Offshore development center (ODC) has become a popular choice for startups/SMBs looking to reduce costs and tap into global talent pools. By setting up an ODC in another country, startups and enterprise businesses can access skilled professionals at lower costs. This blog explores the benefits and challenges of setting up an ODC, along with tips and best practices for managing and optimizing it for maximum success.
Editor’s Note: This blog entry was originally published on Aug 27, 2022, and is updated on 7 March 2023.
Today enterprises are actively looking to move their software projects to Offshore Development Centers, so their in-house resources can focus entirely on their core business activities. But before we dwell on why businesses worldwide opt for Offshore Development Centers, let us find out what they are.
What is an Offshore Development Center (ODC)?
An Offshore Development Center (ODC) is a dedicated team of software developers and IT professionals in another country and a different time zone. Companies establish ODCs to outsource some or all of their software development or IT operations to a cost-effective location, to reduce costs or access specialized expertise.
These teams are managed by the offshore development company, which is responsible for complete infrastructure setup and resource management to ensure seamless operations.
Offshore development centers allow startups, SMBs, and enterprises to augment their IT teams and fast-track project development to reduce time-to-market.
ODC Full Form in the IT Industry is Offshore Development Center. It is also known as an offshore software development center, offshore development team, or offshore software team.
According to Wikipedia, "offshore custom software development consists in offshoring the software development process in a country where production costs are lower, thus decreasing budget spending."
A partner company in the offshore location offers this facility and assists in acquiring, mentoring & managing high-quality resources for the best productivity.
Now that you are aware of what is offshore development center, let's understand how it functions.
- Offshore software development centers provide cost-effective solutions for software development needs.
- Considerations when setting up an offshore development center, such as communication, legal and regulatory requirements, and time zone differences.
- Best practices for managing offshore development teams, include establishing clear processes, fostering effective communication, and regularly assessing performance.
- Challenges of offshore development, include language barriers, difficulty in maintaining control and oversight, and ensuring data security.
How Does an Offshore Development Center Function?
Let us explain it with an example. Suppose you are a US-based company seeking to gain first mover advantage by reducing software development time. Hiring dedicated offshore software developers in a country like India that offers a large talent pool at a low cost can help you speed up your software project development without much cost implication.
By hiring an offshore team of highly-skilled developers and programmers on a contractual basis, you enjoy the benefits of owning talented resources without the commitment of long-term engagement, as you can easily dismantle the team once the project is over.
In 2023, offshore development centers (ODCs) are becoming full-fledged business units operating overseas, owing to their benefits.
Recommended Read: Guide on the Functioning of an Offshore Development Center
But hiring an ODC is not the same as outsourcing IT projects. Both solutions are quite different in their business model. Here is how:
How is Offshore Development Center Different from Outsourcing?
On the surface, Offshore development and outsourcing may sound similar, but in reality, these are very different in their operating model. Unlike outsourcing, where your hand over your project to a third-party vendor for development, in offshore software development, you hire a team of remote offshore developers to work on your project under your supervision.
Offshore development centers give you better control over ongoing project development as the team works as your subsidiary in an offshore country.
As per Dun & Bradstreet's Barometer of Global Outsourcing, 20 to 25% of outsourcing relationships fail within two years, and 50% fail within five, proving that ODC is a better option than outsourcing work.
7 Benefits of Offshore Development Center
1. Cost-effective software development
Hiring offshore development services can reduce development costs by as much as 60%. Setting up an Offshore Development Center in a developing country like India helps businesses.
- It is a major tech destination and ranks among the top 10 countries for offshore IT projects.
- It offers a massive talent pool across technologies.
- It has a lower cost of living, which results in lower labor and infrastructure costs.
- It has favorable government policies toward the IT sector.
2. Specialized Skills
Tech demand plays a critical role in the digital economy of a nation. A nation with an affinity towards certain technologies is bound to have a higher supply of tech experts in those technologies and vice-versa. It creates an imbalance in resource distribution globally.
An offshore development center helps bring balance by providing limited or unavailable tech experts in your local geography.
3. On-demand Team Scaling and Resource Backup
Developing a software solution require tech experts, and losing a resource in an ongoing project can adversely affect the timeline and quality of the solution.
