What Is ODC? Key Features And 7-Step To Set Up Offshore Development Center

Many businesses today face the frustrating reality of needing to build innovative software solutions but being constrained by the limitations of local talent pools and budget concerns. Statistics show that a significant number of tech projects are stalled or even abandoned due to these very challenges. Leaving businesses struggling to keep pace with the demands of the digital age.

This article offers a tangible solution to these pressing issues: the Offshore Development Center. We will discuss the concept of an ODC, revealing its key features and the significant advantages it can offer businesses of all sizes. More importantly, we'll provide a practical, step-by-step guide outlining a proven 7-step process to successfully establish your own ODC.

What Is An Offshore Development Center (ODC)

Companies are constantly seeking innovative ways to optimize their operations, reduce costs, and access specialized skills. One such strategy that has gained significant traction is the establishment of an Offshore Development Center (ODC). But what exactly is an ODC?

What is ODC?

Offshore Development Center is a dedicated team of professionals, typically software developers, engineers, or IT specialists, located in a country different from the company's headquarters. This method offers more control and a longer-term commitment compared to typical outsourcing.

It's like having a branch of your company focused on development or technology, situated remotely. Unlike simply hiring an external company for specific projects, an ODC becomes a real part of your organization. The people in the ODC work only on your tasks, follow your company's way of doing things, and often feel like they're just down the hall, even though they might be thousands of miles away.

Purposes of ODC

Companies decide to build an Offshore Development Center for various important reasons, all aiming to help them achieve their business goals. Let's look at some of the main motivations behind this choice.

• Cost Optimization
• Access To A Global Talent Pool
• Scalability And Flexibility
• Focus On Their Core Competencies
• Gain Access To New Markets

One major draw is saving money. It's a well-known fact that outsourcing, including setting up ODCs, is often done to reduce costs. For instance, many reports indicate that labor costs in countries like India or parts of Eastern Europe are considerably lower than in places like the United States or Western Europe. 

Another big reason is finding the right dedicated software developer. Sometimes, the specific skills a company needs are hard to find in their own country. An ODC opens the door to a global pool of experts, allowing businesses to find people with very specific knowledge or experience that might not be readily available locally. 

Finally, companies establish ODCs to enter new markets, leverage different time zones, or crucially, optimize costs by partnering with offshore providers (due to lower personnel cost per task and favorable exchange rates). An ODC team offers local insights and enables 24/7 operations, accelerating project completion and improving cross-timezone customer support.

For businesses looking to develop new web-based applications, an ODC can be a great way to bring innovative ideas to life.

Comparing ODCs to Traditional Outsourcing

Understanding these differences is key to deciding which approach is the right fit for your business.

When Do You Need an Offshore Development Center?

Let's delve into the key indicators that suggest it might be time to consider setting up your own dedicated offshore team.

Not Enough Local Tech Experts

One big sign that you might need an Offshore Development Center is when you can't find enough skilled tech people in your own area. If it's hard to hire developers, or if it costs too much and takes too long, an ODC can help you reach a much bigger group of talented people around the world.

Local Development Costs Too Much

If paying for developers in your country is becoming very expensive and is affecting your budget, it might be time to think about an Offshore Development Center. You can often save a lot of money on salaries and other costs by having a team in another country where the cost of living is lower.

Need to Grow Your Team Quickly

If your company is growing fast or has big plans that require you to add many developers quickly, setting up an Offshore Development Center can be a much faster way to do this than trying to hire everyone locally. You can often get a team up and running much quicker with an ODC.

Need for Ongoing Development

If your company needs developers for a long time, not just for one project, then an Offshore Development Center can be a good stable solution. The team you build offshore will become familiar with your business and work with you consistently, which can lead to better results in the long run.

Want Your Local Team to Focus on Key Tasks

If you want your main team to work on the most important things for your business, you can set up an Offshore Development Center to handle other development tasks. This way, your local experts can focus on what they do best, and the offshore team can take care of other important work.

Need Specific or Rare Skills

Sometimes, your projects might need people with very specific skills that are hard to find in your country. An Offshore Development Center can give you access to experts in other parts of the world who have the exact skills you need for your projects.

Want More Control Over an Overseas Team

If you want to have more direct control over a team working in another country compared to just hiring an outside company, then an Offshore Development Center is a good option. You get to manage the team and how they work, making sure they follow your company's rules and help you reach your goals.

6-Benefit Of Offshore Development Center For Your Business

An ODC can offer numerous advantages, allowing companies to achieve their technological goals more efficiently and affordably.

