In this COVID hit era, the trend of offshore development centers (ODC) is continuously rising and demand for it increases day by day. It is gradually becoming one of the favorite options of software development solutions due to its cost-optimization and greater access to the availability of expert tech professionals.
Today, 78% of businesses all over the world feel positive about their outsourcing partners. And about 300,000 jobs get outsourced out of the US each year. This entire blog is dedicated to understanding Offshore Development Center and a complete guide to setting up your future offshore development center. But before that, let’s understand, what is an Offshore Development Center (ODC).
What is an Offshore Development Center?
An Offshore Development Center (ODC) is an offshore team of professionals that renders software development services for an enterprise but is located in a different/foreign country. In simple terms, it’s a subsidiary of a particular company that operates in another country. The place where Offshore Development Center is located has a much lower cost of living as compared to the original company.
But, while setting up an ODC, you need to have expert resources that can offer high-end solutions without compromising on the quality of work. The ODC companies mostly have professionals in all the managerial and technical aspects apart from developers and testers to reduce the primary office workload. This includes designers, testers, UI/UX designers, project managers, the HR team, the account team, and much more.
Along with this, Offshore Development Centers have access to advanced tools, technologies, and infrastructure that reduces additional costs on equipment and offices.
Outsourcing vs Offshoring – The Difference
Many think outsourcing and offshoring are interchangeable terms, but in reality, they are different from each other. Let’s understand the differences.
- Outsourcing – IT Outsourcing simply means getting certain products or services from a 3rd party company. Outsourcing can be done by a company that is located anywhere on the globe. This location is further differentiated by offshoring, nearshoring, or onshoring.
- Offshoring – In simple terms, offshoring means getting products or services from another country.
By definition, it can be clearly understood that offshoring takes place only internationally. On the other hand, outsourcing can be done both locally and globally.
The Main Objective
The main objective of offshoring is to reduce costs and gain the benefit of the cost difference between the two countries. On the other hand, outsourcing deals with specialization. A company hires another company to carry out specialized activities in which they are experts.
Level of Control
An outsourcing agency works independently to finish necessary tasks, so the main company has lesser control. Meanwhile, when a company goes for an offshore team, it has much more control over the tasks and works as ODC follows the company’s guidance.
Benefits of an Offshore Development Center
Enterprises that save through offshoring are easily more competitive. They have the option to reinvest those savings in their enterprise and expand continuously while generating more local employment, especially for highly skilled jobs. Below are the top advantages of setting up an ODC company
The offshore development center has a team of experienced professionals along with top-class equipment. Hence, your agency won’t have to spend extra money on setting up the infrastructure. Thus, an ODC project can begin much quicker and can be cost-saving while building an amazing solution from scratch.
Large Pool of IT Talent
You can easily find highly skilled, proficient, and experienced IT teams at an ODC. Most ODC companies emphasize regular training of language as well as tech skills to make sure they deliver the best solutions.
Great Control Over Operations
As mentioned above, the ODC company strictly follows the main office’s guidelines. Hence, you can easily evaluate and track the work progress at anytime. If the results don’t meet your expectations, you can simply ask the ODC company to get the desired results or fix the project.
ODC company renders regular technical support during the entire project. Offshore enterprises can even use their skills to complete their tasks. They can also gain more knowledge from the ODC company which can be further useful in other projects as well.
ODC companies can deliver projects on time due to their experience in working under tight deadlines while closely sticking to project timelines and guidance set by the main office. Along with this, they also collaborate with the in-house team to reduce the total amount of time in completing the project.
Efficient Resource Allocation
The requirement of resources varies from project to project. For each project requirement, you either need to reduce or increase the in-house resources. But, an offshore development center is like an extended help to perform tasks of an in-house team while scaling up your IT department.
The Checklist – Offshore Development Center
Skills and Quality
The most important thing in setting up an Offshore Development Center is to determine which country renders the best service without wasting the budget of your company. India and China have been the most preferred outsourcing destinations due to their cost-effectiveness. India is chosen over China because of the technical and language barrier faced in China. Moreover, it also renders cost savings options.