Working with an offshore software development company mitigates this risk. They have a large and pre-vetted talent pool of software engineers readily available to take over the responsibility, ensuring zero downtime.
Offshore development centers help you become more resilient and agile.
4. Extended Hours of Work Coverage
Offshore development center working across borders operating in different time zone ensures that your project development continues even in your off-hours. Your quality team can easily review the work completed this way with a feedback mechanism in place. This way, companies ensure zero lag or delay in the project. Thereby fast-tracking the overall project development lifecycle.
5. Business Extension
Offshore development centers are a great way to expand your business presence and offerings overseas. An ODC helps you create:
- a physical business presence in an offshore market with minimal cost commitment.
- allows localizing of your products and solutions to tap the potential customer base in new markets.
- helps create brand affinity amongst local businesses.
6. Focus on Core Competencies
With an offshore development center in place, businesses can delegate their IT operations to the offshore team and focus resources and time on building their core competencies. With an offshore software development center, businesses can speed up their product’s time-to-market, giving them a first movers advantage and edge over their competitors.
7. To counter resource crunch
As per Korn Ferry's report, the world faces a major tech talent crunch. By 2030, the talent deficit can amount to 85.2 million workers resulting in an $8.5 trillion revenue loss. While Western economies like the USA, Canada, Australia, and Europe may face major talent gaps, India is expected to have a skilled-labor surplus of around 245.3 million workers by 2030, making it the most viable destination for offshoring software development projects.
However great, working with an offshore development center has its challenges.
Let us find out what they are.
Recommended Read: How to Structure Your Offshore Development Center
Challenges of Working with an Offshore Development Center
Here are some challenges you may face while working with offshore development centers and their solutions:
|Mismatched Performance Expectations vs. output reality due to hiring a misfit team.
|Project management is another challenge one can face while working with remote teams.
|A common challenge a company can face when working with offshore teams is cultural barriers that can lead to miscommunication.
Though profitable, an ODC has risks and challenges. But these challenges can easily be mitigated by onboarding reliable offshore developers.
Learn how to mitigate the top 8 challenges while working offshore development center.
Setting up an ODC has its benefits and risks.
So should a business create its own offshore development center?
Let us find out.
Offshore Software Development: Is the Benefit Worth the Risk?
Yes, when one compares the benefits of having your offshore software development centers against the risks, hiring offshore developers for your development project is advantageous and essential to counter the increasing volatility and uncertainty in the market.
- It saves on your hiring, infrastructure, and employee costs
- You can easily scale up or down your team to meet your project requirement and budget.
- With an available talent pool of pre-vetted programmers and coders, you can quickly onboard resources across different tech-stack.
- The best of all is that you can create an offshore software development center for short-term projects, and once the project is completed, the team can be dismantled.
So, setting up a dedicated offshore development center is always a good idea, especially if you seek quality output and quick delivery at an economical price.
But is an offshore software development team better than an in-house development team?
Read on to explore.
Offshore Development Center Vs. In-House Team- Which is Best for you?
When looking for a dedicated team for software development, companies usually opt for hiring either offshore software developers or an internal team. But, the viability of both options depends on the nature of the project.
The major difference between Offshore Development Center (ODC) & in-house team is that an offshore development center (ODC) is a remote location where companies outsource their software development or IT work, while an in-house team is a team of employees that work within the same physical location as the company.
Read on to discover how.
|Criteria of Comparison
|Offshore Development Team
|Scaling of the team
This brings us to our next part; which businesses should look to build their own offshore development center.
Who Needs their own Offshore Development Center Services?
Whether you are a startup, SMB, or large enterprise, hiring your offshore software development center is always a viable option, especially when you seek benefits like
- quick scaling of your team
- short-term engagement
- experts in different technology
- quality output on a limited budget
- global expansion
Read our blog- When To Set Up An Offshore Development Center – The Checklist to learn how offshore development center has become the most practical solution for businesses.
|#Tip – If you are a start-up or SMB looking to scale your business quickly, an offshore software development center in India can help you achieve your goals without burning a hole in your pocket.
What is the Purpose of an Offshore Development Center?
An offshore team working on your software development project accelerates your business growth.
- It delivers high-quality project development at a lower cost of operation.
- It speed-up the project's time to market.
- Helps expand business in new markets.
- Enables on-demand scaling of teams.
