Nowadays, business is undergoing accelerated development. The challenges of modernity, the need to constantly increase competitiveness and search for new approaches to solving problems with the simultaneous need for rational budget allocation lead to the fact that enterprises have to look for new options and ways to expand their activities. For this reason, one of the global business trends today is the opening of offshore development centers.
Company managers open offices overseas (in most cases, these are countries with lower costs of living and doing business), place all necessary employees there, and benefit from lower operating and labor costs. In this article, we will talk more about the concept of ODC, discuss the advantages of this global business trend and the challenges it faces, and also outline an algorithm of actions to open an offshore development center.
Establish an Offshore Development Center: Purposes and Services
Offshore development center is a type of business model that allows companies to bring software development and other IT-related work outsource, to offshore zones. Let’s figure out right away what an offshore zone means and how ODC in this case differs from outsourcing software development. ODC establishment implies an offsite expansion of the development company, which includes a cross-functional team, infrastructure, equipment and all the necessary tools to set up internal team processes.
The offshore development center team operates under the brand of the parent company and follows its core business objectives. The parent company can control the activities of the ODCs through a designated project manager or in any other way it sees fit.
The main goal of establishing and maintaining an ODC is to provide scalable technology resources while reducing costs.
The structure and composition of the offshore development center team may vary depending on the company’s direction and include developers, engineers, designers, managers, administrators, content makers and other categories of specialists.
For more information about the differences, see the table.
| Offshore Software Development Company | Outsourcing | |
| Location | A region different from the in-house team country | Country is not a critically important factor |
| Hiring | Hiring specialists and building a team is done for a specific project based on the client’s unique requirements | The team has already been created, and its members can be engaged in third-party projects |
| Scaling | Opportunities for team expansion and team composition changes are unlimited | The scaling of the team is limited by the contract |
| Administration and Support | The vendor provides a fully administrative department, including accounting, HR, etc | Only the development team is hired |
Thus, speaking about the advantages and purposes of both formats, we can conclude that outsourcing is a good option for independent performance by hired employees of specific tasks in a short time and does not require special managerial efforts on the part of the client company.
An offshore development center is a team that is recruited specialized for certain tasks for a long period of time. It often has a large interrelated list of tasks, the implementation of which requires control and interaction with the parent company.
Speaking about the establishment of a development center abroad, we mean that there are three options for implementing this task.
1. You can open an offshore affiliate in another country by yourself. This is accompanied by administrative complexities, but as a result you will get a second company in your full ownership, completely subordinated to the mission and tasks of the parent company.
2. You can open an offshore development center based on a vendor that will provide you with everything you need, from a team of professionals to infrastructure and inventory. However, you should be very careful when choosing a provider, since your company’s success and credibility depends on the quality of its services.
On our turn, we would like to recommend OrbitSoft development. Our company specializes in web and mobile application development, providing services in opening and maintaining offshore development centers and many other areas of IT development. OrbitSoft has successful cases and is ready to offer you a free personalized consultation on any issue in its field of activity. Learn more about OrbitSoft on our official website.
3. You can outsource tasks — this format of service can reduce costs and complexity of hiring employees. However, the downside of this format of business relations is that you will be provided with a universal team, not adapted to the specifics of your business. Another not uncommon problem in outsourcing is the unfairness of service delivery and compliance with the contract, so it is worth carefully studying the site of a potential partner before signing a contract.
Today, the practice of implementing offshore development centers is gaining popularity among enterprises that want to delegate their software development tasks to outsourcing. This is facilitated by greater cost efficiency, consisting of a diverse talent pool with specialized skills, differences in time zones and lower costs of maintaining the team’s activities.
Why it is Profitable to Create an Offshore Development Company
Let us summarize the main advantages of opening offshore development centers and discuss in depth the reasons for the growing popularity of this format of operation among enterprises.
- Efficiency gains. With ODC, you can reduce the time to complete projects as tasks can be delegated to the dedicated team members with the most appropriate specialization.
- Improved quality. The work will be done better if there is a clear division of tasks and focus on different subjects of inhouse and offshore teams.
