Offshore Development Trends in 2023

Since 2021, the coronavirus pandemic has driven a shift toward remote work, and offshore-driven system development has been on the rise. Drawing on five years of offshore development experience, Miichisoft explains the current state and trends of offshore development in Japan and Vietnam.

1. What Is Offshore Development?

Offshore development means outsourcing app and web system development to an overseas subsidiary or development company. For details, see this article.

2. Offshore Development Trends in 2023

IT Market Trends in Japan

• Not only IT companies but also non-IT companies now need offshore development.

In the 2000s, the main purpose of offshore development was cost reduction.

However, in recent years the ongoing IT talent shortage has made securing resources a key challenge, so Japanese companies now look for long-term partners. In short, the era of cost reduction as the main purpose has ended.

Not only IT companies but also non-IT companies are increasingly using offshore development. Many companies are applying IT to their operations to expand business through DX. However, since hiring IT talent domestically takes time and money, offshore development has become one option, and it is now becoming common.

• More companies are setting up overseas bases.

Amid the domestic IT talent shortage, instead of outsourcing to an offshore company, some businesses secure resources by setting up their own base overseas, using local resources to run services or develop projects. They can also bring engineers who wish to work in Japan over to Japan.

• Offshore development in English

Google Translate accuracy has improved greatly, smoothing communication between Japan and offshore teams. Tools like Slack and Chatwork also speed up communication. With growing use of global talent and English specs/docs, more projects go to offshore companies that work in English.

Offshore Development Market Trends in Vietnam

• Rising unit prices

Until now, China received most orders from Japan thanks to low labor and development costs. As its economy grew rapidly and quality improved, engineer rates there became nearly the same as in Japan, driving investment to shift from China to Vietnam and other Asian countries. As a result, unit prices in Vietnam are also rising. Vietnamese engineers' capabilities are highly regarded.

• Strong quality and talent

A few years ago, Vietnamese offshore companies mainly handled only the later phases, following instructions from the Japanese team. In recent years, though, they have become able to handle the early phases too. IT engineers in Vietnam also earn high incomes, making it an attractive career for young people.

• Adding value and differentiation

With the rapid increase in Vietnamese offshore companies, differentiation among them has become a challenge. Japanese clients have too many options, so each company's characteristics and strengths become key. Examples include specializing in a particular technology area, flexibly adjusting the team structure, or providing development support.

3. Why Is Vietnam a Popular Outsourcing Destination?

• The quality and talent of Vietnamese offshore companies are highly regarded.
• Vietnam's political and economic situation is more stable than other countries.
• Although the time difference is 2 hours, the workday start time aligns with Japan time.
• Culture and mindset have similarities.

So why is Miichisoft a good choice? Please see Miichisoft's company profile and introduction video.

If you are considering offshore development and have any questions, please feel free to contact us.