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"I want to understand the meaning of offshore development as I just learned about it."
"I am considering offshore development and would like to know basic information."
This article introduces the basic knowledge of offshore development for those thinking this way.
We have compiled explanations of terms, advantages and disadvantages, points to prevent failures, and recommended companies.
Solashi Co., Ltd, which conducts offshore development in Vietnam, will explain it clearly. Based on our experience providing full support through Japanese project managers from project initiation to system operation and maintenance, we will also share how to lead to success.
If you are interested in achieving low-cost, high-quality system development, please read on.
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.
Basic Knowledge of Offshore Development
Offshore development refers to the development method where the system or app development tasks are outsourced to companies in other countries.
"Offshore" is a combination of "off" (away) and "shore" (coast), and it refers to "overseas".
Let's first look at the definition and types of offshore development.
What is Offshore Development?
Offshore development refers to outsourcing your company's development tasks to companies or local subsidiaries in other countries.
In some cases, operations and maintenance tasks may also be outsourced. Products involved include system development, app development, and web service construction.
Offshore development generally proceeds as follows:
- Clarify the development goals and define the requirements
- Select the outsourcing company
- Review contract details (contract type, development method, etc.)
- Create specifications and finalize project details
- Manage development progress
- After confirming operation, the system is delivered
This process is essentially the same regardless of the type of product (system, app, web service, etc.) being developed.
The Main Types: "Contracting" and "Lab-based Development"
The contract methods for offshore development are divided into contracting and lab-based development.
- Contracting: Development progresses after clearly defining the product specifications and delivery date. It is usually for short-term projects. Payment is made when the specified product is delivered on time.
- Lab-based Development: Specifications can be changed during the development process, and details are refined as the project progresses. The contract period is longer than contracting. Payment is made for performing specific tasks within a set period.
Single projects or those with fixed specifications and delivery dates are suitable for contracting.
On the other hand, if there is a possibility of changing the specifications, lab-based development is ideal. It often does not involve additional costs, making it a good choice when trying to reduce costs.
Offshore Development Tasks that Can Be Outsourced
Offshore development allows outsourcing of tasks such as system and app development, operation, and maintenance.
In addition, offshore outsourcing can include tasks such as call center support and data entry.
Offshoring refers to outsourcing part or all of the work to another country. Companies exist that outsource a wide range of tasks, not limited to development work.
Difference from Nearshore Development
Nearshore development, which is similar to offshore development, involves outsourcing development tasks to a local region.
Unlike offshore development, the companies that outsource are primarily domestic, and it is said that reducing development costs and securing personnel can be difficult.
Objectives of Offshore Development
The main objectives of offshore development are reducing development costs and securing excellent IT personnel. These objectives have led to the growing attention on offshore development in recent years.
Cost Reduction
Offshore development allows for reducing the cost per IT personnel, leading to significant cost savings.
While there may be differences in price depending on the development content and technical skills, many of the countries that become offshore outsourcing destinations are developing countries.
Although countries like China and India have seen rising labor costs, countries like Vietnam, Myanmar, and Bangladesh tend to have lower labor costs than Japan.
Since the development cost of a product is largely determined by the labor costs of IT personnel, it helps reduce the final financial burden. Furthermore, it is not just about developing systems at a low cost.
With the savings made from cost reduction, it is possible to secure sufficient resources, strengthen the project team, and expect high-quality outputs.
Related Article: What Are the Challenges of Offshore Development? 8 Problems and Solutions
Securing Excellent IT Personnel
By outsourcing tasks to excellent IT personnel working overseas, it is possible to gather engineers with the same level or even higher level than those in Japan.
Currently, Japan is facing a shortage of IT personnel. To fill the gap, offshore development is becoming a popular way to utilize IT personnel from other countries.
It is estimated that Japan may face a shortage of 400,000 to 800,000 IT personnel in the future, so it is necessary to take countermeasures from now.
(Reference: Reference Material (Regarding the Status of IT Personnel Development) │ Ministry of Economy, Trade and Industry)
Offshore development countries have abundant IT personnel. For example, Vietnam focuses on training IT professionals as a national policy, producing a large number of IT personnel every year. Offshore development allows securing abundant human resources.
Current Situation of Offshore Development in Japan
This section explains the current situation of offshore development in Japan.
The market size of offshore development in Japan is expanding, with both small and medium-sized companies as well as large enterprises increasingly seeking outsourcing destinations overseas. Let's look at recent trends.
Background of Offshore Development Progress in Japan
The main reasons for the spread of offshore development in Japan are the ability to utilize accumulated know-how and the generalization of remote work.
Offshore development began in the late 2000s. As a result, over 10 years of development know-how has been accumulated in related companies.
By having enough successful and failed case studies and lessons learned, it has become easier to lead projects to success.
Moreover, the impact of the COVID-19 pandemic has made remote work more common in Japan, which is also a significant background.
