Top 13 Examples of Offshoring: Companies that Were Successful and the Reasons Behind the Ones That Failed

What is an example of offshoring? TurnKey gathered top giant companies that use offshoring
As technology continues to advance, so does the way we work. Before 2020, companies prefer to hire within their local market, making it difficult to expand and scale their development team. However, with the rise of remote work, startups now have the ability to build offshore global software development hubs and hire specialized talent from all around the world. This has opened up a whole new world of possibilities, allowing companies to easily connect with top talent and build and scale development teams more affordably.

What Does Offshoring Mean and What are Examples of Offshoring?

Offshoring, or the use of developers from a different country than the one your company is based in, has become increasingly common in the tech industry. Some of the most common examples in tech include hiring software developers offshore, building offshore dedicated teams, or creating remote technology centers. Many startups use an offshoring partner like TurnKey who helps companies build their offshore team and grow their tech business.

While building an offshore dedicated team can be a great way to do any type of full-cycle software development, staff augmentation, or team extension, it’s important to choose the right offshoring model. The wrong choice can lead to significant losses of budget, time, and even negatively impact customer experience. 

Before writing this article, I did a deep dive into the success stories of offshoring and the lessons learned by universally recognized tech companies to give you the goods, so you can make an informed decision about offshore.

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Top Reasons Why Companies Opt for Offshoring Solutions

For tech companies and startups, offshoring is so popular because it brings a ton of benefits, including:

#1. Flexibility in development

One of the primary reasons why companies offshore their software development is the flexibility it affords in the development process. When startups need to rapidly scale up or down according to demand, they can do so more easily by tapping into an offshore development team. This way they are not limited by the number of full-time employees they have on staff at any given time; instead, they can flex and contract as work demands.

#2. Time and cost savings

Technology startups use offshore talent to save both money and time. By working with a dedicated offshore development team, startups can get their products to market faster and at a lower cost than if they were to develop the products entirely locally. In addition, by offshoring non-core business tasks, companies can focus their limited internal resources on more important tasks that directly contribute to their bottom line.

#3. Wide pool of highly skilled developers

I have noticed that startups are increasingly turning to offshore workers to tap into a wide pool of highly skilled developers. This trend is driven by the allure of accessing talented professionals who offer exceptional expertise at a more affordable cost compared to their counterparts in countries like the United States. This advantage allows startups to optimize their budget and invest in other critical areas of their business. 

Companies like TurnKey recognize this demand and provide comprehensive solutions for offshore team building, offering access to a diverse talent pool of highly skilled developers. By leveraging the expertise and cost-effectiveness of offshore workers, startups can create robust software development teams capable of driving innovation and achieving their business goals.

If You're Looking for a Dedicated Team to Help With Your Software Development Needs, Look No Further Than the Experts at TurnKey

#4. Access to specialists

Often times a startup is looking for a very specific type of programmer with niche skills.  These folks are hard to find, particularly if you only look locally.  Offshoring this role dramatically increases your chances of finding these specialists.

#5. Streamlined paperwork and legal compliance

Working in a global-first company, I have witnessed the tremendous benefits that companies can experience by partnering with offshore providers specializing in this practice. By transfering their software development needs, companies can alleviate the burdensome tasks of maintaining proper records, navigating complex taxation rules, and addressing intellectual property concerns. Good offshore vendors effectively eliminate the bureaucratic challenges that often accompany hiring developers in foreign countries.

At TurnKey, we understand the importance of providing a seamless and worry-free experience for companies looking to tap into global markets. That’s why we offer our clients worry-free EOR services backed by our team of professional legal officers who have conducted extensive research on the intricacies of local labor laws in countries across Latin America  and Eastern Europe. With this promise, we aim to protect tech startup executives from employee misclassification risks and other potential pitfalls. We believe that the location of talent should never limit the opportunities for growth and success. With our expertise and comprehensive service offerings, startups can confidently embrace offshore team building and focus on their core business objectives.

Watch “When Offshoring is Great, and When It’s a Dog” to learn more about choosing the right time to offshore.

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Successful Examples of Offshoring

Offshoring Examples | TurnKey

Let’s now shift our focus to successful examples of offshoring in the realm of software development. These real-life success stories demonstrate how companies effectively navigated the complexities of offshore collaboration and reaped all the benefits it offers.

Headspace

I coudn’t help but to toss in this TurnKey client example of how sometimes going offshore turns out to be an even bigger success than initially planned. The client was Headspace, a leading meditation app. In this case, the entire first round of offshore hiring for Headspace’s innovation center of excellence in Mexico was completed within 30 days of when the ink dried on the contract, with onboarding completed soon after. This exceptional service won TurnKey praise and allowed Headspace to excellerate their plans for the center.

