Risk Management in Offshore Development: Key Points for Choosing a Partner

July 16, 2025

Labor shortages are leading many companies to consider offshore development. However, companies that are new to offshoring may not fully understand the potential risks or know how to choose the right partner. This article explains the advantages and risks of offshore development. We also provide methods to mitigate potential risks.

1-1. What is Offshore Development?

Offshore development refers to outsourcing software and IT infrastructure development to companies in other countries.

In Japan, this approach has gained attention in recent years due to a shortage of IT engineers and the rise of remote work. The number of companies adopting offshore development is steadily increasing.

1-2. Main Destinations for Offshore Development

While China was traditionally the most common destination for offshore development in Japan, other Asian countries, particularly in Southeast Asia, have become popular choices.

Vietnam is a common choice, followed by the Philippines and Bangladesh. Other destinations include China, India, Myanmar, and Ukraine.

2-1. Cost Reduction

By outsourcing development overseas, companies can significantly reduce costs compared to in-house development or nearshoring, mainly due to lower labor costs in those countries.

2-2. Securing Talent

Japan faces a serious shortage of IT professionals, making it difficult for companies to advance projects as planned. Offshore development allows access to talent abroad. Partnering with companies in countries that focus on IT education increases the chances of securing skilled personnel.

While offshore development offers benefits like cost savings and talent acquisition, it also carries risks. Understanding these risks in advance can help prevent issues.

3-1. Political Instability or Diplomatic Issues

A partner country may be facing political instability or diplomatic tension. If such issues coincide with your project timeline, operations may be disrupted. Therefore, assess not only the cost but also whether stable business conditions are in place.

3-2. Communication Barriers

Offshore development involves working with people from different cultures and languages, making communication challenging. Misunderstandings or misinterpretations may occur.

In some countries, Japanese-style workplace reporting (ho-ren-so, or report-contact-consult: bottom-up reporting where subordinates give regular updates without being asked) is uncommon, which may lead to a lack of updates and deliverables that don’t meet specifications.

3-3. Low Quality of Deliverables

Although many countries have highly-skilled IT workers, training and standards may vary. If only what’s written in the specifications is done, testing and checking may have been neglected — resulting in low-quality or deficient deliverables.

3-4. Budget Overruns and Missed Deadlines

In Japan, sticking to deadlines and budgets is the standard expectation. Some cultures may be more flexible with timelines.

Consequently, you might face delays or incur unexpected costs after delivery, without prior consultation.

3-5. Risk of Information Leaks

Offshore partners may be in areas where awareness of security and compliance risks are lower. Security measures may also be insufficient due to cost-cutting.

In some countries, the law requires disclosure of all company data. Therefore, the risk of leaking sensitive or personal information must be carefully considered.

With these risks in mind, many companies still opt for offshore development for the many benefits. Here are key points to ensure a safe and successful implementation:

4-1. For Japan: Hire a “Bridge System Engineer”

A Bridge System Engineer (a position in Japan also known as a Bridge SE, BrSE, or Bridge Engineer) serves as the liaison between a Japanese company and an offshore team, relaying instructions, checking progress, and managing quality.

To avoid communication issues, hire a Japanese-speaker for this role. Ensure that they have strong multilingual skills and can communicate fluently.

4-2. Strengthen Security Measures

Security awareness can vary by country, so provide training to offshore staff before starting work. Also, implement a secure development environment: a project room with access control and a closed network.

Consider providing company-owned, pre-secured computers for use. Prepare a response plan in advance in case of data breaches.

4-3. Clearly Define Requirements

To prevent misaligned deliverables, put more detail in your requirement definitions than you would for domestic outsourcing. Use clear and precise language to reduce the need for mid-project changes.

Though this requires additional time and effort, it helps avoid cost overruns and missed deadlines, while minimizing communication-related errors.

4-4. Allocate Sufficient Budget and Time

Differences in technical skills, work pace, and perceived priorities may affect progress. Build enough of a buffer into the timeline and budget accordingly.

You might also consider presenting a slightly earlier deadline to the partner, in case of delays.

Each country and company has its own strengths and specialties. Focusing solely on cost when selecting a partner may increase the risk of issues like delays and poor quality.

To ensure project success, choose a well-balanced partner that can reliably complete the required tasks — don’t look solely at cost.

Here are three key factors to consider when selecting a partner:

6-1. Choose Based on Track Record

Before outsourcing, review the partner’s past offshore development projects. Check the number of projects and whether they’ve handled large-scale work.

Firms with extensive experience working with clients in your country tend to have smoother processes and fewer issues. It’s also important that they have a proven record of working with clients who have strict security standards.

6-2. Consider Staff Numbers and Retention Rate

Check the number of IT engineers the offshore company employs to ensure that it has enough resources to complete your project on time. A high turnover rate could also increase the risk of information leaks due to frequent staff changes. Look for a stable workforce.

6-3. For Japan: Confirm Japanese Language Support

Make sure the company can communicate in Japanese. Check whether any staff have passed the Japanese-Language Proficiency Test (JLPT) or if Japanese training is provided internally.

If Japanese proficiency is lacking, assign a Bridge System Engineer who is fluent in the language to ensure smooth communication.

Offshore development is an effective way to address cost and talent shortages while keeping your business or projects on track. Although working with foreign partners comes with unique challenges, understanding and preparing for risks can help you use this approach successfully.

If you’re considering offshore development, consult with ISF NET. As one of the largest providers specializing in IT infrastructure engineer dispatch services, ISF NET offers comprehensive training and technical support.

With a nationwide presence in Japan and a multinational team — including multilingual support — ISF NET also operates throughout Asia, with offices in Singapore, South Korea, and China.

Contact us to learn about ISF NET’s IT infrastructure engineer dispatch services

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