A Detailed Guide on How to Set Up a Dedicated Offshore Development Center
25 March 2023
This article discusses the benefits and challenges of setting up a dedicated offshore development center (ODC) for companies looking to expand their technical capabilities and reduce operational costs.
What is a Dedicated Offshore Development Center?
Offshore development has become a popular option for businesses looking to lower costs, access specialized skills, and focus on core competencies. An offshore development center (ODC) is a dedicated team of remote developers and other professionals who work exclusively for a company. It provides a flexible, cost-effective alternative to in-house development teams, allowing businesses to scale their teams up or down as needed. However, setting up an ODC requires careful planning and execution to ensure its success. In this article, we will explore what an ODC is, how it works, its benefits, and the challenges involved in setting up and managing one. We will also provide useful tips, best practices, and examples of successful ODCs to help you make an informed decision about whether an ODC is right for your business.
Why Consider Setting up a Dedicated Offshore Development Center?
Offshore development has become increasingly popular in recent years, with many businesses choosing to set up dedicated offshore development centers (ODCs) to handle their software development needs. There are several reasons why businesses opt for this approach, including:
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Scaling your Team
Setting up an ODC allows you to quickly and easily scale your development team. As your business grows, you may find that you need to add more developers to your team to handle the increased workload. By setting up an ODC, you can quickly ramp up your team without the need to go through the hiring process, which can be time-consuming and costly. You can also quickly scale down your team when needed, which can be beneficial during slow periods or when you have completed a project. -
Narrow Expertise
Offshore development centers can provide you with access to highly skilled developers who specialize in a particular area. For example, if you need to develop a mobile app, you can set up an ODC that specializes in mobile app development. This can be especially useful if you do not have the necessary expertise in-house or if you need to develop a project in a new technology stack. -
Lowering Operational Costs
Setting up an ODC can help you save on operational costs, as offshore developers are typically less expensive than their onshore counterparts. You can also save on office space, equipment, and other overhead costs associated with maintaining an in-house team. Additionally, many ODCs operate in countries with lower labor costs, which can further reduce your operational expenses. -
Focusing on Your Product
By setting up an ODC, you can free up your in-house team to focus on your core business and product development. Offshore developers can handle the routine tasks, leaving your in-house team to work on high-value tasks that directly impact your product. This can help you speed up your product development process and get your products to market faster.
Benefits of a Dedicated Offshore Development Center
When you decide to set up a dedicated offshore development center (ODC), you not only gain access to top-notch technical talent but also enjoy several other benefits that can help you grow your business. Here are some of the benefits of a dedicated offshore development center:
Own Branding
A dedicated ODC allows you to build your own brand identity in a foreign market. By establishing a presence in a foreign country, you can create a positive brand image and gain the trust of local customers. This can help you increase your customer base and expand your business globally.
Secured IP Rights
Another significant benefit of a dedicated ODC is that you can secure your intellectual property (IP) rights. By setting up an ODC in a foreign country, you can take advantage of the country's IP laws and regulations, which can protect your business against IP theft and infringement.
Committed Engineers
When you set up a dedicated ODC, you get a team of committed engineers who work exclusively for your project. This means you can rely on their expertise and ensure that your project is completed on time and within budget. Additionally, by working with the same team for an extended period, you can develop a strong working relationship with them, which can lead to increased productivity and efficiency.
Offshore Development vs. Other Engagement Models
Offshore development is one of the most popular engagement models for software development. However, it is important to understand the differences between offshore development and other engagement models to determine which one is best for your business needs. Here are some of the key factors to consider:
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Mindset
Offshore development requires a different mindset from other engagement models, as the team is located in a different time zone and culture. This means that communication and collaboration need to be carefully managed to ensure that the project runs smoothly. -
Costs
Offshore development can be more cost-effective than other engagement models, as it allows businesses to tap into a global pool of talent and take advantage of lower labor costs. However, it is important to weigh the cost savings against the potential risks, such as language barriers and cultural differences. -
Team Management
Offshore development requires strong team management skills, as the team is located remotely and may have different work styles and cultural norms. It is important to establish clear communication channels, set expectations, and provide ongoing support and feedback to ensure that the team is productive and engaged. -
Talents
Offshore development allows businesses to tap into a global pool of talent, which can be particularly beneficial for specialized skills or emerging technologies. However, it is important to carefully vet potential partners to ensure that they have the necessary expertise and experience to deliver high-quality work.
