Offshoring Examples: The Good & The Bad, no-BS

Elen Muradian

Last updated on January 10, 2025 | 17 min read

BusinessIT marketOffshoreSoftware development

• Offshoring offers cost-effective global talent but requires managing quality and communication challenges.
• Strategic location choice ensures offshoring success by aligning market potential, costs, skills, and company goals.

Offshoring is a business strategy where companies relocate specific operations or tasks to foreign countries, often to take advantage of lower labor costs. In fact, companies can save between 70% and 90% in labor costs by outsourcing non-core business functions. This cost efficiency is one of the main reasons why up to 48% of companies opt to outsource offshore. The practice is particularly common in industries like IT, where businesses delegate tasks to countries with skilled labor at a fraction of the domestic wage. Consequently, the global IT offshoring market is expected to reach USD 1.06 Trillion by 2031.

While offshoring offers numerous benefits, including financial advantages and access to a broader talent pool, it also brings challenges that companies must navigate carefully. From managing cultural differences and communication barriers to dealing with legal and security risks, the process is far from simple.

Advantages of Offshoring

A primary advantage of offshoring is the ability to significantly reduce costs, especially for non-core functions like IT services, customer support, and marketing. By hiring offshore employees in regions with lower wages, businesses can cut down on expenses by up to 70%. These savings can be reinvested into other areas of the business, facilitating growth and innovation. In addition to the immediate financial benefits, businesses gain access to a diverse global workforce, bringing in new perspectives and expertise.

Another significant benefit is operational efficiency. Offshoring enables companies to take advantage of time zone differences, ensuring that work continues round-the-clock. By leveraging a “follow-the-sun” approach, businesses can ensure that projects progress without interruption, as work completed by one team during their day is picked up by another team in a different time zone. This continuous workflow boosts efficiency, accelerates project timelines, and allows companies to offer faster turnaround times to clients, ultimately enhancing overall productivity and competitiveness.

Disadvantages of Offshoring

However, offshoring comes with its share of risks. One of the major challenges is the limited control over offshore teams. For instance, a company outsourcing software development might face difficulties ensuring that the offshore team adheres to coding standards, resulting in unexpected quality issues. Since these employees work remotely, managing their day-to-day activities and ensuring alignment with company goals can be difficult. Miscommunications, such as unclear requirements or delays in feedback, may also lead to project setbacks or missed deadlines, highlighting the importance of effective communication and oversight in offshoring arrangements.

Cultural and language barriers are another obstacle. Differences in communication styles and work ethics can hinder collaboration, leading to misunderstandings or inefficiencies. These challenges are particularly pronounced in customer-facing roles, where clear communication is essential.

Additionally, offshoring can expose companies to security risks, including data breaches, unauthorized access to sensitive information, and intellectual property theft. Legal differences in data protection laws across countries can further complicate compliance, potentially leading to financial penalties or reputational damage. To mitigate these risks, companies should thoroughly vet offshore partners by reviewing their security protocols and certifications. Implementing best practices such as using encrypted communication channels, conducting regular audits, establishing clear confidentiality agreements, and ensuring compliance with international standards like GDPR can help safeguard sensitive information and maintain trust in offshoring arrangements.

Setting the Stage for Successful Offshoring

When strategically executed, offshoring offers transformative business advantages, helping companies reduce costs, boost efficiency, and scale operations seamlessly. In the following sections, we will explore 5 successful and 5 unsuccessful examples of offshoring, providing insights into how businesses can maximize the benefits while avoiding common pitfalls. By learning from real-world experiences, companies can refine their offshoring strategies and make more informed decisions about where and how to offshore their operations.

The following are examples of companies that have successfully leveraged offshoring.

Offshoring — Successful Cases

1. Spotify

Spotify’s decision to offshore operations to Latin America in 2013 exemplifies how companies can tap into regional markets and expand their global presence. Initially focusing on Mexico, a central hub for its user base, Spotify soon broadened its reach into Brazil and other Latin American countries, gaining significant traction. Chile emerged as one of the fastest-growing markets for the company, showcasing the success of this regional strategy. CEO Daniel Ek and Spotify’s leadership team aimed to replicate this growth in other markets, investing in a strong local presence and partnerships with music rights holders to streamline their expansion.

