Every organization has an ongoing software development need. The business environment changes with new competition coming in. Customer behavior changes. The Business models and processes of the organization need to be tweaked constantly based on the changing customer behavior. The existing software application suite may not be suitable. The organization needs to automate more processes or make a change to the existing processes. So what are the options?
The choice falls on a Fixed bid outsourcing to a capable software organization when the need is unique and short-lived. However, the organization needs to build a dedicated team when the need is ongoing, and the team needs to build in a certain level of domain expertise.
The organization can hire people in their home country and house them in their office. However, the skills availability and the high-cost structure may make them relook at an offshore location. The first option an organization have will be to set up an office and hire full-time engineers in-house. The second option will be to outsource the work to a 3rd party organization with a dedicated team of software engineers.
Now let us look at the benefits of an Offshore Development Centre(ODC) run by a 3rd party in an offshore location. This model is getting to be a popular business model to reduce operating expenses and increase productivity levels. The organization can take over the ODC after a few years of operations when the size of the team gets to be more than 100 people. The transition is done through a Build Operate and Transfer (BOT) model.
The expectations from an ODC can be as follows:
Availability of skill sets in the specific location there are many occasions when the required skillsets for an organization may not be available or too scarce in the home country or the specific location. Locating these people will also be very tough. Managing individuals from one central place will also be difficult. An offshore delivery center in a country or a city with skillsets in one location will be the perfect way to manage the team.
- Cost arbitrage
The cost of the resources in the home country will be very high. The cost of a similar resource in a low-cost country will be very low and attractive. The total cost of developing the application will be low, and hence the company can develop more applications for less. The management of the resources will also be from one location, which will make the process easy.
- Combination of domain knowledge and technology skills
The offshore development center will have a team that has a combination of technology and domain skills. The team would have implemented similar projects in the past. The allotted project managers will also be able to understand the work and will be able to coordinate. Sometimes, the top management or the architects from other projects also can help.
- Works on an alternate time zone to accelerate the development
Countries in Asia can have this locational advantage. The work can happen at a time when the organization in the US is sleeping. The team can do double the quantum of work in one day. The team can complete the project in a shorter time.
- Allows you to focus on your core business
The project management of the offshore team can be done by competent 3rd party software company management. You can spend your time building your business while the dedicated offshore team can execute your projects
- Quickly begin the project
You will be able to quickly begin the project as the software company will have available resources immediately to start. You don’t have to wait for the recruitment, joining time, and onboarding.
- Allows you to scale up and scale down on resourcing
You will quickly scale up and down on the resources because of the staffing arrangement you have with the software company. You will be unable to scale down because of the employment termination policies, severance, and other issues once you have this team in-house
- Keep the headcount low
You can keep your headcount as low as possible, and your team becomes an Operations Expenses (OPEX).
Now, let us discuss how to set up the right Offshore Development Centre?
Here are a few ways to set up an ODC. The steps are:
- Choose the location
You will have to choose the offshore location based on multiple parameters. The parameters may include the comfort level, the availability of the skillset, cultural match, and the cost factors.
- Define the skill sets and the projects
You will have to define the skill sets that you would need to set up a team in the offshore location. You will also have to decide the projects you would like to get implemented. Initially, the projects may be non-critical as you would have to get used to the remote teams. Gradually the criticality of the projects can increase based on the success and the comfort level.
- Define a budget
You should set up the budget for the ODC . As discussed above, the initial budgets can be for a few people with limited funds to get comfortable. The budget can gradually increase once the success is proven.
Read our other post to know ODC pitfalls and solutions.
- Finding the software development partner
The next step is to identify the software development partner who will do the interviewing and the selection of the team. You will have to interview the company, talk to the management team and get comfortable with the team.
- Setting the team
The interviews can begin with the in-house team of the software development partner. You can interview the readily available resources for the fitment of the initial team. The software development company can also select your initial team for you
- Setting up ODC policies
The dedicated ODC that works out of a software development company can interview and hire people for you. You can request a dedicated space for your team within the organization. The dedicated space can be branded as part of your organization. The employees there will feel that they are a part of your organization even though they will work out of another organization. You can establish security and access policies.
- Constant communication
You can set up standard communication protocols. You can review on a Monthly/ Weekly/ Daily reviews mechanisms. Constant communication with the ODC members or Developers will help in building loyalty with the team.
To conclude, it makes sense for you to set up an ODC out of a software development company in offshore locations. Your employees will not feel lonely or a part of a startup because of the other employees that will be there in the software company. They can do the day-to-day management for you in people, task and delivery, etc. The software company can take off your growth. Gradually you can then identify your location and use a combination of your team and also transfer the employees to your employment as per the earlier contract.
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