Outsourcing is there in the market for quite some time now. Initially, the need to work with an offshore team was to save costs and efforts. But later start-ups, SMEs and established firms realized that setting up an offshore development center can enhance productivity and reduce time to market as companies can focus on their core competencies.
Are you a startup or established enterprise that is looking for growth? If so, the offshore development center is something to be considered for sure.
What is an ODC (Offshore Development Center)?
- 1 What is an ODC (Offshore Development Center)?
- 1.1 Why Do You Need ODC?
- 1.2 Offshore Development Center Checklist
- 1.3 How to Setup an Offshore Development Center (ODC)?
- 1.4 How Does a Contract Work?
- 1.5 Why there is a Need for Outsourcing Contracts?
- 1.6 Signing Off
- 1.7 Wrapping Up
ODC or offshore development center means an extended, dedicated, and integrated offshore team. As the name suggests, this external dedicated team is usually located in a foreign or offshore country and give support to an organization as required.
The offshore team becomes a part of your extended team that works at an overlapping shift.
The offshore development center will act as a branch of the company, running specific operations of a business. From a business point of view, most companies (regardless of their size) consider setting up their offshore development center in a country where the cost of living is lower in comparison to their native country.
It helps them to lower down the overall operational cost, increasing efficiency, and skyrocketing the net profits.
You just have to collaborate with your offshore developers effectively, as they already have industry experience, knowledge about the tools and technologies to build innovative software for your business.
The ODC not only includes hiring developers but it also consists of other specialists as well. In the case of offshore software development, your offshore team may include, designers, developers, testers, and a project manager to keep track of the development process.
Here are a few roles that the experts are expected to perform;
- Account Manager: Works with company clients and grants their loyalty. To make sure that the client is satisfied with the work of the company.
- Project Coordinator: The specialist who prioritizes the task to manage ODC, completely plan, and control communication. He builds the development plan, group up the team, provide feedback to customers, and makes sure there is timely project release.
- Designer and Developer: Hold the responsibility of the planning, drafting the designs, develop software, website or app, testing, and maintenance.
- Tester/Quality Analyst: Keeps a check on the quality and integrity of the product.
- Technical Writers: Deal with the content creation of the website, product, or app.
- Usability Engineer: Before the release of any product, it is the responsibility of the usability engineer to evaluate the user-friendliness.
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Why Do You Need ODC?
The offshore development center is a general business idea from which businesses can benefit. From a business perspective, it is always good to have your office located in a country with a low cost of living. India is one of those countries.
According to AT Kearney 2017 Report, India is the top outsourcing destination based on financial attractiveness, skills, and availability. By launching your offshore development center in India, you can reduce your company’s workload and gain more time to focus on the core business objectives.
Starting from managing the recruitment to the development phase, tracking to ensure target to ensure if the team is being productive, ODC takes care of everything.
Offshore Development Center Checklist
Entrepreneurs who are looking for quality services, it is very challenging to determine which service provider is the best in their particular field. To help you chose the best offshore development center, consider the following checklist:
1. Skills and Knowledge
While considering to hire a dedicated team of developers for your company, it’s best to keep the knowledge and skills on the top. Moreover, it is recommended to work with a team that has experience working on similar projects in the past.
While hiring developers online, you should conduct a short technical video interview. Plus, you should thoroughly get an insight into their work approach, methodologies, and try to understand their work culture.
2. Look for a Promising Deal
Before choosing the company, have a look at the most promising deal that will have a good amount of advantage for your organization. A deal that is risk-free and offers a comprehensive package of services is recommended.
3. Reliability and Quality Standards
Consistency and trustworthiness are the two major factors that define a good offshore development company. Trust the one that has certifications and accreditations.
4. Dedicated Workforce
The end goal to set up an offshore development center is to work with a dedicated workforce. Therefore, double-check the same.
For e.g; if you are planning to build your team of native app developers, what’s the benefit of hiring them if they are busy with other projects as well? To deliver the quality results, you need to hire iOS app developers and Android developers that will be dedicated to all your projects. So, hire accordingly.
