HOW TO

How to Set Up an Efficient Offshore Software Development Center

Estimated reading time: 10 minutes
January 18, 2022
HOW TO
How to Set Up an Efficient Offshore Software Development Center
Estimated reading time: 10 minutes
January 18, 2022
HOW TO
How to Set Up an Efficient Offshore Software Development Center
Estimated reading time: 10 minutes
January 18, 2022
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CEO at Aspirity
Written by
This article was written
in collaboration with
Alex N.
Product Marketing Manager at Aspirity
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Suppose your business needs an upgraded solution to develop a product. Turning to an in-house approach may take too much time and resources – you need to find, hire, and train a full team of highly qualified specialists.

If you run a startup or an enterprise that needs an accelerated development process and skilled professionals, it's worth considering an outsourcing solution. Some turn to IT Services Companies.

Multiple outsourcing formats give clients a wide choice depending on their needs and project goals. An offshore development center (ODC) is one of the most beneficial models.

An ODC is a simple and efficient outsourcing format that involves hiring an offshore product development company to provide your project with the required remote specialists. Project management is also conducted on the vendor's side, ensuring the client shouldn't waste effort controlling workflow and stuffing rotation routine.

Aspirity has well-established design, software engineering, research, and project management expertise.

This post explains how to set up an offshore development center. You will also learn the key benefits of building an ODC and the main aspects that distinguish this model from other outsourcing options.

Who Needs an Offshore Software Development Center (ODC)?

An offshore software development center may suit companies with various business needs. However, there is a large number of outsourcing options to choose from. Here are the most typical cases where the ODC model is applicable:
Tech startups with in-house product expertise.
Companies that need to speed up software development.

Tech Startups

The most obvious client for an ODC is a fast-growing software company. Normally, it's a startup that has raised funding and wants to start the development process immediately. Such a company can find it difficult to hire a nearshore or in-house development team to build the product within a certain timeline and at a reasonable price.

An offshore dedicated development center is a great solution since it allows the client to start the development process swiftly. Please note that by choosing an offshore development centre for your technology startup, you get a lot of advantages, which we will discuss below.

Companies Seeking Accelerated Development

It's highly beneficial for a company to have technical and product expertise on its side when turning to ODC. This model enables adding necessary specialists and extending the capabilities of a team – either in terms of the tech stack or tools used. It's also a great option if you need to boost the development process with the management on a turnkey basis.

That's why in-house product and tech expertise is crucial when you set up an offshore software development center. A startup with a tech leader or a product manager in the team has all chances to succeed with a well-applied ODC model.
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How Does Offshore Development Center Model Work?

Looking for offshore development team is a great opportunity to gain affordable resources without wasting time on micromanagement.

What is an offshore development center and how does this model work?
Offshore solutions are always more cost-efficient than onshore ones. So when turning to offshore outsourcing, companies normally choose between several different models. Each of them has certain benefits that could be relevant to your very case. Among the most popular options are freelance, outstaffing, and turnkey ODC. The latter one involves coping with routine tasks like developers' onboarding or replacement and control over in-team work processes so that they don't affect the solution's efficiency.

There's often a clear request for a certain development paсe, which the vendor's side should provide. The client doesn't have to monitor every workflow detail, which can be time-consuming and expensive to manage.

Thus, it's preferable to keep project management on the vendor's side. Such an approach is much cheaper, more efficient, and easier to organize. The project manager won't have to cope with the potential language barrier. Besides, the miscommunication risk is eliminated since the project manager is not detached from the development team. All the project manager needs is to setup of an offshore development center with high focus on software development together with the vendor.

Here are two possible types of offshore development centers you can apply for your product development.

Contractor ODC Model

The contractor model involves a development team ready to cope with the client's requirements when needed. The ODC will complete the assigned development, design, or testing on demand. The client submits the set of requirements to the vendor. Then, the ODC selects a team able to meet the objectives and deadlines.

Customer ODC Model

The customer model involves constant work and is more suitable for large companies requiring active development. Basically, such an ODC is a software engineering department in another location. It's responsible for the major part of IT functions and immutably serves the client's needs. In this case, the ODC assumes not contractual but permanent specialists' service.

