What Is ODC — Offshore Development Center?

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It is not a secret that most of the customers for software development service providers gradually move from having their own in-house development team or traditional outsourcing to the offshore development centers.

This approach allows saving funds just like with an outsourcing company while keeping your own team.

What Is ODC in Software Development?

An offshore development center is a software studio located in a country with a deep talent pool and lower cost of living and offering software development services for the company located in another part of the world, where keeping a team in-house would cost much more.

An ODC usually includes all kinds of specialists besides programmers and testers, so they also offer project managers, designers, copywriters, UX/UI specialists and others for your team to be hired.

Vendors also cover all the additional problems going with your own team like taxing, bookkeeping, HR management, and so on, so your main office has less hassle of that kind.

How Does Offshore Development Center Model Work?

1. Contractor ODC Model

The contractor model is more usual for smaller companies.

With this model, an offshore development center gathers a full team in compliance with the project’s needs and manages the office and other work-related activities.

This kind of work is useful for a wide variety of tasks from updating and expanding the older software, its support, writing new code or migration it to other platforms.

This way, the main office provides a specification, and the team runs all the analytic and system design tasks as well, prior to actual coding.

2. Customer ODC Model

With the customer model, the customer’s powers are much bigger, which is why it suits bigger companies, or those from a narrow area of knowledge, and requires a lot of analysis, design and management tasks to be covered by the customer.

In this case, the offshore development center offers a team of developers, and the other specialists that may be required are provided by the project management.

The main office specialists research, analyze, design, test and deliver the product, while ODC teammates are focused on coding.

Why Set up ODC?

The rationale for setting up an ODC may be different. Companies usually pursue the following goals:

  • Getting the legal entity in a foreign country
  • Cost reduction
  • Hiring a large team of different specialists
  • Security measures

Getting the legal entity in a foreign country

Being on the market, being closer to the customers, and understanding their needs is critical for business success.

Thus, large companies often try to be physically present in the target market, which reduces logistics costs tremendously.

Moreover, opening an ODC in a country with large population is also a great way to increase the sales volume.

Cost reduction

ODCs are usually established in locations where the development costs and office maintenance are much lower than in the company’s home country.

Hiring a large team of different specialists

Vendor can establish a separate office for you with employee branding if you want to set up a team of 50+ members. All your developers, PMs, QAs, and marketing specialists will work there.

Security measures

The vendor’s office always hosts several teams working on several projects side by side.

If you have a secret project in a highly competitive niche and wish to keep all the details private, then it’s much better to ask a Vendor to establish a separate office for your team.

How to Launch an ODC Project?

  1. First of all, select the right vendor for running your ODC.
  2. Explore their track records, references.
  3. Ask other customers for their experience and advice.
  4. After you know your vendor, sort out your organizational structure with your new team.

    They should understand their responsibilities and roles and distribute the tasks equally.

  5. Create job descriptions for all vacancies.

    Pay attention not only to the qualification and education, but also to soft skills while interviewing candidates.

  6. Plan your ODC security measures as well: who has access to different parts of the project and what things are they authorized to do.
  7. Next, start your actual development process management.

    Select your methodology, outline what and how often your team should deliver to you, be it software updates or just reports.

  8. Set up a project-tracking and management suite, like Asana or Jira.
  9. Give your new team a place on your project infrastructure: the teammates should understand their place in the company, who they communicate with, and to whom they escalate any issues.

    The same applies to every individual in the team: everyone should know how to report any problems or issues to manage them as quickly as possible.

  10. Finally, if you have several teams, set up the responsibility areas between them, or blend different workforces on one part of the project if needed.

    Different offshore teams and your in-house team should cooperate, not disturb each other.

Starting an ODC is not a trivial task, but with some set of skills and a right choice of vendor it can turn out into a no-brainer.

Qubit Labs is able to cover all administrative tasks in creating an offshore development center, be it searching a place for an office, managing it, hiring and HR managing your actual team and closing all financial and taxation question on site.

Offshore Software Development Center (OSDC) Checklist

We gathered the most important steps you should remember when setting up a development center and hiring developers:

offshore software development center

1. Facilities

  • Register a legal entity
  • Find and rent office
  • Interior design
  • Renovations in office
  • Buy furniture
  • Prepare workstations
  • Connect workstations to internet
  • Set up security signal system

When setting up an ODC, you first need to register a legal entity.

After all paperwork is done, you need to find and rent an office fitting your requirements and budget.

Renovate the office in the style of your company, buy all needed furniture, and set up the security signal system – your ODC is ready to work!

2. Equipment

  • Office equipment and supplies (printer, scanner)
  • Snacks
  • Water
  • Coffee machine
  • Medicine box

Hardware and software are the core tools for developers’ work, so the purchase of all required equipment and office supplies is the top priority for an OSDC creator.

