What is an ODC? How to Set Up an Offshore Development Center?

An ODC works as a dedicated offshore development center. Unlike traditional outsourcing, this approach provides full control over the team and processes. This way, you can reduce costs. The offshore team also offers access to skilled talent. You will then feel free to scale operations.

The offshore software development market had a value of USD 122 billion in 2024. By 2031, this figure may reach USD 283 billion. Setting up an offshore development center is a smart move to overcome talent shortages in your area. Moreover, you can ensure effective management and long-term scalability when working in another country. Your partner works in a different time zone, which means your project can go on continuously. This article explores everything you need to know about ODC, including its key models, ideal location choices, and much more. Keep reading to discover!

Source: Verified Market Research

What is an Offshore Development Center (ODC)?

An Offshore Development Center (ODC), or offshore delivery center, is a dedicated development team or remote agency located in a different country and time zone. Based on the ODC meaning, your team in the talent-rich country works as an extension of your in-house team. The ODC provides more control, seamless collaboration, and improved data security.

The offshore development center model has its core competencies in cost efficiency. Plus, since you use local infrastructure and access talent there, you can streamline operations. Your partner can also maintain direct integration with your internal processes.

Another benefit of the offshore software development center is time zone differences. Your existing team and your new team in another country work at different hours, ensuring continuous progress. It also means your software development project can go faster.

Moreover, the ODC helps you achieve higher software quality standards. They ensure scalability, too. Ultimately, you can stay competitive in the crowded market.

How an ODC Works

The idea of this outsourcing software development approach is to work with an offshore team. Here is how ODC actually looks!

1. Planning & Preparation

This foundation stage defines the structure of your offshore delivery center. Here are some steps to ensure your partner can match your business needs:

• Identify tasks for the dedicated offshore development center.
• Set timelines and objectives for the project.
• Specify roles, required skills, and qualifications.
• Assess different countries based on cost, time zone, talent availability, and language proficiency.
• Research and shortlist experienced service providers.
• Start with a small team and expand as your company grows.

Tip: It would be best to prepare a checklist so that you won’t miss any steps.

2. Setup & Infrastructure

Once chosen, the offshore service provider starts to set up your team. Here is what you do:

• Register a local entity if needed.
• Set up physical premises and secure IT infrastructure.
• Hire and onboard skills software engineers for the team through efficient recruitment and management processes
• Align the team with your culture, tools, and workflows.
• Ensure the team follows your corporate policies and work culture.

3. Development & Operations

Now, you just need to monitor project timelines and quality since you have full level of control. If needed, the ODC can manage executive tasks like HR and Accounting, payroll, and legal tasks. The offshore team then takes care of everything, such as:

• Work closely with your in-house staff.
• Perform Quality Assurance (QA) jobs to ensure high-quality custom software development solutions with continuous testing and monitoring.
• Track processes, assess performance, and scale the team based on your business needs.

Why Are Businesses Increasingly Adopting ODCs?

ODC benefits are numerous. That’s why many businesses these days have started to adopt ODCs. Here is what you can get from offshore development centers:

– These cost-effective services allow companies to reduce development costs compared to hiring locally.

– Offshore staffing solutions in tech hubs like Vietnam, India, and Latin America offer top-tier developers at competitive rates. They are proficient in English to ensure smooth communication.

– Unlike short-term outsourcing, ODCs provide structured strategic planning. Thus, you can expand teams efficiently without excessive hiring overhead.

Offshore Software Development Center vs Traditional Outsourcing: Shared Goals with Different Models

Many businesses are confused between ODC vs outsourcing. Both help with cost efficiency in your software development and involve external teams. However, these two solutions come with different strategic purposes.

An offshore software development center is a dedicated team of professionals in another country. The team acts as a remote extension of your in-house team. This way, you can access full-time support across development, QA, DevOps, and more. Their expertise ensures high-quality offshore software development services.

The BOT (Build-Operate-Transfer) model is a popular offshore solution. The dedicated offshore development center uses asynchronous communication tools when running your project. Thus, they can bridge communication and cultural differences.

On the other hand, traditional outsourcing practices are about engaging external vendors for short-term or project-based work. In this manner, the service provider establishes, manages, and optimizes the process.

Outsourcing enables quick team setup and lower commitment. However, you have less flexibility and control over in-house team costs, training, and onboarding.

1. Comparing ODCs to Traditional Outsourcing

ODCs and traditional outsourcing provide external development support. However, their strategic value is different for startups vs enterprises. You need to consider your business model and long-term goals to choose the more suitable one. Check this comparison table to learn the differences between these two models in detail:

2. What Are the Key Indicators That It’s Time to Set Up an Offshore Development Center?

Both ODCs and outsourcing offer their own benefits. So when should you choose the offshore software development center? Here are some indicators that suggest it’s time to explore offshore locations for your project!

2.1. High Development Costs in the Home Country

Is it costly to hire developers in your country?  Reducing costs is the first reason for choosing ODC. A US-based company pays $96,733 per year annually for a developer. So, think about offshore hiring. You just need $11.280 per year to work with Vietnamese developers.

2.2. Increasing Demand for Skilled Tech Talent

There is a global shortage of niche specialists in fields like AI, IoT, and cybersecurity. If you only look for professionals in your country, it would be tricky. The offshore development center model enables you to tap into global talent. Thus, the chance of finding specialized expertise can be higher. That’s why Statista predicts the IT outsourcing market will reach $591.24 billion by 2025.