Offshore Development Center Benefits

Supposing your startup lacks certain technical expertise or requires an accelerated workflow within a limited budget. Then, it can be a great idea to set up an ODC. Let's look at the key dedicated offshore development center benefits.

Relieved Staffing Pain

Alarming IT professional shortage in the last few years makes finding a good expert for your in-house team challenging. However, an ODC may help you address this issue. Turning to the ODC solution allows a company to avoid hiring additional specialists. The vendor completely takes over responsibility for finding and training the specialists suitable for your project.

No HR Issues

Human resource management is another common challenge that many companies and startups may find hard to handle. In particular, it's the specialists' onboarding and training, valuable employees' retention, and core team formation. If you turn to this outsourcing model, these and many other tasks are completed on the ODC side.

No Micromanagement

Project management and control over the workflow often take time and distract from the other business goals. A good ODC model provides seamless management. Thus, the client isn't directly involved in monitoring routine tasks and doesn't have to perform micromanagement. For instance, if an ODC team member leaves the project, their replacement will be completed quickly and painlessly.

Team's Flexibility

Offshore development center services are quite flexible in staffing, time management, and budget. Normally, a project requires the designers' involvement at the start, with software engineers and QA specialists joining later on. With an ODC, the number of specialists and their extensions may vary due to the project's tasks, goals, and needs

Security

Security is a must-have for any digital project. With a reliable tech partner providing efficient security management, the client can ensure no confidential information leaks. An ODC model guarantees compliance with all contract terms, including NDA.

ODC and Other Outsourcing Models. What are the Differences?

On the development services market, there are many different options and models to choose from, while their classification is rather vague. Let's overview the key models and identify the main offshore development centers' features compared to other service types.

Outsourcing is a general term that designates transferring certain functions to a vendor company. It's often classified by the geographical area in which the hired specialists are located. Based on this, here are three main types of outsourcing:
Onshore.
A vendor is located in the same country.
Nearshore.
A vendor is located in a neighboring country.
Offshore.
A vendor is located in a distant country, normally with a significant time zone difference.
Outstaffing involves partial vendor service. This solution enables outsourcing only certain tasks and complements the in-house team with the required specialists via the vendor. In this case, management remains on the client's side.

A dedicated team is an outsourcing model that works best on a long-term basis. This model's key feature is the team's flexibility due to the lack of a predefined scope of work. Either a client or a vendor provides management.

Finally, an offshore development center is another outsourcing model suitable for an end-to-end project with the relevant product competence on the client's side. The vendor normally manages the project.

Depending on the outsourcing model you choose, the development price will also vary. It's due to the difference between the number and complexity of the vendor's services. For example, outstaffing is a relatively cheap option since the team conducts the most limited number of tasks. So opening an OCD center in another country is the most popular option.

Key Steps for Setting Up Offshore Development Center

The idea of establishing an offshore development center with a service provider is attractive not only because it has a lot of advantages. There are lots of things to consider for building a dedicated offshore development center. So if you choose this outsourcing model for your project, ensure to be consistent and implement it wisely. Here are several key steps to set up an efficient ODC.

Define the Scope of Work

Determine which tasks you want to outsource to an offshore software development center. You will need to divide the requirements between your in-house team and the ODC. It's crucial to understand that the ODC is a model that works perfectly only if the tasks are set competently.

To achieve the desired results, build a strategy and determine the scope of work with the initial roadmap before hiring a vendor and setting up an offshore development center.

Hire the Right In-house Specialists

The next important step is to find the right in-house specialists to work on the project. An ODC isn't covering all the aspects of the product development cycle, so it's better to have the relevant product and technical expertise on your side. Unless you've already got the necessary specialists in the team, consider hiring a CTO, Product Manager, or Team Lead.

This professional should define the tasks your ODC will carry out. In other words, you should have a person fully involved in product development on your side.

Outline Your Requirements

Based on the defined goals and the formed in-house team, it's time to determine the parameters of vendor selection. Here, it's important to consider the following factors:
The development team's location.
Time difference.
Communication language.
Tech stack.
The required experience.
Budget limits.
These constraints will help you narrow down your choice and target the most suitable candidate.