Main Challenges When Starting a Dedicated Offshore Development Center
When setting up a dedicated offshore development center, there are several challenges that companies may face. Here are some of the main challenges:
1
Quality of Hiring
One of the challenges when setting up a dedicated offshore development center is hiring the right talent. The quality of hiring can affect the success of the offshore team. Companies need to find qualified and experienced professionals who can work effectively in a remote environment. It's important to have a robust recruitment process to ensure that the best candidates are selected.
2
Attracting New Talents
Once the offshore development center is set up, the challenge becomes attracting new talent. Companies need to establish themselves as a reputable employer in the local market to attract top talent. This involves offering competitive salaries and benefits packages, creating a positive work culture, and providing opportunities for career growth.
3
Employee Retention
Employee retention can be another challenge for offshore development centers. Companies need to create an environment where employees feel valued and are motivated to stay long-term. This involves providing opportunities for professional development, offering regular feedback and recognition, and creating a positive work-life balance.
4
Legal Concerns
Setting up an offshore development center can involve navigating complex legal and regulatory requirements. Companies need to ensure that they comply with local laws and regulations, including employment laws, tax laws, and intellectual property laws.
5
Risks for Companies
Offshore development centers also come with risks for companies. These risks include data security, language and cultural barriers, and challenges related to time zones and communication. Companies need to have a plan in place to manage these risks and ensure that their offshore team is working effectively and securely.
Mitigating Risks:
6 Things a CEO Should Do Before Starting Offshore Development
Offshore development can be a powerful tool for companies to scale their teams and cut operational costs, but it also comes with risks. To mitigate these risks, there are six essential things that a CEO should do before starting offshore development.
Decide on an Offshoring Destination
One of the critical decisions that a CEO needs to make is choosing the right offshoring destination. The location that you select can have a significant impact on the success of your offshore development center. Factors to consider when deciding on an offshoring destination include the country's political stability, language proficiency, infrastructure, legal framework, and availability of talent.
Pay Attention to the Remoteness of the Country
When considering an offshore development center, the first thing to pay attention to is the remoteness of the country. You want to ensure that the location is accessible and has good connectivity, so you can maintain effective communication with your offshore team.
Research the Potential Offshore IT Market
To ensure you choose the right offshore destination for your company, it's important to research the potential offshore IT market thoroughly. This will help you to identify the right country, with the right skills and expertise, to meet your specific needs.
Decide on an Offshore-based Partner
Choosing the right offshore-based partner is crucial to the success of your offshore development center. Look for a partner who has the experience and a proven track record in providing offshore development services, and who can offer the right level of support to help you build and manage your offshore team.
Pay Attention to Hiring Speed and Tech Recruitment Expertise
Hiring speed and tech recruitment expertise are essential factors to consider when setting up an offshore development center. You need to ensure that the hiring process is fast and efficient and that your offshore partner has the right expertise to source and recruit the best talent for your company.
Ensure the Right Idea about the Cooperation Model
It's crucial to ensure that both parties have the same idea about the cooperation model before starting an offshore development center. This means clearly outlining roles and responsibilities, communication channels, and expectations for both your company and your offshore partner.
How to Set up and Manage a Dedicated Offshore Development Center
Setting up and managing a dedicated offshore development center requires careful planning and execution. Here are the steps to follow:
Start Recruitment
The first step in setting up a dedicated offshore development center is to start recruiting your team. You need to identify the right talent pool and start advertising job vacancies to attract top-quality developers. You can use online job boards, social media, or recruitment agencies to find the best candidates for your project.
Find an Office
You need to find an office space for your offshore development center. You can either lease or rent an office space or use a co-working space. You should consider factors such as location, infrastructure, connectivity, and accessibility when choosing an office space.
Get Legal Support
You need to ensure that your offshore development center complies with local laws and regulations. This requires you to work with a legal advisor who understands the legal framework of the offshore country you have chosen. They can help you navigate the legal requirements for setting up and operating an offshore development center.
Make Procurements
You need to procure the necessary hardware, software, and infrastructure for your offshore development center. You need to ensure that your developers have the necessary equipment and tools to work efficiently. You should also consider setting up a secure network and ensuring data privacy and security.
Organize HR Payroll
You need to set up a payroll and HR system for your offshore development center. This involves setting up a local entity, opening a bank account, and registering your company with local tax authorities. You should also consider offering attractive compensation packages to retain your top talent.
