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Riddhesh GanatraFounder, Code-Bauthor linkedin

An Insider's Perspective on Outsourcing Software Development to India

If you're deep within development and product circles, you'll have often heard among your circles that Software Development in India is generally quite specialized, and more importantly, much more affordable when compared to the west.

While there's quite a lot of truth to this, one must understand the landscape thoroughly, weigh all aspects and compare alternatives in order to make the most out of a the opportunity.

I am Riddhesh Ganatra and I run a full Service Software Development agency Headquartered out of India with offices and clientele across the globe and while I am bound to be slightly biased, my intent is to provide as much objective information as possible to enable a much more calculated and faster decision making for you.

How Did India Become a Software Hub?

Sometime in the early 2000s, the exports of software services began skyrocketing when a large number of global companies began first by outsourcing their level 1 and level 2 technical work to outsourced service centres in India. Think of BPO companies and call centres.

Western countries that would have to otherwise spend a tremendous amount of capital and resources to maintain a team of professionals capable of providing these services soon realized the benefits of an outsourced service model and experimented by extending this model for software services as well.

Unlike other service models, however, software was deeply technical, posed a sizeable barrier to entry back in those days and western technology and their understanding was miles ahead.

Thankfully, sometime around the 1980s, a few things began to work in the favor of the IT industry. For one, the government's focus on technical education around Computer Sciences began ramping up.

Then there's the story of how Jack Welsh from GE outsourced $10 Million worth of IT work to India after a few rounds of discussion with the president and his aides during his visit;

Then there's also the setting up of NASSCOM (National Association of Software & Service Companies) that enabled the industry to make unified decisions that allowed the country to emerge as the hub that it is today.

While many believe that the liberalization reforms of 1991 were primarily responsible for the emergence of the industry, it was very likely a positive contributor among a full range of other reasons, primarily the ones we mentioned above.

Main Reasons Why Companies Outsource Software to India

In addition to the main motivation of cutting costs, there are a few additional reasons why companies choose to outsource this sort of work to India, instead of other countries.

Software Development Costs

Of course, if you manage to find the right offshore development partner, the costs of development in India will be much cheaper when compared to any Western Nation or Eastern European country and comparable to other software outsourcing hubs as well.

Firstly, we need to quantify by how much.

Unfortunately, software requirements and estimating their prices in different countries is way to difficult to estimate easily; so we've compiled the annual salaries of a full stack developer in different countries so we can arrive at a reasonable estimate.

The data has been compiled from different webpages of Glassdoor, so the foundation of the data should be quite reliable as well.


United States

Mexico

Ukraine

Poland

Philippines

India

Pakistan

Full Stack Developer

$97,000

$33,000

$25,000

$23,000

$17000

$11000

$9,000

In addition to this, you may also want to;

  1. Compare the Costs of Outsourcing React Development to India
  2. Compare the Costs of Outsourcing Python Development to India
  3. Compare the Costs of Outsourcing PHP Development to India


While these numbers may differ quite a bit depending on the seniority of the talent and specific cities where the developer is based, it certainly is indicative and helps us conclude that the value that companies can derive from outsourcing software to India is definitely quite high.

Access to Talent Pool

Naturally, companies that opt to outsource would want to move their entire IT requirements (or, at least most of it) would want to benefit from the scale of doing so.

As one can imagine, IT and software requirements can be quite diverse, requiring talent across backend, Devops, frontend, cloud computing and even a bit of hardware.

Even companies with more than 20 employees have a tough time to solve for these requirements.

And it's not simply an issue of price, finding large talent pool of offshore developers whose expertise spans multiple disciplines, frameworks, languages, tools and platforms is not that straightforward.

For example, Pakistan is a great destination for outsourcing PHP or HTML development at price that would seem scarcely believable to developers in the west.

However, you'd be hard pressed to find reliable Devops professionals, AI/ML specialists and niche developers for NodeJS, React or Angular projects.

The overarching point I'm trying to make is that cost is not the only factor. In fact, it's probably not even the main factor to consider.

If one takes into account the breadth and depth of talent required for any given outsourcing project, several countries from the list above would be elimiated.

Access to this sort of expertise is also why India wins most large ticket outsourcing contracts simply because the professionals that span different software disciplines and the professionals who bridge them together are also widely spread out throughout India.

number of software developers by country

Source: Distant Job

Developer Community

The industry in India is quite fragmented and several players across different software disciplines often collaborate, share deals and accentuate each other's expertise so each of them are in a far better position to offer bundled services.

Of the 100 million developers on GitHub, ~15 million are from India alone and that speaks volumes of the collaboration that's possible in one country alone.

Community

Clocks

Languages & Timezones

After United States, India has the second largest number of English speakers in the country at ~265 Million.

English is one of the official languages in the country and all laws, signages and business communications are generally done in spoken and written English.

Timezones are somewhat of a concern since all of India lies in a timezone (GMT +5:30) that's polar opposite to the ones in the west.