2.3. Need for Business Scalability & Faster Product Development

Scaling up your in-house team is expensive because you have to deal with recruitment, training, and management. Fortunately, the offshore software development team can take care of all those tasks. The employer of record services allows you to speed up this process. The offshore R&D departments also ensure cultural alignment and maintain open communication. The distance won’t be a problem!

Offshore development centers work around the clock to keep your project running. A fintech startup launched 40$ faster thanks to an ODC in India. You can also experience this speed.

2.4. Global Operations & 24/7 Development Cycle

The offshore software development center allows you to work across multiple time zones. The global operations allow your project to run 24/7. Tech giants like Microsoft and Google use this method to maintain their global reach.

You can also take advantage of the vendor’s market reputation in their local market. This way, you don’t have to worry about government regulations and incentives.

2.5. Lack of Local Expertise in Emerging Technologies

Hiring experts in AI, ML, and DevOps in developed countries is costly. Yet, a US company can reduce AI development costs with an ODC in Eastern Europe. Other tech hubs like Vietnam and Latin America offer the same benefits. Setting up an offshore development center, in this case, helps you access the local expertise needed for your project.

ODC supports digital transformation, too. Your offshore partner ensures you meet data security requirements. Thus, no worries when working with sensitive code.

This solution requires a strategic focus shift. While your staff works on business functions, the offshore team delivers IT solutions. Just set key performance indicators for the ODC to follow. That’s how you get the best of both worlds.

3. When Should You Choose Outsourcing?

On the other hand, outsourcing works best if you:

• Want to optimize costs by minimizing hiring and management overhead?
• Have short-term projects or specific deliverables
• Need to quickly scale your resources

Learn more: Benefits of Outsourcing Software Development vs. In-House Development

Benefits of an Offshore Development Center

Setting up a dedicated offshore development center gives you tons of benefits in terms of cost and project management. Let’s explore them one by one!

1. Access to the Global Talent Pool

Talent shortages are rising. According to Gartner, more than half of software leaders in the US and UK required AI/ML engineers in 2024. Luckily, the offshore development center allows you to leverage top global talent. You can grow beyond local teams. ODC services offer technological expertise in AI, DevOps, and blockchain to ensure success.

2. Cost Efficiency

The offshore software development center helps you optimize costs by reducing hiring and operational expenses. For example, you need $96,733 per year to hire a developer in the US. You can take advantage of low labor costs in offshore locations like Vietnam instead. They cost 80% less.  A Vietnamese software developer only charges $11.280 per year. As you hire offshore developers, you will save a lot of money compared to in-house and outsourcing solutions.

3. Maximizing Connectivity and Time Zone Advantages

Time zone diversity optimizes workflow. The Follow-the-Sun model ensures seamless handovers. When one team finishes its shift, the other team takes over. Hence, you can enjoy accelerated product development and round-the-clock customer support. The global teams connect with you regularly for real-time responsiveness. Your offshore development partner also reduces downtime and fixes bugs quickly for continuous progress.

4. 24/7 Productivity and Faster Time-to-Market

Offshore development teams enable 24/7 productivity. For example, if you are in Texas, your Vietnam-based team does the work while you are sleeping. The ongoing workflow guarantees business growth. You can also develop your MVP and enterprise solutions faster. The rapid speed helps you stay ahead of competitors.

5. Being Scalable and Flexible

Scalability and flexibility are crucial for many industries, such as e-commerce and fintech. Startups require a flexible scaling process to improve scalability. If you choose an ODC, you will easily scale your dedicated team members up or down based on project needs. Since there is no need for long-term hiring commitments, the HR and recruitment costs will decrease.

6. Full Control & Integration

When outsourcing, you may find it hard to manage your team. The onboarding process would not be easy. However, ODC teams become part of your company, using the same tools and workflows. In other words, you directly control and manage your offshore teams. As you use effective communication tools like Slack, Jira, and Confluence, you can align teams with business goals.

7. Enhanced Risk Mitigation and Security

Struggling when managing software development risks? ODC comes into play! Before starting the project, you sign an NDA with your ODC. The offshore teams comply with managing software development risks to ensure data protection. This approach ensures compliance with GDPR, ISO 27001, and NDA agreements. On the other hand, outsourcing requires sharing sensitive data with third parties. This approach increases security concerns. Thus, if you prioritize security and quality assurance, ODC would be better.

8. Cultural and Market Insights

The offshore development center can facilitate market entry by giving you access to deep market insights. You will then expand the market. For example, a US-based company can successfully localize its app for Asia by adding multilingual support. As the local teams ensure a smooth cultural transition, you will quickly grow in new markets like Asia, Europe, and Latin America.

9. Innovation Boost

ODC contributes to continuous improvement. You need it for innovation! After setting up an ODC, you can focus on R&D and new technologies. The offshore software engineers work on AI, cloud solutions, IoT, and other advanced tools. Microsoft, for example, has benefited a lot from its ODC in India to strengthen its presence there further. The best thing is that you can allocate resources to strategic initiatives. In the meantime, you safeguard intellectual property, thanks to your trusted partner.

