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What is an Offshore Development Center? Set up your Offshore Development Shop the right way.

Meeting your client's software development ends may require more than just following a standard course of action.

In these recent times, companies need to adapt to the quickly changing dynamics of the latest software development market trends. Considering the plethora of new tech integrations, the urge to compete and lead the market has increased exponentially among all types of tech companies.

Simultaneously, these rapid changes in client demands have led to a gap in the supply and demand of service providers and their employees.

It takes time to hire and nurture the right talent pool. However, to do so, you might need to double the amount of energy, time, and money spent. Despite your rigorous efforts, there's no guarantee that the resources utilized will meet the desired results within the expected time span.

This is a common problem for small startups as well as Global Multinational corporations. There is also a talent gap in the tech industry .

This global shortage is caused by many factors, including the increasing complexity of custom software engineering and growing demand and competition for skilled developers.

But right after COVID hit us in 2020 , ODC 's ( Offshore Software Development Center) have become all the more prominent . Numerous Companies have switched to offshoring models for their software development projects.

Software development companies hiring employees

Credits : freepik.com

Increasing Number of Offshoring Software Development Centers

COVID opened doors for companies to choose from a wide variety of offshore development services , making it easy for them to hire quality developers around the globe with feasible cost to hire compared to internal recruitment .

Soon enough , the organisations that had enough bandwidth to operate from these offshoring countries started setting up their offices in those regions making it more easier to operate alongside these dedicated offshore developers.

stats for 2021 offshoring services

Credits : zipdo

An ODC (Offshore Software Development Center) is just an extension of the main body Organisation following the same code of conduct .

Offshore development services offer significant cost savings compared to internal recruitment or onshore development.

With lower labor costs in offshore locations, companies can access skilled developers at a fraction of the cost, making it a financially viable option, especially during economic downturns.

Setup for these centers depend on the needs and requirements of the set of clients they're catering to.

Offshoring trends for software development

Credits : zipdo

What factors can help you consider the need for an offshore development ?

Deciding whether to offshore software development for your company is a strategic decision that requires simple yet careful consideration of various factors like

  1. Goal to optimize costs.
  2. Varied access to specialized talent.
  3. Enhanced diversity of frameworks
  4. Enhance current productivity.

However, choosing the right country or region for offshoring requires careful consideration of various factors.

We have also written an in depth article for all external factors while offshoring a software development.

Here's a detailed guide on how to determine if offshoring is the right choice for your organization

statistics for opting offshoring software development as a service

Credits : zipdo

Cost Analysis

  1. Internal Hiring Costs Evaluation

    Assess the total expenditure associated with internal hiring, including salaries, benefits (such as healthcare, retirement plans, bonuses), overhead expenses (office space, utilities, equipment), and taxes.

    Factor in the average productivity and output of your current in-house developers to determine the cost-effectiveness of the investment.

  2. Comparison with Remote Development Expenses

    Compare the total costs incurred for internal hiring with the projected expenses of offshoring software development.

    Consider the potential savings offered by offshore developers, who often operate at lower wage rates due to differences in cost of living and currency valuation.

  3. Efficiency and Output Consideration

    Evaluate whether a certain amount of income generated by your company is being disproportionately allocated towards employee expenses, regardless of the output being average.

    Assess the potential for improved efficiency and productivity by leveraging offshore developers who may offer better value for money and higher output at a lower cost.

  4. Potential Cost Savings

    Identify the specific cost-saving opportunities presented by offshoring, such as reduced labor costs, lower operational expenses, and optimized resource utilization.

    Calculate the potential percentage of cost savings achievable through offshoring compared to the current internal hiring model.

  5. Risk Assessment

    Recognize the inherent risks associated with offshoring, such as communication challenges, cultural differences, and regulatory compliance issues.

    Factor in the potential costs associated with mitigating these risks, such as investing in project management tools, cross-cultural training, and legal consultations.

  6. Long-Term Financial Implications

    Consider the long-term financial implications of offshoring software development, including the scalability of cost savings as the business grows and the impact on profitability and competitiveness.

    Evaluate the return on investment (ROI) of offshoring by comparing the upfront costs with the anticipated benefits in terms of cost savings, enhanced productivity, and improved quality of services.

