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

In today's digital world, companies look for ways to stay up-to-date. They want to work better and offer great stuff. One smart move gaining traction is setting up an offshore development center (ODC). We'll explore what an ODC is, why it's smart, and how to start one for your business.

What is an Offshore Development Center - ODC?

We live in an era marked by a surge in digital transformation. So, non-tech businesses grapple with the shortage of software engineering personnel. This deficiency can hinder the pace of business growth. It hinders their ability to compete effectively. To address this issue, businesses can utilize offshore development by setting up an offshore development center.

An offshore development center is a dedicated development team or a remote agency located in another country and time zone. An ODC is equipped with the necessary personnel and infrastructure for software development. It functions as an extension of your in-house team stationed offshore. The dedicated offshore development center model can handle software that hinders their ability to compete effectively in development and manage complex digital projects.

An offshore software development center is a one-stop solution for your recruitment needs. It handles office management and infrastructure investment. With an ODC, you can outsource executive matters. These include taxes, accounting, and human resource management. It lets you cut working costs while ensuring top-tier output and innovation.

“Since the 1960s and the early days of Silicon Valley, technology pioneers developed offshoring centers in the state of Jalisco, Mexico. In 1996, General Electric offshored its IT for the first time when it opened its own center in India Given the rapid growth of this sector, several companies have started to use offshore development in China, India, and other countries with a lower cost per developer model." - Wikipedia

Distinct Yet Interlinked: Offshore Software Development Center and Outsourcing

Choosing between offshore development services can be tricky. You might find yourself at a crossroads between an "offshore development center" and "outsourcing". Both options aim to save costs, tap into expert skills, and boost efficiency. But they differ in experience.

An offshore software development center acts as part of your main team. But its location is in another country. This setup forms a dedicated team. It includes developers, engineers, and project managers. They work on your project all the time. This model gives you a lot of control, much like you have with your in-house team. You manage them by yourself, ensuring constancy and ownership.

Outsourcing means you hand over certain tasks or whole projects to another company. This approach is ideal for one-time, short-term jobs. The partnership lasts as long as the project does. Outsourcing is effective for specific tasks. But offshore development center services offer better control and long-term commitment.

Are you trying to decide between an ODC and traditional outsourcing? Are you unsure which one suits you better? This is a simple table to guide your choice:

Comparing ODCs to Traditional Outsourcing

ODC and traditional outsourcing models differ in several key ways:

1. Client company size

- ODC: Huge global companies

- Traditional Outsourcing: Start-ups to mid-sized businesses

2. Project term or size

- ODC: Large long-term projects

- Traditional Outsourcing: Small to medium projects

3. Operating model

- ODC: Value-based and strategy model

- Traditional Outsourcing: Task orientated

4. Team Access

- ODC: Fast access to complete development teams

- Traditional Outsourcing: Small team that grows as needed by the project

5. Control

- ODC: Full development control

- Traditional Outsourcing: Partial control, depending on the agreed business model

Why Do More and More Companies Opt For Offshore Development Centers?

Offshore development's benefits are clear. The offshore software market will be worth USD 122 billion in 2024. It is expected to reach USD 283 billion by 2031, growing at a CAGR of 10.13%. Venturing into offshore development centers unlocks potential advantages. It presents an appealing choice for businesses aiming for enhanced efficiency. It lets you scale and succeed in your industry.

These are some reasons why companies choose to hire offshore developers. These developers manage the ODCs:

- Cost Reduction: Offshore centers cut costs on staff, management, and equipment. This saving boosts your funds for other key areas. It lets you be flexible and aids growth. On-site work on the software project costs about 60% more than offshore work.

- Access to a Global Talent Pool: Offshore centers provide skilled engineers for your projects. They deliver top-quality results. Your local team can focus on essential business tasks. This boosts your capacity and focus.

"According to recent research conducted by Indeed, the US software job market currently faces a 472K tech talent shortage with 9 out of 10 business owners struggling to find and hire IT professionals. Offshore software development hires a dedicated software development team and opens a new office called an offshore development center in another country. Hence, the main reason companies are looking to build offshore teams and engage developers in countries like India, Singapore, because of low cost and high availability." - Cognitive Market Research

- Cultural and Market Insights: Local centers adapt to your market’s culture and language. This improves your product's appeal. They open doors to new markets as well. This is crucial for going global.

