Offshore software outsourcing: cost savings with added complexity

In the global technology landscape, Offshore software outsourcing remains a familiar option for companies seeking to reduce costs, rapidly scale technical teams, or shorten time to market.

However, reality shows that Offshore outsourcing is not a straight path. It can help businesses cut up to 70 percent of personnel costs, but it can also come at a price in the form of delayed projects, defective products, or solutions that fail to meet urgent business needs.

What is the Offshore model?

Offshore software outsourcing is the practice of hiring a software development provider in a different country, with complete separation in terms of geography and time zone.

For example:

• A Vietnamese company hires a development team in India to build a backend system.
• A Hanoi-based business hires a UI or UX designer from Ukraine.
• A Vietnamese startup uses a mobile development team in Bangladesh or Eastern Europe.

The common characteristics of this model are low costs and abundant talent, but it requires strong remote management capabilities and cross-cultural communication.

Why does Offshore software outsourcing remain attractive to Vietnamese businesses?

Significant cost savings

Developer hiring costs in Vietnam are steadily increasing with market demand. On average, hiring one developer can cost between 18 and 40 million VND per month. Meanwhile, countries such as Bangladesh, Pakistan, or Nigeria offer labor costs that are 30 to 50 percent lower. For businesses with limited budgets, the Offshore model can help launch an MVP quickly without excessive spending.

Easier access to rare technology skill sets

Offshore outsourcing allows businesses to expand their search boundaries when they need expertise in blockchain, AI, or other technologies that are still scarce in Vietnam. This model is particularly suitable for R&D-focused startups or companies with a core team in Vietnam that need additional resources from overseas.

Flexible working models and staffing

Offshore outsourcing offers various engagement models such as hourly rates, sprint-based delivery following agile milestones, or monthly dedicated developers or teams. Businesses can also scale resources up or down depending on each phase, without long-term commitments.

But Offshore software outsourcing is far from simple

Cultural and communication differences

Many Vietnamese businesses are not accustomed to remote management. This often shows in unclear task assignments, lack of proper documentation, or failure to use management tools such as Jira or Trello.

In addition, some Offshore teams do not fully understand industry-specific requirements in Vietnam, such as accounting standards, import export procedures, or electronic invoicing integration.

Difficulty in controlling progress and quality

With Offshore outsourcing, businesses frequently face challenges related to time zone differences, indirect communication, or non-dedicated developers, all of which can delay projects.

Many companies hire overseas freelancers through platforms such as Upwork, Freelancer, or Fiverr, but insufficient legal binding can result in lost source code or incomplete products.

Legal and security risks

Many Vietnamese businesses pay insufficient attention to signing clear NDAs or tightly controlling repositories and codebases, leading to significant security vulnerabilities. In the event of disputes, resolving issues under international law is difficult, time-consuming, and costly.

When should and should not Vietnamese businesses choose Offshore software development?

Offshore is suitable when:

• The business needs to save budget in the early stage or wants to build an MVP quickly to test the market.
• There is an internal Project Manager or CTO capable of effective remote control.
• The project targets a global market and does not heavily depend on local regulations.
• The business needs specialized technology resources that are scarce in the domestic market.

Offshore is not recommended when:

• The product serves the Vietnamese market and requires deep understanding of local cultural and legal contexts.
• The project needs integration with government systems such as tax, social insurance, or customs.
• The business lacks internal technical staff to inspect, review, or manage the Offshore team.
• Timelines are tight, as Offshore projects require very clear and detailed scope definition upfront.

Offshore software outsourcing costs in 2025 (latest update)

Offshore country	Rate (USD/hour)	Market notes
Bangladesh	10 – 20 USD	Very low cost but quality must be carefully tested
Philippines	15 – 30 USD	Strong English communication, suitable for support roles
India	20 – 40 USD	Very popular, but quality varies greatly between large and small teams
Ukraine	30 – 60 USD	High code quality, good understanding of UX and UI
Nigeria, Kenya	15 – 25 USD	Young workforce, competitive pricing

Source: Arc.dev, Clutch.co, and real-world quotations from Vietnamese companies with Offshore outsourcing experience

Offshore software outsourcing process – Preparation to avoid project failure

Each Offshore provider has its own workflow. However, if you are a Vietnamese business considering Offshore software outsourcing, make sure every collaboration follows a standardized governance framework with the following six core steps:

Step 1: Submit requirements and project description (RFP – Request for Proposal)

The business should provide as much detailed information as possible, including:

• Product objectives
• Core and secondary features
• User flow diagrams or wireframes (if available)
• Expected deadlines and budget

If the business does not yet have an internal technical team, it can request consulting support to build a Business Requirements Document (BRD) from advisory agencies.

Step 2: Technical analysis and consultation

The Offshore provider will respond with an initial proposal that typically includes:

• Recommended technology stack
• Implementation roadmap divided by sprint or phase
• Cost estimation for each stage
• Staffing model (who does what and role responsibilities)

The business should request an online meeting (via Google Meet or Zoom) to clarify all unclear points in the requirements.

Step 3: Contract signing and confidentiality commitments

A reputable Offshore provider will allow the business to directly manage repositories, issue trackers, and cloud servers if applicable. At a minimum, the business must sign two documents:

• Software development contract (including timeline, payment terms, source code ownership, and penalties for delays).
• NDA (data and source code confidentiality agreement).

Step 4: UI design and system architecture

After the business approves the UI design (via Figma, Adobe XD, etc.) submitted by the Offshore team, they will build the backend structure, database, and APIs based on the agreed architecture. The business can request delivery of a System Architecture Diagram for future review or audit purposes.

Step 5: Software development by sprint – Agile

Projects are typically divided into two-week sprint cycles. For each sprint or week, the business should receive:

• A demo build (development environment)
• Progress reports
• Official feedback records from the business

Offshore teams usually use tools such as Jira (task management), GitHub/GitLab (repositories), and Slack or Microsoft Teams (communication) to track project progress together with the business.

Step 6: Testing, acceptance, and maintenance

Acceptance is often divided into two phases:

• Alpha test: internal testing by the Offshore team.
• Beta test: UAT testing by the Vietnamese business.

After acceptance, the Offshore provider will:

• Deliver source code, technical documentation, and cloud accounts.
• Commit to maintenance for 1 to 3 months, with extension options if needed.

Tips for running a successful Offshore software outsourcing project

• Choose the right engagement model: Small projects should use milestone based contracts with clear deliverables, while long term projects should choose a Dedicated Team model with an intermediate management layer.
• Sign contracts carefully: Execute NDA and contracts with clear timelines, source code ownership, payment terms, and maintenance clauses.

• Use remote management tools: Require progress tracking and project monitoring through professional tools such as Jira, Notion, Slack, and GitHub.
• Start with a small project to validate capability: Businesses can begin with a single module or a POC (proof of concept) before fully committing to long term cooperation.
• Hold regular progress review meetings: Businesses should organize weekly calls, task reviews, and periodic code audits. Avoid waiting until the end of a sprint to discover issues.

Conclusion

For Vietnamese businesses, the Offshore model should only be applied when the product is clearly defined, control processes are in place, and cross border collaboration is well prepared.

Do not choose Offshore purely because it is cheap. Treat Offshore as a strategic partnership. Verify carefully, define clear commitments, and proceed step by step with confidence.

Frequently asked questions (FAQ)