  7. Strategic Alignment

    Ensure that offshoring aligns with your company's strategic objectives and long-term goals, such as expanding into new markets, accelerating product development, or optimizing resource allocation.

    Assess whether offshoring software development aligns with your company's overall financial strategy and risk appetite.

How to setup your Offshore Development Center?

Begin by selecting a dedicated offshore development team tailored to your project's specific requirements.

Start by focusing on finding a team specialized in a particular type of software development.

For instance, suppose a client requests an IoT system for a novel machine with AI integration. In that case, opt for a team with expertise in precisely that area.

Offshored software developer

Credits : freepik.com

This approach serves multiple purposes

Suitability and Quality Assurance

By selecting a team specializing in the exact technology stack needed for the project, you ensure they possess the necessary skills and experience to deliver high quality results.

This targeted selection increases the likelihood of meeting and exceeding client expectations.

Client Satisfaction

Matching the project requirements with a specialized team increases the chances of producing a solution that aligns closely with the client's vision.

The tailored expertise of the offshore team ensures a deeper understanding of the intricacies involved in AI integration with IoT, fostering client satisfaction.

Long term Relationship Building

After working with the same dedicated team for a period, typically ranging from six months to a year, you can assess the success of the collaboration and the compatibility of working styles.

This extended period allows for the establishment of trust and rapport, essential for nurturing long term relationships.

Expansion and Localization

As trust and familiarity grow over time, consider leveraging the relationship to expand your presence in that region.

Establishing an office or a more permanent setup in the offshore location becomes a natural progression, further solidifying your commitment to collaboration and enhancing operational efficiency.

Perks of Offshore Development Center

1. Product Deployment and QA Testing
  • The role of an Offshore Software Deployment and Quality Assurance (QA) facility in the context of a company's global expansion strategy is multifaceted and pivotal.
  • As businesses increasingly seek to expand their operations globally, offshore a QA facilities serve as a strategic extension of their development and testing capabilities Offshore QA facilities often operate in regions where labor costs are lower compared to the company's home country.
  • This cost advantage allows companies to reduce their overall expenses while maintaining high-quality standards in software development and testing.
  • For small and medium-sized enterprises (SMEs) and multinational corporations (MNCs) alike, this cost efficiency is particularly attractive, enabling them to allocate resources more effectively.
  • As companies expand their global footprint, they need to have a QA teams that can adapt to changing project requirements and scale up or down as needed.
  • Offshore facilities provide the flexibility to quickly ramp up testing efforts during peak periods or scale back during quieter times, ensuring optimal resource utilization.

    2. Continuous Innovation and R&D Support
  • Companies can have their ODC'S serve as hubs for continuous innovation and research and development (R&D) activities.
  • These centers provide companies with access to a pool of highly skilled engineers and developers who can work on new product features, technologies, and solutions.
  • By leveraging offshore R&D capabilities, companies can stay ahead of market trends, drive product innovation, and maintain a competitive edge in their respective industries.
  • 3. Extended Development Capacity and Faster Time to Market
  • Offshore development centers enable companies to extend their development capacity and accelerate time to market for their products and services.
  • By leveraging additional development resources and expertise available at offshore locations, companies can execute projects more efficiently, meet tight deadlines, and respond quickly to changing market demands.
  • This increased agility and speed to market can significantly enhance the company's competitive position and revenue-generating opportunities.

Types of Models You can opt for your ODC (Offshore Development Center)

I've tired and tested using some of the models mentioned down below .

However , there are many other offshoring development models for an offshoring business. I've written a detailed blog explaining as much as i could . You can refer to different types of offshoring and outsourcing models for more insights.

Contact-based Model

  • In this model, a dedicated team of developers is assigned to a project for a specific duration, catering to the project's unique requirements.
  • The project is considered complete once the specified objectives are achieved. The tenure for this model can vary, ranging from monthly to yearly contracts.
  • This model offers flexibility in scaling resources based on project demands and allows for efficient resource allocation.

Fixed Price Model

  • Under the fixed price model, the dedicated development team operates as an extension of your company's workforce, functioning essentially as employees of your offshore development center.
  • They receive a fixed income and work within a predetermined project budget allocated by the main company.
  • This model provides cost predictability for the main company while allowing the offshore team to focus on delivering results within the specified budget constraints.

