Pros and Cons of Outsourcing Software Development From the Philippines

There is no denying that outsourcing software development is a cost-effective plan. With premiere outsourcing destinations like the Philippines close by, it is a better option versus going through the whole time-consuming process of hiring and onboarding more in-house staff. 

But, before you fully commit to an offshore partner, there are a couple of things you need to consider first. This article will examine the pros and cons of outsourcing software development to the Philippines. We also added a list of companies that we consider to be some of the best options when it comes to providing consistent and flexible information technology (IT) solutions.

How is the Outsourcing Industry in the Philippines?

Before we jump into the core topic of this article, let us take a look at the Philippines’ outsourcing industry:

Since the Information Technology and Business Process Outsourcing (IT-BPO) sector was first established in the country, it has steadily grown into what it is today. 

The industry saw a 10.3% increase in revenue which amounts to 32.5 billion USD last year. Moreover, in the same report, the IT and Business Process Association of the Philippines (IBPAP) pledged to generate annual revenues of 59 billion USD by 2028.

This goes to show that the IT-BPO sector, including the software development industry in the Philippines, will grow further and will catch a bigger share of the country’s GDP and the global outsourcing market.

As a business owner, this means you can expect improved services, an increase in highly-skilled professionals, and more resources when you opt to partner with any of the Philippines software development outsourcing agencies.

Pros and Cons of Outsourcing Software Development From the Philippines

The effects of outsourcing in the Philippines do come with plenty of benefits. However, in reality, there will be certain downsides that you need to be aware of as well. 

It is important to note that each outsourcing destination or agency will have its pros and cons. The ones we listed below may apply to other countries as well. 

Pros

Large Pool of Talented Developers

One of the benefits of outsourcing software development to the Philippines is that you have access to high-calibre tech talents. 

The key reason behind this is that the Philippines offers a robust educational infrastructure and provides learning opportunities. Moreover, most of the nation’s working professionals are college graduates. 

In addition, of the 117 million Filipinos,  the Philippines has a staggering workforce of more than 49 million highly skilled professionals. This means outsourcing firms based in the country can easily match your business requirements since there is a guaranteed vast and diverse talent pool. 

Shorter Software Development Cycle

Another benefit to outsourcing software development to the Philippines is that you can effectively shorten the overall development cycle and provide a faster time-to-market.

Naturally, when you have access to highly skilled software developers, you also have access to their technical expertise and experience. Which means they can handle everything from design to coding to testing. 

As such, this saves you a lot of time while still ensuring that your software product meets your requirements and the latest standards.

Cost-Effective Labour

Cost efficiency is one of the benefits of software development outsourcing. It is also one of the key determining factors that you would consider when you opt to look for an offshore partner.

Due to the economic differences and currency fluctuations, labour costs in the country are significantly cheaper. There is also a big difference in minimum wage between the Philippines and Australia. Just recently, the minimum wage for Filipinos went up by 610 PHP  per day. In contrast, Australians have a minimum of 23.23 AUD per hour or 861 PHP per hour.

This is what appeals to most businesses since the cost of hiring, training, and retaining in-house staff is much more expensive compared to a contracted offshore team.  

Above Average English Proficiency

Language is one of the most palpable barriers that your business and other companies consider. This is more worrisome when outsourcing software development or other highly technical services.

That is why Filipinos’ proficiency in English is a big boon and attracts a lot of businesses from different parts of the world. In fact, according to the 2022 report by the EF English Proficiency Index, the country was ranked 22nd out of 111 counties showing an above-average to almost native-speaker level. 

Understand Western Culture

The Philippines has a rich colonial history and has close relations with the West. Naturally, there are certain influences from the countries that occupied before. This resulted in being amalgamated and further enriching the country’s own distinct and vibrant culture. 

Concerning your business, the cultural similarities between the Philippines and Australia make collaboration easier. This relatability makes it easier for your in-house staff and offshore team to gel together.

Easy To Work With

Filipinos are recognised for their politeness, hospitality, and openness. In addition, they are also accommodating and go the extra mile to provide timely and top-notch work. 

These are what make them well-known among the professional community worldwide. For those thinking of outsourcing software development to the Philippines, this means your remote team will be easy to work with and deliver high-quality outputs.

Application of Best Practices and Latest Innovations

While it is every employer’s hope, is unrealistic to expect your in-house staff to acquire new skills within a short timeframe for a new or ongoing software project. This is especially true if you do not have technical experts on your team.

As one of the premier outsourcing destinations in the world, Philippines agencies ensure that they apply the best Agile development practices, remain up-to-date with innovations, and provide the latest technologies. Even on a personal level, Filipino tech professionals make sure to learn and upskill to remain competitive.

Moreover, it is an expensive process to decide whether to hire technical experts or acquire the latest tools. You get the best of both worlds when outsourcing software development to Philippine agencies since you get access to both.  

