Contact us anytime to know more - Abhishek P., Founder & CFO CISIN
What is an offshore Development Center?
Offshore development centers (ODCs) are overseas development facilities with a multi-functional team and the necessary office equipment, amenities, and processes. They can be tailored to meet the specific needs of the client. You can save money on the development, speed up time to market and expand your market even if there is a talent shortage in your home country by opening an offshore development center.
The First Step Toward An Offshore Development Center Is A Dedicated Team
In the early stages of outsourcing, most companies do not need to invest in full-grown centers. The dedicated team can be a good middle ground between an offshore software center and IT staff augmentation. A dedicated team can help you overcome the challenges of talent and skills shortages. Still, it will require fewer resources than a full-scale offshoring development branch.
A dedicated team will carry out the entire development process as an agile team. They are solely focused on your business and development needs. This hiring model covers end-to-end developments and specific processes like design, testing, or business analysis.
A dedicated team, regardless of its area of expertise, brings the following values to the table:
- Self-management, process setup, and self-management.
- Expertise and domain knowledge are relevant to the job.
- Transparent collaboration and a focused approach.
- Easy and flexible hiring.
- Hire based on your specific job requirements.
- Innovation costs are reduced as the vendor assumes overhead costs, employee training and benefits, and hiring costs.
This collaboration option is best suited for long-term software projects with dynamic requirements. What if your project has specific security requirements, or you need to manage sensitive data in the finance or health sector? Your project may be hardware-dependent. You may be dealing with many overheads, such as security and equipment.
When you require a software development center to handle large-scale projects, the bright future of dedicated development dims. Managing 20 teams of dedicated people in different time zones and geographical locations becomes difficult. Outsourcing no longer seems like a good solution. Outsourcing software development companies is easy.
What are the Benefits of an Offshore Development Center?
How can you improve your outsourcing abilities and eliminate the headache of managing teams? You can go one step further by switching a dedicated team to a dedicated offshore center. An ODC increases your production capacity while reducing risks. Offshore development services offer many benefits.
You Have Special Requirements For Data Security
An offshore development center works like a branch of your business, but it's located overseas. It has all the features needed for a traditional office that meets security requirements. Your ODC space is a fortress guarded by a private office, authorized entry, access control software, and integrated network security.
You won't need to hire several compliance and management security officers, as you will only have one development unit.
You Need Bespoke Technical Expertise
If you don't train in an affordable location, acquiring or developing niche skills can be costly. Offshore development centers let you set up your training center without spending money on upskilling third parties.
The training content is tailored to your company's specific goals and does not expose you to additional security risks. In-house training ensures the correct level of knowledge and can be matched to existing technology gaps.
Your Project Is Massive
A dedicated unit is often the best option for one-time projects or minor initiatives. In contrast, larger-scale development initiatives need constant support, updates, and unlimited scaling. You can scale up your development capabilities for multiple projects and establish a continuous delivery loop with an offshore center.
Spend Less To Get More
Offshore development locations are the best choice if software development isn't your core competency. This will keep your costs down. ODCs do not have the same overhead as internal offices. You can reduce costs such as rent for office space, infrastructure, electricity, office maintenance, and salaries.
Offshore Development Model Benefits
Many companies move their software development overseas to find the best talent and cover any lack of expertise in-house. With an offshore model, companies can find the best tech specialists with specific skills vital to their product's successful launch.
A remote office offers greater flexibility than managing an internal IT department. It allows for rapid team deployment, cost optimization, and scalability. This opens up more market opportunities, reduces risk, and allows knowledge sharing.
Access Top Talent
Staffing and recruiting in IT are becoming more difficult every year due to the growing global demand. In 2021 46% of executives in the industry cited talent shortage as their top concern for the next decade. The global talent shortage is expected to reach 85M people in 2030.
Finding high-quality technology specialists in places like the USA and UK is difficult. Offshore development centers are a great way to solve this problem since they offer access to software developers from around the globe.
Moving your business to a foreign location lets you connect with the top developers in your industry. Remote offices reduce geographical barriers and remove the need for big tech companies to compete with you in order to attract top talent.
Easy Launch
The cost of building an internal dedicated development team is high. You must allocate enough funding and hours to recruit, onboard, and train your tech staff.
These problems can be avoided by using offshore development frameworks. The vendor will take care of the rest. You have to tell them what you want. You will be provided with a team of software engineers that have been pre-vetted and are best suited to your project. A partnership offers a high-quality result, easy management, and unbeatable cost-efficiency.
Faster Time-to-Hire
It usually takes between 10 and 12 weeks to find the best talent in the local market. The recruitment process can take 5-7 months, as software engineers are hired one at a time.
You can access a pool of employees you might not have otherwise had. You can find seasoned developers in any part of the world. This will speed up the hiring process.