Full-scale Product Engineering Model

  • In this comprehensive model, the offshore development team not only handles development tasks but also takes responsibility for deploying the final product.
  • They maintain direct communication with clients, ensuring that client requirements are clearly understood and implemented throughout the development lifecycle.
  • This model resembles a fully-fledged company with a separate management structure, following the hierarchy typical of an ideal software development organization.
  • It offers end-to-end services, from product conceptualization to delivery and support, providing a seamless experience for clients.

Build Operate Transfer (BOT)

  • The BOT model involves hiring a dedicated offshore development team initially to work on a specific project. Once the project is completed or reaches a certain milestone, the team can potentially transition to a new project for a different client.
  • This model serves as a foundation for building expertise and infrastructure in a particular domain or technology stack.
  • It enables the main entity to establish a base for product development while allowing flexibility in hiring quality freelancers or transitioning the team to new projects as needed.
  • BOT model helps in reducing time-to-market by leveraging pre-established processes and resources.

Essential Roles and Responsibilities for your ( ODC) Offshore Software Development Center


Establishing a robust organizational structure for an offshore development center is crucial for companies aiming for exponential growth.

However, it's essential to recognize that the organizational hierarchy and cultural norms may vary based on the country where the center operates.

Therefore, adapting the organizational structure to align with local expectations and values is imperative for success.

This involves understanding the ideal organizational hierarchies prevalent in the operating country and tailoring the structure accordingly.

By doing so, companies can effectively navigate cultural differences and optimize the efficiency and effectiveness of their offshore operations.

offshore Development Center Organisational Structure

Credits : existek

Company Management

For starters , what you need is an Account Manager , a Project coordinator and a project analyst .

Head Account Manager

Your offshore Head Account Manager will play a primary role for contact between your company and its clients.

What will your Account manager ensure

  1. Timely responses to inquiries, concerns, and requests.
  2. Maintain strong relationships with clients, understanding their needs, objectives, and expectations.
  3. Coordinate with internal teams to ensure that client requirements are clearly understood and effectively communicated.
  4. Provide regular updates to clients on project progress, milestones, and any changes in scope or timeline.
  5. Address any issues or conflicts that arise during the project life cycle, working towards prompt resolution.
  6. Act as a liaison between clients and the offshore development center, facilitating effective collaboration and alignment.
  7. Keep abreast of industry trends, market developments, and competitors' activities to provide strategic insights and recommendations to clients.

Coordinator

The Coordinator plays a pivotal role in ensuring smooth project operations and communication between internal teams and clients.

What can your project coordinator do?

  • Assist the Head Account Manager in managing client communications and coordinating project activities.
  • Schedule and organize meetings, both internal and external, ensuring that all stakeholders are well-informed and prepared.
  • Maintain project documentation, including meeting minutes, action items, and project plans, to ensure clarity and accountability.
  • Monitor project progress and deadlines, identifying potential risks or delays and proactively addressing them.
  • Collaborate with cross-functional teams to facilitate the timely delivery of project deliverables and milestones.
  • Serve as a central point of contact for internal team members, providing support and guidance as needed.
  • Assist in the preparation of project status reports, presentations, and other communication materials for clients and internal stakeholders.
  • Help coordinate resources and logistics for client meetings, workshops, and other project-related events.

Project Analyst

The Post-Project Analyst evaluates the outcomes and performance of completed projects to derive insights and recommendations for future improvements.

Responsibilities:

  • Conduct post-project reviews and analysis to assess project performance against objectives, budget, and timeline.
  • Gather feedback from clients, internal teams, and other stakeholders to identify successes, challenges, and areas for enhancement.
  • Analyze project data and metrics to identify trends, patterns, and opportunities for optimization.
  • Prepare comprehensive post-project reports summarizing key findings, lessons learned, and recommendations for process refinement.
  • Collaborate with cross-functional teams to implement changes and improvements based on post-project insights.
  • Document best practices, standard operating procedures, and knowledge assets derived from post-project analysis.
  • Support continuous improvement initiatives across the organization by sharing insights and recommendations from post-project evaluations.