So let us learn how you can successfully set up an offshore software development center.
How to Set Up an Offshore Development Center: Useful Tips
Following below steps can help you successfully set up your offshore development center.
- Define your project’s vision and scope of work along with milestones.
- Do thorough research on the technologies you need for your project basis which shortlist location.
- Compare location on Geo-political scenario, Political stability, Cost-of-living, and Government policies on FDI, IP, and data protection.
- Choose an offshore development company that has relevant experience in your industry, social proof, a large talent pool, and an international presence.
- Clearly define roles and responsibilities and terms of engagement on the agreement.
- Create scrum and work overlapping windows.
Read Setup Your Own Offshore Development Center(ODC) In India to learn the step of setting up an offshore development center.
As a business, you can choose one of the three models of the offshore development center.
Types of Offshore Development Center Models
Below are three engagement models to choose from when creating a dedicated offshore development center.
1. Product Engineering Offshore Development Center Model
In this offshore development center service, you can scale your operations by hiring dedicated offshore developer/developers for your ongoing project. You can start offshore development services with as small as 1 member.
2. Build-to-scale Offshore Development Center Model
In this offshore development center service, you can set up a dedicated team of developers & experts to work as your subsidiary. It is best when you have a growth mindset and have experienced success with small offshore groups.
3. Build-Operate-Transfer (BOT) Offshore Development Center Model
In this offshore development center service, you can create a full-fledged business operation in a foreign market under your brand name.
The offshore development service-providing company will assist you in creating the complete office setup along with resource hiring. They will run the operations for the initial years to validate the success of the offshore center. Post which the ownership of the office will be transferred to you.
Members of an Offshore Development Center
A successful ODC team has the right composition of expertise and experience. Though there is no hard and fast rule about the key roles in an ODC, usually, an offshore team has the following key members.
- Account Manager – Accountable for managing client relationships and ensuring on-time delivery of high-quality projects.
- Project Manager – Responsible for project planning, execution, and quality assessment at every project stage.
- Designers and Developers
- The tech team looks into the design, installation, testing, and maintenance of software.
- Test Engineers – Tech team that assesses integrity, quality, and functional and non-functional requirements.
- Usability Engineers – A team that evaluates the usability and user-friendliness of the solution.
- Graphic Designers – Experts who build visual concepts to showcase solutions’ USPs.
- Content and Technical Writers – The team responsible for creating instructions and integration content for the software or website.
Following the steps, you can set up any of the aforementioned models of offshore development centers' ODCs.
Mistakes to Avoid while Setting up your Own ODC
An offshore software development center, one of the most profitable engagements for scaling your business, can easily become a bane if you fail to assess the critical factors. Here are some of the pitfalls your business can fall prey to if not careful:
- Lack of long-term goals
- Focusing only on resource cost
- Ignoring the diversity of the workforce
- Selecting the wrong offshore development partner for your ODC
- Failing to set up the right communication tools and channels.
But following these steps may not suffice; you must avoid mistakes while setting up your ODC.
But to make your offshore journey smoother, here are some tips you must always remember.
Best Practices to Maintain an Offshore Development Center
Setting up an offshore delivery center is just the beginning, the more critical aspect of an offshore development center is its management. It is only through effective management that you can ensure the success of your software development project. Here are some tips that can help:
- #Tip 1- Establish a standardized method of communication
- #Tip 2- Ensure documentation of all ongoing work
- #Tip 3-Treat your offshore developers as part of your business and not as external entities
- #Tip 4- Create regular scrum meetings to ensure you are always updated on ongoing work
Managing an offshore team is as critical as building one; through this, you can derive 100% output from the offshore development center.
Read our blog -’ 7 Tips To Manage Your Offshore Team Successfully’, to gain insight on how you can ensure the success of your offshore development project through proper team management.
Another way to ensure the success of your offshore development center is by partnering with a reliable offshore development company that will help you onboard the right offshore developers that best fit your business needs.
How to Choose the Right Offshore Development Company?
Setting up a dedicated offshore development center has its challenges and risks regarding management, communication, culture, legal compliance, government policies, and cybersecurity.
Businesses can avoid these challenges by gaining information on the country chosen for ODC and thoroughly vetting offshore development companies.
Read on to find out how to vet offshore development companies.
