Steps for Offshore Development: Key Points to Prevent Failures

"I don't know the specific process for offshore development."
"I want to know the flow of offshore development from contract to order."

This article provides a clear explanation of how to proceed with offshore development. When advancing offshore development, there are many points to be careful about, such as progress management and communication.

Therefore, this article summarizes key points to smoothly move through each process and points to avoid failure in offshore development. If you are considering implementing offshore development, please refer to this guide.

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.

Offshore Development Process

Let's explain the process of offshore development. Offshore development refers to outsourcing your company's development tasks to development companies in other countries.

For example, tasks such as system development, app development, and web service construction can be delegated to offshore development companies. In some cases, outsourcing of operation and maintenance tasks is also possible.

The diagram below represents the flow of offshore development.

Here, we will explain the offshore development process in 8 steps.

Step 1: Clarify the Purpose of Development

First, let's clarify the purpose of the development. Setting the goal of the project is an essential task in any project.

In offshore development, instructions will be given to overseas engineers who may have different languages and cultures. Without a clear understanding of the development purpose, the team may not be able to grasp what needs to be achieved.

If the purpose is vague, it could lead to poor-quality products or delays in the project schedule.

The key point in the first step is to articulate the purpose of offshore development as clearly and in as much detail as possible.

Specifically, the following items need to be clarified:

What is the purpose of the system/service to be developed?
Why are you opting for offshore development?
What kind of product is required?
What are the required quality standards?
What is the goal/target of the project?
What is the timeline for the project?

Before proceeding with offshore development, the client must clarify its objectives. Once articulated in detail, these should be shared with the offshore development company.

Step 2: Requirements Definition

Next, proceed with the requirements definition.

Requirements definition refers to identifying the necessary features, performance, and security requirements for development, and deciding what will be implemented. It also includes summarizing the background of the development, budget, schedule, and post-implementation flow.

The development of the project will proceed according to the requirements definition, so this step is essential. Write down all your wishes and expectations.

It is also the client’s responsibility to compile the requirements and create the requirements definition document. Having a requirements document will make the request to the offshore development company smoother.

If your company lacks the know-how or skills to create the requirements document, it is also possible to outsource the creation to the offshore development company.

Ideally, there should be no language barriers in the requirements definition process. If you assign the task to a company with a Japanese project manager, not only will the creation be smoother, but translation and aligning the understanding with the development team will also go more smoothly.

Step 3: Selection of the Service Provider

Once you have decided the contents of the tasks to be outsourced and consultation matters, select the specific offshore development company to which you will assign the work.

Based on the requirements definition and consultation content, create a list of potential countries and companies that match your company’s conditions.

Next, compare and evaluate the features, advantages, and disadvantages of each company. Once you narrow it down to a few companies, request quotes from multiple companies and check the reasonableness of the price, proposal capability, etc.

Key points to consider during selection are as follows:

Country risk in the region
Time difference with Japan
Track record in system development
Experience in working with Japanese companies
Area of expertise and technical level
Communication skills in Japanese
Quality control system
Recovery system in case of issues
Proposal and consulting skills

For more information on how to choose a service provider, please refer to "How to Choose an Offshore Development Company? 4 Steps and Tips to Avoid Failure."

Step 4: Contract Conclusion with the Selected Provider

After narrowing down the offshore development companies in Step 3, select the one that matches your company’s needs and conclude the contract. If you have any uncertainties regarding the estimate or the contract, make sure to clarify them before signing the agreement.

The contract types for offshore development are primarily divided into fixed-price contracts and lab-based contracts. Many companies support both types of contracts, so choose one that aligns with your company’s resources and development objectives.

Here, we will briefly explain each type of contract.

Fixed-Price Contract

A fixed-price contract is often used when the requirements, specifications, and delivery dates are clear. It is sometimes chosen for one-off system development tasks.

In this case, a contract is signed based on the estimated cost and details, and the deliverables are provided by the deadline. After the contract is concluded, you just wait for the deliverables. The advantage is that it reduces the management cost for the client.

On the other hand, a disadvantage is that changes in specifications after the contract may incur additional costs. Since the development is entrusted to the service provider, the know-how may not be accumulated within your company.

Lab-Based Contract

A lab-based contract refers to a contract in which you can secure the offshore development company’s human resources during the contract period.

The big advantage of this type of contract is that development can proceed even if specifications are not yet decided, making it suitable for medium-to-long-term projects.

