How to build an offshore development center?
Building an offshore development center (ODC) can position your company for growth in the next years. Hiring expert software developers and more niche technology talent can be a significant cost in countries like the United Kingdom, United States, Germany, Canada, or France. Moreover, the number of IT specialists in the job market is limited, causing companies to compete for the best talent. However, no organization can be reasonably expected to increase salaries for IT experts forever.
When you can’t find the right talent in your main location, you should start looking into offshore software development services and other types of outsourcing. If preserving control over your IT systems and digital products is important for your organization, consider leveraging an offshore development center that will act as a branch of your company, focused on pushing particular projects (such as application development, quality assurance, and/or cybersecurity) forward.
Setting up an ODC involves navigating legal and regulatory hurdles, understanding cultural nuances, and identifying reliable vendors for things like office space, IT infrastructure, and even the recruitment process. While some companies decide to tackle all this alone, which is time-consuming and risky, most organizations choose to cooperate with specialized offshoring partners.
Read this article to learn about offshore development centers, outsourcing partnerships, and hiring offshore programmers and engineers.
What is an offshore development center?
An offshore development center (ODC) is an outsourcing model where a company sets up a dedicated team of software developers in a different country or region (an offshore software development team) from scratch. ODCs are located offshore, typically in low-cost locations, to work on the company’s software development needs or IT operations requirements. Such centers are usually small branches that mainly employ very specialized teams of software developers and other IT professionals.
Most ODCs are located in India, Poland, the Philippines, and other countries considered more cost-effective than North America and Western Europe. Countries for offshore outsourcing are chosen based on their relatively low labor costs and the broad availability of expert tech talent. Offshore development centers enable companies to find and hire offshore developers and niche technology specialists who might be impossible to hire onshore.
Want to learn more about this topic? See our guide to deciding between onshore vs. offshore outsourcing models.
Types of offshore development centers (ODCs)
There are two main types of offshore development centers - captive centers and standalone centers. The distinction is based on ownership and service structure.
Offshore captive centers
A captive center is an outsourcing model in which the remote development center is a fully owned subsidiary. It is owned and operated by a single company, established for specific, long-term projects, and staffed with employees hired directly by this company.
Captive centers offer the most control, but they also require significant preparations and investments. Reaching full operational capability can last considerably longer than in the case of working with an offshoring partner in a standalone center model.
Standalone centers
A standalone center is a model in which the offshore facility is operated by a contractor company and hires a fully outsourced development team. Standalone offshore development centers are established by third-party service providers that specialize in recruiting, hiring, and managing IT talent in the local market.
Organizations that want to reduce their operating costs can outsource their software development and other technology needs entirely or partially to these centers. Standalone centers offer outstanding flexibility and scalability and are also the most cost-efficient approach.
Working with third-party vendors means relinquishing some control over the offshore development team, but experienced IT service providers offer effective communication and delivery processes to keep clients satisfied and informed.
Offshore captive centers vs. standalone centers comparison
Both approaches to global expansion allow companies to scale their offshore development teams up or down quickly to meet the project needs. In both cases, organizations obtain access to a broader pool of technology specialists, which results in building a dedicated software development team located offshore. As a result, both captive centers and standalone centers enable businesses to scale their operations more efficiently.
The biggest difference between the two is a trade-off of control vs. time to a fully operational facility. While captive centers offer more control for the stakeholders, they are more difficult to set up. On the other hand, establishing a standalone center is easier, as the vast majority of the setup process is your offshoring partner’s responsibility. However, the client company relinquishes some control over employees and facilities to this third-party vendor.
What to do before establishing an offshore development center?
Before you start developing your outsourcing/offshoring strategy, you should clearly define your organization’s needs. The most suitable solution for your company will be different when you experience a lack of suitable talent locally and different when you have a limited budget to maintain some projects. Follow the steps below to assess your company’s offshoring requirements reliably.
1. Identify the project scope
Identify the scope of the project determined to be outsourced. Determine the skills and knowledge needed to perform the type of development your offshore development team will handle. Depending on the project’s type, different resources are needed. This means that for some projects, one country might be better suited than another.
2. Work on a realistic budget
To succeed in outsourcing, it’s essential to estimate setup costs, ongoing operational expenses, and potential hidden costs as accurately as possible. The costs vary depending on project size, technology used, level of seniority needed, and chosen development center location. When working with offshore teams, you will bring the overall cost down, but every single project needs an initial investment, and you will have to balance the pros and cons of outsourcing.
3. Define what success looks like
Define the objectives your new offshore development center must fulfill to be successful. Specify what metrics you want to improve and what benefits you want to get out of offshoring. Depending on your project, you can use metrics like time-to-market (are development cycles faster than before?), cost savings (is your offshore facility cheaper than maintaining an onshore team), or hiring time (how long does it take to hire offshore software developers in comparison with your local job market).
