Hiring an Offshore Development Team in 2021: A Complete Guide for Startup Founders

All you need to know on why and where to hire a dedicated offshore software development team for your early-stage startup

Imagine. You are in the middle of the Y Combinator startup program. You were working hard on your product idea for a couple of months already, but you’ve just realized that you must pivot. You are 100% confident that you need to develop this new disrupting product or feature in order to prove that your idea is worth the investment. And now you’ve got only one month to develop something completely new and present it in front of venture investors at Demo Day. However, you lack technical expertise for this particular feature or product and need help. Don’t panic, as there’s a solution: to hire an offshore development team.

Offshore development partner

Should you skip in-house hiring for outsourcing?

Our answer is yes. But before we unveil all the secrets of successful hiring overseas, you need to consider the following important factors to survive and succeed in a dynamic environment of a startup:

  1. Avoid conflicts between the co-founders, as those conflicts can ruin your startup at the very beginning. According to research by Noam Wasserman, Harvard Business School professor, 65% of startups fail exactly because of that.
  2. Get everything done quickly. The faster the product enters the market, the better it is for the startup.
  3. Pay a reasonable price. As a rule, investors fund the startups only after they see an MVP (Minimum Viable Product) to validate your business model. Therefore, it’s important to remain within the budget (which is typically not that huge) when creating the MVP.
  4. Retain high quality. It’s critical that you maintain the balance between the speed, price, and quality of your MVP.
  5. Use the advantage of remote work (especially since during the COVID-19 pandemic everyone is basically working remotely) to cut the costs.

Sounds challenging? It is. However, if you hire offshore developers, you will leverage all of the above issues and create an MVP that will impress the investors.

Why Hire Offshore Developers for Your Startup?

According to Deloitte’s Global Outsourcing Survey, 72% of companies would prefer software development outsourcing over in-house development. The reasons for that are as follows:

    • It’s a cost-effective product development strategy. Quartz reports that 46% of startups fail because they run out of money. However, this issue is very unlikely to happen if you hire offshore developers. You will not be spending your funds on overhead costs such as office rent, payroll, insurance benefits, vacations, recruitment fees, etc. Instead, you will be directing the funds to the most important domain – a creation of an MVP. Moreover, due to the lower cost of living, the rates of developers in offshore countries are typically much more reasonable than those of their American and Western European counterparts. Hiring a dedicated development team from Eastern Europe, India or Latin America can be twice or even three times cheaper than in the US. 
    • Increased productivity and saved time. A team of offshore developers can not only reduce costs but also speed up the development process and thus save your precious time. As you already know, time is crucial for any startup because each startup is born in a competitive setting. With a dedicated development team, you will not spend any time training new employees, as each outsourced developer has their skills already in place. Finally, you will not spend any time on project management routine or HR activities such as employee retention – a vendor development company will handle all of those tasks. As a result, you will focus only on work and nothing else.
    • More talent than you would find onsite. IT outsourcing gives you access to a larger pool of talents than you would find onsite. For example, most of the developers in California are already employed by tech giants. They receive enormous wages, benefit from attractive perks, and feel quite safe and comfortable with their current employers whereas startups imply risks, hence it is much harder to hire developers for a startup in the USA. On the contrary, offshore countries in Asia and Eastern Europe are full of skilled developers that would gladly join your startup.
Source: Nederlia
      • Flexibility. With an in-house team, it will be very difficult to scale your team or change the technology stack conforming to the project stage and scope. However, such changes are very common for startup environments, so flexibility is crucial here. The good news is that the outsourcing developers are flexible and can be easily moved between the projects, especially if you collaborate with them via a dev shop.
      • Fewer conflicts. Startups typically result from personal relationships between the co-founders that eventually evolve into business relationships. Business interactions may differ from personal ones, so this can cause conflicts and misunderstandings. A guy whom you have known for ages may show a dark side of their personality while in business. However, an offshore development team can help you avoid such conflicts at the MVP building stage.

As you see, hiring offshore developers can streamline your startup. After all, products such as Skype, Slack, Github, and many others were developed by outsourced teams.

Hiring Outsourcing Developers: Where to Start?

