Offshore Development

A German company needs a new app or an internal computer program. It can hire people in Germany for this. But it can also assign the work to a team in India, Vietnam, or Poland. This is exactly what is called offshore development: the programming work happens in a distant country, often in a different time zone. The client stays in its own country and specifies what should be built. Sometimes this is an external service provider, sometimes a company’s own subsidiary abroad.

What companies hope to gain from it

The most obvious reason is cost. An experienced software developer in Germany quickly costs 80,000 euros a year in salary or more. In India or the Philippines, the amount is often a fraction of that. For a company with a hundred developers, that’s a difference of several million euros per year.

But it’s not just about saving money. In Germany, good developers have been hard to find for years. Anyone posting a job opening sometimes waits months for suitable applications. Abroad, the labor market is often larger, because many computer science graduates finish their studies there every year. Offshore development is therefore also a response to labor shortages.

A third advantage is the time difference, if used cleverly. A team in Asia works while it’s night in Europe. For tasks like testing or fixing reported bugs, this can keep things moving around the clock. In practice, however, this only works with very clear agreements.

How a distributed team works together

The client first describes what the software should be able to do. This description is called requirements. The remote team turns them into program code. The code ends up in a shared online repository that both sides can access. Work is usually done in short cycles of one to two weeks, at the end of which there is a visible intermediate result.

For this to work, fixed communication channels are needed. Common practices include daily short video calls, chat programs, and a digital task board where everyone can see the current status. There is often also an additional person who translates between both sides, both professionally and linguistically. This role is often underestimated and yet remains crucial.

The typical problems rarely lie in the developers' skills. They lie in misunderstandings. A requirement that seems obvious in Germany is read differently 7,000 kilometers away. Anyone who describes things poorly gets back software that doesn’t fit well and ends up saving nothing at all. That’s why some companies choose nearshoring: the work goes to a closer country like Poland or Romania, where the time zone and work culture are more similar.

Offshore teams in the news and everyday life

Many of the programs you use every day were partly built offshore. Banking apps, online shops, and booking systems often have code portions from India, Eastern Europe, or Southeast Asia. You can’t tell this from the finished product. Customer service via chat or phone is also often provided from other countries.

In business news, the term usually appears in two contexts. First, when a corporation cuts domestic jobs and shifts the work abroad. Second, in connection with the large Indian IT service providers such as Infosys or Tata Consultancy Services, whose financial results are seen as a mood barometer for the industry.

Currently, artificial intelligence is changing this business. Programs that write code themselves are taking over simple tasks that used to be readily outsourced. Some experts therefore expect pure low-cost providers to come under pressure. Others counter that complex projects will continue to need many experienced people. Anyone reading news about this should be aware of both arguments.