Saving Money

One big reason why businesses choose to have an Offshore Development Center is that it can save them a lot of money. In many countries around the world, like in Asia or Eastern Europe, the cost of hiring people is lower than in richer countries. This means you can pay less for salaries and other work-related costs, which can really add up. According to a report by Deloitte, cost reduction is still a primary driver for outsourcing, with some companies reporting savings of 20-50% or even more when using offshore teams compared to onshore.

Getting the Best Tech People

It can be hard for businesses to find and keep good software developers, especially in places where lots of tech companies are looking for the same people. An Offshore Development Center lets you look for talent all over the world. This means you can find skilled people who might not be available in your own country. India, for example, has one of the largest pools of software developers globally, with estimates suggesting over 4 million IT professionals. This vast talent pool offers a wide range of skills and experience. 

Being Able to Grow Easily

Sometimes your business needs to grow quickly, and sometimes it might need to slow down. An offshore development center models makes it easy to change the size of your development team as needed. If you have a new big project, you can quickly add more people to your offshore team. If things get quieter, you can reduce the team size. This flexibility helps you manage your projects without the trouble of hiring and firing people in your own country all the time.

Making Sure the Quality is Good

Some people worry that the quality of work might not be as good if the team is in another country. However, if you manage your Offshore Development Center well, you can actually make sure the quality is very high. Because it's your own team, you can set the standards for how they work and test the software. Also, many countries have very good tech education, so the developers you hire offshore can be very skilled. A study by KPMG found that while cost savings are a major driver, over 70% of companies also cite improved quality as a benefit of their outsourcing arrangements.

Focusing on Your Main Business

Managing a team of software developers can take a lot of time and effort, which can take your main team away from the most important things your business does. By having an Offshore Development Center handle your development tasks, your main team can focus on the core parts of your business, like coming up with new products or improving your relationships with customers. This helps everyone concentrate on what they do best, making your whole company more successful.

Getting Products Out Faster

In business, it's often important to get your products and services to customers quickly. An Offshore Development Center can help you do this. With a dedicated team working offshore, you can often get more work done at the same time. You might even be able to use the time difference to your advantage, with one team working while the other sleeps. This faster speed means you can respond to what customers want more quickly, launch new things faster, and stay ahead of your competitors.

How To Set Up an Offshore Development Center

Setting up an Offshore Development Center (ODC) requires careful planning and execution. Here's a 7-step guide to help you navigate the process:

Step 1: Define Your Needs and Objectives

Having a well-defined scope and clear objectives will guide all subsequent steps. Before you even think about locations or teams, clearly define why you need an ODC and what you aim to achieve. What are your specific development needs? What skills are you lacking locally? What are your budget constraints? What are your long-term goals for the ODC? 

Step 2: Choose the Right Offshore Location

Selecting the right country for your Offshore Development Center services is crucial. Research potential locations based on several factors:

• Talent Pool: Does the country have a strong pool of developers with the skills you need?
• Cost: What are the average salaries and operational costs in that location?
• Time Zone: How will the time difference impact communication and collaboration? Aim for some overlap with your core working hours.
• Cultural Compatibility: Consider cultural differences and language proficiency to ensure smoother teamwork.
• Political and Economic Stability: A stable environment is essential for long-term operations.
• Legal and Regulatory Framework: Understand the local laws related to business, data protection, and intellectual property.

Step 3: Decide on Your ODC Model

There are typically two main models for setting up an Offshore Development Center:

• Build-Operate-Transfer (BOT): You partner with a vendor who helps you set up the ODC, hires the team, and manages operations for a set period. Eventually, you take full ownership.
• Direct Setup: You establish your own legal entity in the offshore location and directly manage all aspects of setting up and running the ODC, including recruitment, infrastructure, and compliance.

The BOT model is often preferred for its speed and reduced initial risk, while a direct setup offers more long-term control.

Step 4: Establish Legal and Operational Framework

Once you've chosen your location and model, you need to establish the legal and operational framework. This involves:

• Contracts and Agreements: Drafting and signing contracts with your chosen ODC partner (if using BOT) or with individual team members. Ensure these cover aspects like intellectual property rights, confidentiality, and service level agreements.
• Infrastructure Setup: Establishing office space, IT infrastructure (hardware, software, internet connectivity), and communication tools.
• Security Protocols: Implementing robust security measures to protect your data and intellectual property.

Step 5: Recruit and Onboard Your Offshore Team

This step involves defining your hiring process, sourcing candidates, conducting interviews, and making offers. Ensure your hiring process aligns with your company culture and values. Once the team is hired, a thorough onboarding process is essential to integrate them into your organization. This includes:

• Company Culture and Values: Introducing them to your company's mission, vision, and work ethics.
• Project Overview: Providing detailed information about the projects they will be working on.
• Tools and Technologies: Training them on the tools and technologies your company uses.
• Communication Channels: Establishing clear communication protocols and introducing them to the onshore team.