1. Interact with Leadership Team
One must interact with the leadership team before selecting an ODC service-providing team. Talking to the leadership will assess their business capabilities, strength & weaknesses, communication skills, and working style.
2. Experience, Reference, and Social Proof
While shortlisting an offshore software development team, you must find out about previous projects, clientele, successful delivery rate, and industry recognition.
Finding answers to these questions would help you assess their industry, technology niche, and work quality. You will be able to make an informed decision.
3. Transparent and Honest Communication
When an offer sounds too good to be true, you may want to drop it. Developing a successful software product or solution requires time and a skilled team conducting a granular assessment.
Though offshore teams are known to deliver premium quality work while meeting the deadline, anyone promising unrealistic delivery time probably has little to no idea about how software development works.
Know the nuances of hiring an offshore software development center in our blog-Checklist To Hire Offshore Development Team in 2023
Why Choose Your Team in India?
Your Team in India (YTII) is an offshore development company that provides offshore software development services. We empower startups, SMEs, and large-scale enterprises to hire highly-skilled Indian software developers and build reliable software solutions. We believe in and practice committing right to our clients at Your Team in India. Pillars of our ODC services:
- Dedicated Team: We are committed to providing dedicated offshore software developers, irrespective of the size or duration of the project.
- Dedicated Relationship Manager: We assign a dedicated relationship manager to your project who will closely monitor the team and ensure the delivery of quality work.
- Data Security: NDA contracts are signed between the hired talent, you, and YTII to safeguard your solution Ips and build confidentiality of the ongoing project.
- Focused Leadership Team and constant self-owner review and audit: The leadership team constantly reviews and provides feedback on ongoing projects.
- Process framework: Well-formed, reliable, and robust processes framework and SOPs that clearly define the work hierarchy and ownership amongst the team to ensure seamless operations.
- Mentoring of why: At YTII, we mentor every ODC team member on ‘why they are creating a product or solution?’ Knowing the ‘Why’ is crucial, as it becomes a self-checking mechanism for individual contributors. Knowing the purpose helps them evaluate their work and match it to the client’s expectations.
- Agile mindset: Every developer is autonomous and self-sufficient and works with an agile mindset, delivering high-quality work.
Through these pillars of our offshore development services, we have helped businesses across the globe achieve their development goals.
Success Story- GETTRX uses YTII’s Offshore Development Centre Services to scale its operations.
GETTRX, an emerging fintech start-up in the USA is able to improve its regulatory compliance with the help of the offshore development team. Not only are they able to reduce the fraud detection time by 90%, but they also reduce the TAT required for QA by 99%.
Ready to Start your Offshore Development Journey?
Setting up an offshore development center can help businesses achieve high-quality work at a much lower cost. But choosing a reliable ODC partner is critical to an ODC. With 12+ years of experience in delivering quality output, YTII can help you set up a robust and scalable dedicated offshore development center in India. Get in touch with us @ email@example.com. To know how we YTII can assist you in building a thriving offshore development center in India.
FAQs Related to Offshore Development Centers
We have answered some common queries about offshore development centers. For more information, you can contact us.
1. What Is ODC — Offshore Development Center?
An offshore development company is an enterprise that helps businesses set up their offshore development centers overseas. An offshore development company takes ownership of the end-to-end management of your offshore center from hiring the right resources, setting up infrastructure, training & mentoring the developers, and monitoring the entire team's performance.
2. What are the Benefits of Offshore Software Development?
Offshoring software development projects can give your business access to technology experts that are not readily available in your local geography. It helps businesses reduce their overall operational costs while speeding -up their software development and product’s time-to-market.
3. Where can I Find an Offshore Development Team?
You find a talented and certified team of Indian offshore developers by simply filling in the form. Our experts will reach out to understand your requirements and assist you in hiring the right offshore team for your project.
4. What is the difference between an Onsite Team and an Offshore Team?
Onsite is when you hire a team to work from your office location whereas an offshore team is when the hired team works from a remote location.
5. How Much will I Save by Setting up a dedicated Offshore Development Center with YTII?
Setting up a dedicated offshore development center with Your team in India can save you:
- Up to 50% to 60% of wages that you pay in your country
- Approx $2500 to $5000 USD on PCs and software licenses
- Rental cost or the loss from rent if you use your own space