10. Focus on Core Competencies

Your ODC takes care of non-core functions like software development and IT support. They are dedicated to your software development projects and work under your direction. It means you can focus on strategic business areas like sales and marketing. Together, you will ensure everything runs smoothly, contributing to your brand’s success.

Challenges When Starting a Dedicated Offshore Development Center

An offshore development center offers many benefits. Yet, you may face challenges when running a team in a different country. Let’s check some and learn how to solve them!

1. Vendor Reliability and Contract Risks

Choosing the wrong offshore software development company can cause missed deadlines. You may face security risks and financial problems as well. Here are some red flags in vendor selection for offshore outsourcing:

• Lack of transparency in contracts: You may compromise data security or even encounter legal disputes. In this case, you need to define detailed SLAs and ensure security policies before signing contracts.
• Unverified track record: If you find a company with limited case studies or too few testimonials, it can be a sign. You may suffer from poor service quality and unreliable solutions. To avoid this, you should conduct a reputation analysis. Check geopolitical stability, too.
• Hidden costs and budget overruns: Some vendors provide low initial pricing but add unexpected charges later. You will get stuck in financial strain as a result. The best solution for this issue is to evaluate the pricing model carefully. You can also negotiate contracts to find the best bet.

2. Cultural Differences and Communication Barriers

As you decide to set up an offshore development center, get ready to work with developers in distant countries. Unfortunately, this approach may introduce communication barriers due to cultural differences. Without effective collaboration, your project will fail. The challenges are as follows:

• Language Differences: First, you and your partner live in different regions. Language differences lead to different communication styles. It can be a nightmare if your dedicated development team lacks English skills. To deal with this situation, you should use effective communication tools like Zoom and Slack. Check how well your teams communicate in English, too.
• Time Zone Challenges: Different time zones may cause delays. You may not experience smooth response times and project synchronization. In this case, you should establish overlapping work hours. Then, you can enable real-time discussions and faster problem-solving.

3. Data Security & Compliance Risks

Partnering with an offshore team offers many cost benefits. Yet, data security and regulatory requirements remain critical concerns. You may risk data privacy violations that damage your reputation and finances. The challenges include:

• Sensitive Client Data Exposure: Weak security protocols and unauthorized access can lead to breaches. That’s why intellectual property protection is important. You also need to ensure your team has consistent workflows. Then, there won’t be any security gap. Remember to ask your offshore development partner to perform security measures like encryption and multi-factor authentication for data protection.
• Regulatory Compliance Issues: If you don’t comply with GDPR, HIPAA (for healthcare), and other regulations, you may face penalties. The compliance issues can ruin your brand image and affect your finances as well. Thus, your team must adhere to cyber security standards. It will be best if they have ISO 27001 certification. Plus, remember to keep updated with new regulations in the industry.

4. Managing Time-Zone Differences in Offshore Development

Setting up a dedicated offshore development center means you will face time zone differences. Without proper management, delays may happen.

• Delayed Responses: You and your offshore team work in different time zones. Decision-making will be slower, causing missed deadlines. Misalignment between your in-house and offshore teams leads to inefficiencies. To solve this problem, you should identify the overlapping work times.
• Limited Real-Time Collaboration: You work when your partner is sleeping. There won’t be a lot of time for interaction. Limited interactions can affect the project’s progress. Asynchronous tools like Jira, Slack, and Confluence can help you overcome this challenge.

5. Talent Retention & Skill Gaps

The offshore development sector often has a higher turnover than the onshore sector. For example, in Australia, more than 20,000 jobs in telecoms and financial services have been offshored. Large Australian companies consider layoffs and salary reductions. Some hiring challenges you can encounter are:

• Frequent Employee Turnover: Developers may leave mid-project for better chances. As a result, your project remains incomplete. Talent availability issues make it hard for you to find a replacement. So, you must prioritize talent retention to ensure consistency in your offshore development center partner. Consider competitive salaries and benefits for your developers, too. Their commitment deserves it. Saigon Technology takes this effort seriously, making us among the best workplaces in Asia in 2023.
• Skill Mismatch: Recruitment is not easy, especially when you need rare skills. Lack of specialized expertise in advanced technologies can impact software quality. In this case, you can provide regular training in emerging technologies. After training in DevOps and Agile, your teams can develop the skills you need.

6. Overcoming Language Barriers

Effective communication contributes to your success. However, an ODC comes with language barriers. You may misunderstand your partner, leading to failure. Expect these challenges and learn how to overcome them:

• Misinterpretation: During the project, you have many documents. You also need to provide project requirements for your offshore team. Without good linguistic abilities, the offshore partner won’t know what you want. Errors may arise, leading to rework. So, you should ensure ODC personnel have good English skills. Saigon Technology offers training programs in English. By improving employees’ communication skills, we can interact with our clients smoothly.
• Inefficient Knowledge Transfer: You and your offshore partner have regular meetings to keep everything on track. You can use translation tools to ensure understanding.

7. Quality Assurance and Testing

The ultimate goal of your project is to develop high-quality software. Thus, focus on quality assurance. You must follow ISO 9001 quality standards when building your software. However, you may struggle with these challenges:

• Lack of Synchronized QA: Time zone differences can cause delays. The feedback comes late, slowing down the development progress. Good quality control methods should include CI/CD pipelines to ensure continuous monitoring. You can also use automated testing to accelerate the process.
• Inconsistent Test Coverage: Your QA teams work in different locations. Without standard processes, security issues may occur. It would be best to adhere to ISTQB principles to maintain consistency and quality.