- Being Scalable and Flexible: With an ODC service, expanding your team is easy. You choose who to work with and their tasks. This makes scaling up smooth and fast.

“Saigon Technology delivered exceptional offshore software services for our food production company, Sternmaid America. They understood our needs and created user-friendly software that transformed our operations. Their communication was clear, addressing any concerns promptly. The support provided after the project was excellent, ensuring a smooth transition. We highly recommend Saigon Technology for its expertise and commitment to customer satisfaction. Thank you for surpassing our expectations!” - Arthur Briggs - Supply Chain Manager at Sternmaid America

- Focus on Core Business: Your external team handles software tasks. This lets you concentrate on main business activities. You can serve your clients better without distractions.

- Round-the-Clock Production: The offshore team works all day. They ensure your project meets its deadlines. This helps you launch products on time without worry.

- Quality Improvement: An expert team leads your project. This raises your product’s quality. With pros on board, your software performs better than before.

- Intellectual Property Expansion: Your IP stays safe and can grow. Ask your offshore development partner for new ideas. They can help extend your IP to new areas.

- Risk Mitigation: Managing software risks can be tough. You're in luck because your ODC helps reduce these risks. This keeps your project safe during development.

How to Navigate Challenges and Risks?

When setting up a dedicated offshore development center, you must understand the challenges and risks. This ensures smoother operations and successful outcomes. Below are critical points to bear in mind:

1. In-depth Vendor Research: Before partnering with an offshore software development company, investigate its reputation. Review its competence using platforms such as LinkedIn, Clutch, or Google.

2. Addressing Time-Zone Differences: Operating across multiple time zones can lead to missed meetings and delayed responses. Adapt your discussion schedule to fit your developers' time zone. But the difference in time zones between countries helps companies operate 24/7. It improves customer service and operational efficiency.

3. Language barriers: English proficiency is a requirement for ODC personnel. But nuances and comprehension levels may vary. Assess the language proficiency of your developers through interviews. Then, engage in one-on-one conversations when necessary to prevent confusion.

4. Conversation challenges: Establish a clear contact channel. Encourage daily scrum meetings via Zoom, Google Meet, or Microsoft Teams. Introduce video calls as well. They enhance team cohesion and understanding by a mile.

5. Clarity of Tasks: This prevents any confusion or oversight. So, it's crucial to maintain a detailed record of your ideas, tasks, and features.

6. Management challenges: Implement tools like Slack, Jira, Trello, Zoom, and Notion. They help you monitor progress and facilitate discussions.

7. Maintaining Account Access: This should be part of your agreement with the vendor. You should have ownership and access to all created accounts.

8. Understanding Work Processes and Privacy: Educate yourself with the workflow of ODCs. Then, insist on implementing a non-disclosure agreement (NDA). This will protect your business information.

9. Cultural nuances: Cultural differences can impact collaboration within your team. Explore countries' cultures on platforms like YouTube, Facebook, and Instagram. This promotes respect, understanding, and team cohesion. These differences also help you understand business opportunities in the country that set up an ODC.

10. Flexible Pricing Structures: Opt for flexible payment plans. These should mirror the quality and quantity of the ODC work. This provides you with a fair value assessment.

Expectation of Regular Output: Anticipate a minimum viable product (MVP). This should be after each development sprint. It keeps the project on track and aligned with your objectives.

How to Set Up an Offshore Development Center

While creating an ODC may seem challenging, you can overcome these hardships. You can do this by following 10 essential steps. This is what you should do to make it easier for you.

1. Establish project scope and budget

You need to see how much work and money needs to go into an ODC. This is essential before you start developing your offshore development center. Determine the projected budget for your project. This helps you decide which business partner model will suit you best. We will discuss this later. For the moment, you must decide just how big your project and team needs to be. You can’t manage what you can’t measure.

2. Choose a suitable model

This is the part where you select which offshore development center model suits you best. We’ll cover these in model detail later in the article. In the most basic sense, the model is tied to available resources and budget. It considers how long the project will be and more. You can either opt for build-operate-transfer, staff augmentation, or one of the others. Once you’ve selected one that matches your needs, you can head to the next step.

