In the past, all the offshore development center benefits were about operational cost reduction and for those whose primary purpose was not primarily focused on the IT industry. Today, with IT gradually becoming an important part of every field, the demand for IT resources increases exponentially. Along with other working models such as dedicated teams or IT outsourcing, the term offshore software development is now all the rage among decision-makers and C-level employees.
A company owning an offshore development center is virtually a good sign of continued and great growth for businesses. So, in this article, CMC Global will give you an overview of offshore development centers, from its models, benefits, risks as well as challenges.
What is an Offshore Development Center?
Offshore Development Center or ODC is software development is a software development office based in a third country with a huge pool of software development experts and comparatively low cost. The ODC is built to work for companies in a different country or ones located in other parts of the country.
See CMC Global’s list of Top Outsourcing countries 2021
The Offshore development center consists of any roles with technical backgrounds, from testers, IT specialists, remote developers, project managers, UI/UX designers, and so on. Most ODCs are workspaces equipped with any required infrastructure and technical experts. All remote employees work under a manager or PM, who then reports directly to the on-premises teams based in the company’s headquarters in another country.
ODC offers a wide range of services namely software development team establishment, project-based development, testing services, setting up separate ODCs, and many more. They also can tackle additional problems such as taxing, bookkeeping, HR management, and many more. To put it simply, there are countless offshore development center benefits, the problem is you have to choose the right model and be aware of the responsibility you must bear.
Offshore Development Center – ODC Models
Two major ODC models are used the most nowadays, which are the customer ODC model and the contractor ODC model.
Contractor ODC Model
This model especially fits the needs of small companies. In this model, the main office will send out requests or specific requirements for the offshore development center so that the contractor overseas will select a team based on those.
This selected team will hold responsibility for a wide range of tasks, from managerial to technical, including system design, software updating, new code writing, and so on.
Customer ODC Model
Big companies often choose this model since they are big enough to have the capacity to handle a large number of tasks.
In this model, a team is also picked based on the customer or the main office’s specifications. However, in this case, the client will cover a lot more tasks in comparison to those choosing the Contractor OCD Model. This can range from product research, and analysis to team management while the OCD team will mainly focus on coding.
Others categorize ODC models into several development ones:
Software ODC Trust
This is for those who demand top-notch security levels, suitable for those whose software is one-of-a-kind and thus, requires strict confidentiality.
Software ODC Classic
This is another name for the Contractor model as a dedicated team consisting of qualified and certified work together under the supervision of a project manager (PM). This kind of model is useful for projects with a wide variety of tasks, from older software updating and expanding, its support, platform migration, or code writing.
Software ODC Branded
This is the choice to go for when you want to involve and control the whole software development process.
ODC Full Form
This is also known as private ODC, or as mentioned above, the Customer ODC model.
How is ODC different from outsourcing?
Some may confuse ODC with Outsourcing, but these two are slightly different. ODC offers services or IT products made in other countries, while Outsourcing just means having the work done by a third party, regardless of the geographical location.
The main purpose of Outsourcing is to focus on business core competencies to increase productivity and let others take care of their IT worries, while ODC’s primary cause is the tempting cost reduction. However, both ODC and offshore Outsourcing have the same interest in getting access to a larger IT Talent pool with lower cost, speeding up the recruiting, and optimizing their business.
Despite which model you choose, there are two main responsibilities all companies must be aware of to perform a successful project:
Manage the project budget
With ODC, vendors will invoice their clients about the number of hours allocated by their team of developers or testers, not the association between payment and deliverable. Thus, the client’s project manager needs to be conscious of the project budget and the project timeline so that the actual time spent on a task doesn’t exceed the original estimates.
Keep an overview of the project throughout the process
To ensure success, tasks such as deadlines monitoring, outsourced tester or programmer’s outputs overseeing are all responsibility of the client’s software project manager. This requires regular meetings, strict supervision, and harmony between the client and their trusted vendor.
