Two years ago, we were advising companies to get ahead of the curve and turn their attention to Asia. We were right on the money. In 2023, an over-saturated outsourcing market for software development in Latin America saw a big swing back to South and Southeast Asia.
With C-suite budgets still constrained, the region’s competitive rates and speed to scale, fuelled by its sheer depth of resources, are hard to beat. Expect that dynamic to continue as the tech sector grapples with an ongoing talent squeeze in the US. A survey of our own global partner network found that 83% of software development firms in South Asia were planning to increase their workforce significantly this year.
Our 2024 South and Southeast Asia Region Guide to Software Outsourcing draws on a wide range of international data and expert insights to analyze nine key markets and their potential for offshore partnerships.
From countries with a great track record, such as India and the Philippines, to emerging markets in Vietnam and Bangladesh, there are plenty of great options to choose from. Narrowing down the field of potential candidates requires a more cautious and nuanced approach.
Cost vs Culture: How to avoid walking into trouble
There’s no question you can find top-quality talent in Asia, where software development is booming and advanced skills in AI are highly sought after by the best companies. However, the reality is that there are far more companies that fall well below standard. While a proposal might look good on paper, a partnership is likely to fail if vital cues are missed that could put your project at risk.
We’ve looked before at how differences in the way teams communicate can lead to a fatal misalignment in outcomes and goals, because we’re all conditioned by our own cultural norms. To put it bluntly, Western companies don’t operate the same way South Asian ones do.
Dutch social psychologist Geert Hofstede’s 6-D model is a fascinating insight into how culture influences a society’s values and behavior. His research is equally relevant to the workplace. Using this framework when you’re building an outsourcing partnership can identify some of those cultural differences and help bridge the gap.
Hostede's research on cultural dimensions focuses on six factors. However, as this comparative breakdown shows, two measures highlight a striking imbalance between the US and three of its key outsourcing markets that indicate potential red flags.
The Power Distance Index:
Defined as “the extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally.”
A higher degree indicates that hierarchy is clearly established and executed in society, without doubt or reason. Here, the Philippines nudges the top of the scale, with India and Vietnam not far behind.
The US sits at the lower end, signifying a society where people question authority and attempt to distribute power.
The Individualism vs. Collectivism Index:
This dimension explores the “degree to which people in a society are integrated into groups”. Again, a cultural divide is apparent between East and West.
How is this useful in practice? One area to navigate carefully when choosing an outsourcing partner is to recognize when an Asian firm is masking its faults out of deference to you, the buyer. Likewise, going at it hard from a US perspective is unlikely to get the best result.
When it comes to creating a great partner match, that’s where the insights provided by our team at Accelerance can be brought into play. We know what best practice looks like and we know how to get behind the shopfront and identify Asian companies that meet the required expectations.
There’s no one good reason to outsource to South & Southeast Asia - but here are seven of them
| Cost | Top-quality engineering skills for less than half the hourly rate you’d expect to pay elsewhere. |
| Talent | In South Asia, you have access to the most mature outsourcing sector and deepest talent pool in the world, while Southeast Asia’s strong emphasis on STEM education produces developers who are well-trained in the latest technologies and programming languages. |
| Expertise | Software developers in the region have rapidly adopted and excelled in emerging technologies. Many outsourcing firms have expertise in areas such as artificial intelligence, machine learning, blockchain, and more. |
| Scaling | Asian software firms are used to offering flexible scaling of resources based on project requirements, so you can quickly expand or reduce the size of your development team at each phase. |
| Time zone | Distance can be a challenge or a virtue. A “follow the sun” model allows for continuous, round-the-clock deployment, where code written during the day can then be tested overnight by an outsourcing partner in Asia. |
| Government support and infrastructure | The importance of the IT industry in many Asian countries has been recognized through favorable government policies, investment in education and infrastructure, and the establishment of technology parks. |
| Language | English is widely spoken in the software engineering sector, particularly in India and the Philippines. The legacy of British colonial ties makes for compatible business partnerships and many companies have experience working with Western clients. |
Whether you opt for a partner in an established or emerging market will depend on your project’s focus and scale
While South Asia remains the region’s outsourcing powerhouse, a rapidly expanding digital economy in Southeast Asia and a focus on STEM education is seeing skilled, specialized teams of developers starting to proliferate.
We’re keeping an eye on several promising tech hubs across Asia but right now, four countries lead the pack.
India
The Philippines
Vietnam
Bangladesh