3. Research potential ODC partners

With your scope, model, and budget in hand, you can start researching possible ODC partners. Make sure they meet the technical requirements you need. They should meet any other project demands as well. You should contact each of the viable companies and ask them questions about their processes.

4. Study the ODC’s country regulations

Ok, so you have an ODC partner you are happy with. That doesn’t mean you can jump into it and establish the center. You must research the various laws in that country related to your quest. This helps you see if it’s a viable solution. Your ODC partner can help supply this information as well.

5. Register your ODC

With all your ducks in a row, you can register your ODC in the country. This entails completing a set of signed documents. These documents will include essential information to the state authority. While this feels like a lot of admin work, you won’t be able to proceed until you complete this step.

6. Handle management and infrastructure needs

Once you register your ODC in the country, you can proceed. This involves any management and infrastructure needs. It means doing your research on what your new facility will need. Then, start getting everything in place for your future team. It may involve installing the required technology and software as well.

7. Create a remote team

You can help establish your remote team with your ODC partner at this point. This step depends on the model you selected in step 2. If you went for staff augmentation, then you’ll receive additional members to your team. But suppose you went for a dedicated offshore development center. Then, you and the ODC company will discuss which employees will be committed to the project.

8. Establish effective contact channels between internal and external teams

No matter which model you go for, your company and the ODC need proper contact channels. They are in a different country. This means there may be differences in culture, language, and time zones. It’s best to determine who will be the main contact points on either side and on which platform to chat.

9. Build your brand

Your established ODC can start to build your or the project’s brand after the step above. Meetings will occur on an ongoing basis to discuss the visuals, key texts. You will discuss everything that will go into the product development. This step is the heart and soul of the development phase. It is everything you’ve worked so hard to achieve.

10. Monitor the project and ensure constancy

You’ll need to monitor how well your project succeeds. This is useful as the project continues. You'll do this during development and even after completion. You should retain the ODC team for as long as possible. This is true for maintenance and support after you complete the project. Or you can make sure there is an effective handover. This means that your team will be able to handle maintenance requirements.

Popular Locations to set up an ODC

There are several popular locations worldwide for setting up an ODC. It depends on the industry and the specific needs of the business. There are other factors, such as cost, time zone, language proficiency, and cultural fit. Some popular locations include:

1. Asia

Conclusion:

- Vietnam: Young and dynamic population. The advantages of developing ODC in Vietnam are cost savings, modern infrastructure in big cities, proficiency in English, and excellent legal policies. Therefore, Vietnam is quickly becoming the priority choice for businesses in Asia.

- India: India is an ideal choice for a dedicated offshore development center. With affordable rates and a skilled IT workforce, it offers cost-effective solutions. Major cities like Delhi and Bangalore provide robust infrastructure. The convenient time zone supports seamless collaboration with global teams.

- Singapore: Premier choice for setting up an ODC. High English proficiency ensures smooth communication. Competitive developer rates offer value for investment. Major cities provide modern infrastructure. A favorable time zone supports global collaboration. Ideal for businesses seeking top-tier talent and efficiency in Asia.

- Malaysia: Strategic for software development. Competitive rates and skilled IT workforce. Major cities like Cyberjaya offer excellent infrastructure. High English proficiency ensures effective communication. Convenient time zone aids global operations. Ideal for businesses seeking reliable and efficient development solutions in Asia.

2. Eastern Europe

Conclusion: 

- Ukraine: Ukraine offers cost-effective software development. Advantages include competitive rates, a skilled IT workforce, modern infrastructure in major cities, and good English proficiency. With a convenient time zone, it supports collaboration. Ukraine is ideal for businesses seeking reliable development solutions in Europe.

- Poland: A prime location for offshore software development centers. It offers competitive rates and a highly skilled IT workforce. Major cities like Warsaw and Kraków have modern infrastructure. High English proficiency ensures effective communication. Poland is a preferred choice for European businesses.