However, like in Philippines, most offshore software development centres, especially those with global clientele, run night shifts with employees who are already in-sync with the project.

The Pitfalls of Outsourcing to India

Before you plan your next project with a partner in India, you may want to also consider a few aspects that are not so great concerning outsourcing to India.

Vetting the Right Outsourcing Partner

The big names in India like TCS, Tech Mahindra, HCL, Wipro, and Cognizant are mainly preoccupied with multi-billion $ global projects.

Other companies will find themselves having to navigate a fragmented landscape of mid-size and boutique development agencies and software offshoring specialists.

And here it's often the case of a few bad apples.

Cases of data theft, poor quality programming, and downright non-performance after a prepayment is not as uncommon as one might think so it's important to get a hold of the right partner with the right certifications and also to vet the founding and developing team thoroughly.

Staff Turnover

Like the dot com bubble in the late 90s, India's software industry is plagued with a serious problem of staff turnover wherein it's become quite difficult for outsourced software companies to hold onto the talent.

While it may seem like a problem that the outsourcing company has to deal with, it can still lead to problems for a client as well.

If a the team of developers who have been working on your project are rotating often, then it can be a cause of concern as far as continuity and secrecy is concerned.

To get around this, one should thoroughly vet the partner on attrition-related concerns and most offshore technology partners worth their salt will be more than willing to share this information after a couple of rounds of discussion

Timezone Concerns

Not all software projects are created equal, some are more critical while others aren't. Some may require touching base with the development team regularly while some may not.

While we did mention that most global-focused development partners in India do adapt to Western timezones, the smaller ones may not and this can be an aspect that can make or break your project.

Alternatives to Outsourcing to India

Based on your specific requirements, you may want to consider other global software hubs for your projects like the ones we've mentioned below

Ukraine

As the owner of a software services company in India, it's scarcely believable to me how tactfully Ukrainian software companies have navigated their business requirements even during the invasion.

Data gathered by Acropolium shows us just how resilient and reliable the Ukrainian IT companies are. 52% of software & IT companies retained 100% of their contracts, 32% of the companies retained 90-99% of their contracts and about 16% lost around 10% of their contracts.

In fact, during the first half year of the war, Ukrainian companies as a whole managed to scale their software exports by ~23%!

This speaks volumes of the culture of hard work, resilience, and commitment that the Ukrainians possess, and being one of the top IT outsourcing destinations in the world, you should be considering a Ukrainian-based company as well.

Grammarly, Restream, Gitlab, and People.ai are all software companies with roots in Ukraine.

Quite a few major names in tech maintain outsourced teams in Ukraine including Apple, IBM, Lenovo, Uber, and Snapchat.

Furthermore, Ukrainian developers are generally quite skilled with a plethora of widely known and lesser-known programming languages + frameworks.


While the advantages that Ukraine offers as an IT outsourcing destination is quite remarkable, here are also a few aspects that may make you lean towards the other side.

Costs being the main one.

We now understand that the costs of working with a developer in Ukraine is lower when compared to the west, however, working with a specialist in Ukraine, especially one with the pedigree and track-record of working similar projects is going to definitely cost you.

In fact, it's not uncommon for outsourced (but specialized) IT projects in Ukraine to cost roughly the same price as what it would in your home country.

Yes, the development quality, speed of delivery and attention to detail would be absolutely top-notch but the absence of significant cost saving can be a cause of disappointment for several project managers, CTOs and business owners.

Timezones, are also another constraint. The GMT +2:00 timezone is more similar to Asian countries and working on projects that require the management to stay-up-to-date can suffer.

Moreover, Ukrainian companies are much-less willing to work offshore hours unlike their Indian counterparts.

Pakistan

It's no surprise that a country that was earlier part of India is also another destination worth considering, especially if you're looking to cut costs significantly.

Pakistan is riding the wave of outsource IT to Asian countries and in recent times it has emerged as a super low-cost alternative to building in-house IT teams.

The cost of living and the fact that IT supply outstrips demand in Pakistan has directly translated to rock-bottom development costs that can even be 30% lower than in India!

However, you will be hard pressed to find a reliable team well-versed in range of technologies, frameworks and languages and who can take up the entirety of the project.

Most of Pakistan's development talent is engaged in freelancing and the fraction of them that aren't are quite likely already working big-ticket projects so finding a reliable partner can be quite challenging.

Latin America

South American countries, mainly Mexico, Argentina, Brazil & even Costa Rica are seeing a rising supply of software talent.

While still in its nascent stage, the IT companies located here can capitalize on some distinct advantages, thanks to their Geographic proximity.

These pockets of development expertise, coupled with cultural similarities has paved the way for these small pockets of talent to serve several western countries including Australia & European countries.