Spotify’s offshoring strategy also contributed to its ability to cater to regional preferences and penetrate culturally diverse markets effectively. By establishing localized teams, the company gained valuable insights into user behavior, allowing it to introduce features such as region-specific playlists and promotions. These efforts not only increased subscriptions but also strengthened user loyalty in competitive streaming markets. For instance, the integration of Latin music into Spotify’s global playlists helped amplify the reach of regional artists, fostering a sense of community among listeners.

Spotify’s approach to offshoring targeted not only market growth but also a scalable operational model, establishing dedicated legal and business teams in each strategic location. This model empowered the company to scale its global services effectively, capitalize on Latin America’s emerging markets, and cater to the unique preferences of regional users. Since their entry into the region, Spotify has witnessed an astounding 986% increase in Latin music listeners between 2014 and 2023. Today, Latin American listeners constitute one-fifth of Spotify’s global user base, solidifying the platform’s influence and success in the region.

2. Google

Even with a vast team of over 135000 employees, Google leverages offshoring as a strategic approach to enhance technical capabilities while managing costs effectively. One notable example of this strategy unfolded in 2020 when Google bolstered its development capabilities in Eastern Europe by acquiring CloudSimple, a company specializing in VMware migration solutions. Now integrated into Google Cloud, CloudSimple’s offshore team strengthens Google’s ability to serve enterprises transitioning to the cloud, supporting Google’s commitment to innovation and global reach.

Google’s approach to offshoring extends beyond development. Since 2011, Google has leveraged offshore teams for a range of functions, including support roles for AdWords, with centers in the Philippines, and IT outsourcing partnerships with companies like Cognizant, whose global reach includes offices in India. This offshoring framework allows Google to meet spikes in demand and maintain service quality, particularly during staff leave or project expansions.

According to Bloomberg, Google’s offshoring partnerships have led to a workforce where the number of contractors now surpasses that of its in-house staff. This balance has allowed Google to maintain flexibility while scaling its operations, illustrating the competitive advantages offshoring can bring even to tech giants.

3. Netflix

Netflix’s early offshoring initiatives in Latin America illustrate how local insights and content can fuel a company’s global growth. Entering the market in 2011, Netflix initially launched in Brazil before quickly expanding to Argentina, Chile, Colombia, Mexico, and over 38 other countries. Starting with 23 million subscribers, Netflix was primed to capture the region’s vast potential audience of over 600 million people.

The company’s strategy revolved around producing and curating local content, an approach that resonated with Latin American audiences and helped cement Netflix’s foothold. By assembling local teams familiar with regional preferences and media trends, Netflix created a distinct competitive edge. The result was massive subscriber growth, especially in markets like Mexico and Brazil, where Netflix is projected to reach 12.2 million and 14.4 million subscribers, respectively, by the end of 2023. With its Latin American subscriber base anticipated to grow another 15% to reach 52.3 million, Netflix’s regional investment continues to pay dividends.

Netflix’s offshoring strategy in Latin America was pivotal in tailoring content to local preferences, significantly enhancing user engagement and subscription rates. By investing in original productions like “Club de Cuervos” in Mexico and “3%” in Brazil, the platform captured cultural nuances that resonated deeply with audiences. Strategic localization, including high-quality dubbing and subtitling, further ensured global content appealed to regional viewers. With guidance from local teams, Netflix leveraged regional insights to refine its offerings, boosting its subscriber base and strengthening its competitive edge in the region.

Netflix’s Latin American expansion demonstrates the power of offshoring combined with cultural adaptation, underscoring the value of localized content as a global growth strategy.

4. Lyft

Lyft, a leading player in the ride-sharing market, has prioritized innovation and efficiency in customer service since its founding in 2012. To meet the demands of a rapidly evolving industry and capitalize on top engineering talent, Lyft began offshoring product development functions to Eastern Europe in 2021. Establishing a software R&D center, Lyft’s offshore team initially included 20 engineers, with plans to scale up to 100. This strategic move aims to enhance Lyft’s data mapping, optimize service improvements, and further elevate the customer experience.

Lyft’s offshore expansion reflects a broader trend in tech companies relying on international expertise for specialized skills and cost-effective growth. By accessing Eastern Europe’s robust tech workforce, Lyft has strengthened its ability to innovate while maintaining a streamlined approach to operations. The dedicated offshore team not only handles data-driven improvements but also provides crucial support for Lyft’s ambitious product development roadmap, underscoring how offshoring can enhance competitiveness and innovation in tech-driven sectors. This strategic expansion has also led to measurable improvements in service quality and customer satisfaction. By refining data mapping and algorithms, Lyft has improved ride-matching accuracy and response times, enhancing the overall user experience while maintaining cost efficiency.