- Belarus: Belarus offers a cost-effective offshore development center environment. Advantages include competitive rates, a skilled IT workforce, and strong technical education. Major cities provide modern infrastructure. High English proficiency supports effective communication. Belarus is an attractive choice for businesses seeking reliable solutions in Europe.

- Romania: Romania is a top destination. Competitive rates, a skilled IT workforce, and strong English proficiency are key advantages. Major cities like Bucharest and Cluj-Napoca offer excellent infrastructure. Government support and EU membership enhance its appeal.

3. America

Conclusion: 

- Mexico: Mexico is a prime destination. Competitive rates, a large talent pool, and geographical proximity enhance collaboration. Major cities like Mexico City offer modern infrastructure. Government support and cultural compatibility strengthen Mexico's position as a top choice.

- Brazil: Brazil offers a competitive edge for offshore development. It boasts a vast talent pool, strong tech hubs, and innovative infrastructure. Major cities like São Paulo and Recife lead the tech scene. Brazil's robust IT market and favorable time zone enhance collaboration.

- Canada: Canada offers a strong advantage for ODC development. It features a competitive and highly skilled IT workforce. Major cities like Toronto and Vancouver are tech hubs. The robust infrastructure and favorable business environment make Canada an attractive choice.

Demonstrating Success: Prominent Saigon Technology Case Studies

Saigon Technology showcased one of the top offshore development center establishments. We did this with Merit Logistics ODC. Merit Logistics is an industry pioneer. It's been at the forefront of the latest supply chain management innovations of our time. It aims to boost business production toward optimal peak performance.

"Merit Logistics has been leading in the development of supply chain solutions. We work based on planning strategies to increase capacity. We work with partner companies and support operations to achieve the highest efficiency. Our company has more than 100 years of operation in this field. So, Merit Logistics has built a strong logistics team. We have many achievements proving that we are real experts. We're ready to help our partner company improve at all times. Our services help your professional activities and increase your profits. This way, you maintain high competition in the fierce market today."

Mobile Team Manager: Enhancing Field Management

1. Client Needs:

The client sought to create an online field management system to streamline scheduling. It will enable real-time conversations between field and office staff. It will automate reporting and management tasks as well.

2. Saigon Technology's Approach:

Saigon Technology proposed a three-phased strategy. This started with a project-based model. Following this method was the adoption of the Scrum/Agile method. This was valuable for maintenance and continuous improvements. It helped in promoting adaptation and rapid response to changing needs.

3. Outcome:

Saigon Technology executed the project well. The team utilized Agile systems, fostering rapid troubleshooting responses. We implemented swift enhancements. Regular meetings and consistent reporting were vital. They ensured a high level of transparency and clear discussions. This boosted client satisfaction.

Triptomatic: Transforming Medical Transport Management

1. Client Needs:

The client's vision was to build a cross-platform booking system. This system will bridge institutions with transporters in the medical sector. It will include features like transport management and vehicle management. It will have invoice management and a chat platform for real-time contact as well.

2. Saigon Technology's Approach:

Saigon Technology deployed a dedicated team. This team comprised web and mobile developers and a project manager. We adopted various technologies, such as AWS, Nodejs, React Native, and others. This demonstrated their skill and tech-savviness.

3. Outcome:

Saigon Technology's contribution resulted in notable enhancements. These showed in the client's working efficiency and cost management. Regular meetings and structured reporting helped. They ensured that conversations with the client remained transparent and comprehensive.

Offshore Development Center Working Models

When hiring a provider, pick the right offshore model. It helps you find someone who aligns with your project's scope, timeline, and budget. You get a provider who agrees with your desired level of control. This section explores seven common ODC models designed to meet various project demands.

1. Dedicated Development Team

This model involves assembling a specialized team. They will work only on your project. This team functions as an integrated extension of your in-house team. This model is beneficial for long-term projects. These require specific, advanced skills not available within your current staff. 

The dedicated team will meet the precise needs of the project. It ensures that experts in relevant fields handle every aspect. This close integration allows for better understanding. It means smoother discussions and a more effective work environment.

Ideal for businesses that:

- Require long-term development efforts.

- Need specialized expertise not available in-house.

- Desire close cooperation with the offshore team.

- Want high control and coordination?