Step 6: Implement Project Management and Communication Strategies

Effective project management and clear communication are vital for the success of your offshore development center guide. Implement strategies such as:

• Project Management Tools: Utilize tools for task management, progress tracking, and issue resolution.
• Regular Communication: Establish regular meetings (video conferences, calls), daily stand-ups, and clear channels for communication (e.g., Slack, Microsoft Teams).
• Performance Monitoring: Implement mechanisms to track the performance of the offshore team and provide regular feedback.

Step 7: Manage and Nurture Your ODC

Setting up an Offshore Development Center is not a one-time task; it requires ongoing management and nurturing. If feasible, plan occasional visits to the offshore location to foster stronger relationships and team bonding.

Best ODC Models For Business To Apply

The "best" ODC model really depends on your company's specific needs, long-term goals, the nature of your projects, and the level of control you want to have over your offshore team.

BOT (Build-Operate-Transfer)

In this model, you partner with a service provider who takes care of setting up your entire Offshore Development Center. This includes finding office space, hiring the team, and putting all the necessary processes in place. They operate the ODC for a specific period, and then, as the name suggests, they "transfer" it to you, and you take over full control.

Best for:

• Large enterprises looking to establish a significant offshore presence.
• Companies new to offshore outsourcing and wanting guided setup.
• Businesses with a long-term strategy for offshore development and eventual full ownership.

Dedicated Development Team

This is a very popular model where you essentially hire an offshore team that works exclusively on your projects. The team members are usually employees of the service provider but function as an extension of your in-house team. You have direct control over their tasks, priorities, and how they work.

Best for:

• Small to medium-sized businesses (SMBs) and large enterprises with ongoing development needs.
• Companies that require a consistent and reliable offshore development capacity.
• Businesses that value team integration and direct control over their development process.

Hybrid Model

As the name suggests, this model combines elements of different ODC approaches. For example, you might have a core dedicated team offshore for your main projects, but you also use a project-based approach for specific, short-term tasks or when you need very specialized skills for a limited time.

Best for:

• Businesses with diverse development requirements, both long-term projects and short-term.
• Companies that want the flexibility of project-based outsourcing.

Project-based Model

In this model, you outsource specific projects to an offshore team. Unlike a dedicated team, the offshore team might be working on projects for other clients as well. Once the project is completed, the engagement usually ends.

Best for:

• Startups and SMBs with clearly defined, short-term development needs.
• Companies that want to outsource specific tasks or features without a long-term commitment.
• Situations where specialized skills are required for a limited duration.

Key Tips To Avoid Mistakes And Choose The Right ODC

Like any strategic partnership, it's easy to stumble if you don't approach it with careful consideration. Here are some key tips to help you avoid common mistakes and select the ODC that best fits your needs:

1. Be specific with a clear plan: Many outsourcing failures stem from poorly defined requirements. Spend the time upfront to document your needs thoroughly.Before even looking at potential ODCs, you need a very clear picture of what you want them to do. What specific skills are you looking for? What are your project goals and timelines? What's your budget? A vague idea will lead to a mismatched partnership. In essence, a clear plan provides significant operational value by minimizing costs, maximizing efficiency, enhancing quality, improving communication, and facilitating effective performance evaluation.

1. Look Beyond the Price Tag Alone: While cost savings are often a major driver for choosing an ODC, focusing solely on the cheapest option can be a costly mistake in the long run. Factors such as quality, communication effectiveness, and the ODC's alignment with your business are equally, if not more, important. Includes factors like communication overhead, potential rework due to quality issues, and the time spent managing the offshore team. Prioritizing a strong fit over the lowest cost ensures a more successful and value-driven partnership.

1. Think About Cultural Fit: It Matters More Than You Think. While seemingly less tangible, cultural differences can significantly impact teamwork and collaboration. Even small cultural differences can lead to misunderstandings. Offshore teams are typically expected to adapt to the client's work styles and communication norms. However, it's crucial to clearly communicate your work styles, holidays, and communication norms upfront, while also being aware of and accommodating the offshore team's local holidays to avoid disruption.

1. Care about security and Intellectual Property: Your data and intellectual property are invaluable. Critically, verify if the ODC possesses relevant security certifications (e.g., ISO 27001) and clearly define their data protection policies within the contract or service agreement. Review their security certifications and data protection policies. Learn more about robust security measures with Golden Owl's cybersecurity services.

Popular Locations To Reach Out The Best ODC

Here is a list of popular locations to reach out for the best ODCs:

• India
• Philippines
• Vietnam
• Poland
• Latin America (e.g., Mexico, Colombia, Brazil)

India: India has long been a leading destination for offshore software development. The country boasts one of the largest numbers of STEM (Science, Technology, Engineering, and Mathematics) graduates globally, with estimates exceeding 1.5 million graduates each year. 