Choose Wisely

It's often mentioned that leasing the office and hiring the employees are the factors that may have an impact when choosing the vendor to set up your own ODC. However, based on our experience, a good company providing an offshore development center should have a core team ready to start working with your project right away. The rest of the team can be staffed on the go, depending on your project's goals and requirements.

What's more, all these steps should be taken by the vendor, which is the main value of the ODC model.
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Main Challenges of Building an Offshore Development Center

If you've decided to set up an offshore software development center, you should be aware of the potential issues and pitfalls that could prevent you from achieving your goals. Here are the most common challenges and mistakes, along with the ways to avoid them.

Wrong Vendor Choice

When choosing a vendor to build your ODC, one should be careful since the cost of an error is rather high. Normally, it's hard to estimate the team's expertise before the project start. You will have to take this risk and give the chosen vendor a chance to prove their relevance.

Before making any conclusions, it's necessary to see how well the team performs its functions. This process requires certain time investments. Unfortunately, there's a risk that it won't be returned if you've made a mistake when selecting a vendor.

Inflexible Budget

Many choose an offshore development center model due to its cost-efficiency and flexibility. However, it's still crucial to control overall ODC spendings and set budget frames that will work. It means that the approximate rates should be defined beforehand.

Next, monitor the project's budget on the go. Remember to keep it flexible enough. The salaries increase over time, and this natural process will affect the service's cost. If you aren't ready to experience any changes in this aspect, they are likely to come as an unpleasant surprise.

Staff Rotation

The rotation might be challenging if you're unprepared for the ODC's staffing specifics. Normally, clients don't participate in the workflow itself, so they could even be unaware of who is involved. It's worth mentioning that even if ten junior specialists work on your project instead of three senior ones, the difference won't be significant provided the management is effective.

However, it's still important to understand the overall situation, conduct regular checkups, and verify the development speed. The key is to ensure the core team is involved, which is usually more expensive than rotation.

Experienced professionals have higher wages and more opportunities on the job market. So it's a good idea to agree on the core team's salaries and reduce the cost for less crucial project aspects to keep the right balance.

Poor Project Management

A good ODC doesn't force the client to monitor minor workflow issues and routines. They don't have to know who is currently onboarding, who has joined or left the project, etc. Only the core specialists directly dealing with the project should be introduced to the client.

All internal work processes should occur on the vendor's side without engaging the client in micromanagement. Simply put, the point of the ODC model (Offshore Software Development Center Model) is to provide seamless project management and staff rotation.

Thus, if you don't get the benefits mentioned above and are still coping with project management yourself, the main ODC advantage is missing. In this case, it's worth considering another outsourcing model like outstaffing.
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Why to Choose an Offshore Development Center in Eastern Europe

There are many possible destinations to set up an offshore development center. Eastern Europe and is one of the best choices in this regard.

To be more precise, the Statista report claims Eastern Europeean countries to be among the leading countries with professional developers in Europe.
Here are a few factors that distinguish Eastern Europe from the other offshoring destinations.
Quality education.
There are a large number of world-renowned universities that train outstanding IT professionals. Thanks to excellent mathematics and programming education, Eastern European software engineers are in great demand on the market. What's more, Eastern Europe has high-quality design schools.
Relatively low pricing.
According to Glassdoor, the average hourly rates of Eastern European developers are 60-70% lower compared to the rates of an average American software developer.

Trust Your Project to Professionals with an ODC Model

Setting up an ODC is highly beneficial for a startup or any other business that needs to speed up software development at a reasonable price. At the same time, this outsourcing model releases the client from the necessity to conduct project management and constantly participate in minor workflow aspects. An efficient ODC ensures the development lifecycle will be seamless and fast.

To get the most out of this solution, the clients should have product and technical expertise on their side. Also, it's recommended to define the scope of work, set clear project requirements, and carefully choose the vendor.

Need to establish a dedicated offshore development center?

Aspirity is an offshore agency with rich experience building various digital products, providing efficient research, design, and software development. Reach out to us to learn more about setting an ODC to drive your project into a success!
This article was written in collaboration with Alex N. — Product Marketing Managerat Aspirity
CEO AT ASPIRITY
For more than 2,5 years, I've been working as CEO at Aspirity. I help professionals launch digital products by providing dedicated development teams.
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