Given the fact that the cost of living in these countries is far lower, you can expect great value for work as well

That being said, many companies eliminate LatAm as a possible outsourcing hub, mainly for the following reasons;

  1. Despite an overlap in cultural aspects, there very much is a language barrier in that, apart from Guyana, which is a very small country, no other LatAm country has English as it's official language
  2. While there does exist great tech talent in small pockets, the breadth and depth of talent is simply uncomparable to that of India, Poland or Ukraine

How to Vet Your Software Solutions Partner in India

Like I'd mentioned earlier, after the initial discovery call, in almost 65% of the inbound enquiries, my recommendation is generally to find to an offshore services partner within India itself.

But that's only half the job done.

As you may probably already know, India is a vast Geographic and cultural landscape with more than 28 states, 122 languages and more than 4000 cities!

Moreover, India holds 55% of the Global IT outsourced services by value and while there are quite a few multi-billion dollar software companies, most of this value comes from medium or small or specialized development centres.

This means finding the right partner can be trickier than you may expect so we've compiled a few pointers that you may want to keep in mind while exploring your options.

Track Record & References

Starting with the most important aspect to consider. Any software partner worth its salt will have a demonstrable track record of clients and will be more than willing to share references to allow you to smoothly authenticate their claims as well.

This is a super-critical step and vendors that check this criteria are good to go provided their pricing and transparency aspects are acceptable.

Ideally, one should thoroughly verify the track-record in line with one's own requirement. For instance, a company seeking app development and maintenance should ask for track record and references around application development.

I have stumbled across multiple instances wherein the company management has been hesitant to ask for references and track record simply because they thought asking for the same would seem intrusive!

That's far from the truth though and software companies do understand the importance of this verification so they're more than willing to share this information.

Location

India has long faced a problem of over-saturation in and around its IT hubs. Places like Bangalore, Mumbai, Chennai, Pune, Delhi, Hyderabad & Ahmedabad have historically been the IT hubs and most companies worth dealing with will be based out of here.

That's not to say that companies from other cities are not worth working with, it's just that language barriers, inability to make a visit or verify etc becomes a whole lot more difficult.

Steer Towards Technical Questions

Having spent the last 5-10 years in this industry, I can confidently say that the best thing a client can do is thoroughly seek technical expertise even during the discovery phase of any given project.

The software centres that truly excel in their services will always be on top of these technical questions and it it is fairly easy to gauge the technical depth in their responses.

Even if you're not well placed to seek these technical clarifications, you certainly do understand the scope of this project and what kind of expertise and cost savings you're looking for.

My suggestion generally is to get a hourly paid consultant simply to ask technical questions and seek clarifications to be able to ascertain the fit.

Certifications & Partnerships

I generally shun away from certifications and dismiss many of them as merely a cosmetic instrument that doesn't speak much of a IT company's depth of skill sets or management expertise.

But there's no denying the comfort that a stranger can draw by seeing independent certifications endorsing the company.

The total cost of some software certifications can go as high as $3,000! so at the very least, having these shows commitment on the part of the outsourcing partner.

At the very least, a company should review certifications or partnerships either of the outsourcing company or the founders or the development team members to the extend of the project scope.

For instance, if one is looking to engage a company on cloud computing based services, then being part of AWS partner network or GCP partner network is an added plus!

A few tips to keep in mind;

1. GDPR & Data Security: As I may have mentioned earlier, GDPR laws in India aren't as evolved as they are in the west. However contractual obligations are thoroughly enforced.

If you're somewhat hazy about some risks, it's always a good idea to enter into standalone contracts that protect and safeguard your interests.

2. Staff Retention: You would want to make sure that resources mapped to your project are more or less fixed and that they don't rotate into other projects or leave the outsourced company quickly.

Be sure to ask details regarding staff attrition and feel free to specifically request for tenured resources for your project.

3. Explore Outsourcing Models: You'd be surprised over the number of outsourced models available for a company to choose from. To quickly summarize them;

  • Dedicated Resource: In this model, a junior or senior developer is assigned to your project full either part time or full time at an agreed upon hourly rate, regardless of scope of work or outcomes. Model can be extended from a single resource to an entire offshore development team.
  • Build Operate Transfer: This model is pretty self explanatory, the scope of the project will be agreed upon beforehand, generally by way of a detailed PRD, at a fixed price. The development agency will then build the software or application and hand over the codebase to the company.
  • Time & Materials: A great option for projects where there's little to no visibility on the scope and requirements. Here the an hourly price for the resource and other variable costs like subscription fees for tools, server costs etc are estimated frozen beforehand and charged based on actual utilization.
  • KPI Based Models: This is generally not a preferred model in Software services, however, in specific cases, these models may make sense. for example; A company that is incurring heavy server or cloud computing costs due to their current set-up may request an IT company to overhaul their set-up and get paid a variable component from their cost savings.
  • Shared Risk Models: Particularly useful for companies who are looking for specific guarantees concerning a given project and for outsourcing companies that are confident on delivering the same. Like regular models, these projects also have a flat fee linked to them, additionally, based on specific project guarantees (like delivery timelines), the parnter gets paid additional incentives