Introduction

As more Japanese companies leverage offshore development, concerns such as “quality didn’t meet expectations” and “poor communication caused the project to go off track” are frequently heard from those with offshore experience. Indeed, the “Offshore Development White Paper (2025 Edition)” surveying approximately 1,200 companies shows that the top challenges felt by client companies are “communication ability” and “quality management,” while the most valued criteria for vendor selection are “Japanese language capability,” “development track record,” and “experience with Japanese companies” (Source: Offshore Development White Paper 2025 | offshore-kaihatsu.com).

Based on years of observing offshore development projects firsthand, one truth stands clear: the success or failure of most projects is determined at the vendor selection stage. For specific examples of common failures, see 5 Offshore Development Failure Patterns to Avoid — Lessons from Real Cases. The right vendor delivers cost, quality, and speed all at once. The wrong one means that any attempt to course-correct will drain your time, budget, and trust.

“What criteria should I use to select a vendor?” is a question that companies without offshore experience find genuinely difficult. Is it technical skill? Price? Track record? Everything seems important, leading to gut-feel decisions like “let’s go with a big-name company” or “a contact recommended them.”

This article explains 8 key checkpoints for vendor selection, drawn from a perspective shaped by observing many offshore development projects firsthand. The content is organized practically so you can use it as reference material when making your vendor decision.

3 Common Failure Patterns

First, let’s identify the problems that tend to arise from poor vendor selection. The following three patterns are frequently heard from companies that have engaged in offshore development.

Failure Pattern 1: Misaligned Expectations

One of the most commonly reported offshore failures is that “the deliverable was vastly different from what we envisioned.” The primary cause is typically that language and cultural differences prevent the intent of the specification documents from being conveyed accurately — a problem widely noted across multiple surveys and case studies.

A particular issue is the accuracy of information passed through the point-of-contact liaison between the client and the development team. When that person merely translates language without truly understanding and conveying the context and background of the development, misinterpretation of requirements becomes likely.

Failure Pattern 2: Lack of Progress Transparency

The situation of “only discovering a delay right before the deadline” is one of the problems that frequently occurs in offshore development. This often stems from the vendor lacking a proper reporting structure, or from neither party having built a shared mechanism for tracking progress.

While progress management is the vendor’s responsibility to drive proactively, it’s equally important for the client to have a structure for regular checking and involvement. Verifying whether both parties have a mechanism to visualize progress together is a worthwhile step at the vendor selection stage.

Failure Pattern 3: Insufficient Compatibility Check Early On

There are cases where large-scale development is commissioned without verifying team structure, quality standards, or communication style — only for a mismatch to surface later. In offshore development, vendor compatibility and actual development quality are often things you can only truly assess once you’ve actually worked together, which is why starting small in the early stages is considered one of the most effective approaches.

8 Checkpoints to Avoid Failure

Building on the failure patterns above, here are 8 checkpoints to confirm when selecting a vendor.

Checkpoint 1: Japan-Focused Track Record and Retention Rate

When reviewing track record, what matters more than sheer volume is how much experience the vendor has with Japan-focused projects and whether they receive repeat orders from the same clients.

Whether a vendor is truly familiar with Japanese business practices and development approaches cannot be judged by the number of completed projects alone. Verifying whether they have long-term clients and whether they have experience in your industry domain and development scale gives a much more realistic picture.

Key confirmation points:

• Years of experience with Japan-facing projects and continuity of client relationships
• Experience with projects similar to your industry and development scale

Checkpoint 2: The “Quality” of Japanese Communication

While Japanese language support is generally available in offshore development, what you need to confirm is not whether they can use Japanese, but whether they can communicate substantively within the context of system development.

What matters is whether the point-of-contact person has the IT knowledge, project management skills, and understanding of Japanese business practices needed to align both parties’ understanding. Even with strong language ability, if they don’t understand the background of system development, misunderstandings will easily arise.

Key confirmation points:

• Not just Japanese proficiency, but the contact person’s depth of understanding of IT and development work
• Whether there’s a structure to ask clarifying questions about ambiguous requirements
• Flexibility in communication tools (Slack / Teams / Chatwork, etc.)

Checkpoint 3: Japan-Side Point-of-Contact and Support Structure

In offshore development, it’s not uncommon for the project manager (PM) to be Japanese. What matters more than the PM’s nationality is whether the roles functionally necessary to drive the project forward are all in place.

Pay particular attention to whether there is someone who can carefully align with you on the purpose and direction of the project — not just manage the development workflow — and who understands Japanese business practices. The challenges that arise in offshore development go beyond technical issues and include gaps in business customs, misalignment of direction, and questions around contracts. Having someone at the point of contact who can handle these situations makes a significant difference in the long-term quality of the relationship.