5. Payment Terms
A transparent discussion about the financial terms will clear all your doubts regarding the hidden cost, payment schedule, and any other questions. Flexible pricing procedure does tempt but don’t let it govern the outsourcing relationship.
Discuss these with your service provider prior to outsourcing;
- Pricing models proposed
- Agreement cost, exception cost based on performance metrics, price stability
- Time accounting
- Milestone management
- Payment schedule
What is the scale of measurement for the credibility and reliability of an offshore development company? You should carry out a proper background check regarding the work efficiency.
There are a lot of offshore development companies in India. To avoid much confusion, it’s best to check out B2B Review and Rating platforms and create a list of top 10 or 5 companies. Get an overview of the comments and reviews posted by their clients on Google, LinkedIn, or other social media platforms.
By conducting a thorough background check on the credibility, you can find a perfect offshore development company. And it can lead you to hire offshore developers that are best in business (while saving your time and money).
6. Quality Assurance
Quality means two elements: people and process.
When there are right people taking care of your project, documenting the requirements, and outlining the process, taking care of the quality standards, you get the best results.
7. Clear Communication
When you plan to set up an offshore development center, you work with the ones that are miles away from you having a different timezone.
Having a good communication plan enables you to establish an effective business relationship with your offshore team. So, it’s best to choose the right communication and project management tools to ensure that operations will run smoothly in your offshore development center.
8. Delivery and Guarantee
When you decide to partner with an offshore development company, be aware of the vendor’s track record regarding the on-time delivery of the project. Make sure they also have additional support like further assistance for resolving bugs. If you hire offshore developers who are ready to support you and assist you for future needs as it occurs, it will save a lot of effort.
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With the below-mentioned steps, understand the execution phase and see how quickly an offshore development center can be established in India.
How to Setup an Offshore Development Center (ODC)?
- Assort your company with the new partner
- Create job descriptions and responsibilities
- Plan security measures
- Give the new team time to understand the culture
Engagement Models used in ODC
- Time and Material Model: This is recommended when the scope and specifications of the projects are subject to change.
- Fixed Cost Model: Suitable for short-term, medium size projects defining scope as well as specifications. This is the project completed for a lump sum. The cost and time frame are fixed before starting the project.
- Dedicated Resource Hiring: Recommended for longer projects that have unclear requirements. The customers pay monthly money that covers the salary of the team member.
Note: When you have companies whose proposals make sense and feedback is genuinely promising, move ahead with them for further discussion to determine which bidder is better.
How Does a Contract Work?
When you have finally set up an offshore development center in India, now is the time to understand the technicalities of a contract that your clients will give you. The basic function of an offshore contract is to put forward everything so that there is no room for confusion while implementation.
It gives an assurance about what they can expect from their offshore company. Apart from laying down the fundamental outsourcing rules, the outsourcing contract handles the legal issues.
Whether it is regarding the protection of the intellectual property or securing the information provided by the company. The contract would have certain legal terms and agreements.
Why there is a Need for Outsourcing Contracts?
With the help of a contract, there are terms of the outsourcing arrangement that take place beforehand directing the company to deliver in their favor. It is important to pre-define the important terms of agreement like expectation, legalities, liabilities, etc.
This will help in guiding the behavior of both the companies during the complete tenure of arrangement.
Components that Make a Good Outsourcing Contract:
- Detailed project scope
- Service level agreements
- Transfer of assets
- Product warranty
- Product ownership
- IP protection
- Cost and payment structure
- Duration of completion
- Dispute resolution
- Detailed Project Scope
The initial contract element acts as the project scope. It describes the requirements of the company. RPF can also be included in this section. You have to ensure that the finalized scope of the project and services are mentioned clearly by the third party.
Service Level Agreement
SLAs or Service Level Agreement are the components used for obtaining the service guarantee from your ODC. It sets a quality benchmark regarding the services that the company is offering.