Managing a dedicated offshore development center requires effective communication, collaboration, and project management. You should also establish clear goals and expectations for your offshore team, provide regular feedback, and offer professional development opportunities. By following these steps, you can set up and manage a successful dedicated offshore development center.
Sergio A.
Account manager
Popular Locations for Dedicated Offshore Development Centers
When it comes to finding a suitable location for setting up a dedicated offshore development center, there are several regions that are popular choices among companies worldwide. Two of the most popular regions for setting up offshore development centers are Asia and Eastern Europe.
Asia
Asia, particularly countries like India, China, and the Philippines, has been a top choice for offshore software development for many years. The region boasts of a large pool of highly skilled and affordable tech talent, making it an ideal destination for companies looking to reduce costs without compromising on the quality of talent. Additionally, most Asian countries have a high proficiency in English, which is a significant advantage for companies looking to outsource their IT development to countries where English is not the primary language.
Learn more
Europe
Eastern Europe, including countries like Ukraine, Poland, and Romania, has become increasingly popular as an offshore development destination in recent years. The region boasts of a highly educated workforce with a strong technical background, making it an attractive destination for companies looking for a skilled workforce. Eastern European countries also offer several incentives, including low taxes, subsidies, and grants, making it a cost-effective choice for businesses. Additionally, the proximity of the region to the EU and the US makes it an attractive option for companies looking for nearshore development centers.
Learn more
Mistakes to Avoid while Setting up a Dedicated Offshore Development Center
Setting up a dedicated offshore development center can be a daunting task. While the benefits are significant, mistakes in the setup can lead to losses and project failures. Here are some common mistakes to avoid when setting up a dedicated offshore development center:
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Involving Several Recruitment Agencies
Involving multiple recruitment agencies may seem like a good idea, but it can lead to confusion and complications. It is best to work with one agency that has a good track record and specializes in IT recruitment.
2
Ignoring Employer Branding
Employer branding is essential for attracting and retaining top talent. Ignoring this aspect can lead to difficulty in hiring and retaining staff. A good employer brand will attract the best talent and help build a strong team.
3
Ignoring Office Location Details
The office location is critical to the success of an offshore development center. Factors like proximity to talent, transportation, and infrastructure should be considered. Ignoring these details can lead to a lack of interest from potential employees.
4
Unadaptable Company Policies
Setting up rigid company policies that are not adaptable to local cultures can lead to issues with employee retention and low morale. It is important to have policies that are flexible and can be adapted to local cultures and practices.
5
No IP Rights Agreement
Intellectual Property (IP) rights should be protected when working with an offshore development center. Without a clear agreement in place, companies risk losing their IP or seeing it being used by others.
Avoiding these common mistakes will help ensure a successful setup and management of a dedicated offshore development center.
Sergio A.
Account manager
Frequently asked questions
Read these commonly asked question by our customers.
Question:
What is the difference between an offshore development center and an in-house team?
Answer:
An offshore development center is a remote team that is set up in a different country to work on software development projects. In contrast, an in-house team is located in the same country as the company and is managed by the company's own HR and administration team.
Question:
Which one is better for my company, an offshore development center or an in-house team?
Answer:
It depends on your specific needs and requirements. Offshore development centers are generally more cost-effective and offer access to a wider pool of talent, while in-house teams offer more control and easier collaboration due to their physical proximity.
Question:
Who needs their own offshore development center services?
Answer:
Companies that need to scale their software development teams, require specific technical expertise or want to reduce operational costs can benefit from setting up their own offshore development center. It is also beneficial for companies that want to focus on their core business while outsourcing the development of their software products.
Question:
What size of the company is suitable for setting up an offshore development center?
Answer:
There is no specific size requirement, as even small companies can set up offshore development centers. However, it is essential to have a clear understanding of the benefits and challenges associated with setting up an offshore development center before making the decision.
Question:
How can I choose the right offshore development company for my business?
Answer:
It is essential to consider several factors when choosing an offshore development company, including their expertise, experience, communication skills, and cultural fit. It is also important to research their reputation, read reviews and testimonials, and ensure they have a proven track record of delivering high-quality software development services. Read more about this ...
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Sergio Art is the entrepreneurial mind behind the Offshore Development Center (ODC), which he launched in 2010 to support U.S. businesses in their digital transformation efforts through access to skilled software engineers.
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