Offshore Software Development Center: Definition, Benefits, Setup Process

11 min read
Apr 27, 2021
Offshore Software Development Center: Definition, Benefits, Setup Process
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Offshoring is a great software development practice, especially when it comes to optimizing costs. There is a model of offshoring called the offshore development center. What is offshore development center? It basically entails the creation of an off-site team to work on a software development project.

Most projects won’t require the level of dedicated resources (human and infrastructure) required for situating a development team abroad. Therefore, this practice is common among large corporations or generally for projects requiring the collaboration of over 30 people.

What is an offshore development center?

An offshore development center provides a development team with the required office infrastructure and manpower including administrative and support staff necessary to carry the development process to completion. A project manager is usually set in charge of the development center.

An offshore software development center can help you save up to 60% of your software development project execution expenses, particularly in terms of infrastructure. It is a secure location that is dedicated and customized for a software development project execution.

That is, basically an offsite extension of your organization since the composition of the team and the installation of the infrastructure are built to follow the client’s requirements and prescribed methodologies.

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The purpose of an ODC is to provide scalable technology resources, allowing you to eliminate redundant expenses. Usually, the client company has direct supervision over offshore development center services by interfacing with the team members responsible for the execution through a project manager.

ODC vs. Outsourcing: What’s the Difference?

Outsourcing is basically assigning a third party to a project that would have been fulfilled internally. Here, location is not important as long as two different companies are involved, with one party taking up responsibility for the internal processes of another party.

Offshoring is best understood as a model of outsourcing. That is, hiring a Ukrainian company, for instance, to carry out a project from a US-based company would be offshoring. Whereas, if both companies were based in the US, it would simply be outsourcing.

Therefore, while outsourcing pays no regard to location, offshoring is an international arrangement, more like international outsourcing.

The important question is this: why does location matter anyway? Also, what’s the emphasis on offshoring. The reason is that offshoring (or international outsourcing) is more cost-effective than local outsourcing. The former allows an organization to exploit the cost differences between multiple countries to optimize a project’s budget.

In the specific case of an offshore software development center, regardless of the model (which is discussed in the section below), an ODC functions more like a branch of an organization. That is, it is built following the company’s guidelines. It has a lot in common with e-residency Ukraine, for instance, provides this business option for foreign companies, but do not confuse them.

That’s unlike regular outsourcing arrangements where, since the project is handled by a third party, the main organization has limited control over the project specifics. Whereas, by setting up an offshore development center, the organization ensures that it retains control over the project details in accordance with the vision charted out prior.

Why do You Need to Set Up an Offshore Development Center?

Why have large corporations been turning towards the use of offshore development centers? What does your company stand to gain by establishing one? This section deals with some great benefits of setting up an offshore software development center for your business. They are detailed below.

  • What is offshore development center but a model that allows you to focus on your core business responsibilities while outsourcing software development needs? The team is dedicated to that specific project, providing stability throughout the project lifecycle as well as scalability as the client’s needs evolve.
  • As mentioned above, an ODS is like a new office branch of a company, except that it is located abroad. The main advantage here is that it helps to accelerate development for large projects, especially when there are more than 30 developers involved. That’s a situation when an ODS is a viable working model. Otherwise, you should consider the outstaffing model, in which ProCoders are high professionals.
  • You have full operational control of the project. For most companies, outsourcing their software development project means letting go of some control regarding the direction and execution of the project. However, with offshore development center services, you have a direct interface with the team members responsible for executing the project. Having greater control of a project ensures that there is an efficient allocation of resources to ensure the success of the project.
    Ultimately, this means that project milestones are delivered in a timely manner. With outstaffing, ProCoders can provide you the same with even fewer expenses and lesser worries.
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  • An offshore software development center is a dedicated office environment equipped with every need of a physical office, including in-built network security. Therefore, taking your work off-site would not affect the security or the efficiency of a project. Most projects don’t require high-level security anyway. Nevertheless, if yours does, ProCoders can provide a functional agreement and supporting resources to ensure that.
man talking about security which is the key point in offshore development center definition
  • It helps you to access the best and the most affortable talents from overseas. Ukraine, as well as other countries in eastern Europe, are some of the hottest destinations for software development project outsourcing. The low cost of living in these areas makes talents correspondingly easier to hire.
    Although, that does not diminish quality in any way. Ukraine churns out more IT talents than many European countries yearly and is home to some of the best IT institutions on the continent.

What Risks and Challenges May Arise?

In setting up an offshore software development center, you can anticipate some risks in terms of management, communication, culture, legal compliance, and cybersecurity, all explained below.

Management Challenges

You need to hire a full range of employees here: project managers, recruitment staff, office administration staff, as well as developers, engineers, quality assurance testers, UI/UX designers, etc.

You have to think carefully if it’s all worth it, especially in terms of cost. Perhaps, you can achieve your goals better by hiring a development team through an outstaffing company such as ProCoders.

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Communication challenges

An offshore development center meaning is essentially working remotely. Therefore, fostering effective communication between the client organization and the offshore team can be difficult if not managed properly. Also, you need a vibrant project manager who is efficient at managing remote teams.

Although, using an ODC enables great communication between the team members since they are working on the same site. ProCoders, by keeping developers together who speak English as a common language, has been able to facilitate effective communication for successful projects.

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Cultural differences

The differences in cultural values and the business model when working with foreigners would always be evident, no matter how well the system of the client organization is replicated at the offshore development center, meaning not that they are wrong but that people in different locations (often, even within the same country) approach business in different ways.