Service Level Agreement further contains;
- Covers the project scope
- Performance standard
- Financial implications
- Issues, corrections, and iterations
- Application enhancement
- Specified obligations
- Monitoring and Analysis
Let the company set the level of performance they are expecting from you. They can also include the contractual provisions to penalize you in case the quality standard and service level are not expected.
There are plenty of assets that the company which is taking the help of your services needs to transfer while making an outsourcing arrangement. A formal sales agreement is needed to formally transfer the assets to your outsourcing company.
When transferring the licenses, it is possible that there is an extra cost of licensing fees while the transfer of the assets. In addition to this, you can also charge for taxes and stamp duties while transferring the assets.
Project Warranty: When you have to make your credibility with your client, make sure you don’t breach the contract as it will drain the client’s time and effort. Guarantee them good quality products and services and lifetime-maintenance.
Every company wants to complete ownership of their product or service. In some contracts, the ownership can be shared by you as the vendor. For example, you have created an app for a company, there will be your name in the footer that says, “Powered by ABC”.
If the third-party is customizing the software or presenting an extended version of the existing app or software, they will get complete ownership rights.
Mostly, the client can access the source codes as it helps in modifications whenever they would like to do. This avoids further disputes.
The agreement describes the conditions under which confidential information has the risk of sharing, accessing, and use. This is the non-disclosure agreement. You will get plenty of samples of NDA on the internet.
Intellectual property theft is one of the biggest fears while working with a remote team.
When both parties sign a non-disclosure agreement, there are plenty of legal terms and conditions for licenses and restrictions of data sharing. The relationship is legally viable for complete IP protection.
Here is how a company protects its IP legally:
- Copyright of their property
- A trademark for their product/software and services
- Information trade secret
- Patent protection and application
Cost and Payment Structure
Whether you have collaborated to hire mobile app developers or web app developers while establishing an offshore team, it is important that they expertise in their field.
While dealing with the third party for completing their project, clearly mention the payment structure and the mode of payment in the contract itself. There should be the ‘when, how, and whom’ of pricing. Besides that, the amount that has to be paid with its breaks should be clearly defined.
The final negotiated prices on which you and the company agrees would include all the available services, the software license fees, taxes, stamp duties, and more. There have to be sections to cover the re-negotiation of the cost in a particular time period as per the latest technology market dynamics.
Duration for Completion
In the fixed-cost model, the project scope is very clear so deciding the deadline is not challenging at all. Let the company clearly mention the duration for which the contract exists. Discuss with them if your team can complete the tasks within the given time frame or will they take more time?
Make sure to pay heed to your outsourcing team as they will be one taking care of the project, so they will have a clear idea about the implementation of it.
If they wish to extend the time, discuss the same with the company that wants you to work on their project, and then finalize a particular date.
When you are working with another company, there are chances of a dispute. You should pull up your socks for such disputes to save yourself from entering into legal battles.
It is good to involve another party for resolving such dispute and this clause would be clearly mentioned in the contract.
There are a few companies that will come up to you with the question, whether your in-house team is providing the services or your outsourcing company.
Show them a clear picture. Tell them that your remote workers are exceptionally talented having specialization in their particular field.
You can define them the tasks your in-house team will be working on an outsourcing team will work on so that they get clarity and they feel you are transparent about your work.
Sometimes, there are a few legal issues that may arise while you are trying to complete the project. This particular Indemnification clause ensures that there is no negligence at your end. This helps you to protect yourself from any loss that may occur.
Signature plays a very crucial role in the contract.
By signing the contract, both parties agree that they have read everything and agree to the same. They will be legally bound to the contract once it is signed. Before the contract is signed, you can negotiate from the company regarding the price point.
Create a skeleton contract first and then leave the scope for negotiation. A well-drafted contract is key to a fruitful outsourcing venture.
IT startups are the ones that offer consider ODC as they feel it is a good start for their development. This approach certainly gives them a perfect balance of price and quality.
India is one of the best locations for setting up an ODC but it is always important to plan the venture carefully in order to achieve success.
If you are still reading this, you may be interested in the offshore development center model and we have something for you. If our company matches your ideas, you can contact us and we will help you in establishing an offshore development company. Get in touch now.