Looking for a cost-effective and reliable way to build the product of your dream? An offshore development center is a right choice. Learn about ODC benefits and steps to build it effectively.
What Is an Offshore Development Center (ODC)?
For starters, let’s define the term offshore software development center.
An ODC is a physical space or office abroad with a vast tech expert pool that provides its services for a low cost. To put it simply, you have a dedicated team which is located abroad. Many well-known companies have already built their offshore development centers — for example, Slack, Samsung, Google, and other technology leaders.
Nowadays, the ODC approach is becoming increasingly popular among startups, medium-sized, and large enterprises. As stated by IBISWorld, the outsourcing industry’s US market size was $132.9 billion in 2020, and it’s not going to stop.
It’s particularly important to note that due to the COVID-19 situation, the international market for IT outsourcing is expected to reach $410.2 Billion by 2027.
So why is an ODC so popular? Keep reading to learn the key advantages of an offshore development center.
What Are the Key Offshore Development Center Benefits?
You might question why it’s worth considering an ODC. The most popular answer is — it’s profitable. Meanwhile, there are other compelling reasons to set up an offshore development center:
A large choice of tech experts
You can hire the most suitable IT talents for your project without limiting yourself to a specific location. An ODC allows you to employ highly experienced professionals from anywhere in the world with the specific expertise you require.
Reduced operational costs
You do not need to spend on recruitment costs, payroll, setting up and maintaining an office, bookkeeping, and other IT infrastructure things. All this results in a fast project start at a lower cost.
You have the possibility to alter the team size anytime you need according to the project stage needs while cooperating with an offshore software development center.
Product development price within your budget
There are various countries with different rates. You can compare the average yearly software developer salaries and choose a country that suits your budget best.
Opportunity to devote more time to the business
ODC allows you to concentrate on your urgent tasks without wasting time on the development routine. An ODC team takes care of all technical issues while you do what you’re best at. For instance, you can devote more time to think through your marketing strategy or concentrate on your budget planning.
What Are the Offshore Development Center Models, and How Do They Work?
Now, let’s take a look at the most widespread ODC models used to successfully cooperate with offshore development centers and see if they work for your company
Full-time equivalent (FTE) model
This model means you get a full-time equivalent team of experts that perfectly fit your project. FTE is considered a transparent and flexible model for cooperation since you can manage team size according to project requirements and pay a fixed monthly fee.
When to use. This offshore model is excellent for a long-term project with a dynamic scope of features. If flexibility and scalability are a must for your project, choose this model.
Build operate transfer (BOT) model
BOT means hiring a remote team that takes care not only of product development but also of setting up your IT and business process. To put it simply, your provider builds your offshore development center that operates on a high-quality level and then transfers your subsidiary or intellectual product on legal grounds.
When to use. This model is suitable for startups that need guarantees they’ll eventually have rights over their intellectual product. This option is also appropriate for enterprises that want to build a long-term offshore development center, and they need a launchpad.
For example, your offshore development model is BOT. You have a dedicated team with the required expertise. But during product development, it’s windfall required AI or ML functionality. In this case, the offshore team can provide extra specialists temporarily and on an hour model. When to use. This model is particularly suited to startups that need specialists with different expertise and skillsets.
How to Set Up an Offshore Development Center: Useful Tips
Now that we’ve defined what an ODC is and how it works, it’s time to find out how to set up an offshore development center and start dealing with top-notch tech experts at optimal cost. Below we share some useful things to consider for building an offshore development center. Let’s look at the best offshoring practices!
Define your business needs and goals
First and foremost, your dedicated offshore development center should start from a clear definition of business goals:
- What issues need to be solved,
- What should be done,
- What type of cooperation to choose,
- What is the budget,
- What level of control to have in the future,
- What type of entity management you choose (by you — BOT or by partner — FTE),
- What results need to be achieved.
For example, you have an idea for a product, but you aren’t sure if it fits the market and solves people’s problems. You define that your goal is to build an MVP. To do this, you’re looking for an ODC with a fixed price model since you have a low budget and a project with limited features.
Well-defined business goals lead to a better understanding of what offshore development center model to choose and what budget you are ready to allocate for this project.
Choose the appropriate location
After defining your goal and budget, you should determine the ODC location you want to cooperate with. The offshoring destination worth considering is Eastern Europe, US & Canada, Latin America, and Asia. When choosing an offshore country, pay attention to vendors’ expertise that should suit your specific project functionality.
The country you choose to deliver your product should offer quality service on your budget. To compare offshore countries’ services, you can see the country ranking of the 2019 Global Services Location Index by A.T. Kearney.
Find a reliable vendor
When you’ve decided on the country, the next step is to choose a trusted vendor. It won’t be as easy as it might seem. There are thousands of offshore companies in every country. Each company has an ideal portfolio, a high rating, a lot of good reviews, and an acceptable price for services.
To facilitate your searching for the right offshore vendor, we’ve prepared some useful tips on what to pay attention to:
Your vendor must have expertise in your specific product functionality and tech stack. If you’re going to implement a VR feature into your product, you should look for vendors with such expertise and experience. So it’s best to keep the knowledge and skills in mind. Only then should you compare vendors against pricing, size, and other criteria.
