As the offshore software development trend continues to rise, the need for an offshore development center (ODC) naturally follows. To many IT companies, ODC (Offshore Development Center) is long no longer an unfamiliar term. It is slowly becoming a favorite option for software development solutions due to its cost-effectiveness and excellent access to the vast availability of tech experts.
In 2017, software application development was outsourced by 64 percent, according to Statista. Suppose you wish to reduce software development costs and improve software quality by using an ODC yet don’t know where to start. In that case, this article might be just for you.
1. What Is ODC In Software Development?
“In software engineering, offshore custom software development consists in offshoring the software development process in a country where production costs are lower, thus decreasing budget spending.” – Wikipedia
An Offshore Development Center (ODC) is an offshore team of integrated talents which offers software development services for the company but is located in a foreign country. Simply put, it is a subsidiary of a company that operates in another country. The land where the ODC is located usually has a much lower cost of living than where the mother company is located.
However, setting up an ODC must have resources available for the integration of the company. To reduce the primary office workload, offshore development companies usually have specialists in all kinds of management and technical aspects apart from programmers and testers. These people range from project managers, designers, testers, and UI/UX specialists to account manager HR teams and so forth.
Moreover, ODC tends to have advanced equipment and infrastructure, which minimizes additional expenses on offices and equipment.
1.1. Is It Different From Outsourcing?
Many people think of “outsourcing” and “offshoring” as interchangeable, but they are two distinct concepts. So what are the differences here?
- By definition, outsourcing refers to “obtaining certain services or products from a third party company. Outsourcing can be done to a company that is located anywhere. The location is then differentiated by offshore, nearshore, and onshore.”
- On the other hand, offshoring refers to “obtaining services or products from another country. For example, when a car manufacturer in the U.S. opens a factory in Thailand to make certain parts, they are offshoring.”
|Work Location||From these definitions, it appears that, in essence, offshoring only takes place internationally. At the same time, outsourcing can be carried out both locally and globally. Offshoring is international outsourcing most of the time, but there are cases where a company is offshoring without outsourcing.For example, IBM can offshore work to its Indian offices. Still, since both the people sending the work and doing the work belong to the same company, they’re offshoring and not outsourcing.|
|The Objective Of Each Activity||Outsourcing is all about specialization: a company contracts certain business activities to a specialized, external party to focus on its expertise and core activities.On the other hand, offshoring aims at minimizing the cost, taking advantage of the cost difference between the two countries.|
|Level of Control||A company will have greater control when hiring an offshore team than outsourcing to a third party. Though being their own established entities, ODCs follow the company’s guidance.Meanwhile, an outsourcing vendor works independently to complete necessary tasks, which might cause a loss of control on the company’s part.|
|However, both ODC and outsourcing (especially offshore) share the same interest: get access to a large, talented developers pool with lower costs for development services, allows enterprises to save funds and other resources while speeding up the productivity in recruiting, optimizing accounting, human resources, etc|
1.2. Key Members in an ODC
As you establish an offshore development centre, it’s important to carefully discuss and identify the key members in the OCD with an offshore vendor. An offshore team should include these major roles:
- Account Manager – Responsible for the management of relationships with particular clients, ensuring that all your needs are fulfilled.
- Project Manager – Responsible for the entire project from planning to executing, making sure that all the required resources in the project are covered.
- Designers and Developers – Responsible for the design, installation, testing, and maintenance of your software.
- Test Engineers – Check the integrity, quality, and even non-functional requirements of your product.
- Usability Engineers – Perform tests to evaluate the usability or user-friendliness of your product.
- Graphic Designers – Creates visual and graphical concepts or language to promote a product’s unique persona or brand.
- Content and Technical Writers – Create instructions and content integrated into the software or website.
2. How Does Offshore Development Center Model Work?
Discover and learn more about the most popular ODC models and how they function:
|Contractor ODC Model||
In this model, the central office sends specific requirements to the contractor or the offshore development center. Then a team will be selected based on those requirements.This team will then be responsible for a wide range of managerial and technical tasks, including analytic and system design, updating software, writing new code, and so on.