8. Knowledge Transfer

In every ODC setup, you have to work on knowledge transition. Your offshore partner comes from external parties. It means you will face these challenges:

• Confusing Information: If you don’t organize documents neatly, new team members will struggle to get up to speed. Projects will slow down as a result. You should use shared repositories like Notion and Confluence to keep things organized.
• Inconsistent Workflows: Coding styles may differ, leading to ineffective development. You need regular code reviews and peer programming to ensure consistency.

9. Project Management and Delivery Delays

Delays in offshore projects are totally possible. Some challenges to deal with are:

• Unclear Project Scope: Unclear requirements lead to frequent revisions. The timelines will be extended as a result. Thus, make things clear from the start. You should discuss your needs with your partner. Also, use project management tools for remote teams to track progress effectively.
• Time Zone and Response Delays: Your partner doesn’t work when you run the project. Time zone differences slow progress. In this situation, sprint tracking and regular check-ins can ensure continuous progress.
• Inadequate Testing Cycles: You can rush the project, but improper QA may cause software defects. Regarding testing, you should implement automated reports and CI/CD pipelines. An Agile methodology also helps. It enables iterative development and faster delivery.

10. Varying Corporate Tax Rates Across Offshore Locations

Offshore countries may fail to address legal complexities. Here are two things you should pay attention to when handling compliance with offshore tax regulations:

• Double Taxation: The worst case is that you have to pay taxes in both home and offshore business locations. Tax burdens will break your project. So, you should use offshore tax agreements to avoid this issue.
• Legal Compliance Tasks and Financial Implication: If you don’t comply with offshore tax rules, you will face penalties and legal disputes. Legal experts can help you adhere to local labor and tax laws. Financial consultants also assist you in mitigating risks.

11. Exchange Rate Volatility

You have to manage currency differences in offshore operations. If the exchange rate fluctuates, you will face a big problem. The challenges are as follows:

• Unstable Exchange Rates: Fluctuations make it challenging to forecast final earnings. In the end, financial uncertainty will hinder your project. In this case, you should adjust the pricing model based on exchange trends.
• Cash Flow Risks: Volatility in exchange rates can impact profitability. Maintaining steady revenue is now super hard. It would be wise to work with financial experts to keep your revenue in check and comply with government regulations.

How to Set Up an Offshore Development Center

Setting up an offshore development center involves multiple steps. Let’s break this process down!

1. Define Your Needs and Goals

You can’t manage what you can’t measure. So, you need to start your project with a well-defined strategy. What level of control and integration do you need with the offshore team? Are you setting up a short-term or long-term offshore presence? The checklist for this stage includes these tasks:

• Determine why you want to set up an offshore development center. It can be cost savings, access to specialized expertise, and scalability.
• Outline the technologies and resources to define the project scope.
• Track ongoing costs with project management tools like Jira or Monday.com
• Identify the necessary infrastructure to support your offshore team. Your partner needs IT systems and communication tools to run the project.
• Work on budget planning to control expenses. It’s how we optimize resources and prevent financial risks.
• Choose a suitable offshore engagement model based on your business needs.
• Set KPIs to track productivity, cost efficiency, and project milestones.

2. Choosing the Right Offshore Location

You need to select the right country for your offshore software development center. The perfect location ensures access to top talent. You can also optimize costs and experience smooth legal operations. Some factors to consider when choosing an offshore location are:

• Talent Pool & Skill Availability: Conduct a market analysis to know if the country has a rich source of skilled developers. Countries like Vietnam, India, and Eastern Europe are popular for their strong IT expertise.
• Cost of Living & Developer Salaries: Compare offshore rates based on the living cost and developer salaries. Vietnam stands out with its competitive pricing and high technical proficiency.
• Legal and Compliance Frameworks: Check the country’s political and economic stability. These factors impact long-term operations. You should also ensure alignment with regulations like GDPR, IP laws, and local labor regulations.
• Time Zone Differences: Optimize working-hour overlaps. Then, you can easily enhance communication and real-time collaboration.
• Infrastructure & Tech Ecosystem: Robust tech ecosystems attract talent. Thus, look for countries with established tech hubs. They should have coworking spaces and government incentives.
• Political & Economic Stability: Stability ensures continuity. Many countries welcome foreign investment. You should find regions with a predictable business environment and low corruption. Friendly foreign investment policies are also helpful.
• Language Proficiency & Cultural Compatibility: English is the key language used to communicate across countries. English proficiency and cultural alignment ensure smooth communication. You need it to reduce misunderstandings. With seamless collaboration, you will speed up project delivery. Learn more at https://www.ef.edu/epi/.

3. Vendor Selection: Choosing a Reliable Offshore Partner

After choosing the offshore country, it’s time to select the ODC vendor. Cost is not the only factor to consider for this selection process. You should pay attention to security compliance as well. Past client reviews and success stories are proof of our reliability. Here is the checklist for choosing a trusted offshore development center partner:

• Portfolio: Review case studies and client testimonials of some potential partners. Websites like Clutch, GoodFirms, Google business, DesignRush, LinkedIn ratings, and G2 will help. It would be best if they had experience in similar projects and gave you a feasibility study for yours.
• Technical Capability: Conduct coding tests and technical interviews to assess their capabilities.
• SLAs: Define clear performance metrics and timelines. Include intellectual property protection clauses, too.
• Payment Structure: Check their payment terms along with your project.