Besides that, it’s vital to organize good conditions for the human work; developers will definitely appreciate having some snacks and a coffee machine at their disposal in the office.

Moreover, it’s critical to provide staff with the first aid box for emergencies.

3.Core team

  • Recruiter
  • HR manager
  • Accountant
  • Lawyer

An ODC is not only about developers, as you might need some additional staff for the center’s proper daily functioning.

In most cases, the basic staffing requirements include having a recruiter, an HR manager, an accountant, and a lawyer.

4. Branding

  • Office branding
  • Branded T-shirts
  • Branded cups

The company’s brand glues the team together and increases developers’ commitment and job satisfaction.

So, it’s highly recommended to incorporate some form of office branding like branded T-shirts, cups, caps, etc.

5. Corporate culture

  • Plan team buildings and pizza parties
  • Benefit package for employees

The work people do in ODCs is only a part of their lives and being a part of the company’s corporate culture is what gives meaning and enriches their workplace experiences.

Thus, it’s advisable to plan team buildings and pizza parties to get employees closer together.

A benefit package for employees is also an attractive perk for many, so it’s better to have one in place to keep the best talent loyal to your company.

Perfect Location for Your ODC

Here are some popular locations for establishing an OSDC:

Asia

Asia is the region offering the benefits of rapid technological growth and advancement combined with highly competitive development rates.

Moreover, most Asian residents have a decent level of English proficiency.

The Asian markets have a plentiful supply of developers proficient in numerous technologies.

Together with a convenient time zone, Asian countries offer a favorable legal environment for setting ODCs, with many of them already internationally regarded as mature outsourcing markets.

India

India is the pioneer of IT outsourcing; its market has been on the path of active development since the 1980s, and at present, it boasts the labor supply of over 3 million engineers.

China

China has a much younger IT outsourcing market, but it exhibits exponential growth within the past couple of years and promises further expansion.

Currently, the IT outsourcing companies invest over $15 billion in the Chinese market with their projects and ODCs.

Eastern Europe

A number of countries select the Eastern Europe as a major outsourcing location because of the large number of highly-qualified professionals, affordable development rates, and availability of all required infrastructure (e.g., high-speed Internet access).

Moreover, small travel distances and minor cultural differences contribute to smoother collaboration and better productivity of outsourced professionals from this region.

Most preferred locations here include Poland and Ukraine.

Poland

Hiring Polish programmers is cost-efficient and beneficial because of their good level of English proficiency, low living costs, and cheap tech education.

The company offers a favorable legal climate for foreign IT companies and has a stringent set of intellectual property protection laws.

The country currently offers over 250,000 experienced developers, which makes it the largest outsourcing market in the region.

Ukraine

Ukraine is another regional market exhibiting strong growth and expansion in terms of experienced tech specialists’ supply.

In 2018, there were over 160,000 programmers offering their services in Ukraine, but impressive market growth rates exceed 30% per year, suggesting that the labor supply will soon equal that of Poland.

The country offers a favorable legal environment, continuously improved local infrastructure, and great availability of well-trained professionals.

Why Ukraine?

Why set up offshore software development center or team in Ukraine? We decided to do a short interview with Stas Oskin, from WINGS company to ask him about that.

Stas Oskin, a co-founder, Core Dev and Biz Dev at WINGS Stiftung, a Swiss company with offices in Kyiv, Saint Petersburg, Puerto Rico and a small office in Tel Aviv.

WINGS is a global international project with huge potential – a platform that accelerates DLT companies growth.

The platform helps the community to evaluate the potential of a company, invest, manage funds and protect investors from dishonest companies.

Lyudmila: Why did you decide to set up an offshore software development center?

Stas: We decided create an ODC in Kyiv because we were looking for a country with a western way of thinking to outsource our development.

We believe that Ukraine is a place for it.

Lyudmila: How do you choose people for your offshore software development team?

What do you ask on interviews?

Stas: The most important factor for choosing a developer is a “hunger.”

We want a person to be motivated and to develop together with us to jump into the DLT world. He must believe that it is the next level of development of technology.

It is essential that a person wants to learn and invest not only in their work time but extra time to learn, network, explore.

When we hire people relying on this values, we are rarely mistaken.

We track metrics and follow how the process is going.

We monitor the result according to the results after quarter, half-year and a year. We value personal values and motivation.

We believe that an intelligent person can learn everything by him/herself.

Of course, we check the experience of the candidate, but we will not look for people with DLT experience on purpose.

We expect that he/she will improve skills in the shortest terms.

That is how it works; no one will teach you something in DLT.

If someone expects that any company will guide you, you will be left behind.