Furthermore, India's IT sector is substantial, with a market size expected to reach $166.4 billion  The combination of a vast, highly skilled IT workforce, competitive pricing, and the absence of additional benefit costs makes India a preferred choice for many organizations seeking offshore development partners.by 2030.

Philippines: The Philippines stands out as a popular ODC location, particularly for businesses that prioritize strong English language skills and customer service capabilities. The Business Process Outsourcing (BPO) sector, which includes IT services, is a major contributor to the Philippine economy, employing millions of people and demonstrating a strong infrastructure and government support for outsourcing. Our suggested top countries are popular outsourcing destinations. 

Vietnam: Vietnam has emerged as a compelling alternative and increasingly popular location for ODCs in recent years. Similar to India, Vietnam offers significant cost advantages in terms of IT personnel. While salaries in major tech hubs like Ho Chi Minh City and Hanoi are competitive within the local market, they remain considerably lower than those in developed nations. Furthermore, the current favorable exchange rates can further reduce the effective cost of hiring Vietnamese developers for foreign companies. According to a report by TopDev, Vietnam's IT workforce is growing at an impressive rate, making it an attractive option for businesses seeking a dynamic and cost-effective offshore development partner. 

Poland: Its strong technical education system produces a large number of highly skilled software developers with a strong understanding of Western business culture. Poland's geographical proximity and cultural similarities to Western Europe make it an appealing choice for businesses looking for easier collaboration and potential for in-person visits. 

Latin America (e.g., Mexico, Colombia, Brazil): Particularly for companies based in North America due to their geographical proximity and overlapping time zones. The cultural affinity with the United States can also contribute to smoother working relationships for North American businesses.

Success ODC Case Study With Golden Owl Team

Golden Owl is a reputable provider of offshore development services, recognized for offering stable and competitive offshore development costs, particularly beneficial for small and medium-sized enterprises (SMEs).

Golden Owl Solutions (GOS) specializes in building dedicated offshore development teams for businesses across various industries. Their core services typically include software development (web, mobile, and custom applications), quality assurance and testing, UI/UX design, and project management. 

Client Needs: "Innovate Retail," a rapidly expanding SME in the e-commerce sector based in Australia, was facing significant challenges in keeping up with the demands of their growing customer base. They needed to develop new features for their online platform, improve website performance, and integrate with new payment gateways.

How GOS solved it :  Innovate Retail partnered with Golden Owl to establish a dedicated offshore development company in Vietnam. Golden Owl worked closely with Innovate Retail to understand their specific technical requirements, project goals, and company culture. GOS then assembled a team of experienced developers with expertise in the required technologies (e.g., React, Node.js, AWS).

The partnership with Golden Owl yielded significant positive outcomes for Innovate Retail:

• Seamless Integration & Faster Releases: The offshore team integrated smoothly with your tools and meetings, leading to a significantly faster pace for releasing new features and platform improvements. 
• High-Quality & Stable Platform: They delivered high-quality code with thorough testing, resulting in a more stable and better-performing e-commerce platform. 
• Dedicated & Collaborative Team: Every team member is fully focused on your project, fostering deep collaboration and unmatched flexibility. 
• Clear Requirements & Transparent Costs: With well-defined requirements, you get clarity on project scope, deliverables, and upfront costs, ensuring complete transparency.
• Flexible Scope & Pay-as-you-go: Even with fluid scope and specifications, the model offers flexibility for modifications, and you're billed only for actual hours worked. 

Discover how Golden Owl's offshore development services can provide you with a dedicated, skilled team at stable and competitive costs. Ready to explore how Golden Owl can help you establish your own ODC? Contact their team today for a consultation.

Wrap Up

In conclusion, establishing an Offshore Development Center presents a powerful strategy for businesses aiming to achieve sustainable growth and technological advancement in today's competitive landscape. By carefully considering your needs, choosing the right model and location, and implementing a robust setup and management plan, you can unlock significant benefits in terms of cost efficiency, access to talent, and scalability.

FAQs

1. Planning an ODC: What's the very first thing we need to figure out?

While cost savings are a significant advantage, an ODC also provides access to a global talent pool, allowing you to find specialists you might not be able to hire locally. It also offers the flexibility to quickly grow or shrink your team as needed and can free up your local team to focus on your core business strategies.

1. How's an ODC different from regular outsourcing?

An ODC is like having your own dedicated branch office overseas. You have much more direct control over the team members, their day-to-day tasks, and the processes they follow, unlike traditional outsourcing where you're handing over a project to an external company. This dedicated model often leads to better integration and a stronger sense of partnership.