- Availability of the best resources. With offshore development centers located overseas, you can take advantage of the opportunity to attract talent from around the world, with the education and experience you need.
- Reducing the cost of provisioning. The creation of an offshore development center implies the absence of overhead costs that are common in traditional hiring models. It is possible to save money on office space, as employees do not have to move to the parent company’s country and can work remotely.
- Improving time- and project management and simplifying the prioritization. With an existing offshore development center team, the processes in the enterprise will run faster as you transfer this responsibility to outsourcing and the in-house team is assigned all other tasks.
- Quickly entering the market and gaining the trust of the audience. Recruiting talented members of an offshore development center team can help bring a company’s products to market faster than it could be done by an in-house team alone. This is especially relevant if the ODC is opened in the region where the business is going to expand — then the offshore team will help with localization of the development. And a clear, easy-to-understand, and high-quality product is always a guarantee of increased audience loyalty.
Setting Up an Offshore Development Center: What You Need to Know About
The creation of an offshore development center involves some points that should be taken into account before starting to launch it. Let’s take a closer look at these subtleties and summarize what questions you need to ask yourself when planning to set up an offshore development center.
Determine the geo of your offshore development center
Questions to ask yourself:
- Which country’s structure will best suit the scope and direction of my business?
- How will the time zone of this country affect the work of the parent company?
- How might the culture of this country affect communication with core team members?
We recommend you consider the cultural characteristics of the countries that may best suit your business. The geopolitical stability of the «candidate» countries and the volatility of the local currency should also be taken into account.
Study legal issues, labor and tax laws
Questions to ask yourself:
- Do I know the legal aspects of setting up a business in this country?
- Am I informed about labor laws and the average level of education in this country?
Study the peculiarities of the local legal environment, labor and tax laws. We recommend getting a consultation with a professional lawyer to learn all the specifics of doing business in the country of the future ODC.
Choose a reliable provider
Questions to ask yourself:
- Is the information on the provider’s website trustworthy, is the scope of its activities clear and concise?
- Does this company have customer feedback, is it freely available and positive? Is there information about case studies?
A solid part of success in opening an offshore development center depends on the choice of a reliable partner. Please pay special attention to this issue. On our turn, we would like to recommend OrbitSoft development.
Our company specializes in web and mobile application development, providing services in opening and maintaining offshore development centers and many other areas of IT development. OrbitSoft has successful cases and is ready to offer you a free personalized consultation on any issue in its field of activity. Learn more about OrbitSoft on official website.
Build a team of competent employees
Questions to ask yourself:
- Would I work with a provider or hire specialists on my own?
- Am I prepared to accurately visualize the composition of the team?
- Would I have enough resources to hold interviews?
When faced with the need to build an ODC team, many leaders prefer to delegate this task to a provider. However, keep in mind that composition and skills of your talent pool will determine whether all the efforts to open an ODC will pay off. Therefore, we recommend you allocate the necessary amount of resources and take a responsible approach to selecting candidates.
Provide the necessary infrastructure
Questions to ask yourself:
- Do I know the specifics of Internet and telecommunications facilities in this country?
- What specifically will I need to equip my ODC office (if there is one)?
The most important infrastructure features include equipped workspace, IT and TV systems, internet access, software, security measures, etc.
Develop a quality adaptation program
Questions to ask yourself:
- How will I ensure the interaction of the core team and the ODC?
- Will I be able to invest additional resources in coaching the new team?
At the point where the decision to create an ODC is realized, you need to think about how the team will be trained and immersed in the work. You need to determine how much budget you are ready to spend on training the ODC team and how to set up the interaction between the parent company team and the ODCs.
Identify the main channels of communication
Questions to ask yourself:
- How should ODC team members work to maximize interaction with the core team?
Teams will interact effectively and overall business progress will be significant if there are no difficulties with communication, tasking and tracking progress. Therefore, it is important to provide ODC team members with access to task trackers, corporate messengers, conference and development services, etc.
Monitor and track the work of the ODC on an ongoing basis
Questions to ask yourself:
- How do I plan to coordinate the work of the ODC?