2. BOT (Build-Operate-Transfer)

 

The Build-Operate-Transfer (BOT) model is a strategic framework. It encompasses three distinct phases. They include team building, project operation, and operation transfer. This model provides a systematic and phased approach. It helps you set up and transfer ownership of an offshore development facility. At first, the outsourcing provider constructs a dedicated team. They build infrastructure tailored to the project as well.

This model is best for businesses looking to establish a permanent offshore presence. It lets you do this with gradual investment and minimized risk.

Ideal for businesses that:

- Plan to establish a permanent offshore presence.

- Prefer a low-risk expansion into new markets.

- Require full working control in the end.

- Are looking to build long-term capacity.

3. Project-Based Model

The Project-Based Model is a comprehensive approach to outsourcing. The ODC services take full charge of completing an entire project from start to finish. This is within pre-established timelines and conditions. This model is effective for clients who want a hands-off approach. It allows them to focus on other business priorities. The ODC handles all aspects of the project lifecycle.

This includes initial requirement analysis, development, and testing. It includes final delivery and post-launch support as well. It’s ideal for clients seeking a turnkey solution with defined outcomes.

Ideal for businesses that:

- Want a turnkey solution for specific projects?

- Prefer to outsource entire project management.

- Need expert handling from concept to completion.

- Lack of the bandwidth to manage new or side projects.

4. Hybrid Model

This model blends elements of both fixed-price and staff augmentation models. It provides a versatile and cost-effective solution. This helps you manage software development projects well. This model lets clients be flexible. They can adapt to the size of the development team. They can modify the project scope according to evolving requirements. This is possible throughout the project lifecycle.

At the same time, it maintains a degree of budget certainty. This enables better financial planning and control. Merging the pricing of the fixed-price model with the pliancy of staff augmentation is great. This helps the Hybrid Model to cater to various projects. It doesn't matter if it needs to be price stable or execution flexible.

Ideal for businesses that:

- Seek the best of pliancy and fixed pricing.

- Need to scale resources based on project phases.

- Desire control over key project components.

- Want to balance between in-house and outsourced services?

Roles of ODC Team Members

Managing an ODC team requires understanding the key roles within the team. Each member has specific tasks to undertake. This ensures the success of the dedicated offshore development center.

These are the main roles the key ODC team members play. These are important in managing the operations of the facility:

- Account Manager: Maintains client relationships.

- Project Manager: Responsible for the entire project.

- Tech Lead: Provides technical guidance and leadership to the development team.

- Back-end Developers: Build and maintain the server-side logic and databases.

- Front-end Developers: Develop the user interface. They handle the client side of the application

- Full-stack Engineers: Work on both the front-end and back-end parts of an application.

- Testing Engineer: Ensures product quality.

- UX/UI Designer: Creates visual concepts and graphic assets.

- Content Writer: Authors instructions and content for the software.

- Business Analysts: Strategize business processes and requirements. This guides the development of solutions.

Identifying the Right Time and Candidates for an Offshore Development Center

Many businesses can benefit from a dedicated offshore development center. But do your business conditions align with such a strategic decision? This section provides insight into the ideal candidates for an ODC. It explains when it might be the best time to consider this option.

Ideal Candidates

An offshore development center is suitable for a broad range of companies. This includes startups and global corporations. These are some examples of who might benefit the most from establishing such a facility:

1. Startups and SMEs: Most times, startups and SMEs don't have sufficient resources. They might not have a large enough in-house team. This team should handle complex or numerous projects. Offshore development center services can help them. ODCs provide them access to a skilled workforce at a fraction of the cost.

2. Companies with High Development Demand: This is for businesses experiencing rapid growth. It's for those with a high demand for software development as well. Suppose this demand exceeds their in-house capacity. Then, they can supplement their development teams and help meet deadlines.

3. Companies Seeking Specialized Skills: An ODC provides access to experts with specialized skills. These skills might not be available or affordable in the home country.

4. Businesses Seeking Cost-Effective Solutions: Does your company want to reduce working costs? You can leverage an ODC to access cost-effective labor markets.

When Do You Consider an Offshore Development Center?