Key confirmation points:

• Is there a person who can discuss and adjust project purpose and direction with the client?
• Is there a mechanism to regularly report on progress and quality?
• Is there a point of contact who can also handle non-development inquiries (contracts, costs, business requirements)?

Checkpoint 4: Quality Management Processes and Proprietary Quality Standards

“What quality standards and management processes do they have?” is a question whose importance grows with the length of the project. In IPA’s “Software Development Analysis Data Collection 2022,” which analyzed 5,546 projects, over 70% of projects were completed roughly within plan across all QCD metrics (quality, cost, schedule) — demonstrating that having structured processes directly correlates with project outcomes (Source: Software Development Analysis Data Collection 2022 | IPA).

A key question is how the vendor defines “quality.” There is a significant long-term output gap between a vendor that thinks of quality simply as “few bugs” and one that has systems in place to understand, share, and train their team on the quality level that Japanese companies take for granted.

There are four key elements that should be in place for a quality management structure.

① Shared quality standards: A system exists for the whole team to understand and be trained on the quality level Japanese companies require.

② Training structure: Education covers not only technical skills but also Japanese business practices.

③ Standardization: Development processes and procedures are documented and standardized so quality is maintained even when personnel change.

④ Improvement cycle: A mechanism exists for continuous improvement based on data and field feedback.

Key confirmation points:

• Code review processes and implementation rate
• Who handles unit and integration testing, and what is the structure
• Recurrence prevention processes after bugs occur
• Presence of proprietary frameworks or mechanisms for quality improvement
• Status of quality and security standards such as QMS and ISMS

Checkpoint 5: Technical Capability and Technology Coverage

When assessing technical capability, asking about actual development approaches is more useful than reviewing skill sheets or lists of supported languages. From how they answer questions like “How does your typical workflow look for a project of similar scale and content to ours?” and “What challenges do you commonly encounter during development?”, you can glean clues about their real capabilities.

Note that details of past projects are often not shareable due to NDAs. Asking about development workflows and approaches to challenges can sometimes give a better read on actual capability than asking for specific case studies.

In recent years, AI tool adoption has been influencing development productivity. Whether a vendor incorporates tools like GitHub Copilot or ChatGPT into their development workflow is also worth confirming.

Key confirmation points:

• Concrete development experience in the required languages and frameworks
• Depth and specificity of responses to technical questions
• Capability with legacy technologies (VB6, COBOL, etc.)
• Use of AI tools like GitHub Copilot and ChatGPT in development workflows

Checkpoint 6: Cost Structure Transparency

Many companies consider offshore development with cost reduction in mind, but final costs can sometimes balloon beyond initial estimates. The cause isn’t only the vendor’s estimation accuracy — post-engagement spec changes and additional requirements accumulating are equally common. Both parties need to recognize upfront that such changes tend to lead to cost overruns in offshore development.

Key confirmation points:

• Are estimates broken down in detail by man-hours, unit price, management fees, and tool costs?
• Are conditions and criteria for additional charges clearly documented?
• Is there an explanation of the cost structure for both lab and fixed-price contracts?
• Is there a policy for handling foreign exchange risk?

Checkpoint 7: Information Security Measures

For development involving business systems or customer data, verifying the security framework is non-negotiable. For healthcare, financial, and infrastructure projects in particular, addressing information leakage risk is a prerequisite of the project.

In offshore development destinations like Vietnam, there are still areas where security and compliance awareness lags behind Japan, and the risk of information leakage may be higher than domestic development. This is something we have experienced firsthand as an offshore development partner on the ground.

Key confirmation points:

• Status of ISMS and information security policy development and operation
• Policies for managing development devices and networks
• Status of regular security training implementation

Checkpoint 8: Contract Flexibility and Willingness to Run Trials

The optimal contract structure varies by project type. When specs are fixed, a “fixed-price contract (deliverable-based)” is appropriate; when ongoing improvement and additional development are anticipated, a “lab contract (dedicated team)” is better suited. The characteristics of each are explained in detail in “Lab vs. Fixed-Price Contracts: The Reality of Offshore Development Contract Types | ALLEXCEED VIETNAM“.

Most vendors support small starts. Beginning with a small project to experience actual communication quality, development processes, and quality management firsthand before committing to full-scale engagement is one of the lowest-risk approaches for both parties.

Key confirmation points:

• Can they support both lab-type and fixed-price contracts?
• Flexibility in contract duration and termination conditions

Setting Up Offshore Development for Long-Term Success

Companies that are succeeding with offshore development share a common trait: they select vendors based on axes of “strong communication,” “solid technical capability,” “robust security measures,” and “flexibility to adapt to changing circumstances.”