It is essential that a candidate searches and learns, and looks for new information by him/herself and does not wait for someone to tell what to do.

Lyudmila: What is crucial for a remote team to succeed?

Stas: We hire people like us and better than us.

Our goal is to have team players who mentally match and provide total support.

Lyudmila: Thank you for your time, it was a great pleasure talking to you.

I hope it will be helpful for other entrepreneurs, who are now investigating outsourcing destinations around the world.

What Are the Pros and Cons of ODC?

Setting an OSDC requires time, effort, and money, so we advise to think twice before making the final decision.

Having such a remote development center comes with its pros and cons that you should keep in mind.

Pros

  • Access to talent pool
    Having an OSDC in the country where you plan to hire developers is always better than hiring a freelancer.

    When job seekers see that they will work in the company’s office, they are more likely to take the vacancy.

  • Convenient location
    Once you plan to set up an ODC in the target job market, you can study it and select the best location in terms of pricing, time zone, and culture.
  • Lower developer rates
    Before setting up an ODC, you can easily monitor the developer rates and set it up in the location where proper talent may be acquired to the team with considerably lower expenditures.
  • Cheaper facilities
    Establishing an offshore development center in an affordable location is likely to reduce office rent, maintenance, Internet costs manifold.
  • Access to the foreign market
    In case you have a foreign ODC, you have a direct access to that market due to your physical presence there.
  • Product localization
    Your developers in the ODC are locals, so they may localize your product for their market much easier than specialists in the headquarters would do.

Cons

  • Wrong choice of location
    It’s possible to make the wrong decision about the ODC’s location if you select a small city with few specialists available in your specific niche.
  • Hardship with registration of a legal entity at a distance
    Numerous countries are unfriendly to foreign business and pose certain legal and bureaucratic hurdles for setting up a new business.
  • Challenges with hiring the core team without assistance
    The process of recruiting the new team in the location of your ODC may be costly (if you send recruiters from the main office to complete the task) and ineffective (foreign recruiters may fail to understand the market and proper channels for candidate search).
  • Challenges with remote team management
    Managing remote teams is a science in itself.

    Thus, it’s necessary to assign properly trained managers for remote teams, which is sometimes costly and still may have little effect on the team’s productivity or communication quality.

  • Security risks
    Having a distant office is prone to risks such as data leakage, raids of law enforcement officers or criminal groups (in non-democratic states).
  • Cultural differences
    Hiring developers in countries with a culture distinct from the main office’s one is always associated with challenges stemming from the difference in personal and business values, attitudes to communication, punctuality, conflict management, etc.

Why Set Up an ODC with Qubit Labs?

Setting up an ODC in an unknown location, with no supportive representatives, may be quite a challenge.

With Qubit Labs, you may benefit from all the advantages of an offshore software development center as a business model and will avoid all potential hurdles of the process.

Here’s what you get when working on the OSDC with us:

  1. Legal support
    Qubit Labs provides a lawyer who assists with registering a legal body, consults on all legal issues, etc.
  2. Office facilities
    We help clients to find the building for locating their office in line with their requirements (i.e., size, budget, location).
  3. Recruiting
    We hire not only developers, but also your main team members. If you need recruiters to work specifically in your ODC, we can hire such staff for you as well or find the specialists you need (e.g., marketing specialists, HR, accountants, etc.).
  4. Accounting
    If you don’t need a full-time employee to conduct accounting, we can provide you with a part-time service of this kind.
  5. Equipment
    Our technical specialists consult clients on the purchase of all equipment required for the ODC’s functioning.
  6. Office perks
    Experts of Qubit Labs help to choose the office furniture, to equip the kitchen, and to establish snack budgets.
  7. Benefits package
    We can help you to create an appealing package of workplace benefits for your employees within the budget you estimate.

    They may include insurance, gym membership, English courses, professional training, etc.

  8. Office management
    We can hire a full-time or part-time office manager to manage the daily running of your ODC.

Final Thoughts

As you can see, having an ODC may be a highly favorable alternative to outsourcing or hiring a dedicated team in the vendor’s office.

You receive the freedoms of having your own team in your own office, which is often more cost-efficient and convenient.

However, setting up an ODC is a challenging task, so we recommend doing that only once your outsourced team gets large enough to require a separate location.

With Qubit Labs, you will never experience any hardships with getting an ODC setup and running.

Turn to our specialists to create your ODC today!

Svitlana Rumyantseva
Project Manager
Svitlana is a PM with legal education and PhD degree in political science. She has experience in managing in-house and offshore/nearshore software development teams including freelancers. She is sure that smooth communication and motivation is the basis of efficient teamwork and successful projects. Svitlana is passionate about networking, achieving great results and acquiring new knowledge.