This model is suitable for small companies.
|Customer ODC Model||A custom team is also selected in this model based on the customer’s specifications or the main office. Still, the main office will cover many more tasks than in the Contractor OCD Model, ranging from product research and analysis to team management. The OCD team will focus mainly on coding.This model is recommended for big companies which can handle a large number of tasks.|
3. Offshore Development Center Benefits
3.1. The Pros of Offshore Development Center
Businesses that save money from offshoring can easily be more competitive. Alternatively, they may choose to reinvest those savings into the company to expand and generate more local employment, typically in more highly skilled jobs. Here are the top advantages of setting up an offshore development center.
|Cost Reduction||The Offshore Development Center has its own equipment and infrastructure and a team of experienced specialists. Your company won’t have to worry about expenses for setting up the necessary infrastructure.As a result, the ODC project can begin much faster and cost you less than building everything from scratch.|
|Access To A Large Pool Of IT Talents||An ODC is where you can find highly proficient IT teams with proven IT competency, skills, and experience. Leading ODCs often emphasize sharpening their employees’ skills, making sure that they are capable of delivering the best solutions to your target customers.At Savvycom, our staffs have weekly training in both English and technical skills to not only improve the quality of our products but also the communication between the team and the clients.|
|Great Control Over Operations||As mentioned previously, the ODC strictly follows guidance from the main office. You’ll be able to evaluate and keep track of the current work progress. You might want to negotiate contract terms with the ODC company.If the results don’t meet your expectations, you can demand the ODC to fix the project with extra costs.|
|Continuous Technical Support||ODC offers continuous technical assistance during the entire cycle of the project. During the project, offshore companies use their expertise to complete their tasks. They also gain more knowledge which will be further developed later on and then applied to other projects if possible.|
|Projects Delivered On Time||ODC teams can deliver on time because they operate under optimal conditions and closely stick to the project timelines and guidance set by the main office from the beginning to the end of the project.In addition, they effectively cooperate with the in-house team, which makes it possible to reduce the total amount of time to complete the project.|
|Efficient Allocation Of Resources||The amount of resources required varies from project to project. When resources at the main office have to be reallocated to accommodate the project requirement, you will have to either reduce or increase staff in your in-house team.An Offshore Development Center is like an extended arm that can perform the tasks of the in-house team, effectively assisting you in scaling your IT department. Without an ODC, resources allocation would be a very challenging feat.|
3.2. The Cons of Offshore Development Centre:
Offshore Development Center is has become the way to go in a world troubled by Covid-19, and standing on top among all countries is Vietnam. According to Statista, Vietnam currently holds the 6th position in the offshoring chart. But still, there are some factors that business leaders need to take into account when choosing an offshoring partner.
At Savvycom, we have identified these problems and always put them on top of our avoid list. So that we can create a professional and transparent working environment for our beloved clients and staff.
|Remote Management Challenges||Although technology has developed enough to assist remote work, that doesn’t mean communication issues never arise. Fostering open communication with remote employees can be difficult.So, managers of the main office should be able to get their ideas across and make sure that the small team gets hold of the current strategy.|
|Cultural Barriers||Cultural differences can negatively affect the work process. For example, an Indian or Chinese programmer used to the hierarchical workplace culture might not feel pleased with the casualness and informality typical to the US workplace.Differences in cultural and business values are where conflicts often come in, lowering morale and reducing work efficiency.|
|Legal Barriers||Some countries prevent foreign companies from setting up a business within their territories, which poses a significant challenge to registering new legal entities.Therefore it is essential for the company’s leaders to thoroughly research the offshore countries beforehand to know if those countries have open policies regarding foreign companies.|
|Security Risks||It’s not exactly easy to keep your confidential information safe at a distance. Data leakage can happen, and the government where the offshore company is located can require you to provide access to your company’s restricted information.|
4. Offshore Development Centre (ODC) Checklist
Before venturing into establishing an Offshoring Development Centre, here is a list of essential requirements to help you determine the best ODC vendor and acquire the most for your businesses.
4.1. Skills and Quality
From the very beginning, it is vital to have a thorough understanding of which country offers the best service without wasting your company’s budget. Alongside the top two IT outsourcing destinations (India and China), Vietnam is a rising destination that is drawing the attention of many foreign businesses. Vietnam has a great pool of skillful software developers with a solid IT background and always stays up-to-date with all the latest technologies.