Selecting based solely on price means communication gaps and quality management issues will surface later. Thoroughly evaluating the structure, approach, and track record that should be confirmed from the start is what leads to stable long-term projects.

From our experience with 800+ projects, a clear pattern emerges: clients who build stable long-term relationships have consistently taken care to verify structures thoroughly from the outset. In projects that have continued for years — such as an 84-month e-commerce operation or long-term hospital system maintenance — relationships flexible enough to handle changing requirements were built in from the beginning.

Client feedback also confirms this. One ICT subsidiary of a major printing group, after completing a 2.5-year, 300 person-month migration project, cited “confidence in Japanese-language communication” and “a partner who actively pursues improvement through productivity reports together” as their key selection criteria. Their IT Communicator was described as “not just a translator, but a facilitator who organizes meetings by grasping the context and intent behind discussions” — a reminder that communication quality directly determines whether an offshore engagement continues.

From another client with hundreds of projects across CATV, healthcare, and logistics, we received the feedback: “We almost never find ourselves in a situation of waiting for translation.” Having translation staff in Tokyo who translate content left after end-of-day in Vietnam first thing in the morning creates near-real-time collaboration that makes the time difference feel invisible.

Offshore development is increasingly being positioned not as “cheap resources” but as “a means to secure talent with the skills you need.” As offshore adoption for “resource securing and quality stabilization” grows against the backdrop of domestic IT talent shortages, identifying a vendor you can trust as a partner is where it all begins.

Conclusion: Select Your Vendor Across 3 Axes

Evaluating offshore development vendors purely on “low price” will inevitably create problems somewhere. The 8 checkpoints in this article ultimately distill into the following 3 axes:

A vendor with all 3 axes in place functions not merely as a “development company” but as a long-term business partner. If any one axis is significantly lacking, risks tend to surface as project scale grows.

For companies considering offshore development for the first time, we strongly recommend starting with a trial project. Experience the vendor’s capabilities, structure, and communication quality through a small engagement first — then make your full-scale commitment. It’s the lowest-risk path forward.

We hope the 8 checkpoints in this article serve as useful reference material for your vendor selection.

Frequently Asked Questions

Q. Which checkpoint is the most important when selecting a vendor?
“Communication quality” and “Japan-focused track record and retention rate” are the top two. Technical skill and cost matter, but if communication breaks down, the entire project stops functioning. Confirming communication quality during initial discussions has an outsized impact on downstream risk.

Q. What scale should I start with for a first offshore project?
We recommend starting with a small fixed-price engagement of around 1–3 person-months. Confirm real communication quality, development workflow, and quality management practices through a trial before making your full-scale engagement decision — it minimizes risk.

Q. Does the PM have to be Japanese?
No. More important than nationality is whether the PM has both IT knowledge and an understanding of Japanese business practices, and can align understanding with the client. Being able to speak Japanese means nothing without understanding the development context; conversely, a local PM who meets those requirements is perfectly fine.

Q. Is it risky to engage a vendor without ISMS certification?
It depends on the industry. For healthcare, financial, and infrastructure projects, the presence or absence of certification is often a practical prerequisite. For general business systems, it may be possible to make an engagement decision by individually verifying whether internal security rules are in place and operationally effective, even without ISMS.

Q. Should I start with a fixed-price or lab contract?
Starting with a fixed-price contract is the norm for a first engagement. Confirm capabilities and compatibility through a project with clear specs and defined scope, then consider transitioning to a lab contract once ongoing development and feature additions are anticipated. See Lab vs. Fixed-Price Contracts: The Reality of Offshore Development Contract Types for details.

Q. Why are low-bid vendors so cheap?
It’s not just a unit price difference — the costs of PM structure, quality management processes, and communication quality may have been omitted. Post-incident remediation costs can surface later, and the total cost can end up exceeding domestic development. Always verify the breakdown of estimates and the conditions under which additional charges apply.

Q. What size company is offshore development suited for?
Not just large enterprises — small and mid-sized companies can leverage it too. In our track record, the vast majority of our 800+ projects are small-scale engagements under 10 person-months. It can also be used for targeted purposes like “just the specific process where we’re short-staffed” or “freeing up core team members to focus on DX initiatives.”

Q. How does Vietnam offshore compare to China, India, and the Philippines?
The main differences are in the depth of Japanese-speaking talent, time zone proximity, and geopolitical risk. Vietnam has only a 2-hour time difference from Japan, and with Japanese language education thriving there, many vendors have strong experience with Japan-facing projects. For a detailed comparison of development destinations, see A Complete Comparison of Offshore, Nearshore, and Domestic Development.

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As a leading Japanese IT solutions company with approximately 20 years of experience in Vietnam offshore development, we provide software and system development services. Please feel free to contact us when considering offshore development.
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