Additionally, changes and revisions to specifications can be made flexibly, which is a key benefit. By securing talented engineers’ resources for a certain period, and collaborating with the offshore provider, it becomes easier to accumulate in-house know-how.

However, note that it takes time to build the team, and internal personnel may need to allocate resources for management tasks.

For more details, please refer to "What is Lab-Based Development? Advantages, Disadvantages, and Differences from Fixed-Price Contracts."

Step 5: Kick-Off

Before starting development, hold a kick-off meeting.

Gather both your in-house team and the offshore development team, and create an opportunity for everyone involved in the product to meet in person.

If it's possible to visit the site, go to the offshore development country and conduct the kickoff. If face-to-face meetings are difficult, you can hold it via online meeting tools.

The purpose of the kickoff is not only for self-introductions and getting to know each other, but also to ensure a common understanding of the goals we are working toward. As a result, it becomes easier to build trust and enhance communication between both parties.

Additionally, if there are any uncertainties regarding the development flow or communication procedures, it’s a good idea to clarify them at this stage.

Step6. Progress Management

Once development has started, manage the progress of the project. It's crucial to appropriately track progress at each stage to identify problems and mistakes early.

Specifically, track the status of each task and any deviations from the schedule.

To prevent issues caused by lack of communication, it's good to establish regular meetings in addition to text-based communication.

Progress management tools like Backlog or Jira Software are useful. These tools can visualize the workload and progress of each team member.

Step7. Operation Check & Testing

Perform operation checks and tests to ensure the program matches the specifications.

The developers are responsible for unit testing and integration testing. In unit testing, the individual components or modules of the system are checked for correct functionality, while integration testing verifies if the system works when combined.

If you have QA (Quality Assurance) engineers with specialized knowledge in quality control, they can handle the testing.

Subsequently, the client company will conduct acceptance testing. In acceptance testing, the delivered system is checked to ensure it meets the requirements.

At this stage, it's recommended for the system development staff to be involved in the operation check as well. This ensures that any issues can be addressed promptly.

Step8. Product Release

Finally, the product is ready for release.

Even if the release is smooth, issues or updates may still arise afterward.

Some offshore development companies not only handle development but also provide ongoing support for operations and maintenance. If your company is unable to handle these aspects, it’s worth selecting such a company.

System development, whether offshore or not, doesn't simply end with the "release." Depending on your company's or product's situation, the relationship with the offshore development partner may extend long-term.

If you can continue working with the company that handled your system development, you can entrust the system's operation with peace of mind.

At Solashi Co., Ltd, we also provide system operation and maintenance after product release. We even handle revision projects and infrastructure tuning within a certain number of working hours.

If you want to outsource both offshore development and post-release operations, feel free to contact us at Solashi.

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4 Key Points to Prevent Failures in Offshore Development

To smoothly carry out offshore development, here are four points to prevent failures.

Maintain strong communication
Allow for a flexible budget
Ensure thorough creation of specifications
Select a partner that can handle the entire development process

Let's take a closer look at each point.

Maintain Strong Communication

For smooth system development, close communication is essential.

In offshore development, a common cause of issues is communication gaps or misunderstandings with overseas engineers.

Specific measures to prevent communication problems include:

Give clear instructions on the details
Convert requirements into specifications whenever possible
Do not expect the Japanese cultural norm of "understanding without saying"

If you feel that instructions are not being understood clearly, using visual approaches like diagrams or flowcharts can be effective.

Additionally, when communicating verbally, be conscious of using subject, predicate, and object clearly to define responsibilities and relationships.

Allow for a Flexible Budget

It’s important to have a flexible budget for system development, as things may not always proceed according to the initial schedule or plan.

Changes in specifications or unforeseen troubles may extend the development period, which will add to the costs. As a risk hedge, it’s recommended to secure a budget of about 4-5 million yen for IT investment.

The majority of costs in offshore development are for engineer labor. Other costs include:

Engineer labor costs
Design costs
Direction costs
Operation and maintenance costs
Miscellaneous expenses (communication fees, travel expenses, accommodation, transportation, etc.)

Additionally, there may be cost fluctuations due to economic conditions or exchange rates. If you want to learn more about offshore development costs, refer to the article below.

Ensure Thorough Creation of Specifications

It’s also crucial to thoroughly create specifications.