- Will I be able to supervise the ODC myself or will I need an additional supervisor?
- What are the main company goals assigned to the dedicated offshore development center?
Once the ODC is established and its work is up and running, it is necessary to develop a strategy for tracking the work and evaluating the effectiveness of the center. This can be done, for example, by implementing a KPI system or setting clear deadlines for major tasks. Conduct necessary research during the course of the ODC’s work, collect feedback, and develop a reward system.
These tips are mostly universal for different types of businesses and will help you avoid the most common mistakes when starting an ODC. We hope you find them useful and the ODC will bring your business exceptional success!
What challenges a business faces when launching an ODC
Although the trend of ODC implementation has gained popularity today and has become widely demanded by businesses of different orientations, this system also has some growth points. Let’s discuss the challenges that are currently considered to be the most significant in the issue of ODC launch.
- Communication and interaction difficulties
This challenge includes lack of language skills, time zone differences, conflicts caused by cultural differences. The solution to this challenge is a well-developed communication plan (with corporate etiquette, hours of required online interaction with the core team, and opportunities for language learning).
- Lack of a monitoring and quality control system
Due to the communication problems described above, the problem of insufficient monitoring of work and loss of work quality can also appear. The solutions to this can be to develop a plan and define communication channels between the ODC and the parent company.
- Staff turnover
This problem is one of the most frustrating, but it is also a very important indicator of an error in the work organization. Staff turnover can provoke a sag in the offshore development center’s operation, sabotage the cyclicality of work and threaten the loss of budget. To assess the severity of this problem, you should collect employee feedback and eliminate the underlying causes of employee disengagement.
- Vendor blocking
Working with an unreliable provider can threaten that all communication with the offshore development center will be lost and the company will suffer great damage. Choose your provider carefully and be sure to sign a contract before starting collaboration.
- Rational management
Differences in mindset, time zones and a number of other reasons that we have already mentioned above can have an impact on management within the company. It should be calculated beforehand whether you will have the capacity to manage the ODC team or an individual manager needs to be brought in.
Conclusion
Offshore development centers are now one of the global trends in business scaling, providing entrepreneurs with the opportunity to internationalize their business, improve the quality and security of its technical side while reducing costs.
Despite the fact that the practice of implementing offshore development centers has gained its popularity to date, in its process, businessmen frequently encounter challenges that can be avoided with the appropriate knowledge, well-developed soft skills and a detailed implementation plan. In case of need, entrepreneurs can take the help of experienced vendors.
Thus, offshore development centers as a global trend deserve proper attention from entrepreneurs, as this practice opens up new opportunities for business growth and development.
FAQs
What is an offshore development center?
Offshore software development center is a type of business model that allows companies to bring software development and other IT-related work outsource, to offshore zones. This establishment implies an offsite expansion of the development company, which includes a cross-functional specially dedicated team, infrastructure, equipment and all the necessary tools to set up internal product development processes. The offshore team operates under the brand of the parent company and follows its core business objectives. The main goal of establishing and maintaining an ODC is to provide scalable technology resources while reducing costs.
What does an offshore developer do?
An international team of offshore developers helps optimize your projects. Top-notch professionals with strong backgrounds and relevant levels of education will drive results while minimizing costs.
What is ODC in cyber security?
The offshore development center model may be a more appropriate fit than other software outsourcing formats if your project involves sensitive data. Responsible vendors recruit the strongest cybersecurity, artificial intelligence, machine learning, etc. experts to cross-functional ODC teams.
How to work with offshore software developers?
To maintain the quality of an offshore development team, you need to follow simple rules that apply generally to the management of any team. Let’s enumerate these points:
- Clearly define the ODC model responsibilities of each role in your ODC team,
- Define the goals that the ODC team will have in common,
- Establish communication channels and collaborate with the ODC team to ensure the most profitable communication,
- Pay special attention to the recruitment of specialists,
- Provide all the equipment necessary for quality work,
- Be alert to the general mood of the team, collect feedback,
- Conduct performance reviews, track problems and growth points of the team.