Background and Compliance: Ensure the financial health of the ODC service provider. They should also adhere to regulations. You can ask about their security protocols, too, to see how they safeguard your offshore development project.

The interview round is super important. You can grab this chance to understand your partner better. Try these questions at the interview:

– What experience do you have with ODCs in our industry?

– How do you manage data security and intellectual property?

– Can you provide case studies or references from previous clients?

4. Identify the Provider’s Scope of Services to Choose a Suitable Model

You can set up your offshore software development center in different ways. The best model depends on your needs and budget. Some common models include:

• Build-Operate-Transfer Model (BOT): Your offshore partner sets up and manages the ODC for a specific period. Then, they transfer the full ownership to you. This model is perfect when you want to minimize your risk from the start.
• Dedicated Development Team: You can hire a dedicated team that works exclusively on your project. They become part of your in-house team. Together, the team can achieve your goals. This model is ideal when you need ongoing development and control over your resources.

Each model has its pros and cons. You should perform a cost analysis and assess your requirements in detail to opt for the best one.

5. Legal and Compliance Considerations

Establishing an offshore software development center means you have to understand the legal environment. Compliance with country regulations ensures smooth operations. You can also protect your assets. Some legal and compliance issues are:

• Intellectual Property Protection: Draft NDAs, IP agreements, and data security policies first. The legal landscape in the offshore country may be different from yours. So, preparation for the partnership is a must. Learn data protection standards and data privacy laws, too.
• Employment Laws: Legal entity registration involves an understanding of offshore labor laws. Spend time on this to avoid legal risks.
• Tax Regulations: Familiarize yourself with Double Taxation Agreements (DTAs). You can then reduce financial liability.

You should consult experts to handle legal and compliance issues. A clear SLA will also help you with this offshore partnership.

6. Infrastructure Setup & Security Measures

A strong offshore development center requires a scalable infrastructure. A robust facility setup and IT environment are needed to enhance efficiency. Key infrastructure considerations are:

• Cloud-Based Development Environments: Cloud-based platforms like AWS, Azure, and Google Cloud allow for customized infrastructure.
• Collaboration & Security Tools: Cybersecurity is essential. You can implement VPNs and multi-factor authentication (MFA). Encrypted communication also helps secure your data.
• Access Control & IT Governance: Use role-based access control (RBAC) to limit sensitive data access.

Besides, you should conduct regular security audits to find and fix errors. Consider ISO 27001-certified policies, too, to strengthen data protection.

7. Create a Remote Team

You need a structured recruitment process for your dedicated offshore development center. That’s how you ensure the dedicated core team has the right expertise and aligns with your project goals. You can consider the following practices:

• Use local tech job platforms to find talent for your remote team.
• Conduct technical and culture-fit interviews.
• Offer competitive salaries and long-term career growth paths.
• Run structured training and onboarding programs for new hires.
• Provide educational and training programs to upskill team members.
• Have regular performance reviews with salary adjustments.

After recruitment, you can build your dedicated team. The process varies depending on the ODC model you choose in Step 4. You need to create clear job descriptions to outline the roles and required skills. If you go for the dedicated model, you and your partner will work together to build the project team.

Communication must be hard. So you can use platforms like Slack and Microsoft Teams to collaborate smoothly with your offshore team.

8. Establish Effective Contact Channels Between Internal and External Teams

Now, your remote team is set up! You need continuous interactions for an efficient development process. Here are some tips to ensure smooth collaboration:

• Schedule daily updates, weekly check-ins, and progress reviews.
• Define clear operational protocols to keep everyone on the same page.
• Designate specific internal and external team contacts.
• Use effective communication channels. For example, Zoom is ideal for face-to-face meetings. Meanwhile, Asana works well for tracking tasks and deadlines.

9. Build Your Brand

With your offshore development center running, it’s time to build your product and grow your business. The offshore team’s efforts should match your business goals. Follow these tips to build your brand:

• Make sure all deliverables reflect your brand identity.
• Conduct regular UX/UI reviews. Continuous testing helps enhance user experience and stakeholder engagement.
• Maintain clear communication with your offshore developers.

10. Performance Monitoring & Scaling Your ODC

Continuously track performance to maximize the success of your ODC model. Effective project management ensures efficiency. The key to this step is to monitor Key Performance Indicators (KPIs):

• Sprint Completion Rates: Measures how efficient the product development cycle is.
• Code Quality & Testing Success: Assess code quality and fix bugs. You also need to establish risk management protocols for quality assurance.
• Employee Retention Rates: Ensure long-term commitment from offshore developers.

Monitoring is an important task. You can use tools like ClickUp, Trello, Jira, Asana, or Toggl for real-time project monitoring. Have regular meetings with your partner, too. Regular status updates help you track milestones and resolve issues promptly.

You can expand your team based on project needs and budget. AI-powered productivity tools help streamline workflows. Plus, invest in team management and leadership training for sustained growth.

Popular Locations to set up an ODC

Where can I hire an offshore developer? Here comes your favorite part! We will recommend popular locations to set up an offshore development center. They offer benefits in terms of operational costs, time zones, and language proficiency. Check it out to find your best match!