The decision to engage an ODC depends on several factors. These are some scenarios when it might be beneficial:

- Scaling Up: If your business is growing fast, consider an ODC. If your development requirements surpass those of your in-house team, consider an ODC as well.

- New Market Expansion: Do you plan to expand your operations into new world markets? An ODC can provide valuable insights into the local market and business practices.

- Optimize Costs: If reducing costs is a strategic imperative, outsourcing is best. It can provide substantial savings on salaries, benefits, and overhead expenses.

- Digital Transformation: If your business needs a digital transformation, an ODC can help. It can provide the necessary technical skills to navigate the transition.

Why Choose Saigon Technology?

When selecting offshore developers, Saigon Technology stands out for several reasons:

1.  Agile Systems: Our teams employ Agile methods to make your project flexible. This enhances delivery efficiency. It ensures that your projects adapt to any changing requirements.

2. Unified Conversations: We focus on clear and consistent discussions. So, we ensure that all stakeholders remain aligned. We do this throughout the project’s lifecycle. This enables smooth project execution and delivery.

3. Spectrum of Data Security and Quality Management: We have high security standards. We value data security and quality management as much as you do. This shows in our ISO 9001 and ISO 27001 credentials.

4. Gateway to Skilled Professionals: We tap into the top 1% of IT talent in Vietnam. This way, we provide access to an expansive pool of skilled professionals. These experts are adept at navigating complex project requirements.

5. Flexible Models: We offer various flexible offshore development center models. These include staff augmentation and dedicated teams. We provide project-based contracts as well. These can suit the scale, budget, and timelines of any project. This ensures effective work and delivery.

Conclusion

Establishing an offshore development center might sound challenging. Yet, it’s easy to achieve if you partner with the right business. We’ve shown you several ways and methods you can use. Now, it’s up to you to take the next step toward success.

Are you still worried about achieving your goals? Luckily, you have experts in the field to help you. Contact us today if you need help establishing an ODC. We have the team and experience you’ll need for your project.

FAQs

1. What are the Cost Components Related to Utilizing an Offshore Development Center?

There are several cost components to consider when utilizing an ODC. These can broadly be categorized into:

- Personnel costs: Salaries or hourly rates of the offshore team members. They include developers, project managers, testers, and other staff.

- Infrastructure costs: This involves the expenditure on physical space and software. They include expenses, hardware, and other resources needed for the team to function.

- Management costs: These expenses encompass local taxes, accounting, and legal fees. They include HR management and other legal expenses in the offshore location.

- Vendor fees: Fees charged by the vendor providing the services.

- Contact and coordination costs: Expenses for smooth and regular discussions with the team. They include teamwork tools, regular meetings, and visits to the location.

2. How To Manage The ODC Team?

Managing an ODC team requires a balanced approach. It involves clear conversations, proper coordination, and efficient project management. Below are some key strategies:

- Maintain clear and regular discussions: Use tools like Slack, Zoom, or email. They help you stay connected with your team. Regular meetings, both formal and informal, help in ensuring everyone is on the same page.

- Delegate tasks well: Ensure you allocate tasks to the right people. Consider the strengths and expertise of every team member.

- Use project management tools: Tools like Jira, Trello, and Asana are crucial. They help keep track of tasks and maintain deadlines.

- Foster a collective work environment: Encourage team bonding and a positive work culture. The physical distance shouldn't matter. This can involve casual catch-ups or celebrating team successes. It ensures every team member feels valued.

3. What is the Difference between EDC and ODC? 

Their scope and function differentiate an EDC and an ODC. They identify an Extended Development Center and an Offshore Development Center.

- EDC (Extended Development Center): An EDC extends a company's development team. It functions in a separate location. It operates as a remote branch. This branch focuses on specific tasks or projects assigned by the parent company. The EDC may have limited autonomy. It is much integrated with the parent company's operations.

- ODC (Offshore Development Center): An ODC is a more comprehensive setup. It functions as an independent entity. The ODC handles software development and related activities. It operates as a separate unit. It's set up by a third-party service provider. The ODC provides end-to-end services. These include project management, development, testing, and support. Unlike an EDC, an ODC operates with a higher degree of autonomy. It may serve multiple clients.