If you have ever considered outsourcing your IT or software development projects, an offshore development center (ODC) might be an option for you.
An offshore development center is a development company that provides you with software development services but is located in another country. It is deemed that this type of company is a subsidiary of your main company.
The country in which ODC is located has much lower living standards compared to the country in which the holding company is located.
So how is it different from outsourcing?
ODC is slightly different from software outsourcing. ODC provides services or products and it’s located in another country while outsourcing is a service that offers some certain services or products from a third party company, the geographical location might not be a critical factor.
The main purpose of outsourcing is to increase productivity and focus on other important tasks while saving cost can be one of the reasons but it is not the fundamental cause. On the other hand, ODC’s primary cause is to help reduce the company’s expense by utilizing the cost difference between the two countries.
However, both ODC and outsourcing (especially offshore) share the same interest: get access to a large talented developers pool with lower costs for development services, allows enterprises to save funds and speeding up the productivity in recruiting, optimizing accounting, human resources, and office budgets.
ODC can provide various services like building a software development team based on your requirement, project-based development, testing services, setting up separate ODCs for clients.
There are several development models that you can have a look at:
- Software ODC trust: for clients who demand top-notch security levels in their design models. This model is suitable for those whose software is one-of-a-kind and needs to be confidential.
- Software ODC classic: the most popular software development model employed by ODC. The model includes a dedicated team who has the necessary technical skills to be able to deliver the project as required is supervised by a project manager. This kind of model is useful for projects that have a wide variety of tasks such as updating and expanding the older software, its support, migration to other platforms, or writing new code.
- Software ODC branded: the best option for businesses and corporations that want to be extremely active, involve, and control the process and its development process.
- ODC Full form: also known as private ODC. This model allows customers to get their own development centers in other countries. The team employed is based on the client’s requirement that will plan, research, analyze, design, and manage tasks in close cooperation with the client’s headquarters.
There are multiple benefits that ODC can bring. Here are some rationales behind it:
- Cost reduction: like we have mentioned earlier because ODC is often placed in countries that have lower living costs compared to the ones in which the headquarters are located, you can refer to the offshore software development rates by country. They can utilize the cost dissimilarity to reduce costs in materials, labor, while increasing sales, or shift the main focus to other factors.
- Cheaper Facilities: establishing an offshore development center in the center of the economy in a much cheaper country not only is beneficial to enterprises in terms of reputation, and sales but also is likely to reduce office rent, maintenance, internet costs manifold.
- Expand the market to a foreign country: being in another country’s marketplace is a way to increase the sales volume, reputation, get closer to the customers, and understand their needs better. This is also a way to be physically present in the target market, at the same time reducing logistics costs.
- Large team with a different set of skills: if you want to set up a team of 50+ members, vendors can establish a separate office in which all your developers, PMs, QAs, and marketing specialists will work here for your employee branding.
- Access to the Talent pool: having your company in a different country equals getting access to the talent pool of that specific country to enrich your company working cultures and enhance your skills in general. When job seekers see that they will work in a “foreign company’s office”, they will likely take the jobs.
- Improving confidentiality: ODC likely hosts several teams working on several projects side by side most of the time. It’s always a nice idea to ask your ODC to establish a separate office for your team.
- Product localization: If you want to reach the overseas market, ODC is a nice choice since it does not only bring your enterprise closer to that one specific market but also helps in localizing your products. For example, you want to bring your products to Vietnam, then having your ODC there is a smart move since all of your developers are locals, they can help input some ideas which localize your product for their market.
Along with benefits, of course, there will be risks and challenges. Here are some challenges that you might come across while having an ODC
- Hiring the core team without assistance: the process of recruiting the new team in the location of your ODC may be costly and ineffective if the foreign recruiters fail to understand the market and proper channels for candidate search.
- Security risks: having a distant office is at risk of data leakage, raids of law enforcement officers and criminal groups
- Cultural differences: cultural differences such as language barriers, working culture, attitudes to communication, conflict management, communication channels are still there.
- In-house team vs them: there is a big difference between hiring an in-house team and a remote team. Will all of your employees be sitting in the office? Some of your employees will be remote for sure when it comes to ODC, but what are your main communication channels? Will everyone be in the same office all the time so that you can reach anyone you need once you call or email them?
- Time Zones: This is one of the significant challenges you need to overcome when having an ODC. Most of the companies will help you to schedule and warn developers if there is a specific request from the client to make communication easier
- Communication and management: when online communication is taking place, there is a huge loss since you can’t see someone’s facial expression or body language. Therefore, clear and instructive communication is crucial to compensate for the gestures. Make sure to unified the means of communication and working styles.
- Team concerns: it’s necessary to inspire and treat the remote team fairly since they might feel like a second team. Occasionally visit them in their country if you can or invite them to the main office to get to know each other better in person.
- Scalability: this is more like a benefit than a challenge. But since you have your ODC in another affordable country, you can easily scale up your team size while still staying within your budget.
Select the right vendor by having a look at the vendor’s working culture, ask for their case study, and analyze the skillsets.. Explore track records, references. Ask other customers for their experience and advice.
When you’ve already done choosing your software vendor, talk to them about your organizational structure and culture. It is essential that you all work together in harmony, and they understand what is their responsibility, their roles, and distribute tasks equally as well as help each other.
When hiring new employees, remember to create job descriptions for all vacant positions in order to help them know their roles and responsibilities better. And pay attention to soft skills while interviewing your potential employees besides qualification and education.
Giving them clear instructions and a place on your project infrastructure. Your team members should understand what is their role, who they will communicate with, and whom they will come to when issues occur. Individually they should know how to report problems and manage them as soon as possible.
The next step is to plan your ODC security measures: who can access which parts of the project, what is their responsibility, followed by selecting your methodology, communication channels, and communication frequency?
How often your team should talk to you, what is the due date and how they should deliver to you. Asana or Jira can be an option for you to set up a project-tracking and management suite.
If you have several teams, be clear about the responsibility areas between them, or blend different human resources on one part of the project if necessary. Offshore teams and in-house teams should be coordinated and cooperative, not disturbing each other.
By understanding the challenges, you will be well prepared for the upcoming when starting an ODC. By choosing the right vendor with the right skill sets and flexibility, your vendor can be your right hand.