5. WhatsApp

WhatsApp’s rise as a global messaging giant highlights how strategic offshoring can provide a competitive edge, especially in accessing top-tier talent and optimizing costs. Prior to its 2009 launch, WhatsApp turned to Eastern Europe for software development, allowing it to access top engineering talent at lower costs. Offshore developers handled much of the technical groundwork, focusing on key aspects of app design and development. This setup enabled WhatsApp’s lean in-house team to focus on customer-related functions, like refining user experience and handling support.

This streamlined approach allowed WhatsApp to scale quickly, reaching 450 million active monthly users with a small team of just 55 employees by the time Facebook acquired it in 2014. By relying on offshore expertise, WhatsApp rose to the top of app rankings on both Google Play and the App Store, catching the attention of Facebook, which ultimately acquired it for a record $19 billion. This offshoring strategy was central to WhatsApp’s rapid ascent, giving it the agility and resources to compete effectively and secure its position as a leader in mobile messaging.

Now, let’s overview several less successful offshoring cases and analyze what the businesses did wrong and how to avoid the same mistakes when considering offshoring your business.

Offshoring — Failed Cases

1. Homejoy

Homejoy, once a promising online platform connecting homeowners with local cleaners, is a classic example of offshoring gone wrong. Established to serve the home services sector, Homejoy grew rapidly and had serviced over 1 million homes before its sudden closure in 2015. The company’s initial aim was to expand quickly and economically, and offshoring was an attractive choice for reducing overhead costs.

Homejoy outsourced several essential functions, including customer support and IT operations, as a way to keep expansion costs down. By securing affordable offshore support, Homejoy hoped to sustain a model that would allow it to scale to new cities and countries without the high costs of local hiring.

What They Outsourced:

The company delegated customer service, IT operations, web maintenance, and development tasks to offshore teams. These teams managed critical parts of Homejoy’s user experience, from technical assistance to interacting with customers.

How They Failed:

Homejoy’s over-reliance on offshore teams for customer service contributed significantly to its decline, as inconsistent support quality eroded customer trust. The customer service representatives lacked uniformity in skills and dedication, resulting in service issues that hurt customer satisfaction and loyalty. Offshore teams, often far removed from Homejoy’s brand culture and customer expectations, struggled to consistently deliver the quality that customers expected. This disconnect between service delivery and user expectations led to deteriorating brand reputation and diminishing customer retention, two factors that contributed to the platform’s downfall.

2. Better Place

Better Place, a company dedicated to building electric vehicles and creating battery-swapping stations, was once a promising figure in the clean energy sector. Founded with a bold vision for a more sustainable future, Better Place raised over $850 million in funding and quickly moved toward large-scale operations. However, despite their groundbreaking ideas and substantial financial backing, Better Place went bankrupt in 2013. Their downfall is often attributed to operational struggles that were exacerbated by offshoring.

To accelerate development and expand its services across global markets, Better Place relied on offshoring to quickly scale operations. By delegating core functions like software development and facility construction, they aimed to establish a competitive edge and maintain rapid progress in multiple regions.

What They Outsourced:

Key outsourced functions included software development, facility construction, and customer support. By offshoring these services, Better Place hoped to leverage specialized expertise and establish a widespread infrastructure for battery-swapping stations as quickly as possible.

How They Failed:

A heavy reliance on contractors across various countries ultimately became a liability. The geographical separation of Fisker’s design and production teams resulted in coordination challenges, ultimately compromising technology and service quality. This fragmentation affected everything from customer support to the reliability of the battery-swapping stations, diminishing Better Place’s reputation in the market. Quality control and coordination issues hampered their ability to deliver a unified, dependable user experience, contributing to their eventual collapse.

3. Quirky

Quirky, a unique platform, connected an online community of inventors, who could submit product ideas to be developed, manufactured, and brought to market. With over 100000 members and 400 products launched, Quirky aimed to transform crowdsourced ideas into physical products, partnering with prominent retailers and manufacturers to scale its offerings. However, despite its initial popularity, the company filed for bankruptcy in 2015, partly due to challenges with its outsourcing strategy.