Before you hire developers for a startup, make sure you follow the checklist:

    • Define your business goals and be ready to communicate them. Clearly identify the problem that you are planning to solve with your initial MVP, as you will have to explain this problem when outsourcing developers. Determine the main goal of your product that should be fulfilled, break it down into smaller, measurable milestones, and set approximate deadlines for those milestones.
    • Evaluate the skill set for the project. Identify the technology stack(s), expertise, and skills that you are going to need for your project. Define which roles you need for the project. Do you need only the developers, or also PMs, QAs, or business analysts?
    • Plan the budget. Budget is often a pitfall for any startup, so it’s crucial for you to plan it until the very last penny. Define the size of your initial capital and the areas on which you can save money, leaving only the most important ones. Find the investors whom you are going to show your MVP beforehand.
    • Collect information about offshore locations. There’s a wide variety of offshore countries to choose from, each of which has its own advantages and challenges. Shortlist the countries that are not only closest to you in terms of time zone and culture, but also consider the best offshore development price/quality ratio.

How to Find a Developer for Your Startup

Now that you have fulfilled all of the necessary prerequisites, it’s time to move on to the next stage and hire development teams. You can find a dedicated development team for your startup via the following sources:

    • Recommendations (referrals) from people who you know
    • Networking on conferences, hackathons, and meetups
    • Searching for the developers or teams at freelance portals
    • Looking for the developers at tech talent marketplaces
    • Searching for the offshore developers or teams via social media or LinkedIn
    • Using the services of offshore software development agencies
    • Asking for the help of local recruiters

Offshore Software Development Challenges

Outsourcing developers are for sure beneficial for your startup, but be prepared for the following challenges when looking for potential candidates:

Time Zone Differences

The most common IT outsourcing destinations are Latin America (Argentina, Chile, Brazil, Colombia, etc.), Eastern Europe (Ukraine, Belarus, Poland, etc.) and South-East Asia (especially India). If your offshore development team is located in a time zone that’s different from yours, it may be hard for you to synchronize the time when both the in-house and offshore guys are online. However, you can turn this challenge into an advantage by choosing the correct time zone. For example, if you are in New York and hire a dedicated development team that’s based in Ukraine, you will get only 7 hours of difference. Besides, Ukrainian time is ahead of the New York time, meaning that the Ukrainian software engineers may be already having lunch when you wake up. And the good news is that they have already completed some work before lunch, so it’s ready for you to review. On the contrary, if you hire an offshore team of developers from India, you will get more than 10 hours difference and, what’s more important, in another direction. It means that your offshore team members will be still asleep when you start your working day, so it may hamper your workflow. Nevertheless, no matter which country you choose, modern timezone management tools can help you overcome this challenge.

Lack of Face-to-Face Communication

“Offshore” means “located in another country”, so it’s obvious that there will be a certain barrier between the in-house startup founders and remote developers. However, there’s a solution: you can visit the offshore team location from time to time, personally meet your remote colleagues, spend some time together, and break the ice. Believe it or not – such travels would cost you less than a startup failed because of hiring mistakes. Another solution is to hold regular video conferences and start them not with the work-related questions straight ahead, but with small talk about what’s currently going on in your lives.

Too Many Vendors to Choose From

The abundance of software development vendors on the offshore market can bring you not only benefits but also confusion. It’s hard to choose between thousands of agencies that offer you to hire offshore developers as well as build trust with them.

Cultural Differences

When working with offshore development teams, it’s important that you understand the difference between the low context culture and the high context culture.

Source: mlpeterson.com

The low context culture is:

    • specific for the US and Europe, including Eastern Europe;
    • relies on words and facts;
    • task-oriented;
    • deadline oriented;
    • logical;
    • open to changes;
    • based on the agile methodology.

The high context culture is:

    • specific for China, India, Philippines, and other Asian countries;
    • relies on trust and emotion;
    • team-oriented;
    • not deadline oriented;
    • intuitive;
    • reluctant to changes;
    • based on the waterfall methodology.

If possible, we recommend that you hire offshore developers whose culture is closer to yours. As a result, you will not have to spend extra time understanding the new culture and getting used to it. 

How to Hire Offshore Developers for a Startup

So how your hiring process should look like and what are the signs of a perfect offshore development team? Here’s a checklist of hire developers for a startup:

