Offshore Development Center (ODC)
Small and Medium Enterprises
“In software engineering, offshore custom software development consists in offshoring the software development process in a country where production costs are lower, thus decreasing budget spending.” Wikipedia
Setting up a dedicated ODC is the best fit when
- You need to hire multiple engineers at once;
- Your project has complexity, and you require many services;
- You have different products and require different teams for each product;
- You have security-sensitive software and don't want to "put all eggs in one basket";
- You want to have your brand presence in other countries.
Depending on your needs, offshore software development centers are of good use for different types of technology companies. The main common factor is the desire to work on their own tech products and bring innovations to the world.
Startups that develop a certain kind of innovative technology may require engineers with narrow expertise. It’s challenging to find brilliant experts onshore, and that’s why co-founders are likely to look for dedicated offshore developers. This decision leads to accessing the global talent and finding the best of the best.
A dedicated offshore development center is also an attractive opportunity for already established technology corporations. With limited resources available in one place, it’s difficult for them to scale up and expand into the new markets.
Pro and Cons of an Offshore Development Center
You probably want to learn about all advantages of opening your ODC – offshore development center.
- Cost reduction. ODC is often building in countries with lower living costs as Viet Nam, Indonesia or India compared to where the headquarters are located. This is how businesses can dissimilarly utilize the cost in labor, infrastructure, and other benefits for full-time local employees.
- Cheaper Facilities. Lower living cost also means competitive facilities. Establishing an ODC in a much cheaper country can significantly reduce facilities costs such as infrastructure, office rent, maintenance, internet.
- Market expansion. ODC is also a way of reputation expansion as it increases the reputation, sales volume by getting closer to a new market of customers, and understanding their needs better. An ODC, especially placed in big local companies, is also a physical presence in the target market and thus, can reduce the logistics costs.
- Easy Scalability. With your ODC in another country with a much affordable cost, a company can easily scale up or down their team size based on the deadline, technology changes while still staying within your budget.
- Product localization. And if you want to take advantage of this and reach the overseas market, ODC is a pleasant choice. Not only does it bring your enterprise closer to a specific market, but it also helps to localize your products to meet the demand of customers in that market.
- Business optimization. When your business is not IT-focused, dealing with your IT department can require tremendous operative costs just to handle a completely separate area.
Thus, if your IT department is not that good in software technologies, having other experts who are experienced, skilled, and well-equipped will not only save your cost but also bring out the highest quality possible.
Although there are enough benefits, tech companies need to understand the risks before considering offshore development centers. This includes hidden pitfalls that are difficult to foresee, but easy to prevent in the right hands.
- Scattered services. There are few service providers that offer turnkey services for building ODCs. This forces you to consult a bunch of law firms, accounting specialists, and financial consultants for contradictory opinions. Avoid this by finding a service provider with full expertise in operational management. You'll have access to different specialists who come up with a single one-stop-shop solution that suits your business.
- Drawn-out recruitment. Sometimes country managers of ODCs struggle to hire IT specialists quickly. This may relate to a scant understanding of the local market or ineffective recruitment services from your vendor. A competent recruitment agency with defined KPIs, commitments, and guarantees will reduce the risks and speed up your hiring.
- Vague pricing. To make your offshore development cost-effective enough, make sure you use a flexible pricing model. This should include the possibility to pick up the necessary services and pay only for those you used. If your invoice doesn’t contain detailed information about the costs, change your offshore IT services provider.