Offshore Development Center Benefits
There must be several benefits of ODC to explain why big companies are so eager with this approach. Here are some rationales behind the trend:
As mentioned above, ODC is often placed in countries with lower living costs in comparison to where the headquarters are located. This is how businesses can dissimilarly utilize the cost in labor, infrastructure, and other benefits for full-time local employees.
Lower living cost also means cheap facilities. Establishing an ODC in a much cheaper country can significantly reduce facility costs such as infrastructure, office rent, maintenance, internet, etc.
ODC is also a way of reputation expansion as it increases the reputation, and sales volume by getting closer to a new market of customers and understanding their needs better. An ODC, especially placed in big local companies, also has a physical presence in the target market and thus, can reduce the logistics costs.
With your ODC in another country with a much more affordable cost, a company can easily scale up or down its team size based on the deadline, and technology changes while still staying within your budget.
And if you want to take advantage of this and reach the overseas market, ODC is a nice choice. Not only does it bring your enterprise closer to a specific market, but it also helps to localize your products to meet the demand of customers in that market.
For example, when a Korean company wants to bring its products to Vietnam, they partnered with CMC Global to set up their ODC right at our office. This is considered a smart move since our local team members can input some ideas to localize their products for the Vietnamese market.
See how we build ODC to help our customers achieve the best result here: https://cglobal-uat.cmcglobal.com.vn/service/offshore-development-center/
Larger team with a diverse skillset
Big IT solution providers like CMC Global can set up a team of 50+ members including all the titles you ask for, from developers, PMs, and QAs, to marketing specialists. You want a team that is fluent in English, consisting of different languages or anything else – we have it all.
Vietnam IT Talent Pool: A force to be reckoned with: https://cglobal-uat.cmcglobal.com.vn/software-engineering/offshore-it/vietnam-it-talent-pool-a-force-to-be-reckoned-with/
When your business is not IT-focused, dealing with your IT department can require tremendous operative costs just to handle a completely separate area.
Thus, if your IT department is not that good in software technologies, having other experts who are experienced, skilled, and well-equipped will not only reduce your cost but also bring out the highest quality possible.
Challenges of Offshore Development Center
Along with many offshore development center benefits are the risks and challenges that it may have, so keep yourself updated about these challenges while having an ODC
Without assistance from a local agent, your team’s recruiting process may be costly and ineffective since most foreign recruiters are not familiar with the labor market or proper channels for candidate search.
You must think through other cultural factors such as language barriers, time zone differences, working culture, conflict management, attitudes to communication, etc. How to smooth out these differences or have everyone in a meeting at one specific time so that you can reach out and discuss project-related issues?
Without absolute control, the risk of data/ information leakage is still there. A distant office, without proper security methods and processes, can be an easy target for criminal groups.
Communication and Management
Face-to-face communication helps teammates collaborate more effectively when they can see someone’s facial expression or body language. Therefore, the ODC and in-house team need to set up clear and instructive communication to compensate for the gestures.
How to set up an ODC?
Knowing the exact offshore development center benefits, you may wonder how to successfully set up an ODC in other countries, especially in Vietnam. CMC Global has issued an article namedÂ How to set up an Offshore Development Center (ODC) in Vietnam. You can check it out for the most detailed content, or you can have a quick look at this checklist.
For the office
- Research the market, and living standard of the country you are aiming to have your ODC in
- Plan the facilities
- Register with the local government as a legal entity
- Find and rent an office
- Design and decorate the office
- Install furniture accordingly
- Prepare and connect workstations to the internet
- Set up the security system
- Set up workplace equipment such as a printer, scanner
- Plan for pantry area, water, coffee machine, medicine box
- Buy and install hardware and software tools
- Purchase other office supplies
For the team:
- Recruit your core team
- Hire an HR manager
- Hire Accountant
- Hire Lawyer
- Hire Developers
- Hire any additional staff so that your center can function smoothly
Is this too much work, complicated or time-consuming? CMC Global offers you a one-stop Offshore Development Center solution to optimize your business by taking care of any ODC-related tasks and letting you focus on your main business competencies.