    • Create a detailed job description. Make sure you’ve listed the functionality of your project, all the right skills a developer has to have to fit the job
    • Find out if the developer or outsourced team has a proven track record. Look up their ranking at websites such as Clutch, see if they have a profile on LinkedIn, and find out which clients they have already interacted with. If possible, contact their previous clients and ask if they can recommend this remote team or developer. If you’re a non-technical founder, make sure your technical co-founder (if you have one) is truly dedicated to the selection process. If you don’t have a technical co-founder, hire a consultant (an experienced tech person) to help you make the right decision, if you have hesitations.
    • Make sure that you have access to the latest code. Unfortunately, it can happen that the developer may refuse to release the code because of possible personal conflicts. Therefore, we recommend that you make your access to the code one of the prerequisites of their participation in your project. Besides, you should be the owner or admin of all related accounts at Github, TFS, clouds, or other platforms.
    • Ask the outsourcing development company about their workflow. Find out how they interact with their clients and allocate developers to projects. Ask if they are flexible enough, i.e. if they can add more developers in the course of a project. It may happen that the development company’s workflow may not suit your needs, so better know this before you hire a remote team and sign the contract. Do not forget about the NDA (non-disclosure agreement), you’re also free to request the NDA signature even before the dev team starts working, e.g. during the interviews.
    • Reject the cheapest quotes. Focus not on low but on cost-efficient rates. With the cheap quotes, you may end up paying more at the end of the project because someone else will have to rewrite the poorly written code. And once again — never feel ashamed to ask for Stack Overflow or GitHub profiles of developers to check the code quality.
    • Stay away from fixed-price payment models. Actually, a fixed price includes a minimum of 25% of additional costs to cover the risks. An hourly (time & materials) model will be a better option for you, as you will know what exactly you will be paying for. Besides, the time & materials model allows more flexibility for the project, and you won’t have to negotiate each change. Some offshore companies that work under a fixed price model also charge an overhead for uncertainties. However, startups are typically full of uncertainties, so a fixed price model is definitely not an option for a startup that wants to hire a software development team.
    • Check if the remote team is agreeing with everything that you offer or would prefer to argue. If the developer or webshop says that they are able to fulfill literally each of your requirements, it’s an alarm sign. It means that they have not studied your requirements thoroughly enough to see if they can align them with their available skill sets. Each web dev shop specializes in different skill sets, and none of them can do everything you want without any adjustments unless it’s a fraud. 
    • Find a good project management tool. Collaboration tools make offshore development much more convenient. Exchanging lengthy emails is an outdated method of project management. Use modern project management, tracking, and collaboration tools such as Slack, Jira, Trello, etc. As a result, you will clearly see the tasks and progress of your team, lead discussions, leave comments, and quickly get to the point.
    • Be proactive. Proactiveness is one of the most important soft skills of a startup founder, especially if they are working with an offshore development team. Try to be one step ahead of the next day’s tasks, especially if your remote team members are awake and working while you are asleep. As a result, you will feel confident that everything remains on track when you wake up.
    • Insist on frequent deployment. Ask your offshore developers to show you the demo of the MVP at the end of each sprint, typically on a weekly or bi-weekly basis.

Finally, make sure that your team:

    • Understands your instructions and assignments. In some cultures, people have a fear of showing that they don’t understand something. Your task is to inform them that it’s okay to ask questions. Better solve all of the issues at the beginning than try to sort them out when it gets too late. If you feel that they say only what they think you want to hear, bring up this issue.
    • Understands your business and has at least one similar project in their portfolio.
    • Has experience working with startups.

Outsourcing Developers via Tech Talent Marketplace

Startup founders are typically open-minded people with lots of brilliant and innovative ideas, eager to bring them to life. Therefore, it’s obvious that they seek fresh solutions not only as entrepreneurs but also as users, to simplify their workflow and even revolutionize it. We at YouTeam understand the young entrepreneurs and their pains like no one else because YouTeam is also a startup. Founded by a bunch of enthusiasts in Ukraine, one of the leading offshore countries, YouTeam offers a new way of collaboration between the startup founders and a dedicated development team. Here’s how our workflow looks like:

  1. We collaborate with and create a database of the world’s best web dev shops that have undergone a strict vetting process.
  2. We provide a tech talent marketplace with the profiles of developers who are working at those dev shops on a full-time basis.
  3. Our clients create accounts at the marketplace, are checked by our representative, and get access to the developer profiles.

4. The clients can choose a team to work with according to their requirements and then personally interview the members of this team.

5. The client signs the contract with the webshop that is responsible for the team of their choice and kicks off the project in the course of two weeks.

6. The webshop handles all overhead issues such as payroll, office space, sick leaves, vacations, and so on.

The size of the offshore development team that you will get with YouTeam is up to 24 persons (and even more by your request). When you hire offshore developers with YouTeam, the structure of the dedicated development team is typical as follows:

    • Project manager. A PM makes sure that the team remains on track and adheres to the deadline. The PM collaborates with the development team leads to set agendas and processes, allocate resources, detect and overcome obstacles, and provide you with timely feedback.
    • Front-end development team. The front-end developers work on the implementation of the visual aspects of the software, focusing on graphical elements, user interface design, and user experience.
    • Back-end development team. The back-end developers are responsible for the server-side aspects of the software. They provide the APIs and code that their front-end colleagues use for software development.
    • Business analyst. A business analyst (requirements engineer) can be an essential part of a dev team. They analyze your project requirements and work to develop technical solutions according to those requirements.
    • DevOps engineer. A DevOps engineer is in charge of bridging the gap between the software development and IT processes to speed up and optimize the development, testing, and release of the software.
    • Quality assurance team. The QA engineers team makes sure that your quality specifications and standards are met throughout the project. They are also responsible for detecting and reporting bugs within the MVP software.