TurnKey was able to build out the first team in under two months of working with Headspace. The talent was overwhelmingly positive. We were surprised at the quality of the engineers TurnKey was able to find and the speed with which they were able to find them.
CTOHeadspace

WhatsApp

In 2014, this messaging app was acquired by Facebook for 9 billion. At the time of the acquisition, WhatsApp had only 55 employees, but it had already become one of the most popular messaging apps in the world with over 450 million monthly active users. 

One key to WhatsApp’s success was its reliance on offshore talent. The company hired development teams in Eastern Europe which helped it to break the top ranking lists on Google Play, App Store, and other platforms. Thanks to its offshoring strategy, WhatsApp was able to grow at an incredible pace and become one of the most valuable properties in Facebook’s portfolio.

Google

While Google does have one of the corporate world’s largest development teams, they wanted the perspective that comes from outside talent to truly advance and innovate. Because of this, the total number of Google contractors outnumbered their inhouse employees in 2018, according to a Bloomberg report. This is just one example of how Google is continuing to grow and expand its global reach.

In 2020, the company also made a major acquisition to consolidate its position as a leading provider of cloud-based services. CloudSimple is a Ukrainian company that provides a secure, high-performance, and a dedicated environment to develop a VMware migration solution. With this acquisition, Google was able to offer an even more comprehensive suite of cloud-based services to its customers.

Such offshoring solutions illustrate that even the world’s largest companies can’t do it all on their own. By tapping into the knowledge and creativity of contractors, they’re able to keep their business fresh and relevant. In a rapidly changing world, that’s more important than ever.

Amazon

Amazon is always looking for new ways to stay ahead of the competition. One way it has done this is by offshoring its research and development. By offshoring to a Ukrainian startup specializing in home security systems, Amazon has been able to access exceptional talent at a reasonable wage. As a result, Amazon is likely to remain a leading player in the e-commerce and cloud computing industries for many years to come.

We Get You Best-In-Class Talent From Latin America and Eastern Europe

Slack

Slack is one of the most popular communication tools on the market today, with more than 12 million daily active users. Simplicity and great design are the landmarks of Slack. However, few are aware that the company offshored a great deal of its development such as its logo creation, marketing and design, and software for web and mobile apps.

IBM

IBM is one of the world’s largest technology companies, with operations in more than 170 countries. IBM has a long history of offshoring, dating back to the 1960s when the company began shifting production to foreign markets. In recent years, IBM has continued to offshore talent for software development, consulting services, R&D, and monitoring cloud-based computer systems. 

Over time, IBM became the largest multinational employer in India. In addition to its large workforce, IBM has made a significant investment in India’s infrastructure and economy. The company has spent billions of dollars on research and development, and it has established several technology labs and centers in the country.

JPMorgan Chase & Co.

In recent years, JPMorgan has been expanding its operations in the Philippines. The company offshored to Metro Manila and a captive site in Cebu City, employing locals to provide software development and operations (in addition to mortgage operations and customer care services for their US-based businesses). 

JPMorgan isn’t the only financial institution to offshore. It’s estimated that about 80% of the world’s largest banks have offshore software development operations. By moving operations to countries offshore, financial institutions can reduce costs and boost their profits without sacrificing service quality. In addition, offshoring solutions can help to improve quality control and speed up production timelines.

People.ai

People.ai is a startup that offers a B2B sales acceleration platform based on machine learning technologies. The company is based in San Francisco but decided to open an R&D office in Ukraine to find offshore AI developers (which are a bit of a rarity).

Now, People.ai has access to a talented pool of developers who can help create innovative products and improve existing ones. In addition, the company benefits from lower costs associated with running an offshore tech office in Ukraine and can offer a more competitive product to its customers.

Examples of Offshoring - TurnKey

Lyft

Despite being a relatively young company, Lyft has made a big splash in the ride-sharing industry. Founded in 2012, Lyft has quickly become one of the leading providers of on-demand transportation. 

One of the company’s key differentiators is its focus on creating an innovative and convenient customer experience. Lyft is always exploring new ways to improve its service, and it has established a strong reputation for being at the forefront of customer service innovation. In 2021, the company decided to open a software research and development center in Eastern Europe as a way to further strengthen its tech community and product development capabilities. The technology center has already made significant progress, and the team currently consists of 20 people. With plans to grow to 100 members focused on data mapping, and improving Lyft’s services, the center is expected to make even more contributions to its product development efforts.