Quirky aimed to accelerate product development by outsourcing. By relying on external manufacturers, the company could expedite the journey from idea to market, hoping to keep up with high consumer demand and maintain momentum.

What They Outsourced:

Quirky primarily outsourced the manufacturing of its products and, in some cases, aspects of design and engineering. This approach allowed them to quickly prototype and launch products in response to ideas generated by their community.

How They Failed:

The rapid pace of Quirky’s development left limited time for quality assurance, resulting in products that sometimes lacked sufficient testing and refinement. Quality control inconsistencies became a recurring issue, causing customer dissatisfaction and product returns. These setbacks not only impacted revenue but also eroded customer trust, putting additional strain on the company’s already ambitious business model.

4. Fisker Automotive

Fisker Automotive, an American hybrid-electric vehicle manufacturer, aimed to revolutionize the green automotive industry. Despite its innovative goals, Fisker produced only about 2450 vehicles before declaring bankruptcy in 2013, a failure partially attributed to challenges in its offshoring strategy.

Fisker adopted an outsourcing strategy for production to avoid the significant capital investment required for building and operating manufacturing facilities. This approach allowed the company to prioritize innovation in design and technology by leveraging the expertise and infrastructure of external partners.

What They Outsourced:

Fisker primarily outsourced vehicle production and logistics operations, including significant elements of assembly. This arrangement enabled them to allocate resources toward research and development without shouldering the financial burden of in-house manufacturing.

How They Failed:

A considerable geographical distance separated Fisker’s design team in the U.S. from the production team in Finland, leading to communication and coordination issues. With limited oversight and real-time collaboration, quality control became a problem. Production inconsistencies and quality concerns eventually led to product recalls, further damaging the company’s financial stability and reputation.

5. Bluegogo

Bluegogo, once one of China’s largest bicycle-sharing companies, allowed users to rent bikes through a smartphone app. With over 20 million users at its peak, the company seemed poised for success. However, rapid expansion and a focus on cost-cutting in its offshoring approach eventually undermined its business.

To control expenses, Bluegogo opted to delegate critical operations to external providers. This included contracting out app development and user interface design, as well as partnering with manufacturers to produce its bicycles at a lower cost.

What They Outsourced:

The company’s outsourcing strategy included manufacturing its bicycles and developing its IT infrastructure and software, including the app that supported its rental system. Bluegogo expected that by relying on outsourced services for these areas, it could focus on scaling up quickly and capturing market share.

How They Failed:

Despite its success in expanding rapidly, Bluegogo’s cost-focused approach compromised product quality. The outsourced areas — manufacturing and rental app development — became the weak link of their operation. Many bikes were reported to break down frequently and were prone to vandalism, both of which degraded user experience and added to maintenance expenses. These issues eroded customer trust, contributed to financial instability, and ultimately made it challenging for the company to maintain its position in the competitive market.

Top 3 Mistakes & How to Avoid Them

1. Inconsistent Quality Control and Standards

Many of these companies—like Bluegogo, Better Place, and Quirky—failed to maintain consistent quality across their products and services. Outsourcing critical components such as product manufacturing, software development, or customer support without implementing stringent quality checks led to unreliable products, poor user experiences, and brand reputation damage.

Suggestion: Establish robust quality control processes.

Companies can benefit from setting up regular audits, quality checkpoints, and close supervision to ensure that outsourced work aligns with their standards. Weekly quality audits, monthly performance reviews, and clearly outlined quality expectations can help catch issues early and prevent larger setbacks.

2. Communication and Management Challenges

Fisker Automotive and Better Place both encountered significant issues with communication and management when dealing with offshore teams located in different countries. Fisker, for instance, struggled with the distance between its U.S. design team and Finnish manufacturing partners, which caused delays, misunderstandings, and quality issues. Without effective communication channels, feedback loops broke down, and the companies could not address problems quickly.

Suggestion: Implement clear communication channels and management tools.

Using collaboration tools like Slack, Microsoft Teams, or Zoom, along with project management platforms, can help bridge time zone gaps and ensure that all teams remain aligned. Scheduled check-ins and updates can also streamline communication and foster transparency between teams.

3. Over-reliance on Cost-Saving Rather than Strategic Fit

For companies like Homejoy and Bluegogo, the drive to cut costs was a major reason for offshoring, but this approach often led to hiring offshore teams without fully considering skill alignment or potential long-term issues. This narrow focus on cost-saving meant they sometimes sacrificed quality and service reliability, resulting in a negative impact on customer satisfaction.