Although, since Ukrainian culture is just the same as the rest of Europe’s and not so far apart from America’s, organizations from these regions have found it easier to work with Ukrainian developers and development agencies.

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Therefore, strive to build an integrative system that preserves the essence of a project while adapting to the peculiarities of doing business in that location. This is where hiring an agency comes in. For instance, ProCoders has years of experience building software and doing business in Ukraine and understands the business landscape well enough to reduce possible friction to the barest minimum.

Legal Challenges

If you are setting up an arm of your organization in another country, of course, you must research the legal landscape and find out if the business policies in the country are favorable to your business. If you don’t want to deal with this, you can simply hire an agency to carry out the project on your behalf. Ukraine, for one, has quite open policies regarding foreign organizations establishing their business in the country.

Security risks

This is one of the most important factors for many companies regarding offshore development center services: how to keep information secure despite the distance. There are risks of data leakage of sensitive information. To mitigate this risk, it is crucial that you build network security into the very infrastructure of the offshore software development center.

More so, keeping all your resources in a single location does not exactly keep you safe from all security risks. What is important is that you conduct a security risk assessment ahead and take steps to address the specific risks that your offshore development center is faced with.

Existing ODC Working Models

There are two principal models for offshore software development. They are contractor and customer models. Each offshore development center model has its own peculiar features, challenges, and approach. Understanding both would help you to choose the one most appropriate for bringing your vision to fruition.

Contractor model

This is an offshore development center model where a company hires a team of IT specialists to take on specific projects. Every aspect of the project is executed by a remote team from planning, to development, testing, and right to the implementation. Startups find this model really helpful for realizing timely software while their on-site IT teams focus on core business processes.

A lady is telling about a win-win situation

In many cases, businesses use this model to attract and harness talents (particularly for specialist roles) that are missing from their core IT composition. This model is more affortable because there is less overhead cost from salaries and the likes since the offshore team members are not full employees of the company. Usually, they are supplied by an outstaffing agency, as ProCoders does for its various clients across the globe.

Customer model

This offshore development center model is more common among big corporations. It’s like when General Electric opened one of the first offshore development center services in India in 1996.

Basically, the team members in this model of offshore development are still full employees of the corporation. However, the project is still executed from a remote location. The reason for this is usually to preserve the confidentiality and security of a project, particularly if it is related to proprietary software.

cyber risks everywhere

So, essentially, in this offshore development center model, an on-site group of senior employees provide the management and direction of the project and take all critical decisions; yet, the actual development, testing, and execution are in the hands of an offshore team. In this format, the offshore software development center operates very much as a subsidiary of the main organization.

How to Setup Your Own Software Development Center?

Knowledge transition

This is the stage where you (as the client) sets forth a list of expectations and requirements for the project’s fulfillment. It does not stop there, though. An offshore software development center should properly simulate the client’s IT environment. Therefore, the knowledge transition process should also include a replication of the client company’s standards, approaches, and overall culture. What is offshore development center can only be made possible through an official business agreement.

man figured out workplace culture

There should also be a security onboarding aspect in order to avoid unintentional exposure of confidential information and the project details in general. Likewise, create a hierarchy for resolving issues and challenges that arise at work. Each member should know how and to whom to report problems that come up for quick resolution.

Appoint key workers

As mentioned already, offshore development center services have functionalities that make them resemble an arm of the organization rather than an independent body. Therefore, its structure often resembles the anatomy of the client organization.

Yet, some key workers are indispensable. For one, there must be a project manager who is responsible for the entire life cycle of the project right from planning to execution. The project manager also functions as a liaison between the organization and the members of the offshore development center, meaning they are critical for the smooth sail of the project.

all types of offshore development center need PM

After assigning a project manager and an accounts manager who together are responsible for the administrative aspect of the project, then you fill other roles as necessary: developers, designers, software engineers, technical writers. One advantage of using an ODC is that it allows you to scale your team up or down quickly according to the present demands of the project.

Set Execution target

This is the stage where the expectations defined above are broken down into quantitative milestones according to established metrics. The deliverables should be communicated to the team members and individual responsibilities assigned to avoid any confusion throughout the duration of the project.

man say about going strict to the goal

However, you should allow the team members some time to blend into their new space. The project timeline should be established as well as how progress would be monitored and reported. This may be by submitting written reports, having stand-up meetings, etc. All these details must be finalized before the project begins.

Our Advice

Engagement is critical to keeping your offshore development team continually on track. By engagement, we do not simply mean communication, although communication is a critical part of the engagement factor. Engagement is ensuring the active participation of all the contributors to the project. This can be ensured by embracing agile practices of continuous development.

For effective integration, you need to treat the offshore team like you would your on-site team. After all, whether the developers are provided by an agency or not, they are essentially part of what you do at your company once they are working on your project. Therefore, include the team in all the important considerations to ensure that they are delivering well on your expectations for the project.

Because of our timely service at ProCoders, Quartz Network became the first mover in releasing a multi-faceted web application that serves B2B clients as a one-stop virtual destination for professional networking.

In fact, at the outset of the project, we had assembled a super-team from our pool of experienced developers within a week. The onboarding process was even more seamless. In record time, a full-stack software solution was created, with a library of coursework, a people-matching system, and a payment system all implemented. That’s the power of what is offshore development center.

Conclusion

Over the years, ProCoders has been part of big-time projects, building dedicated teams and providing appropriate infrastructure to support the development of critical software. ProCoders stands out as an example of how companies can power their teams via a dedicated offshore development center, meaning via a dedicated team and infrastructure. If you have an idea for a software product already, you can talk to us about your options and get a budget-friendly package that fulfills your needs.

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