How to set up an offshore development center?

Introduction

Setting up an offshore development center can seem daunting, but it doesn't have to be. With the right plan in place, you can establish a high-performing team to help you achieve your business goals. 

In fact, according to a recent study by Deloitte, companies that have set up offshore development centers have seen an average of 30% cost savings and a 20% increase in productivity.

Imagine having a team of skilled developers working on your project while you focus on growing your business. That's the power of an offshore development center.

But where do you start? How do you set up an offshore development center that will bring real value to your business? 

Well, that's what we're here to discuss today. Keep reading to find out how you can set up your offshore development center and start reaping the benefits for your business.

What is an offshore development center?

An offshore development center offers a development team the workspace and personnel needed to complete the development process, including the administrative and support staff.

You can decrease your software development project execution costs by up to 60% using an offshore software development center, especially regarding infrastructure. It is a safe location that is designated and tailored for the execution of software development projects.

Since the team's makeup and infrastructure installation are established per the client's requirements and recommended practices, this effectively functions as an offsite extension of your business.

An ODC's function is to offer scalable technology resources so you can cut out unnecessary costs. Typically, the client organization has direct control over the services an offshore development center provides by interacting directly with the team members carrying it out through a project manager.

Offshore development center vs. Outsourcing

There are a few different options for businesses to consider regarding software development. Two popular options are setting up an offshore development center (ODC) or outsourcing development work to a third-party provider.

Both options have unique advantages and disadvantages, and it's essential to understand the differences to make an informed decision.

 What is an Offshore Development Center (ODC)? 

An offshore development center (ODC) is a facility set up by a company to perform software development work in a different country. It enables you to take advantage of lower labor costs and access to a broader pool of skilled workers. ODCs are usually owned and operated by the company that establishes them. The employees working in the ODC are considered part of the company's staff.

What is Outsourcing?

Outsourcing is hiring a third-party provider to perform work you would otherwise do in-house. This can include software development work, but it can also refer to other types of work, such as customer service or data entry. Outsourcing is often done to take advantage of lower labor costs, but it can also be done to access specialized skills or to free up internal resources for other tasks.

Pros and Cons of ODCs

The main advantage of an ODC is that it allows a company to access a vast pool of skilled workers at a lower cost. It can help to reduce development costs and increase efficiency. However, there are also some downsides to consider. For example, setting up an ODC can be a significant investment, and it can also be challenging to manage and communicate with a remote team.

Pros and Cons of Outsourcing 

It allows a company to access specialized skills and expertise that may only be available in some places. This can improve the quality of the finished product. Additionally, Outsourcing can be more flexible and cost-effective than setting up an ODC. However, there are also downsides to consider. For example, it cannot be easy to ensure quality.

Offshore development center: Existing working models

Dedicated Development Center

In this model, a company sets up a dedicated development center for a specific client. The ODC is responsible for developing, testing, and delivering the software product to the client. The ODC has its team of developers, project managers, and other IT staff who work exclusively for the client. This model is usually used by companies that require a high level of customization and personalization for their software products.

Advantages

1. Cost savings: By setting up a dedicated development center, companies can save money on salaries, benefits, and other related costs compared to hiring a full-time in-house development team.
2. Better control: Companies can have better control over the development process by having their team work on their projects.
3. Customization: Companies can customize their software products to their specific requirements.

Disadvantages

1. Lack of scalability: If a company needs more resources, they have to set up a new ODC, which can be time-consuming and costly.
2. Dependence on a single vendor: Companies may depend on a single vendor for their software development needs.
3. Limited pool of resources: Companies may not be able to access a large pool of resources, which may limit their ability to find the best talent for their projects.

Shared Development Center

In this model, several companies share a common development center. The ODC provides development services to multiple clients who share the resources and facilities of the center. This model is usually used by companies that have similar software development needs and want to reduce their costs.

Advantages

1. Cost savings: Companies can share the costs of setting up and running the ODC, which can result in significant cost savings.
2. Access to a larger pool of resources: Companies can access a larger pool of resources, increasing their chances of finding the best talent for their projects.
3. Flexibility: Companies can choose to use the ODC as needed, giving them more flexibility than having a dedicated development center.

Disadvantages

1. Lack of customization: Companies may not be able to get their software products customized to their specific requirements.
2. Limited control: Companies may have limited control over the development process as they share the resources with other clients.
3. Dependence on other clients: Companies may depend on other clients for their software development needs.

Virtual Development Center

In this model, a company outsources its software development needs to a remote development center. The ODC is responsible for developing, testing, and delivering the software product to the client. The development center can be located in a different country, and the developers may work from different locations. This model is usually used by companies that want to reduce their costs and access a larger pool of resources.

Advantages

1. Cost savings: Companies can save money on salaries, benefits, and other related costs compared to hiring a full-time in-house development team.
2. Access to a larger pool of resources: Companies can access a larger pool of resources, which can increase their chances of finding the best talent for their projects.
3. Flexibility: Companies can choose to use the ODC as needed, giving them more flexibility than having a dedicated development center.

Disadvantages

1. Communication issues: Companies may face communication issues with the remote development center, which can affect the quality of the software product.
2. Time difference: Companies may have to work around the time difference between their location and the location of the ODC, which can be a challenge.
3. Dependence on a single vendor: Companies may depend on a single vendor for their software development needs.

How to set up your offshore development center?

Here are some critical steps to take when setting up your ODC.

Step 1: Define your business needs

Before setting up an ODC, it is essential to define your business's specific needs and goals. Consider what type of work will be done at the ODC and the skills required for the team members. It will help you determine the location, size, and structure of your ODC.

Step 2: Choose a location

Once you clearly understand your business needs, it's time to choose a location for your ODC. Some popular destinations for ODCs include India, China, and the Philippines. Each area has its strengths and weaknesses, so it is crucial to research and compare them before making a final decision.

Step 3: Build a team.

Building a team for your ODC is one of the essential steps in the process. You will need to recruit and hire employees with the necessary skills and experience to meet your business needs. Consider hiring a mix of local and expatriate staff to ensure that your ODC has diverse skills and perspectives.

Step 4: Set up infrastructure

Once your team is in place, it's time to set up the necessary infrastructure for your ODC. This includes setting up office space, IT systems, and equipment. It's essential to have a reliable internet connection, power supply, and backup systems to ensure that your ODC can operate smoothly.

Step 5: Implement processes and procedures

To ensure that your ODC runs smoothly, it's vital to implement transparent processes and procedures. This includes standardizing workflows, establishing communication protocols, and creating reporting and performance management guidelines.

Step 6: Monitor and review

Finally, it's essential to monitor and review your ODC's performance continuously. This includes tracking key performance indicators, addressing issues, and making necessary adjustments.

Conclusion

Setting up an offshore development center can significantly expand your business and tap into a global talent pool. It can bring many benefits, such as cost savings, access to specialized skills, and a 24/7 work schedule. However, it also comes with challenges, such as cultural and communication barriers and the need for proper project management.

To successfully set up an ODC, it is essential to do thorough research and due diligence on potential locations and partners. Having a clear plan and strategy and effective communication and management tools can help ensure a smooth and successful transition.

Check out AppsRhino for the best offshore development team to build quality software for your company.