Suggestion: Balance cost-savings with strategic fit.

Businesses should evaluate whether the offshore team has the necessary skills and experience to align with their strategic goals. Prioritizing cultural and operational alignment between the company and offshore teams can improve long-term results and prevent issues stemming from a purely cost-centered approach.

DevsData LLC — Your Offshoring Partner

With over 8 years of experience, DevsData LLC has established itself as a trusted partner in IT recruitment and software development, delivering tailored solutions to global clients. It has an extensive pool of google-level in-house engineers with over 10 years of experience. They completed over 100 projects for over 80 clients. DevsData LLC has built a solid reputation globally, with offices in North America, Europe, and Latin America, the company has local expertise and experience in various major markets.

The company specializes, among others, in Big Data and Machine Learning. It is highly rated with a perfect score of 5/5 on Clutch and GoodFirms. With a proven track record of delivering high-quality services, DevsData LLC has successfully served clients across different markets and locations, including innovative startups from the US and Israel.



A key example of DevsData LLC’s offshore expertise is a recent collaboration with a major financial services firm. The project involved developing a custom ERP and project management system tailored to the client’s specific needs. This project was successfully delivered, despite facing challenges such as ensuring top-tier security, handling sensitive data, and integrating complex features into a user-friendly system.

DevsData LLC leveraged its offshore capabilities to complete the project efficiently. Despite the complexities involved, their team managed the offshore collaboration seamlessly, communicating effectively to meet tight deadlines while maintaining high standards of quality. The result was a solution that replaced Jira in two departments, improved task management and data handling, and contributed to cost reductions for the client. More about this case here.

To connect with DevsData LLC, email them at general@devsdata.com or visit their website at www.devsdata.com.

Bottom Line

Offshoring has become a crucial strategy for many businesses looking to scale efficiently and reduce costs, but it’s not without its challenges. While outsourcing certain business functions, such as IT support, customer service, and software development, can deliver significant cost savings, many companies face setbacks when their offshore efforts are not well managed. The key to success lies in careful planning, clear communication, and robust quality control measures.

A well-thought-out offshoring strategy involves selecting the right functions to outsource and ensuring the offshore team is aligned with company goals. Clear and consistent communication between onshore and offshore teams is crucial for managing expectations, maintaining focus, and fostering collaboration. In addition, implementing robust quality control measures is essential to uphold standards and ensure that service quality does not suffer. Regular performance assessments and continuous oversight can help identify issues before they escalate, preventing any negative impact on customer satisfaction and overall business performance. By combining careful planning, effective communication, and diligent quality control, companies can maximize the benefits of offshoring while minimizing its risks.

One of the most common reasons companies fail in offshoring is a lack of consistent communication between onshore and offshore teams. Disparities in time zones, language barriers, and cultural differences can hinder collaboration, leading to project delays, misunderstandings, and subpar results. Another challenge is the inconsistency in the quality of outsourced work, which can harm customer satisfaction and brand reputation. Finally, rushing to expand or outsource without fully vetting partners can result in poor service, operational inefficiencies, and a lack of alignment with the company’s goals.

For businesses to avoid these pitfalls, establishing clear communication channels is critical. Regular meetings, effective project management tools, and ensuring that both offshore and onshore teams are aligned on goals and expectations can prevent many common issues. Additionally, companies should invest in building strong relationships with offshore partners and ensuring that they have a deep understanding of the company’s core values and processes. Training and setting measurable performance goals can further help maintain quality across services.

DevsData LLC exemplifies a successful offshore partner. With over 8 years of experience and a strong track record in handling complex software development projects, they demonstrate how a well-managed offshore collaboration can lead to highly secure, scalable, and tailored solutions. DevsData LLC’s approach to offshoring ensures quality, security, and efficiency, making them an ideal partner for companies seeking reliable offshore development services.

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Elen Muradian Copywriter and Marketer

As a versatile and accomplished writer with 3+ years of experience in digital media publishing, Elen is skilled in crafting engaging content across various subjects, styles, and media. In her previous experience, Elen worked closely with editorial teams and visual artists to bring content to life. She always seeks opportunities for personal and professional growth and is eager to contribute to the writing field.

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