4. Select a vendor you can trust
Compare companies specialized in offshore outsourcing and pick one that understands your business well. Anyone can recruit a programmer or software tester, but not everyone can fill the position with a candidate who fits the project and your company culture. Don’t hesitate to contact Maxima Consulting. Our 30 years of global experience resulted in many successful offshoring projects for companies in multiple industries, including banking, logistics, and telecommunications. Our talent acquisition specialists from NA, EU, Asia, and Australia will know exactly what to do to bring in the most suitable talent for your company.
5. Establish your expectations and proper communication channels
Create clear guidelines for your partner and establish unambiguous expectations for the offshore software development team. Select suitable collaboration tools to facilitate long-distance teamwork and keep the feedback flowing. Good information flow between your main stakeholders, the project team, and the ODC will be essential to achieving your business goals.
Steps to setting up an offshore development center
From location selection through recruitment and onboarding to project delivery guidelines, there are many intricacies that go into building a development center abroad. We can divide the entire ODC setup into seven major stages, but remember that each stage consists of a number of smaller but still necessary steps.
- Offshore location selection process.
- Local legal requirements assessment.
- Office and infrastructure setup.
- Recruitment and hiring process.
- Onboarding and team building.
- Project management.
- Streamlined quality assurance processes.
To build a fully operational offshore development center, dozens of tasks must be completed during every one of these stages. Moreover, the needed steps will also vary depending on your unique business needs and the goals you set for the offshore facility. You’ll need to have different agreements in place when hiring by yourself and different ones when working with an outsourcing partner.
If you’re considering setting up an offshore development team or a remote IT operations unit, contact us to speak with an expert who can guide you through the process.
Working with an offshore solutions provider
To set up your offshore operations quickly and painlessly, you should consider working with a company that specializes in doing exactly that. A solid offshore outsourcing partner will help you plan, take the first steps, reduce risks, and better understand local specifics. As every country is different, the management style that may work well in the US or the UK can bring unsatisfactory results when outsourcing to India or Poland.
The biggest advantage of working with a partner is that you will get to see if offshoring is really for you. You don’t have to be directly involved in setting up the office, hiring dozens of people to make it work, and traveling back and forth to sign documents. A trusted partner will build you a core offshore software development team capable of beginning the work on your project, and if you’re satisfied with the initial results, they will help you establish an entire development center.
Benefits of working with an outsourcing partner
- Local experience: Offshoring vendor who already operates in your location of choice knows how to navigate the local market.
- Access to partner’s talent pool: You don’t have to leverage internal recruiters to hire new people, as your partner’s recruitment team will provide you with promising candidates pooled from their existing contacts.
- Regulatory compliance: The process of founding a company and labor laws (for example, how contracts of employment and notice periods work) differ in every country. Your partner is responsible for knowing and following the local regulations - you can focus on the project.
- Cost savings: You will have to pay the margin so the vendor earns something on the project, but SLAs (service-level agreements) will act as your safety net. A solid vendor will help you avoid costs that occur if something doesn’t work out and keep their eyes open for additional optimizations.
- Increased efficiency: There is a world of difference in the ramp-up time when working alone vs. with a dedicated offshore development partner. If you want to handle everything by yourself, you will have to either engage more resources or devote additional time to the project and meetings. When working with a specialized IT outsourcing partner, your offshore development center can start the work in a matter of weeks.
- Improved scalability: Need more office space, developers, or designers quickly? Consider it done. Companies like Maxima Consulting have access to vast talent pools, so they can quickly add more people to projects when the project scope grows.
- Dedicated account manager: This is your single point of contact in the partner company who will work with you on pushing the project forward. Our delivery team shares updates with clients every week and schedules meetings at least once every month to ensure efficient and transparent communication. This helps us deliver better results, react to your needs in a timely manner, and ensure all stakeholders are kept in the loop.
- Tools and technologies for collaboration: Companies that operate globally have tools and procedures in place to streamline communication and collaboration. You won’t have to make additional investments. Your offshore software development services partner will adapt to your ecosystem and onboard you to their toolset.
- Service-level agreements (SLAs): Strict SLAs protect your organization from potential risks. Your IT services partner will do what is needed to meet the contractual obligations or risk consequences.
What else do you need to know before committing to offshoring?
The global talent pool of IT professionals is constantly evolving. Companies are increasingly exploring outsourcing capabilities in geographically closer countries with similar time zones and fewer cultural differences. The future of outsourcing software development and IT operations seems to be in a combination of onshore, nearshore, and offshore teams working together.
This global delivery model allows companies to leverage the strengths of each location and optimize their development resources. In this context, offshoring must be recognized as a strategic decision with prolonged consequences, not a cost-cutting shortcut. While cost savings resulting from an offshore app development project can be significant, it’s necessary to prioritize quality, cultural fit, and long-term value creation over short-term cost reduction.
Building strong relationships with an outsourcing partner and a remote software development team is crucial for the success of any offshore development center. Frequent communication, transparency, and fostering a culture of mutual respect will be the key drivers of your project’s success. To increase the probability of your offshored project’s favorable outcome, send us a message to schedule a talk with our workforce and offshore development experts.