Access to Flexible and Scalable Solutions 

Lastly, one of the benefits of software development outsourcing to the Philippines is the scalability and flexibility. This is not limited to one country. Most outsourcing firms already have the resources to effectively help your business.

However, what sets Filipino firms apart is that you have access to a large pool of highly skilled and English-proficient technical professionals. This means, even in the middle of the development cycle when you realise need a specific expert, your third-party partner can adapt to your needs and provide it.

Cons

Strict Labour Laws 

One of the glaring disadvantages of outsourcing software development in the Philippines is the country’s strict laws. Not surprising since there is a growing demand for Philippine-based outsourcing companies. 

However, it is important to note that these laws are not meant to inconvenience anyone. These were legislated with the express intent to protect concerned parties while still fostering support, growth, and fairness. Here are a couple of examples:   

• Presidential Decree No. 851 details the rules and regulations in the implementation of the thirteenth-month pay, an extra income that is equal to one-twelfth of an employee’s annual salary.
• Article 282 of the Labour Code describes the specific causes that justify when an employer can fire an employee.
• Data Privacy Act of 2012 (R.A. 10173) ensures that an individual’s privacy is protected while information is still free-flowing in a safe way that complies with international standards. 
• Republic Act 10844 details the reason why the Department of Information and Communications Technology is established and its key functions.

Poor Weather Conditions

The Philippines often faces challenging weather conditions. The country’s average is 20 storms per year due to its location on the west side of the Pacific Ocean. Moreover, these storms cause frequent power outages and work cancellations, especially for those in low-lying areas.

Aside from storms, the archipelagic nation is also situated along the Pacific Ring of Fire. This means the country is prone to volcanic eruptions and earthquakes. However, this does not happen frequently. 

With that said, there is a silver lining. Most outsourced teams work remotely, which comes in handy during times of natural disasters. Most IT-BPO providers have maintained remote work setups even after the ease of the pandemic restrictions due to the ease it offers.

Many Holidays 

This is one of the disadvantages of outsourcing software development you need to consider when you plan to outsource to the Philippines.

Filipinos enjoy a total of 18 official non-working religious and government holidays. The reason behind this is that the majority of the population in the country respects many religions, mainly Christianity and Islam, historical, and culturally significant holidays hold great importance.

However, some companies do require their staff to work on holidays. As such, they are legally required to provide higher pay for such days. Because of this, many Filipino professionals welcome the opportunity to work during holidays because of the extra compensation involved. 

Negative Stereotypes

People tend to hold stereotypes about outsourcing destinations. Unfortunately, these are due to the instances where some companies needed more satisfactory experiences with the service quality of IT-BPO service providers in the Philippines. 

However, it is essential to note that these instances usually occurred when they did not partner with a reputable company. This results in a higher risk of additional costs, hiring less skilled individuals. Consequently, because of the unfortunate experience of these customers, a stereotype emerged unfairly labelling Filipinos as incompetent or lazy.

Lack of Personal Touch During Software Development

One of the dangers of outsourcing software development is that you potentially lose the personal touch of your product. This can manifest in a lot of ways at the very top is the lack of control during the development phase. 

Some third-party agencies provide a complete team. This means they are already pre-assembled and usually work independently. However, some firms are more geared towards providing staff augmentation. The difference is that they help you find the right talents and take care of the details but these talents are dedicated to your company and are essentially a part of it.

Remember to thoroughly check the agency’s services and process first before you choose to ensure you maintain that personal touch throughout the project.

Where to outsource software developers in the PH?

With that said, if you are looking for reputable and trusted firms we put together a short list of the Philippines software development outsourcing agencies.

• Flexisource IT is a flexible IT solutions agency that partners with businesses in Australia to help them handpick top-calibre talents from the Philippines and build a 100% fully dedicated offshore team.  
• Remote Developer helps businesses grow and expand by connecting you with expert IT talents from the Philippines and creating a dedicated remote team.
• Emapta provides premium offshore staffing services that build teams of English-speaking professionals from the Philippines.
• Global Brainforce is a Dutch-managed software development firm that provides customised outsourced solutions to tech companies worldwide.
• Hireplicity is an American-led custom software development company that helps companies build software solutions with talents from the Philippines. 

How to ensure you are hiring the right outsourcing software development company?

Finding the right outsourcing software development agency in the Philippines can be challenging for a business owner. Not only do you want to find a partner who believes in your mission but you also need them to help you build a high-calibre technical team that meets your requirements and needs.

As a rule of thumb, here are a couple of things you should do when you are looking for the right offshore company to partner with: 

• Be clear about your expectations and requirements
• Check the agency’s services and process and see if it matches your present and future needs
• Consider how your partnership will affect your software development project and company
• Meet with your offshore and in-house team to get a sense of the overall dynamic
• Request for a trial period to see how things play out before fully committing.

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