IT workforce, making it possible to secure talented engineers at a lower cost than in Japan. In recent years, companies capable of handling advanced projects such as AI, blockchain, and core systems have been increasing.
At Solashi, we have a team of excellent Vietnamese members who graduated from top science and engineering universities, including the CEO and CTO who are graduates of Hanoi University of Science and Technology. We have a strong presence in development in Vietnam. If you are considering offshore development in Vietnam, please feel free to consult with us.
Japanese PMs Handle Communication
Looking for an Offshore Development Company
For such individuals, we recommend Solashi’s Vietnam offshore development
We also provide a detailed explanation about the merits of choosing Vietnam as a development destination in "8 Reasons Why Vietnam is the Optimal Choice for Offshore Development and How to Select a Reliable Company." Please refer to it as well.
3 Key Points to Avoid Mistakes When Selecting an Offshore Development Company
Choosing the right company is crucial for the success of offshore development. Here are three important points to consider when selecting an offshore development company.
- Assigning an excellent Japanese PM
- Thorough code reviews and quality assurance
- IT consulting for system implementation
Assigning an Excellent Japanese PM
To ensure smooth offshore development, it is essential to have a Japanese PM (Project Manager) who deeply understands the technical requirements of the project and can engage in discussions at the technical level.
The PM oversees the front-end, back-end, and QA engineers, and plays a significant role in progress management and the quality of deliverables.
The PM is responsible for managing schedules, resources, risks, and communication, handling the project from its initial stages to closure.
By assigning an excellent Japanese PM, the following benefits can be achieved:
- Smooth communication across language and cultural barriers
- Maximization of time and cost performance
- Increased motivation for engineers
- Creation of a comfortable work environment for the team
- Achievement of high-quality standards
- Selection of development languages with a focus on sustainable operations and maintenance
- Deep understanding of technical requirements and ability to discuss at the technical level
Additionally, to ensure proper handling of any issues that may arise, confirm that a Japanese PM, with whom communication is easy, will be assigned.
Thorough Code Reviews and Quality Assurance
Quality management can be a challenge in offshore development.
To ensure stable development and quality assurance, it is advisable to select a company that performs thorough testing, code reviews, and bug tracking.
Check if the company has a well-established review system, such as "ensuring external quality at the functional level through QA engineer testing" and "ensuring internal quality at the code level through double code reviews by bridge SEs."
IT Consulting for System Implementation
When selecting an offshore development company, it is also an important point to confirm whether they provide consulting services for system implementation, in addition to development.
IT consulting involves identifying the business challenges a company faces and providing strategic planning and execution support for business efficiency improvements and system implementation through IT.
If there are systems, services, or applications you plan to implement or develop in the future, selecting a development country, estimating costs, selecting development languages, and determining schedules may require considerable time and effort.
At Solashi, we also offer IT consulting services, including identifying risks and hidden costs associated with system operation, and supporting improvements in outsourcing-dependent practices.
If you tell us about the business you wish to start, we can suggest necessary IT services and similar case examples. Additionally, we can guide you through the steps of business launch, the difficulty of IT service construction, and the development outline.
We provide detailed support for the practical application of systems, offering appropriate solutions tailored to your needs.
For Offshore Development in Vietnam, Solashi is Recommended for Low Cost and High Quality
Offshore development is a recommended approach for companies considering new service development or system implementation, as it can secure excellent IT talent at a lower cost than domestic development.
However, offshore development also has its drawbacks, including language and cultural barriers, as well as country and exchange rate risks. There are examples of failures where the final product's quality was low, deadlines were missed, and the project cost exceeded the budget.
When engaging in offshore development, it is crucial to not only strengthen communication processes and progress management but also to select the best development partner company.
If you choose "Solashi Co., Ltd", we have a wealth of experience in offshore development in Vietnam. We also offer proposals for Japanese PMs and take on direction代代理 services, so even those concerned about communication with the development team can be assured.
Furthermore, our company offers the following features:
- IT engineers are mainly recruited from top universities such as Hanoi University of Science and Technology, Vietnam National University, and Trade University
- We can offer high-quality services at a low price by cutting unnecessary sales costs
- We offer "small start" development that aligns with customer budgets and development processes using lab-type development
- We provide a wide range of services, including system operation and maintenance, prototype creation, and IT consulting for system implementation
Those considering the introduction and release of new systems and services to make full use of the benefits of offshore development, please feel free to contact us.
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."