Choose a software development service partner who is experienced. You will be able to have a full-fledged team of product developers ready within 6-10 weeks. Vendors don't need to spend additional time on interviews, screening for technology, or coding assessments because they have a pre-screened talent pool. They choose the best people for your project. It takes them only weeks and not months to assemble the best team for you.
Cost Efficiency
Offshore business models allow you to combine powerful tech with reasonable rates and low operational costs. The cost savings can range from 40% to 60% on the development services you would have paid in the US or Western European countries.
You can hire the same qualified professionals abroad at a lower cost than locally. According to the U.S. Small Business Administration (SBA), the average basic salary package is 1.25-1.4 times that of the employee. Taxes, health insurance plans, retirement savings, vacation, and medical leave reimbursement are all additional costs.
How To Calculate Offshore Software Development Costs In 2023
You need to understand the offshore software development cost structure. Direct costs, ad hoc costs, rates for offshore developers, and much more.
Round-the-Clock Activity
Remote staffing is usually associated with a significant time zone difference. Some may consider it a disadvantage, but it helps speed up product delivery. The overlap between local and remote working hours will ensure a continuous supply of services and work.
Thanks to the availability of resources around-the-clock, there will always be someone working on your project. This allows you to quickly identify and resolve any problems arising during the development process.
If you have only a local team on hand, your employees must work late shifts and extra hours when major service updates are made. You can make changes to your workflow without interruption by collaborating with software specialists who work 4-6 hours ahead of or behind your local time zone.
Flexible Team Structure
Most tech-oriented businesses don't always require the same amount of resources. The ability to adapt quickly to changing project requirements, whether it's a change in tech stack, business models, or team capacities, is shown by the companies' ability to switch between them. Offshore development centers are very good at this.
Team composition is flexible with the remote office model. At the beginning of the development cycle, most work focuses on creating user-facing elements. Therefore, you only need to hire front-end engineers. As the project changes to include the development of server-side logic, the number of back-end specialists in the team will increase.
This level of flexibility can only be achieved by relying on an in-house team. With offshore development, you can do it more efficiently. You will also always have the exact team that you need.
Grid Dynamics - Build Your Remote Office
Grid Dynamics can be your partner if you consider building an offshore development center. Our service model includes team augmentation, pod teams, and remote development offices. We can help build an offshore development center of high-end developers from scratch or find tech professionals for your in-house IT team.
Grid Dynamics can be much more cost-effective and efficient than hiring local developers. Our experts will create a pre-screened team of developers best suited to your project.
Read More: What Are the Cost Components Of Offshore Software Development?
Investing in an Offshore Development Center Worth the Effort?
Fast-growing businesses can benefit from offshore development centers. You will need to put in a lot of work to set up an overseas development center, especially if it is your first time.
Choose your ODC Destination
First, you need to choose the best location for your offshore development center. Many factors need to be considered, from tax policies to English language proficiency.
Legal Consultants
You will need a professional consultant to look at the legalities and choose the correct legal structure for a business entity.
Register your center to be a Legal Entity.
You must submit all the documents you have collected to the territorial registration authority to be registered with the state.
Rent, Buy, or Renovate a Business Office
You will need to find an office for your offshore unit after all the paperwork has been completed. Most offices will require renovations, new office equipment, and materials.
The Tax System in Your Locality
Find out what your tax liability is by diving into the tax mysteries.
Hire Administrative and Support Staff, Including Recruiters
Your center is a fully-fledged business, so it requires trained personnel who can take care of your workspace and manage your business processes.
Run a Brand-Building Campaign
Your new branch will need some exposure in order to establish its presence on the market and gain an advantage over other businesses.
Recruit and Retain Developers
If you are persistent enough to finish this arc, the ultimate prize is the fear of having to hire local specialists in an uncharted market.
You might be thinking that establishing an overseas office will take a long time and cost a lot of money. It is. It doesn't need to be that way if you work with a trusted ODC provider who has over a decade of experience setting up offshore centers. Your responsibility (and costs) are reduced to selecting your ODC and validating tasks.
Where should you Locate your Offshore Software Development Center?
The location can make or break an ODC's efforts to expand beyond national borders. An ideal destination should have a large talent pool not to limit your center's growth. It is important to consider the price-value ratio in order to get more out of a new office and innovate for less money. Your ODC team needs to be on your wavelength, which is impossible with language and cultural differences.
Eastern and Central Europe has traditionally been regarded as a mecca for offshoring that is affordable. It is for this reason that Bulgaria, Romania, and Poland are the top offshoring destinations where all criteria align. Let's take a closer look at one of these leaders -- Poland.