In offshore development, remote communication is essential when outsourcing to other countries.
As fewer companies are reluctant to work with other countries remotely, it has become easier to implement offshore development.
Popular Offshore Development Destinations
Among offshore development countries, Vietnam is particularly popular. The ranking of popular countries is as follows:
＜Offshore Development Outsourcing Destination Country Ranking＞
1st place: Vietnam (48%)
2nd place: Philippines (21%)
3rd place: India (13%)
4th place: Bangladesh (8%)
5th place: China, Myanmar (4%)
6th place: Ukraine (2%)
(Reference: Offshore Development White Paper (2023 Edition) │ Techno Digital Co., Ltd.)
The reason Vietnam enjoys overwhelming popularity is due to the progress in IT personnel training and the overall high technical capabilities.
Vietnam has invested in IT personnel training as a national policy, and as a result, it has an abundant supply of talented personnel. When in doubt about which development country to choose, Vietnam is a good option.
Related Article: 8 Reasons Why Vietnam is the Best Choice for Offshore Development and How to Select a Quality Company
4 Benefits of Offshore Development
There are numerous benefits to implementing offshore development.
Since it helps solve issues like increasing development costs and a lack of human resources, the demand for offshore development will continue to rise. Here are four key benefits.
Reducing Costs While Securing a Robust Development Structure
By adopting offshore development, you can secure higher quality resources at a lower cost. For example, the cost comparison between Japan and Vietnam for development is as follows:
▼ Japan
Development period: 3 months
Number of employees: 2 people
Cost: Approximately 5.4 million yen
▼ Vietnam
Development period: 3 months
Number of employees: 5 people + support from senior members
Cost: Approximately 4.04 million yen
In Japan, due to the shortage of IT personnel, it may not be possible to set up an ideal development structure due to budget constraints.
However, with offshore development, you can enhance the development environment by reducing labor costs.
Resource Management Becomes Easier
Offshore development allows you to secure the necessary personnel resources according to the project, making it possible to build a development structure suited to each project.
You can adjust the volume of required personnel and the scale and duration of the project as needed.
This flexibility allows you to efficiently manage resources and handle both large-scale and short-term projects.
Access to World-Class Cutting-Edge Technology
A key benefit of offshore development is the ability to use technologies that give you an edge over domestic competitors.
In specific countries, there is expertise in new technologies like AI, blockchain, IoT, and other cutting-edge fields.
By accessing global communities, you can obtain information that may be difficult to access by only developing domestically in Japan.
Shorter Delivery Times
Offshore development can achieve faster delivery times by utilizing cloud systems. IT personnel in multiple locations can work simultaneously on development tasks.
Work can continue in other countries after Japan's working hours, which accelerates progress. Offshore development is a method that can achieve both high quality and fast delivery times.
4 Drawbacks of Offshore Development
Offshore development has its drawbacks as well. It is important to learn about the specific issues that may arise to prevent future problems.
Communication Issues May Occur
In offshore development, you must be aware that communication problems can arise in various aspects.
If you do not understand English or the local language, it can take time to translate documents such as information sharing and specifications.
There is also a risk of various problems arising due to differences in work culture. Depending on the time difference with Japan, it may be difficult to schedule regular meetings.
Quality Control Becomes More Difficult
Offshore development introduces the risk of lowering the final product quality. Some countries may not have clear standards for quality control.
If there is no clear process, it may be difficult to assess the situation accurately, increasing the risk of project failure.
In offshore development, where it is difficult to accurately grasp the progress on-site, it is necessary to pay strong attention to quality management.
Increased Security Risks
One of the drawbacks of offshore development is the potential for leakage of confidential information, source code, and personal data.
There may be differences in how security, intellectual property, and data protection laws are handled between Japan and other countries.
In some cases, budget constraints may prevent the company from allocating resources for security measures or providing the necessary tools and education.
However, since it involves the company's reputation, attention should be paid to security aspects.
Therefore, it is important to confirm whether the offshore development company incorporates security measures, and whether security measures can be included from the contract stage.
Common security measures include the following:
- Sign a non-disclosure agreement (NDA)
- Data encryption
- Strict access management and permission control
- Security training
- Fill out security checklists
At Solashi Co., Ltd, we also take measures from the perspective of information security by restricting access to the development environment and not allowing operations or viewing in the production environment. For more information, please contact us.
Increased Costs
In small-scale projects, costs may actually increase. This is because of the need to arrange personnel who can handle English and set up remote environments.
Even if offshore development is introduced with the expectation of cost reduction, it may end up requiring significant additional expenditures, so it is important to carefully check your company's personnel and environment beforehand.
4 Ways to Prevent Offshore Development Failures
If you understand the methods to prevent failures in offshore development and the points that lead to success, you can avoid major troubles.
Here, we introduce four key points for project success in offshore development.
Communicate Regularly
It is necessary to communicate frequently with the development company. By checking progress regularly, you can ensure a shared understanding of the schedule and future plans.