Why Hire Offshore Developers for Startup with YouTeam?

Here are the key reasons for deciding to hire offshore developers with YouTeam:

    • Broad choice of software developers. YouTeam gives you access to a much wider pool of offshore developers that you would get when cooperating with a traditional offshore development agency.
    • Only the trusted dev shops. Dev shops that are featured on YouTeam undergo a multistage screening process, during which we decide if we can entrust our clients to it. 
    • No recruitment fees and other overhead costs. We charge the commission only to our vendor dev shops while our clients use the platform for free, paying only for the development services. Our goal is to make offshore development transparent for our clients. 
    • Ability to scale the team. The scope of any startup project constantly changes at the MVP stage. We at YouTeam know this like no one else, so we give our clients an opportunity to quickly scale the team with the desired number of developers.

No need to wait for months. With traditional outsourcing developers, you may wait for quite a long time until your team is formed and the project starts. With YouTeam, the entire process will take about two weeks.

Hiring an offshore development team for a startup: FAQ

What are the main advantages of hiring offshore developers for a startup?

One of the main reasons why many startups fail is due to budget issues. Hiring offshore developers is a solution that will not exhaust the company’s funds by removing overhead payments such as payroll, office rent, etc. Thus, you automatically have more money in your hands to spend on things that truly matter. Moreover, you will be able to acquire some of the best and talented developers from all around the world who will be a great addition to your in-house development team.

What are the top offshore destinations for hiring software engineers in 2021?

The two regions that offer the best price-quality ratio in 2021 are Eastern European and Latin American countries. Both regions are represented by a variety of dev shops that are used to working with North America and Western Europe. Interested to learn more? Check our article about the top offshore locations where you can learn about each region and country in detail.

What collaboration tools are necessary when working with offshore developers?

Managing a remote development team is not an easy task for any CTO, VP of Engineering, or founder, but thanks to the collaboration tools, a doable one. It is also extremely important to use these tools in the right way, be it remote pair programming tools or code collaboration tools. Head over to our blog post to find out the eight collaboration tools you need to have a fruitful cooperation with your remote dev team.

Should you hire an outsourcing agency or freelancers?

Both options could work but if you (or your investors) need more trust and safety, we’d suggest going with the dev shop hire over freelancers from services like Upwork. The reason is that with the dev shop you can be sure that the process is clear, communication is going smoothly (according to the previous agreement you had in your documents), and that deadlines will be caught. A freelance programmer is a less trustful option since you have less control over the process. Hiring developers from a dev shop can be a bit more expensive but you’ll also have access to the client reviews, good documentation, and sometimes even get a project manager to control the process offshore.

Where the best developers are located?

Best offshore developers are usually located in Eastern Europe and Latin America.

The Bottom Line

The best option for a tech startup is to hire an offshore development team. In such a way, startup founders will save their funds and time while receiving a high-quality MVP. Before you hire developers for a startup, you must clearly define your requirements, determine the required skill set, plan the budget, and start looking for offshore locations. Besides, be aware of challenges that you may encounter when hiring offshore developers – specifically, time zone differences, lack of personal communication, and cultural differences.

Additionally, consider the following aspects:

    • Proven track record
    • Access to the latest code
    • Unreliability of the cheapest quotes
    • Time & materials payment model vs. fixed price model
    • Not letting the team agree with everything you say
    • Good project management tool
    • Proactivity
    • Frequent deployment

YouTeam talent marketplace is one of the best platforms for startups that need offshore developers. Founded in Ukraine, one of the leading offshore countries, YouTeam connects the developers from the best webshops with the clients whereas the dev shops take over any related overhead costs. We carefully select only the best dev shops and offer benefits such as scalability, secure payment, quick interaction, and access to a broad tech talent pool. Consider us if you are seeking a dedicated development team for your startup.

Hire software developers

Written by
Anastasiia Myronets

Technical writer, IT copywriter, content manager, translator with 12 years of experience.

View all articles

Tell us about your plans on a brief intro call and we’ll start the matching process.

Hire developers