Extensive Developers' Skill Sets
Poland has a large number of software developers who are highly skilled in a wide range of fields. Polish software engineers' expertise and knowledge have earned them the third spot among top developer locations. Poland has the largest IT talent in Europe, with more than 400,000 IT professionals. This makes Poland a major IT powerhouse.
Growing IT market
Poland is a mature market for outsourcing, but it continues to grow in the IT industry. Statista reports that the IT and IT Outsourcing markets have grown steadily over the past few years.
The country's IT market was expected to reach $6.45 billion, with outsourcing as its largest segment valued at $ 2.29 billion. Poland's resilient economy contributes to its overall image as a business-friendly environment.
Location in Europe: Strategic Location
The EU's positioning of Poland translates to a convenient timezone. Warsaw's six-hour difference from New York allows software companies to respond quickly to their clients. India is about 12 hours from the USA. Poland's central location makes it easy to communicate with other countries such as the UK, Europe, and even the rest of the world.
Low Development Costs
Unlike other Western European countries, Poland offers talent that is vetted at affordable rates. PayScale reports that the average annual rate for Poland's software engineers is over $21,000, whereas the average US developer earns x6 more.
Lower rates do not compromise the quality of the software. The quality of the software is at least as high or better than that in the top-paid locations.
Data protection in the EU and US
A strategic location means that Poland has to adhere to the same regulations regarding data protection as other EU nations, like Germany or the Netherlands. The data protection regime is governed mainly by the General Data Protection Regulation (GDPR), a standard that EU companies are familiar with.
Communication Gaps are Eliminated
Poland is part of European culture. Therefore, there's no cultural divide between the team members and their clients. In Poland, the influence of European culture is combined with a global business mindset. Business operations don't suffer when local teams interact with people of different backgrounds.
Mature R&D Hub
Microsoft, Google, and Oracle are among the global tech giants that have established their R&D centers in Poland. This ODC location provides a mature, tax-friendly, and affordable outsourcing framework which encourages foreign investment in the development of innovative products.
Even the best team can make the most effective setting ineffective. The most important factor in establishing a foreign presence is choosing a partner with experience and repute.
What should you look for in a vendor of Offshore Development Services?
Confining a fully-functional business unit to a tertiary is a risky move. Your ODC partner must act as an extension of your company and know all the ins and outs of your business. You can easily predict the reliability of an offshore development center by looking at its track record. Your initiative will likely succeed if they have completed more ODC projects. You can also validate your partner's credibility by using the following methods.
Assess IT Expertise
Your team should be able to speak both English and the language of software innovation in order to provide your products with the most up-to-date technologies. The main reason why a business owner will hire a third party is because they lack the technical expertise and domain knowledge on their own. A company that wants to drive digital change may not have the resources to develop a BI system and analytics, so it farms out the task to a vendor.
It would be best if you also considered your specific tech stack as well as the domains you want to focus on. We offer not only our technical expertise but also a variety of consulting services that culminate in a technology-enabled, end-to-end business transformation.
Your partner should have a broad technical understanding and a deep understanding of your business to help align technology and value. Developers with domain expertise can contribute at a conceptual and development risk-reducing level. We have extensive industry expertise that spans almost all domains - from manufacturing to healthcare and entertainment.
Investigate Relevant Experience
Without real-world experience, no matter how vast your vendor's technological command spans may be, it will still be weak. To ensure your initiative's success, it is best to dig deep into the vendor's portfolio. The portfolio would include similar projects within the same domain or a related one. Check that your partner has experience setting up offshore development centers, including their associated processes.
If you cannot find any relevant projects, contact the partner directly. Not all projects will be listed in the Clients section because of confidentiality concerns. You can also understand a vendor's maturity by reading client testimonials in directories like Clutch and GoodFirms.
Cost-Effectiveness is the key, not cost
Fully managed operational centers offer great potential for reduced development costs and easier management. Only a few deals are worth investing in, and ODC is no different. Low-cost labor is a major factor in price calculations. However, it is not the only thing that helps assess the viability.
Some hidden costs, such as travel, project management, and procurement, can backfire, reducing your savings to zero. The key to finding the right partner for your offshore center is to know the value you expect from it and then correlate this with the effort and investment involved.
Offshore Software Development Centers: a Cost-Effective Solution for all
Businesses that aren't able to adapt quickly and accelerate their growth will be crippled by the competitive market dynamics. To maintain a competitive advantage, businesses must accelerate their technological initiatives. They also need to supplement traditional services with digital-first experiences.
Digital transformation can be expensive if not done in a more cost-effective environment. Offshore development centers help companies innovate and scale up their technological offerings at lower costs and with less administrative burden.
An ODC is not a solution for all problems. Setting up an ODC in another country should only be considered if you have large-scale projects in mind, niche skills, and high-security requirements.