A. Asia-Pacific (Cost-Effective & Skilled Workforce)

You can build dedicated offshore development centers in Asia-Pacific countries. These areas offer a skilled workforce at a competitive rate.

1. Vietnam 🇻🇳 – The Rising Star in Offshore Development

Among Asian countries, Vietnam is the best for customer software development. Cost savings are the most significant benefit when running an ODC in Vietnam. Vietnamese developers charge you 30 to 50% lower than those in Western Europe and the US. The competitive developer rates don’t compromise quality. Vietnam ranks high in software engineering skills. Plus, this country offers tax incentives for IT companies.

– Average Salary: USD 996 – 2,547 per month

– Talent Quality & Availability:

• Tech Labor Force in IT: 530,000
• English Proficiency Index: Ranked #63 (EF EPI)
• Vietnam Ranked #23 in HackerRank’s

• Most popular tech stacks: Java, JavaScript, C#/.NET, Python, Go…

Source: Vietnam IT Market Report 2024- 2025 | TopDev

– Time Zone: UTC+7

– Political Stability and Absence of Violence/Terrorism: Percentile Rank: 45.02

– Vietnam startup ecosystem ranking: Vietnam ranks as the 56th best country for startups globally and the 5th best in SEA.

– Vietnam’s Infrastructure Rating in the Global Innovation Index (GII), presented by the World Bank: 71

Cost-effective services sound impressive. Yet, you should expect communication challenges related to different languages. English fluency is better in major tech hubs like Ho Chi Minh City. Besides, some businesses may face cultural differences in work processes.

Learn more: Building a Robust Tech Team in Vietnam: Strategies and Insights

2. India 🇮🇳 – The Largest IT Outsourcing Hub

India has the biggest workforce, with over 4 million software developers. You can also take advantage of the well-developed tech parks and the strong SaaS industry. Connectivity is an impressive advantage, too. Such an ideal place to build your offshore team, especially when you work on SaaS projects!

– Average Salary: USD 586.3 – 1.506 per month

– Talent Quality & Availability:

• Tech Labor Force in IT: 5.8 million
• English Proficiency Index: Ranked #69 (EF EPI)
• India Ranked #31 in HackerRank’s
• Most popular tech stacks: MongoDB, Express.js, React.js, Node.js, Java, C#, Linux…

– Time Zone: UTC+5:30

– Political Stability and Absence of Violence/Terrorism: Percentile Rank: 21.33

– Tech Ecosystem Maturity: Over 128,000 startups as of April 2024, up from 450 in 2016.

– India’s Infrastructure Rating in the Global Innovation Index (GII), presented by the World Bank:  78

However, the developer salaries are rising here. Those in major tech cities like Bangalore and Hyderabad are really high. Moreover, the time zone differences with the US and Europe require flexible work shifts.

3. Philippines 🇵🇭 – Ideal for Customer Support & IT Services

The Philippines ranks 2 in Asia in terms of English proficiency. The established IT infrastructure in the local market is another plus. You should consider Metro Manila and Cebu first.

– Average Salary: USD 396 –918 per month

– Talent Quality & Availability

• Tech Labor Force in IT: 1.3 million
• English Proficiency Index: Ranked #20 (EF EPI)
• The Philippines Ranked #46 in HackerRank’s
• Most popular tech stacks: Linux, PHP, Python, MongoDB, Express.js, Angular, Node.js…

– Time Zone: UTC+8:00

– Political Stability and Absence of Violence/Terrorism: Percentile Rank: 23.70

– Top 30 Global Ecosystem and Top 15 Asia Ecosystem in Affordable Talent, which reflects the ability to recruit tech talent;

– The Philippines’s Infrastructure Rating in the Global Innovation Index (GII), presented by the World Bank: 81

Unfortunately, the Philippines has limited AI and blockchain expertise compared to Vietnam and India. Plus, it’s more BPO-focused than deep tech development.

B. Eastern Europe (Strong Tech Talent & EU Compliance)

Eastern Europe is known for its strong tech talent. You can set up your offshore software development center in these two countries:

– Average Salary: USD 2000 – 5000 per month

– Talent Quality & Availability:

• Tech Labor Force in IT: 300.000
• English Proficiency Index: Ranked #40 (EF EPI)
• Ukraine Ranked #11 in HackerRank’s
• Most popular tech stacks: Linux, PHP, Python, JavaScript, MongoDB, .NET…

– Time Zone: UTC+3

– Political Security and Absence of Terrorism/Violence: Percentile Rank: 10.90

– Ukraine’s Infrastructure Rating in the Global Innovation Index (GII), presented by the World Bank: 82

Yet, geopolitical instability is a big issue. You can face long-term concerns when working with developers there. The higher cost is another disadvantage. While lower than the US, it costs more than Asia.

2. Poland 🇵🇱 – Ideal for EU-Based Companies

Poland gives you access to the EU market. You can also enjoy legal and compliance benefits. Moreover, this country is a rising leader in financial technology innovation.