For instance, the average developer rate per hour in the USA is anywhere between $70- $150. Whereas, in India, the average hourly rate of developers is around $20-$40 per hour.
How can you choose a company to partner with while offshoring? It’s simple. Peep into their history. Ask their clients about their experiences. Client reviews and interviews are priceless. With this practice, you can get more insights into the company as well as its business activities.
It is also beneficial to partner with an ODC company that has more experience. Such enterprises are familiar with using top technologies for ODC projects. They are well versed with the brimming tech trends. Moreover, enterprises with vast experience are more reliable when it comes to project, information and confidentiality.
Communication is a vital aspect while going for an ODC company. Hurdles in communication can lead to misunderstandings and delayed project deliveries. Today, English has become one of the most acceptable languages in the world for communication. According to a survey, approximately 350 million people speak English in India. It is more than the English-speaking population in the UK and USA. This makes sure that setting up an ODC in India won’t cause any communication gap.
Guide to Set Up An ODC Center
- Complete Transparency: It is necessary that each team member clearly understands their roles and responsibilities from the beginning.
- Vacancies: Companies need to pay attention to every aspect of the applicants ranging from their qualification, skill-set, soft-skills, as well as, experience.
- ODC Security: It’s very important to discuss what part of the project can be accessed and by whom. Security is the most important aspect of ODC projects. You must follow global encryption standards like AES, RSA, OpenPGP, SHA2, HMAC, or PBKDF2.
- Detailed Development Process: Companies must select their approach and prepare the timeline for each project and make sure whether it is a software update or report.
- Crystal Clear Instructions: Every team member must know how to tackle the problems and solve them as soon as possible.
- Effective Team Management: There must be good collaboration and cooperation between the offshore development team and the in-house team for quick project deliveries.
Billing Models/ ODC Company Payment
Time and Material
When the scope and specification of the project are subject to change, go for this model. The clients can easily reduce or add on resources as per the requirements of their project. In this model, the clients will be charged based on the actual amount of time and effort spent by software developers on their projects.
This model of ODC Payment is mostly suitable for small, short-term, and medium-sized projects that have well-defined scope and specifications along with minimum chances of modifications. In this model, the cost and time frame are fixed before the project begins and the clients will be charged similarly.
This model is most suitable for long-term projects where the scope of work and specifications are quite unclear. There may or may not be any modifications. In this model, the clients have an entire dedicated team at their disposal. It follows a very simple pricing system. Clients can pay on a weekly/monthly period which covers the salary of each team member, the company’s infrastructure, and much more.
How to Maintain Offshore Development Center
Equal Important to In-house and Offshore Teams
You must understand that your in-house team and offshore team are equally important for the success of your company. Hence, instead of supporting and treating them separately, treat them equally. Make sure to include them in your decision-making process, and maintain a great relationship between your offshore team and in-house team to ensure world-class productivity.
Access to the Big Picture
Although remote, ODC is a part of your team. Hence, every member of your ODC team must be aware of the big picture, ideas, and goals of your company. This will ensure that both ODC team members and the in-house teamwork towards achieving a common goal act accordingly.
It is necessary to give short, crisp, and clear directions to your offshore team. This is because they may belong to a completely different cultural background as compared to your company. Also, it is advisable to use practical communication tools to share your ideas. A screenshot or short video sent to your ODC team can be much more helpful rather than discussing something for hours. Conducting video conferencing and meetings through zoom or Skype can help you track the work progress more efficiently.
Want to Set Up Offshore Development Center in India?
India can be the best choice to set up your Offshore Development Center. India accounts for about 46% of the global offshoring/outsourcing industry. Possibly the most impressive fact outlined in the report is that IT-sector heavyweights like CapGemini, IBM, and Accenture now employ more offshore employees in India than they do back home in the mainland U.S.
Deloitte, the IT giant, said that approximately 60% of people already outsource to India and a further 22% will do so shortly. Also, India is amongst the countries that have the highest number of ISO-9000 certified companies, and thus quality is never compromised. Along with this, over 75% of the world’s CMM Level 5 certified companies are in India.