Feb 18, 2023
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Offshore development is a profitable and convenient form of cooperation that allows you to reduce costs and receive the services of experienced engineers at the same time. Large companies such as Google or Samsung open independent offshore development centers to get new ideas and solutions.
In this article, we will discuss ODCs, their benefits to businesses, their models, and how to open your own center.
An ODC or offshore development center is an office or company branch located in a foreign country and usually consists of a full development team. Such separate offices are opened due to the lower cost of development services and a larger talent pool. For example, giants such as Google and Samsung have ODCs in Eastern European countries.
Both ODC and outsourcing provide access to a large talent pool at lower rates. However, they have some critical differences.
|Location||Foreign country.||Location is not a critical factor.|
|Hiring||Hiring specialists and forming a team specifically for the customer’s project based on its unique requirements.||A ready-made team of specialists who can be involved in other projects as well.|
|Scaling||Provides unlimited opportunities to scale and change your development team.||Scaling is limited by time frame and contract.|
|Administration and Support||Vendor provides a full-fledged administrative department, including accounting, HR department, etc.||The development team only.|
Nearshore software outsourcing and ODC are quite similar models of cooperation, with the exception of only a few points.
Nearshore development means transferring specific tasks or projects to companies from neighboring countries or even regions. ODC, in turn, is about creating a full-fledged branch of your company in a country where it is profitable and it is not necessarily near you.
The other major differences related to management and development follow from the previous one. ODC involves the creation of a business infrastructure, while nearshoring is transferring a task to a contractor with a ready-made team and infrastructure that can be used for third-party projects.
In both cases, the developers are dedicated to your project. They have the opportunity to develop within your company, which is a big advantage. However, the in-house option doesn’t provide such benefits as a reduction in operating costs and wide opportunities for finding unique solutions. There are other differences as well.
|Price||Lower price for high-level developers.||Higher costs due to hiring, insurance, equipment, etc., expenses, and higher developer’s rate.|
|Communications and Management||Remote communication, the need to clearly define communication tools and strict schedule.
Experienced vendors provide timely personal meetings with the team.
|Both personal and remote communications are possible.|
|Scaling||Unlimited opportunities to scale and change your development team.||Scaling is limited by employment contracts and hiring prices.|
One of the main reasons why companies open ODC is the need to reduce their operating costs due to the difference in high-level specialists’ rates, as well as savings on office rent, technical equipment, etc. But there are other cases when this approach can be beneficial.
In some cases, opening such a center can be a measure to increase the security of the development because the ODCs work within the framework of a non-disclosure agreement and complex technical security measures.
Let’s take a look at the main ODC models
Each model may have individual limitations and requirements within a specific cooperation or employment agreement.
Among the main advantages of ODC, the following are worth special attention:
It is also worth noting that this approach allows you to optimize the development process and find new solutions in cases where the in-house team is stuck and needs a fresh view.
Leobit team will be happy to discuss cooperation options best suited for you.
Opening an offshore development center has its own risks that should not be ignored.
The opening process is complicated, but it goes more smoothly if you follow this step-by-step system:
1. Locations. Let it be a country with favorable tax and economic conditions, a good technical education, and sufficient English proficiency.
2. Vendor. Choose companies with extensive experience in offshore cooperation and an extensive portfolio. Also, use demo calls to get to know them better.
3. ODC model. It all depends on your project needs. An experienced vendor will help you with this.
4. Hiring. Choose specialists who will share your business values and have the necessary expertise. You can contact a specialized recruitment agency or rely on a vendor.
The next steps depend on the ODC model. Office rental, onboarding, and other aspects can be handled by the vendor or yourself.
Here are some helpful tips to make managing an offshore center easier.
First, find a reliable vendor interested in your business success. Stay in touch with the team and establish a comfortable communication system. Regular reports and timelines will help you stay on top of progress and improve interaction with developers.
Second, define the center’s success metrics for yourself. These should be not only financial parameters but also staff performance evaluation, achievements, and customer feedback.
In addition, an intermediary as a project manager plays a major role in establishing work processes. So find someone to control workflow and maintain regular reporting for you.
The choice of location depends on the level of technical education, competence, and rate of developers. In recent years, the best option for opening an ODC was Eastern Europe, namely Poland, Ukraine, and Romania. They are suitable for all parameters, including a loyal taxation system, the closeness of time zones, and a high English knowledge level.
Poland offers 250,000 experienced developers and a relatively cheap cost of living. The number of developers in Romania is slightly less, namely about 140,000, but this country is known for the rapid pace of development of the industry.
As of 2022, Ukraine has about 190,000 experienced specialists and the most dynamic tech market. Such giants as Google, Magento, Samsung, etc., have experience centers here and continue to invest in their development, despite the military actions.
Ukraine has a vast talent pool, including specialists of a narrow profile. The tech industry here is developing fast, and educational institutions conclude agreements with IT companies and train new specialists specifically for them.
At the same time, the country’s tax system is open and loyal to foreign investors. The cost of renting offices and accommodation is relatively small. That is why opening the ОDС here is quite a profitable solution.
Offshore development center is a great option for companies that need fast and inexpensive scaling with lower operating costs. It allows you to open a full-fledged company branch and hire highly qualified specialists at a much lower price.
Leobit is a Ukrainian company with extensive experience servicing ODC and providing full-cycle development services. We’ll be happy to advise you on this topic and discuss cooperation options, so feel free to contact us.
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