Hiring software developers overseas: why and how to do it
I have a basket of startups that I follow. They span various stages and sectors. I usually look at their headcount, news updates and any new positions they post. I recently noticed two interesting trends across many of them (N = 12). First, most are hiring again, which is a welcome sign after the harsh winter of 2023. Second, many of the open positions for software engineers are overseas primarily in Europe, mainly in southern and eastern Europe. There are numerous companies also hiring in South America and Asia. For most, this is a change in their US-only hiring approach, especially for series-C and earlier companies.
I’m not sure if this is a broader trend, or just one idiosyncratic to my basket. Note, StrongDM - where I presently work - is also hiring software engineers overseas in Poland (feel free to DM me if interested!). I do have a feeling that it is primarily driven by many of these companies returning to a hiring mode, but wanting to do that in a reasonable financial manner.
Therefore, it should come as no surprise, that at the forefront of this trend is the pursuit of cost efficiency. The allure of reducing salary expenses by hiring in countries with lower living costs cannot be overstated, especially for startups operating within the constraints of tight budgets. Hiring overseas, at a lower cost, can also help balance the need to grow headcount whilst extending cash runway - efficient growth. It’s not unusual for headcount to comprise about 80% of a startups expenditures. Lower-cost markets, therefore, provide the needed talent to grow whilst helping maintain reasonable cash burn.
Beyond cost considerations, the quest for talent plays a significant role. Certain regions around the world are rich with a surplus of talent in specific technology stacks or industries, making them fertile ground for startups looking to tap into a broader talent pool. This international expansion in search for expertise can be particularly beneficial in scenarios where such talent might be scarce or subject to fierce competition within a startup's home market.
The flexibility and scalability afforded by assembling a global team are other critical factors. Such an approach allows startups the agility to scale operations up or down in response to project requirements and budgetary considerations. This flexibility is invaluable for startups poised on the brink of rapid expansion or those navigating through the process of pivoting their business model.
Moreover, the advantage of round-the-clock productivity offered by having team members in different time zones cannot be overlooked. This setup facilitates almost continuous work cycles, accelerating development timelines and ensuring that support is readily available across different markets, regardless of the hour.
Lastly, the diversity of perspectives brought in by international teams is a boon for creativity and innovation within the product development process. Such diversity fosters the generation of more comprehensive solutions, designed with a wider audience in mind, enriching the product's appeal and functionality.
Choosing the right region from which to hire software developers necessitates a thorough and multifaceted examination of various criteria, crucial for aligning with the specific needs of a startup. Developing an objective framework to assess and compare these regions can significantly streamline this complex process.
I rely on a few factors, all outlined in the diagram below. Each criterion below has its own weight associated with it, with the talent pool and business environment at the top of that list. It’s worth noting that even though some criteria have a low weight, e.g. political stability, they can be sufficient to exclude a region altogether.
The talent pool and skill set available within a region also demand close scrutiny and command the highest weight. This includes gauging the size of the workforce skilled in the necessary technologies or domains, the quality of STEM education, and the availability of specialized training or certifications. Language skills, especially proficiency in English or other languages critical to the project, play a significant role in ensuring effective communication and project success. I spend cycles looking at candidate profiles on LinkedIn, reading job postings on local job boards, and trying to assess whether the available talent pool is a good fit for what I need.
Labor laws and the broader business environment further influence the decision-making process. Understanding the ease of hiring and firing (try doing that in France!), the legal obligations towards employees, the strength and enforcement of intellectual property laws, and the general ease of doing business, including contract setups and dispute resolutions, are all critical considerations. Another important factor is the ability to offer stock options to employees hiring overseas. Your legal and people teams should be involved when assessing both labor laws and the overall business environment.
Time zone differences and cultural compatibility are equally important. The extent of working hours overlap can facilitate smoother communication, while cultural similarities or differences can impact work styles, communication, and overall project management. I tend to minimize the impact of time-zone somewhat, because I try to avoid dependencies of continuous communication and collaboration between US and overseas engineering teams. We’ll expound on this point in a follow up post.
Considerations around mobility and accessibility, including visa and immigration policies and geographical proximity, affect the feasibility of physical relocations or the necessity of on-site visits. This is important for both sides. US-based employees should be able to travel with relative ease (e.g. no complex visa processes) to their peers outside the US and vice-versa.
The political and economic stability of a region can significantly impact business operations, with factors such as political climate, economic conditions, currency fluctuations, and inflation rates affecting the long-term sustainability of hiring decisions. The latter can be of significant importance depending on how you pay these employees, meaning you might be taking currency risk that you need to consider.
Finally, the region's infrastructure and technological ecosystem also play a pivotal role. Reliable internet access and support for remote work technologies are non-negotiable for the modern workforce, while a vibrant tech ecosystem suggests a healthy environment conducive to innovation and collaboration.
I’ve covered the main reasons for hiring overseas, at least from my perspective. I also covered how to evaluate regions to help choose one(s) that work for you. In my next post I will share some of the patterns I have applied to best setup both sides - US and overseas employees - to succeed. Hiring is just the start, a lot more has to happen to ensure that your overseas employees succeed.