BigCommerce

BigCommerce is a leading e-commerce platform that provides innovative solutions for businesses of all sizes. Founded in 2009, BigCommerce has helped tens of thousands of businesses worldwide to grow and scale their online operations. 

In recent years, the company has been on an aggressive growth trajectory, expanding its team and its product offerings. However, a skilled workforce in tech is in short supply in the U.S., so BigCommerce decided to open a company offshoring unit in Ukraine. The move has been highly successful: in just one month, the team settled into their brand-new office, and within six months the team grew to exceed 30 developers. BigCommerce is now well positioned to continue its rapid expansion and drive even more innovation in the e-commerce space.

ThredUp

The online resale platform ThredUP decided to open a software R&D office in Ukraine. They knew that they could tap into a pool of highly-skilled tech professionals in the country, and they were not disappointed. Now their offshore team includes hard to find machine learning specialists, Java programmers, and .Net Warehouse developers, as well as payroll & accounting operations. The results were impressive: in 2019, they raised 68 million in funding from their IPO and became the world’s largest consignment store. ThredUP is now on track to revolutionize the clothing industry.

Offshoring Examples of Companies Who Failed and Why

I hope those examples have given you a better understanding of the potential power of offshoring software development.  In this section, let’s bring it back to earth and explore the darker side of offshoring. Here are a few real-life examples where offshoring endeavors encountered difficulties. These case studies provide valuable insights into the common pitfalls and serve as cautionary tales for tech businesses considering or currently engaged in offshoring initiatives. I share them in hopes you can extract valuable lessons along the way, and they will help you make informed decisions to ensure the success of your offshoring endeavors. Let’s dive into these stories of offshoring failures:

Accenture and Hertz

Hertz has accused Accenture of breach of contract, fraud, and negligence, claiming that the management and consultancy failed to deliver on its promises to build a new customer-facing website and mobile apps. 

According to the lawsuit, Hertz paid Accenture over $32 million for the project, but the result was “a buggy website that did not work as intended and mobile apps that had to be completely rebuilt.” Hertz was seeking unspecified damages from Accenture and a jury trial. This case exemplifies how important it is for startups to carefully vet their partners before entering any contractual agreement.

At TurnKey, we have a robust candidate vetting process that global companies like Headspace, diib, Ripple trust. Every developer that joins your team is put through a robust screening protocol.

TurnKey's people professionalized our company from the processes they've implemented to the product features they've developed. TurnKey has the uncanny ability to recruit top professionals to our cause who don't churn. They are critical to diib's core culture.
DanielFounder & CEO at diib

Navitaire and Virgin Airlines

The software developed by Navitaire crashed two times within three months, and it took nearly 24 hours for Virgin to find a solution and fix the problem each time. With this in mind, Virgin realized that it could not take the risk of another software failure. Therefore, they made the tough decision to shut down all operations for 24 hours to fix the issue once and for all. This decision may have caused some inconvenience for passengers, but it was ultimately the right call.

Potential Pitfalls from Offshoring

While offshoring offers numerous benefits, it is crucial for startups to be aware of the potential pitfalls that can lead to failures, like in the previous examples. Ideally, this firsthand experience and substantial research have highlighted the importance for companies considering offshoring solutions to proactively identify and mitigate these risks:

Poor offshoring partner

In many cases, the offshoring agency may not care about being a true partner or may stretch the truth about what is possible.  Moreover, offshore firms often try to offload the developers they have on their “bench” onto clients regardless of whether it is a good fit for the client’s needs or not; instead, insist that any developer you work with is custom recruited based on your exact specifications.

What’s the main lesson? Carefully research potential providers before heading down the offshore development path. (Or skip this process all together and just call TurnKey!)

Wrong choice of location

When a company decides to offshore its operations, it is crucial to choose the right country or region. Several factors must be considered, including labor costs and infrastructure. If one of these factors is not up to par, it can lead to problems down the road. For example, if labor costs are too high, it may stop you from hiring a full team. If infrastructure is lacking, it may be difficult for your developers to work on code in real time. As such, companies must carefully consider all factors before deciding where to hire offshore.

Weak communication management

One of the biggest challenges of offshoring is that it can be difficult to maintain open lines of communication between employees in different time zones. This can lead to miscommunication and delays, which can ultimately impact the quality of the product or service being offered. In addition, offshoring can also create cultural misunderstandings if employees are not sensitive to the differences between their own culture and the culture of their offshore staff.

