Offshore Development Centers

As the demand for software development grows worldwide, offshore software development centers are emerging, which have become the norm in recent years. For some businesses, this is the best choice because of the benefits they bring. Let’s take a closer look at what such a center can directly give you and what benefits you can get from it.

What is an offshore development center, and how is it different from outsourcing?

If you’ve ever thought about outsourcing your IT projects, an offshore development center (ODC) may be the way to go. An ODC is a software development company that provides you with software development services in a different country. This type of company is considered to be a subsidiary of your parent company. An ODC is a little different from software outsourcing because it’s a location in a foreign country. Outsourcing, like service, offers services or products from a third-party company, but the geographic area may not be critical.

Increased productivity and focus on other essential tasks is the primary goal of outsourcing. At the same time, cost savings may be one reason, but not the main one. Anyway, the primary purpose of an ODC is to help reduce costs for the company by exploiting the difference in price between the two countries. However, both an ODC and outsourcing, especially offshore, have the same interests, namely to gain access to a large pool of talented developers and managers with lower service costs. And this allows businesses to save money and increase productivity in hiring, streamlining accounting, human resources, and office space.

If you already have ideas for creating an ODC, be sure to consider all the advantages and disadvantages of such a solution.

Engagement model differences

Today there are several models for creating teams for development and management:

Allocated dedicated team

When a product company is confident in the quality and cost-effectiveness of doing business in the selected offshore country, it hires dedicated offshore developers or managers. This service, provided by outstaffing agencies, allows you to have direct access to engineers for a limited period.

Offshore development center

ODC is the most advanced model and leaves a lot of room for independence. You can modernize your business from any stage and open your own offshore development office. The biggest bottleneck in operations management is getting rid of it with a trusted partner and focusing on your own IT product instead.

Build-operate-transfer

BOT is a more profound solution similar to the ODC offshore software development model. That model proposed to enter into a contract with a local supplier who will build, launch and then hand over the software development center. However, in the final phase, BOT carries many risks associated with transferring knowledge and people. With this model, the supplier opens offshore development, including hiring all key personnel, and then hands it over as a fully functional regional office.

Offshore development center pros

ODC has many benefits. Let’s see at the main ones:

Cost reduction

ODC locations are often in countries with a lower cost of living than the headquarters location.  They can use the price difference to reduce material and labor costs while increasing sales or shift their focus to other factors. Setting up an offshore development center in the center of the economy in a much cheaper country is not only beneficial for businesses in terms of reputation and sales, but it can also cut office rental and maintenance many times over.

Overseas market expansion

Being in a foreign market is a way to increase your sales, build your reputation, be closer with your customers, and better understand their needs. It is also a way to be physically present in the target market while reducing logistics costs.

Personnel fund expanding

Having a company in another country is equivalent to gaining access to that particular country’s talent pool to enrich the company’s work culture and improve skills in general. When job seekers see that they will be working in the office of a foreign company, they are more likely to accept the job. If there is a need to create a team of 50+ people, suppliers can make a separate office in which all developers, QA, marketing, and sales managers will work as employees of a different brand.

Enhanced privacy

The ODC probably brings together multiple teams working on various projects, most of the time side by side. It’s a good idea to ask your ODC to set up a separate office for your team.

Product localization

If you are looking to enter an overseas market, ODC is a good choice as it brings your business closer to that specific market and helps you localize your products. For example, if you want to get your products to some country, having an ODC is an intelligent move. Since all your developers are local, they can help bring in some ideas that localize your product for their market.

Offshore development center cons

A fundamental understanding of the apparent purpose and reason for creating an ODC is needed, and should not overlook the risks involved in creating one:

Choosing the wrong location

If your goal is to cut costs and increase sales, pay attention to the location of your ODC. You should avoid traveling to small towns with too few specialists in your specific field and fewer opportunities. Always keep up with global talent trends to get an idea of the future landscape of the work environment worldwide.

Price

While ODC looks cheaper than hiring an in-house team, the cost of an offshore development center is higher than the cost of traditional outsourcing. Therefore, initially, it is necessary to compare the prices of different companies and make sure that the decision is correct.

Registration Difficulties

Some countries are unfriendly towards foreign business and create specific problems, legal and bureaucratic obstacles for startups. It is essential to be careful and choose the right type of cooperation, taking into account all the features of the jurisprudence of a particular country.

Long-term commitment

Organizing long-term cooperation with a large remote team is a rather complicated process. It’s necessary to do everything possible for effective management and use new technologies in existing projects.

Of course, hiring and managing an ODC is a big challenge for any company because, in addition to the main pros and cons, there are security and data leakage risks, cultural and ethnic characteristics, the difference in time zones, the motivation of a remote team. There is an excellent opportunity to scale the company and represent in another market, and often, without a huge budget.

Who needs an offshore development center?

Offshore software development centers can be helpful for different types of technology companies. The main common factor is the desire to work on our technology products and bring innovation to the world. Startups developing certain innovative technologies may require engineers with little experience. Finding brilliant experts in their local area is difficult, which is why founders often look for dedicated offshore developers. This decision leads to a search for worldwide talent and chooses the best of the best.

An ODC is a lovely opportunity for established tech corporations. With limited resources available in one place, it is difficult for them to expand and enter new markets. For these reasons, some global tech companies such as BigCommerce, Oracle, and Reddit are hiring offshore developers. This decision has brought them an increase in IT supply and in-house capacity.

Conclusion

In whatever form you would not want to expand your company’s activities, ODC is one of the most trendy and high-quality solutions today. By understanding the advantages and disadvantages, you will well be preparing for the upcoming ODC launches correctly. By choosing the right supplier with a quality skillset and flexibility, they can be your right hand.

Argent offers many benefits, such as hiring developers or whatever specialists you need, as well as full-service packages to support your team.  We are always ready to provide legal and accounting services, consulting, office benefits, creating an attractive workplace benefits package for your employees, and much more.

If you already have ideas for creating your own ODC, you can contact us at any convenient time here hello@argent.team