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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 Dec 26, 2022.
The increased market volatility and the economic downturn have forced businesses to adopt stringent budget cuts and rethink their modus operandi to build resilient and flexible business models.
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 ODC – Offshore Development Center?
An offshore development service provides a development team with the required office infrastructure and manpower including administrative and support staff necessary to carry the development process to completion.
In most cases, the development center is overseen by a project manager. It is a branch or a subsidiary of a company located in another country.
You can save up to 60% on software development project execution expenses when you use an offshore software development center. This is a dedicated and customized location where software development projects are executed. This is basically an offsite extension of your organization since the team composition is built in accordance with the client’s specifications and methodology.
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.
How does an Offshore Development Center Function?
One can better explain the functioning of an Offshore Development Center through an example. Suppose you are a company based out of the USA, developing a software solution, and wish to reduce your time-to-market to gain the first mover’s advantage. Hiring an Offshore Development Center in countries with a lower cost of living could be your answer to achieving this goal without much cost implication. Offshore Development Center allows you to own a team of highly skilled software engineers and programmers overseas who dedicatedly work on your software development project. So, the offshore development company is responsible for infrastructure setup, resource management, mentoring, and training of the hired team.
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 2022, 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
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. Let’s find out how.
|Criteria of Comparison||Offshore Development Center||Outsourcing Partner|
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.
But is an offshore software development team better than an in-house development team? Let’s find out:
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 an offshore development team or an in-house 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||In-house Team|
|Scaling of the team||
So, when compared, there is no correct answer to the question of which engagement model is a better in-house team or offshore team. It depends on the requirement of your project and business. This brings us to our next part; what purpose does an ODC serve for your business?
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.
With all these advantages, offshore development centers have emerged as winners over IT outsourcing. But which businesses stand to get maximum benefits from an offshore development center? Let us find out.
Who Needs an Offshore Development Center Services?
Whether you are a startup, SMB, or large enterprise, choosing an offshore 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.
Today, businesses across industries like SAAS, manufacturing, and automation use offshore delivery centers for R&D, customer support, product development, team augmentation, etc.
#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.
But hiring an ODC is not the same as outsourcing IT projects. Both solutions are quite different in their business model. Here is how:
Offshore Development Center Benefits
Delivering high-quality projects without exceeding budget is software development companies’ most prominent challenge. 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 towards 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 these technologies and vice-versa. This creates an imbalance in the distribution of resources across the globe. An offshore development center helps balance the market by providing technology specialists that may not be available or are limited in your local geography.
3. On-demand Scaling and Tech Backup
While building a software product, enterprises hire specialists and uniquely skilled resources to create quality solutions. Losing a resource like this could adversely affect the timeline and quality of the solution. An Offshore Development Centre aids in creating resource backups for your in-house teams. These backups are maintained at a much lower cost of ownership and can take over the responsibility of the project, ensuring zero downtime. This enhances your organization’s resilience and thereby helps mitigate risks.
4. Extended Hours of Work Coverage
An offshore team working across borders operating in a 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. By setting up an offshore development center, businesses can speed up their product’s time-to-market, providing them with a first movers advantage and edge over their competitors. Here is a quick graphical representation of the benefits of an ODC:
Starting an ODC can get tricky as there are certain challenges that you may face while you set up your offshore development center. Read on to discover the risks/challenges of setting up an ODC are?
Challenges of Working with an Offshore Development Center
In today’s world of uncertainty, Offshore software development has proven to be a profitable choice for many enterprises. Though profitable, an ODC is not without its risks and challenges. But these challenges can easily be mitigated by onboarding a reliable offshore team.
Here are some challenges you may face while working with an offshore development team and their solutions:
Challenge 1: Mismatched Performance Expectations
The first risk you may face is mismatched performance expectations vs output reality. This can occur when the hired team is a misfit for your project. This challenge can be mitigated through a transparent hiring process, proper resource mentoring, and regular feedback.
Challenge 2: Project Management
Project management is another challenge one can face while working with remote teams. This can be managed by creating SOPS, escalation matrix, work hierarchy, etc.
Challenge 3: Language Barriers
A common challenge a company can face when working with offshore teams is cultural barriers that can lead to miscommunication. This challenge can be easily managed by proper training of offshore and in-house teams about nuances of each other’s culture, tradition, and beliefs.
Learn how to mitigate the top 8 challenges while working offshore development center.
So, setting up an ODC has its benefits and risks, and businesses must carefully evaluate both while creating their offshore development center.
Offshore Software Development: Is the Benefit Worth the Risk?
Yes, when one compares the benefits of offshore development centers against the risks, one can see that hiring an offshore team for your software development project is viable and essential to counter the increasing volatility and uncertainty in the market. How?