Even if there are discrepancies due to cultural differences, addressing issues early on can prevent potential problems. It is recommended to decide the frequency of meetings in advance.
Clarify the Order Details
The order details in the specification document should be written as accurately and in detail as possible. What is commonly understood in Japan may not be the case in other countries.
Anything not written in the specification document will not be included, so try to make the specifications as clear as possible. Providing highly specific specifications will also contribute to stabilizing the quality.
Request Experienced Companies
When outsourcing offshore development, it is advisable to choose a development company with abundant experience in projects similar to yours.
By utilizing the know-how they have built, it can lead to the success of the project while considering the cost aspect. Look into the scale of the project, the type of product, and the development period.
It is also recommended to choose companies with Japanese project managers (PMs). PMs with experience working in or founding Japanese companies can often be found working in offshore development companies.
With an excellent PM, smooth communication, project progress management, and security measures can be expected.
At "Solashi Co., Ltd", we have Japanese PMs with experience in business startups.
They deeply understand the technical requirements of projects and can discuss the pros and cons of development languages, selecting the best one considering sustainable operation and maintenance.
Request Companies Focused on Quality Control
If you choose a company that emphasizes quality control, the product quality can be maintained.
It is important to check whether clear quality standards are set, and whether activities like code reviews, testing, function checks, and feedback are being implemented.
Also, check if there are QA (Quality Assurance) engineers responsible for quality assurance or bridge SEs who manage overall quality within the development team.
This can lead to the following benefits:
- Prevents quality variations
- Allows you to communicate the quality level to engineers
- Enables early detection and correction of errors and bugs
- Allows implementation of improvements and cycles
Recommended Offshore Development Companies
Here are some recommended offshore development companies for outsourcing offshore development.
We will introduce one company each from Vietnam, the Philippines, India, and Myanmar, so please refer to them.
Solashi Co., Ltd
First, let us introduce our company. Solashi Co., Ltd, based in Vietnam, is characterized by the high skills of Japanese PMs and top-class engineers who graduated from leading engineering universities.
We have received high praise for our ability to engage in technical discussions at a high level and our proactive attitude in understanding the project details.
There is no issue with communication in Japanese by local project members. We communicate smoothly via email using Japanese. We also focus on code reviews, providing stable quality control.
With a wealth of experience working with Japanese companies, we can proceed with the work based on past know-how. Our company is truly capable of creating project value and accompanying the project towards success.
Japanese PMs Handle Communication
Looking for an Offshore Development Company
For such individuals, we recommend Solashi’s Vietnam offshore development
Ubicom Holdings, Inc.
A global offshore development company from the Philippines with a base in the United States. They are recommended for companies looking to promote global development work due to the availability of cutting-edge technologies from the U.S.
AKT Health Co., Ltd.
AKT Health, based in India, specializes in the healthcare and life sciences industry. They are adept in advanced technologies such as AI and blockchain, making them ideal for companies considering the use of new technologies in their development.
Global Innovation Consulting Co., Ltd.
This offshore development company has Myanmar personnel who are fluent in both Japanese and English. Even if English-speaking staff is unavailable, smooth communication is possible. They also handle IoT and AI development.
Global Innovation Consulting Co., Ltd.
Leave Offshore Development to Solashi
Offshore development is expected to become an essential method for significantly expanding business in the future. Choosing the right offshore development company and collaborating to create successful projects is crucial.
If you are considering offshore development, please feel free to contact Solashi Co., Ltd..
Japanese PMs Handle Communication
Looking for an Offshore Development Company
For such individuals, we recommend Solashi’s Vietnam offshore development
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Ubicom Holdings, Inc.
This is a global offshore development company from the Philippines with a base in the United States. They are recommended for companies looking to promote global development operations because they have access to cutting-edge technologies from the U.S. A key point is that active engineers serve as bridge SEs.
AKT Health Co., Ltd.
AKT Health, based in India, specializes in the healthcare and life sciences industry. They excel in advanced technologies such as AI and blockchain, making them ideal for companies considering the use of new technologies in their development projects.
Global Innovation Consulting Co., Ltd.
This offshore development company has Myanmar personnel who are fluent in both Japanese and English. Even if English-speaking staff is unavailable, smooth communication is possible. They also handle IoT and AI development.
Global Innovation Consulting Co., Ltd.
Leave Offshore Development to Solashi
Offshore development is expected to become an essential method for significantly expanding business in the future.
While there are both advantages and disadvantages, careful selection of the right company can help avoid troubles.
If you are considering offshore development, Solashi Co., Ltd, with multiple Japanese PMs who have experience in business startups, can guide your project to success. They are not only proficient in understanding businesses but also offer a very high cost-performance level.
They offer a small start using a lab-type development model, so companies new to offshore development can feel confident in their support.
If you are considering offshore development in the popular development country of Vietnam, feel free to consult Solashi Co., Ltd.
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."