4.2. Working Profile
How to know which company is suitable for entering a partnership with? Look into their history. Ask their clients. Reviews and interviews from clients are priceless. Through this, you will gain more knowledge of the company and its business activities.
It is recommended to partner up with ODC companies with years of experience. These firms are more familiar with utilizing suitable technologies for ODC projects. They keep up with the trends in the world of technology. More importantly, companies with a long history are likely to be more reliable when keeping projects and information safe and confidential.
There will be less burden when working with an ODC company in a country with no trouble communicating. Companies that want to reduce labor costs can look for employees from countries like Vietnam who have no problem communicating in English. Such an advantage makes misunderstandings less likely to happen between the client and the Offshore Development Center company.
5. Guide to Set Up Offshore Development Center
Now, after all the research and selection on the country and ODC company, let’s move on to the actual work required to launch an ODC project. We’ll be covering this step-by-step:
It is substantial that each member within the team understands their role and responsibilities well right at the start.
Suitability For Vacancies
Pay attention to every aspect of the applicants, from qualifications and education to soft skills.
Setup ODC Security Measurements
What parts of the project will be accessed and authorized by which members.
Detailed Development Process
Select your approach and outline the timeline for each project, whether it is software updates or just reports.
Giving Clear Instructions
Every member should learn how to write any problems to manage them as quickly as possible.
The offshore development team and the in-house team should be able cooperate with each other if needed
6. ODC Payment / Billing Models
6.1. Time & Material
This model is recommended when the scope and the specifications of the projects are subject to change. Clients can add or remove resources as their project requirements are modified. They will be charged based on the actual amount of time and effort the software developers spend working on the project.
6.2. Fixed Cost
This model is suitable for short-term, small, and medium-sized projects with well-defined scope and specifications. The timeframe and cost are fixed before the project begins, and clients will be charged accordingly.
6.3. Dedicated Resources Hiring
This model is used for long-term projects with unclear scope and requirements. Within this model, clients will have a whole team at their disposal and follow a simple pricing system. Clients will pay a monthly sum of money that covers the salary of each team member plus overheads, including the outsourcing provider’s administrative and infrastructure expenses.
7. How Maintain Offshore Development Center
7.1. Treat Your In-House & Offshore Teams Equally
Both are equally important to the company’s overall success, so the offshore team must receive the same treatment instead of being treated as a separate, supporting team. Include them in your decision-making process and maintain a harmonious relationship between your in-house and offshore teams, which will, in turn, translate into workplace camaraderie and productivity.
7.2. Get The Big Picture Across
An ODC is also a part of your team, albeit remote. Every member in an ODC team needs to be aware of the big picture and act accordingly, ensuring that both in-house and offshore teams work toward a common goal.
7.3. Ensure Clear Communication
Keep your directions short and sharp. Chances are that your offshore team might have a completely different cultural background from yours. They might even have difficulties communicating in English. In these cases, get straight to the point and make sure they understand it.
Use practical communication tools to better demonstrate your ideas. A screenshot or quick video sent to your offshore team can be more helpful than hours of poring over instruction documents. Do meetings and video conferencing via Skype or Zoom to better keep track of the work progress.
8. Offshore Development Center In Vietnam, Why Not?
According to TopDev’s report, Vietnam has about 400.000 IT Enginners and over 50.000 graduated IT Students from over 153 IT Institutions per year.
- Vietnam ranks 29th in terms of Skillvalue Worldwide in Developer Skills Chart Of Skill Value Report in 2018.
- Top 06 worldwide in Developer Skills Charts Of Topcoder Report in 2016.
- Rank 23rd worldwide in Developer Skills Charts of Hackerrank’s Report in 2016.
Another reason that makes offshoring to Vietnam an appealing option is its cost-effectiveness. Vietnam is among countries with low-cost labour; the IT industry is not an exception. In addition, high technology is a sector that is granted tax incentives by the Vietnamese government, according to PwC – Vietnam Pocket Tax Book 2019
And since the primary goal of outsourcing is to reduce costs, here at Savvycom, we always aim to provide the best possible quality at the most reasonable price for a growing business.