Lack of control over business processes

When a company outsources its software development to another country, it can lose a certain degree of control over the process without safeguards in place. This can lead to delays and errors in the development process. Additionally, the company may not have the same level of expertise in-house to oversee the project and ensure that it is being developed correctly. As a result, offshoring can fail due to a lack of control over software developers (which is why working with TurnKey is so great – you are always in control!).

Want to Avoid These Problems and Head Straight to Success?

How to Make Software Development Offshoring Work for Your Startup or Company

Ready to wave your wand and conjure the perfect software development team from afar? This section reveals the secrets to harnessing the powers of offshoring and having them work their magic in your startup or tech company.

#1. Set clear goals

Setting clear goals is essential for any product team, but it’s especially important when offshoring. Without clear goals, it can be difficult to know whether or not your offshoring partner is meeting your expectations. Trying to accomplish too much in a short period can set you up for disappointment, while unrealistic goals can breed frustration. So when setting goals for your software development, be specific and be realistic. With clear and achievable goals in place, you’ll be well on your way to making your offshoring model work.

#2. Identify which time zone and culture is best for you

There are many things to consider when making this decision. What time zones will work best for your team? What kind of culture do you want to work with? What language do they speak? Do they have the same values as you do? These are all important questions to answer before making a geographical decision about where to offshore.

#3. Use time zone differences as an advantage

Rather than seeing time differences as a hurdle, use them to your advantage by hiring employees in time zones that only slightly overlap. That way, you can have someone working on your startup 24/7.

If you’re running a startup, you know that time is of the essence. Every minute counts when you’re trying to get off the ground. So when it comes to offshoring, using time zone differences to your advantage can be a game changer.

Note that this won’t work for every task or job function but for tasks that can be done remotely and don’t require face-to-face interaction, offshoring can be a great way to get things done around the clock without breaking the bank.

#4. Provide effective communication channels and tools

When you’re working with a remote team, it’s essential to have clear and concise communication to maintain a cohesive workflow. There are a few ways to ensure that your communication is effective. First, you should invest in reliable video conferencing software to hold regular face-to-face meetings with your team. Also, make use of project management tools like Asana or Trello to keep everyone on track in real time. Finally, set clear expectations from the start so that everyone is on the same page.

#5. Partner with a great offshoring provider such as TurnKey

Each startup that’s looking to scale quickly knows offshore teams are an attractive option. However, it can also be risky, as it can be difficult to manage a remote team and keep track of progress. That’s why it’s so important to partner with a great offshoring provider like TurnKey. We allow you to retain control over your team while handling all the nasty administrative work for you. If you’re looking to build a world-class remote development team, there’s no need to look any further than TurnKey’s Yourshore model, which we named as such to emphasize that this is YOUR team!

How Does TurnKey Help You Turn Your Offshoring Into A Success Story?

Thanks to our years of experience and proven process, TurnKey provides you with top offshore talent faster than most offshoring companies.  We custom recruit your dedicated software development team, and we are super transparent when it comes to pricing, so you’ll always know exactly what you’re paying for. Even better, we can help you reduce churn dramatically. So if you’re looking for a recruiting partner that can help you take your startup to the next level, then you should contact us today. We will build YOUR team on YOUR rules to lead you to YOUR success–we call it the YOURshore way!

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Final Thoughts

Offshoring can be a great way to get the software development help you need while saving time and money and still maintaining control of your startup. But it’s important to do your homework first and make sure you’re making the best decision for your company – and partnering with a firm you can trust. Otherwise, it could end up costing you more in the long run.

We’ve Helped Tons of Companies Reach the Offshore Promised Land

FAQ

What is an example of software development offshoring?

From a software development perspective, offshoring is the use of developers in another country from the one your company is based in. The most common examples of offshoring services in the software development industry include hiring software developers offshore, building offshore dedicated teams, and creating remote technology centers.

Which companies use software development offshoring?

Startups hire talent offshore more often because it helps save budget, but big technology firms like IBM and Apple also offshore to other countries because they recognize talent is available globally and can help them scale quickly.

Why do companies look offshore for software development?

When scaling a company’s software development operations, there should be a good balance between cost, quality and speed. Startups find all of that and more when they hire offshore developers. They leverage the expertise found in a global talent pool while also saving significant money and accelerating their speed to market.

January 4, 2024

TurnKey Staffing provides information for general guidance only and does not offer legal, tax, or accounting advice. We encourage you to consult with professional advisors before making any decision or taking any action that may affect your business or legal rights.

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