– Average Salary: USD 1250 – 2750 per month

– Talent Quality & Availability:

• Tech Labor Force in IT: 600.000
• English Proficiency Index: Ranked #15 (EF EPI)
• Ukraine Ranked #3 in HackerRank’s
• Most popular tech stacks: Python, Java, JavaScript, C#, C++, PHP, .NET…

– Time Zone: UTC+2

– Political Security and Absence of Terrorism/Violence: Percentile Rank: 63.98

– Poland’s Infrastructure Rating in the Global Innovation Index (GII), presented by the World Bank:  43

However, like in Ukraine, the developer salaries in Poland are quite high, about $45,000 per year. Meanwhile, the salaries in Vietnam range from $20,000.

C. Latin America (Best for US-Based Companies)

US-based companies can choose offshore development in Latin America. Mexico and Brazil are the best options.

1. Mexico 🇲🇽 – Proximity & Cost-Effectiveness

Mexico is close to the USA. The overlapping work hours can improve collaboration. If you plan nearshore or onshore projects, this option will be best. Moreover, Mexico’s IT sector is growing at 10% YoY. You will surely take advantage of its IT infrastructure. But the cost may annoy you. Mexican developers charge you about $40,000–$50,000 per year.

– Average Salary: USD 944 – 1947 per month

– Talent Quality & Availability:

• Tech Labor Force in IT: 300.000
• English Proficiency Index: Ranked #87 (EF EPI)
• Poland Ranked #33 in HackerRank’s
• Most popular tech stacks: Python, Java, JavaScript, Ruby on Rails, .NET…

– Time Zone: UTC-6

– Political Security and Absence of Terrorism/Violence: Percentile Rank: 22.75

– Mexico’s Infrastructure Rating in the Global Innovation Index (GII), presented by the World Bank:  63

2. Brazil 🇧🇷 – Largest IT Market in Latin America

As the largest IT market in Latin America, Brazil gives you tons of benefits. The strong AI and machine learning development bring advanced features to your software. The large English-speaking IT workforce is another advantage. However, when working in this country, be careful with taxes. Complex tax systems here require local legal expertise.

– Average Salary: USD 400 – 1200 per month

– Talent Quality & Availability:

• Tech Labor Force in IT: 630.000
• English Proficiency Index: Ranked #81 (EF EPI)
• Brazil Ranked #38 in HackerRank’s
• Most popular tech stacks: Python, JavaScript, Kotlin, Ruby on Rails, PHP, Java…

– Time Zone: UTC-3

– Political Stability and Freedom from Violence/Terrorism: Percentile Rank: 28.44

– Brazil’s Infrastructure Rating in the Global Innovation Index (GII), presented by the World Bank:  66.5

Success in Action: Saigon Technology Case Studies

Choosing the top offshore development center can be a game changer. Saigon Technology must be what you need now. Our dedicated development team offers exceptional services at a competitive rate. Since 2012, we have delivered top-notch solutions to clients worldwide. Let’s check some of our case studies! You will then understand why Saigon Technology is a reliable choice for setting up an ODC in Vietnam!

Merit Logistics ODC

1. Client Needs

Merit Logistics ODC needed to maintain and upgrade an outdated ERP system. Our client also wanted a new version of the system.

2. Challenges

We had to understand the old system first. Moreover, the project required AI features to simplify processes.

3. Solutions

We divided the project into three phases: system analysis, maintenance, and redevelopment. Our offshore development center developed an Android app using AI. This way, employees could check in with a PIN and facial recognition.

Evolution and Engine ODC

1. Client Needs

Our client is a Canadian fund management company. The app has two aspects: EVO and Engine. EVO is for investment data, while Engine deals with complex financial calculations.

2. Challenges

The project faced challenges due to the complexity of financial formulas. Limited handover time demanded a fast learning curve. Moreover, our clients require strict security standards. We also had to work with a large, multi-level team while maintaining zero downtime.

3. Solutions

We assigned a senior developer to learn the source code. They then served as the primary contact for after-hours meetings. Regular client sessions also helped us keep the project on track. Finally, we performed strict security measures.

Learn more: Offshore Dedicated Team Case Studies

Offshore Development Center Models

You can build your offshore development center following different models. Each offers pros and cons. Check this section to explore everything and find your favorite.

1. Dedicated Development Team

This dedicated team model means your ODC works exclusively on your project. They act as an extension of your in-house team. Choose it if you need continuous development and innovation for long-term projects. Your dedicated offshore development center also gives you high control and deep team integration.

Pros:

• Ensures deep product knowledge, long-term collaboration, and smooth communication.
• More cost-effective than hiring a full in-house team.
• Access extensive technical expertise.
• High flexibility in scaling resources.

Cons:

• Requires strong project management to ensure efficiency.
• Not ideal for one-time and short-term projects.

2. Build-Operate-Transfer (BOT) Model

The vendor builds the offshore team and operates for a set period. Then, your partner gives you full ownership. This Build-Operate-Transfer model is ideal if you need a long-term development strategy. Full ownership also helps minimize risks.

Pros:

• Low-risk expansion while setting up operations.
• Smooth transition from the vendor to your in-house team.
• Hands-off setup but full control in the long run.
• Technical leadership and expertise from the offshore team to ensure quality.

Cons:

• High initial setup costs.
• Requires long-term strategic planning and investment.

3. Project-Based Model

In the project-based model, the offshore software development center handles everything from start to finish. Of course, they work under predefined business needs and deadlines. This model will be best if you need one-time software development. It gives you fixed-cost pricing for a defined scope.

