What is an Offshore Development Centre (ODC)?

What is an Offshore Development Centre (ODC)?

Every company dreams of spending minimum resources and completing their project in the shortest time possible. Especially for startups when they don’t have to spend too much funds on one area alone. With offshoring being a popular and effective alternative, many companies have switched to this alternative in their effort to increase their time to market. 

However, many companies have taken this several notches further and decided to set up an Offshore Development Centre in an effort to bring more success to projects. 

What is an Offshore Development Centre?

Offshore Development Centre (ODC) is a development office housing teams of software engineers in an offshoring location/country. In simple words, it is an office with skilled professionals, run by a company in another country. Both large multinational companies and startups employ this technique to efficiently run their projects. This would definitely help ease the big financial strain companies are likely to experience when they have to hire professionals from another country, train them and then update them with the latest technologies. 

The Offshore Development Centre is a real working space, a physical space where there will be a team working on software development projects for a particular company. This physical space can be set up anywhere convenient to the parent company, but normally companies choose a place that’s easily accessible, has a lower cost of living (when compared to the native company) and a profusion of skilled talents at reasonable rates. 

It’s different from Outsourcing 

Outsourcing work to a different country happens when a company faces a shortage of software engineers or if they want to scale, but don’t want to spend any more money on infrastructure. The easiest way out would be to find a good company to partner with, and the offshoring relationship can go successfully well. There are different varieties in an outsourcing model, and when your company has definitive project requirements, it is possible to outsource the work. It will be more of a fixed-price model, following agile methodology. 

Before going ahead with this kind of working scenario, let’s have a look at the differences between ODC and Outsourcing:

The differences:

Scaling 

Outsourcing – If you plan to scale, outsourcing is a good option to choose, because you can start small, and then scale to full-stack complex projects. 

ODC – Setting up an ODC is a viable option if you have big long-term projects requiring committed attention, expert attendance and professional support. 

Developer commitment 

Outsourcing – In this scenario, one developer would be working on more than one project at a time, and one of the projects could be yours. They would be working on more than one company at a time.

ODC – There would be a dedicated team working exclusively for all the projects in your company. They would work at the office set up for this purpose. 

The size of team

Outsourcing – The team members may start with one to any number required for your project. It solely depends on your project, and the time to market.

ODC – In an ODC, there is no one-man scenario. You have to hire an entire team of professionals and delegate the tasks to them. 

Who hires and how

Outsourcing – In an offshoring system, the vendor usually has their own team and depending on their skill and potential, tasks would be assigned. There will be a ready-to-go team once the client requirements are conveyed. 

ODC – The team would be selected carefully according to client demands. They might require a particular skill level for the software engineers, since the team would be exclusively for them. 

Ramping up team

Outsourcing – You get to have more members added to the team, provided you let them know of your requirements. The vendor will recruit and hire the team members.

ODC – Scaling of the team will be done with active participation from the company itself. 

Support system

Outsourcing – In this scenario, the support team will be set by the vendor company, including the accounting team, project managers, HR etc. 

ODC – The patent company sets up the entire support team, and so they have a good idea who does what, and how good they are at support. 

The main purpose behind:

Outsourcing – In an outsourcing style of work, the focus is majorly on specialisation of the outsourced team. The company residing in another country hires people who are skilled at a particular job, to fill the talent gaps in their own team. So the ultimate focus would be to increase productivity, while the company focuses on other important things. However, cost is not a critical factor, but a fundamental reason. The geographical location might also not be that important. 

ODC – the main purpose would be to control the costs by capitalising on the lower manual labour in these countries when compared to the parent company, so it will act as a subsidiary.

To keep the long story short, while they both have their differences, they join together in one common goal- increase productivity at lower development costs, optimize accounting and human resources, get access to more infrastructure and save money.  

Benefits of ODC

The Offshore Development Model is getting really popular because of these benefits:

Cost control 

As mentioned earlier ODC is set up in countries where the cost of living is much lower than in the parent country, so the money saved can be utilised for other purposes. The focus of the entire company shifts when a lot of funds can be saved. 

A good idea for those expansion moves

If you plan to expand to a different country, and spread the word about your company, increase your reputation and sales volume, setting up an ODC in a different country is just the thing to do.  

Lower infrastructure

Setting up an office in another country where cost of living is low is good to help regulate infrastructure costs too and thereby lower rent, maintenance, other miscellaneous expenses etc. 

A lot of skilled people in one team

With an offshore development team working out of a single office, it is possible to hire all the exceptional people you need under one roof. However, you might still need them to adapt to your country’s working culture, and you to theirs. 

Product localisation 

If you are planning to expand into other countries, having an ODC would be a clever business move. All the developers will be local, the market team will be local and they would be easily able to adapt to the target segment’s interests. They would be able to come with innovative ideas that can tap the local market and bring them into the fold. 

Conclusion

However, there are a few challenges involved in setting up an ODC. Choosing the right location is the most crucial thing because a wrong choice can give you years of set back. You can choose a major city because there will be no dearth of talents, and you can choose not so big cities if you are willing to start out with intermediate to beginner talents. 

And the government policies are another thing. Some countries are not open to foreign businesses coming up and setting up shop, so if you have a particular country in mind, network with the local contacts there to understand the market. 

Interesting Links:

What is Offshore Software Development?

Advantages and Disadvantages of Offshore Software Development

Pictures: Canva

The author: Sascha Thattil works at Software-Developer-India.com which is a part of the YUHIRO Group. YUHIRO is a German-Indian enterprise which provides programmers to IT companies, agencies and IT departments.