- Having an offshore team saves on your hiring, infrastructure, and employee cost as all these are managed by your offshore development company.
- You can easily scale up or scale 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 ODC for short-term projects and once the project is completed the offshore team can be dismantled.
So, setting up an offshore development center is always a good idea, especially if you seek quality output and quick delivery at an economical price.
Types of Offshore Development Center Models
Below are three engagement models to choose from when you plan to create an offshore service center.
1. Product Engineering
The Product Engineering model is an ODC model suited for businesses looking for an extension and support for their in-house team on ongoing projects. These could be the sole product development team with in-house Sales/Marketing and Management.
The build-to-scale model is an ODC model suited for businesses that wish to set up their business and an offshore team of experts in another country. These businesses have a growth mindset and have experienced success with small offshore groups.
3. Build-Operate-Transfer (BOT)
Build-Operate-Transfer is an ODC model suited for businesses that wish to create a full-fledged business operation in a foreign market under their brand name. Here, the ODC service-providing company and the hiring company agree that the ownership of the set-up office and its employees would be transferred to the hiring company after a specific time frame. Now that you know about the three models of the offshore development center, let us explore the process of creating successful ODCs.
Setting up an Offshore Development Center in 9 Easy Steps
Setting up an offshore team can become daunting if you don’t know how or where to start. But you need not worry; this section of our article will cover the step-by-step process of setting up an ODC. Read the complete offshore development center checklist:
Step 1: The first step is to define the Vision & Requirements of your Business and the scope of work for your project.
Step 2: The next step in setting up an offshore development center is to choose the right location. Here location is not being referred to only as of the nation but the city and area where your offshore team will operate in the future.
Step 3: Choosing an offshore development company to navigate the challenges you may face while working with offshore teams from different backgrounds and ethnicities.
Step 4: The next step is to select your offshore software team on the basis of project requirements, technical expertise, years of experience, and soft skills.
Step 5: Create legal documentation with the assistance of legal advisors from both countries.
Step 6: Define the infrastructure requirements in terms of Systems to be used, Internet bandwidth, Communication channels and technologies, Server Backups, Management policies, Data security system, Data access & exchange protocols, and KT process.
Step 7: Team training and mentoring are a must to ensure smooth interaction between your in-house and offshore teams.
Step 8: To ensure the team works and delivers the project on time, you must define milestones with timelines for them to follow.
Step 9: Establish scrum meetings to regularly update project progress, feedback, changes, and bottlenecks.
These steps can help you successfully set up your offshore development center. But following these nine-step may not suffice; you must also ensure that you avoid mistakes while setting up your ODC.
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 very easily become a bane for your business 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.
Read our blog: A Guide to Set Up an Offshore Development Center in India to explore how to successfully set up an offshore development center.
All these challenges can be navigated by partnering with a reliable offshore development company that will ensure your success by providing you with an offshore team that best fits your business. But to make your offshore journey smoother, here are some tips you much always keep in mind.
How to Set Up an Offshore Development Center: Useful Tips
- 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.
Managing an offshore team is as critical as building one; through this, you can derive 100% output from the offshore development center.
Recommended Read: When To Set Up An Offshore Development Center
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 team as part of your business and not external entities
- #Tip 4- Create regular scrum meetings to ensure you are always updated on ongoing work
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.
Members of an Offshore Development Team
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 – Team responsible for creating instructions and integration content for the software or website.
Selecting the right offshore team is the key to successful project execution. But how can you ensure that you choose the right one? Here is how-
How to Choose the Right Offshore Development Company/Partner?
Setting up an 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 thorough vetting of offshore development companies. Read on to find out how to vet offshore development companies/partners.
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:
- How well does the organization know its business? What are their strength and weaknesses?
- Do they understand your brand requirement, and can they onboard the right talent for the project?
- How good are their communication skills, and how soon can they debrief your instructions?
Communication is a non-negotiable aspect of setting up an offshore business. Good communication, the right talent selection, and the right cultural fit ensure project success.
2. Experience, Reference, and Social Proof
While shortlisting an ODC team, you must find out:
- How long have they been doing this business?
- What kind of projects have they successfully delivered in the past?
- How many industries have they served?
- Who are their clients?
- What are they saying about their business operation?
- Have they received awards and accolades in the recent past from the industry?
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.
- Multiple rounds of quality assessment.
- Feedback and code inspection at various stages of development.
Though offshore teams are known to deliver premium quality work while meeting the deadline, anyone promising unrealistic delivery time has probably little to no idea about how software development works.
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 a dedicated offshore development team, 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 offshore development center in India. Get in touch with us @ [email protected] 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 an Offshore Development Center with YTII?
Setting up an 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