Look for a tech partner that fits your price range and the expertise they offer. The project’s budget usually depends on the software functional complexity, required experience and skill set, and team size.
Comprehensive experience with setting up R&D departments
This criterion is important if you’re looking for valuable product development. Be sure your offshore vendor has a holistic experience in building R&D departments, namely solving administrative tasks, analysis, and a clear understanding of current market conditions, enhancing business processes and legal support.
This criterion plays an integral part when choosing a vendor. If your project implies complex functionality or you’re planning project scalability in the future, a vendor with a few in-house experts is not your choice. For example, you have a large project, and you need five software engineers to develop a product, while a vendor has only three experts in-house. It’s unlikely that this option will suit you.
To ensure your company’s data and project details will be in safe hands, check the reviews and feedback about your future vendor. Nowadays, there are several ways to do that. One of them is to visit trustworthy review platforms such as Clutch, AppFutura, or GoodFirms. On these review websites, you can find real customer feedback about any vendor you need. Another way is to check vendors’ Facebook accounts and, of course, Google reviews.
When hiring an offshore team, it’s better to set up an initial call to better explain your goals, product ideas, and expected results. Thus, you’ll make sure you and your partner are on the same page, get useful insights into their work approach, and make sure that the chosen team clearly understands your business goals. Plus, it’s a great way to find out if your vendor has any difficulties communicating, for example, in English.
Identifying the rules and regulations
After you finally choose an offshore partner, the next significant step is to draw up a list of your rules, regulations, and an NDA in case you want to keep your project details safe. This activity will help you protect your business. The offshore team will clearly understand what is expected of them and what will happen if they bend the rules.
Do your best to establish clear and daily communication with your ODC. This will result in an effective and long-lasting relationship. Regular meetings will keep you informed about product development progress, allow you to discuss urgent issues, and ensure smooth and transparent cooperation. To effectively communicate and track project progress, you can use such tools as Jira, Slack, and Zoom.
What are the risks of having an offshore developer?
Apart from the substantial advantages of building an offshore development center, there are some risks while cooperating with an ODC team. Let’s consider the most common challenges of having an ODC and tips on how to overcome them.
Lack of trust
Many people believe that an offshore development center is vulnerable to leakage of project and company details. Security is the most common challenge that makes many people abandon the idea of setting up an offshore development center.
Solution. Indeed, it’s hard to be sure your private data is safe, especially at a distance. Fortunately, there are some practical ways to make sure that you’re dealing with a reliable offshore team.
Before concluding a contract, you can check your vendor on trustworthy directories like Clutch or G2 to see previous clients’ ratings and reviews. Feel free to ask for the team’s portfolio to make sure of their expertise and professionalism. You can also study your offshore team on sites like GitHub, Dribble, and Behance to ensure they have real projects. One more effective way to protect your data is to conclude a non-disclosure agreement (NDA). This agreement implies establishing the confidentiality of any data the involved parties share.
At first sight, the cultural gap may not seem the most crucial challenge in cooperation with an offshore development team. Lack of cultural diversity can considerably influence the overall working process.
Your offshore team’s cultural environment influences their personal and business values, how they make business decisions, how they solve problems and cooperate with others.
Solution. To avoid cultural barriers, you can personally interact with your offshore team and discuss your vision with them. Thus, you get everything clear with every member of the team and stay on the same page. To make your work more productive, you can conduct workshops or do team-building exercises. All these activities will help you avoid cultural barriers with your ODC team.
Different time zones
According to GoodFirms, 31 percent of respondents claim that time zone differences are a considerable offshoring risk. Well, when planning meetings with your ODC team, you should bear time zone differences in mind. Your offshore team can also celebrate a national holiday while you have a usual workday. But that shouldn’t be too much of a problem.
Solution. It’s necessary to discuss the work schedule with your remote team at the beginning of your cooperation. Eventually, you can find an offshore team that shares your time zone or team with a minor time difference.
Moreover, see the positive side of this challenge. For example, if your head office is in London and ODC is in Los Angeles, your business can work 24/7 due to a significant time gap. So while you’re sleeping, your offshore team is meeting all deadlines.
Lack of control
It’s hard to control the development process and stay up to date on project progress when your team isn’t at your fingertips. But this does not necessarily mean that there is no way to overcome this challenge. Solution. If you want to have as full control as possible, you should choose the BOT model. Eventually, you’ll get 100% control over your offshore center and intellectual product legally. Using other models, you should be interested in the product development process at the very start of your cooperation. You can hold regular daily calls to stay informed of current tasks. One more way to track progress is to ask a team to prepare detailed reports on product development results with all required details. All of this can help you supervise the product development results and keep the working process transparent.
Setting up an offshore development center may seem a complicated task. However, you can avoid all pitfalls in dealing with an ODC team by following the above best practices. We believe that regular communication and a transparent working process are essential to successful and effective offshore team management. Ready to build an offshore development center? Contact Fayrix and get a reliable technical partner that helps you develop a robust product on time and within budget.