Pros:

• Easier budgeting, thanks to fixed pricing.
• No need for day-to-day project management.
• Perfect for well-defined, short-term projects.

Cons:

• Less flexible to change requirements in the middle of the project.
• Limited control over development processes.

4. Hybrid Model

The hybrid model combines different offshore development model types. For example, you can have both dedicated teams and project-based work. Such offshore development center services are perfect for ongoing development. It works well for occasional short-term projects. You can also ensure cost flexibility with team control.

Pros:

• Cost effective and adaptable
• Ability to scale resources while handling specific projects separately
• More control over long-term development with flexibility in short-term needs.

Cons:

• Requires careful management due to the combination of various models.
• It can be complex because of the different vendors involved.

What is the Difference Between Offshore, Onshore Vs Nearshore Development Center?

You can choose the BOT model when outsourcing your IT project. Then, you have R&D departments to handle the recruitment tasks. The key is to maintain communication between your teams.

IT outsourcing comes in different types, depending on the vendor’s location. Check this comparison table to find the best solution:

Why Choose Saigon Technology?

Are you planning to build an ODC? Then consider Saigon Technology. Here’s why!

• Over 13 Years of Experience: We have worked in the industry since 2012. Our offshore developers follow industry best practices. We also offer excellent project management strategies to ensure success.
• Cost-effective Solutions: You can take advantage of the low labor costs in Vietnam. Despite the competitive price, we don’t compromise quality.
• Access to the top 1% Talent Pool: Our team has top talent in Vietnam. The strict recruitment process ensures you have the best developers for your project. Plus, we use Agile methods to enhance efficiency and adaptability.
• Deep-rooted Project Experience Across Industries: We have worked in different industries. Hence, we know the best practices for your field. With us, you can have tailored solutions for your unique needs.
• Flexible Engagement Models: Our flexible offshore development center models help you reduce costs. So feel free to choose the one that matches your budget and timeline. You can speed up time-to-market, too.

Ready to establish your ODC? We have the expertise and experience you’ll need for your project. Contact us today to build your dream team!

Conclusion

An offshore development center provides cost efficiency. You can also ensure scalability and access to top tech talent. You need to choose the right model and location for success. When running your ODC, remember to focus on security and compliance.

To select your best partner, you need to evaluate your business needs and offshore development goals. An ideal vendor then helps streamline setup and operations. Ensure they use automation and Agile methodologies for long-term efficiency.

FAQs

1. How much does it cost to set up and maintain an ODC?

There are different costs related to an offshore development center. The cost components include:

• Personnel costs: Consider the salaries or hourly rates for offshore team members. Your team includes developers, project managers, testers, and other staff.
• Infrastructure costs: These cover expenses for office space, hardware, and software. You need them for operations in the offshore location.
• Management costs: Pay legal fees and local taxes. The management costs also involve accounting and HR.
• Vendor fees: These include charges from the service provider.
• Contact and coordination costs: Consider the expenses for communication. You need to pay for teamwork tools, meetings, and visits to the ODC.

2. How To Manage The ODC Team?

Managing an ODC team is a tricky task. You have to work on all the factors below:

2.1 Communication and Interaction: Clear communication channels are essential. You can use collaborative tools like Slack, Zoom, and email. They can help ensure remote team collaboration. Moreover, consider time zones to ensure all team members can stay aligned. Schedule regular meetings with your offshore development center, too. Language proficiency contributes to clear team communication. So, assess skills during the recruitment process.

2.2 Structure and Project Management: A clear structure enhances efficiency. You need to clearly define roles. Your project includes a project manager, QA lead, technical lead, and developers. The roles should be based on resource allocation and project needs. Also, use agile project management methodologies like Scrum and Kanban. Another tip is to use reporting mechanisms using Lucidchart and the RACI model. Last but not least, an ODC team must have structured project management.

2.3 Project Infrastructure: A well-structured infrastructure ensures seamless development. Automated CI/CD pipelines can help. Additionally, use GitHub for version control. You should also implement security measures. Encryption and secure data handling will be useful. Together, they assist you in managing your offshore development center.

2.4 Organization and Delegation: Jira, Trello, and Asana help you manage your team. You can then streamline workflows. Those tools are necessary for quality assurance processes, too. You will ultimately enhance productivity in your dedicated team.

2.5 Team Culture: A positive atmosphere is crucial for an offshore development center’s success. You can hold virtual team-building activities for your team. Milestone celebrations also keep your team members engaged.

2.6 Documentation and Training: Use platforms like Google Drive or SharePoint for knowledge sharing. A code documentation tool is helpful, too. It helps support knowledge retention and smooth onboarding.

3. What is the Difference between EDC and ODC?

The key difference between EDC and ODC comes from their scope.

• EDC: An EDC works as an extension of your company’s development team. It’s a remote branch that focuses on specific tasks and projects. However, the EDC has limited autonomy. It remains integrated with the parent company.
• ODC: The offshore development center is a more independent setup. A third party manages the dedicated offshore development center. The vendor provides end-to-end services. For example, you can rely on them for software development, testing, support, and project management. Unlike the EDC, the offshore development center works as a separate unit.

4. Is an ODC suitable for startups or only for large enterprises?

An ODC is ideal for large global businesses. Yet, this model also benefits medium-sized enterprises.