The Ultimate Guide to Offshore Development Centers

The demand for offshore software development centers continues to rise because of the cost-effectiveness and vast variety of tech experts. 

The beauty of offshore software development centers is that it balances the speed and cost of outsourcing.

For companies and brands, this means high-quality work. In this article, we want to know:

  • What offshore software development centers are;

  • The key benefits of the offshore development center model;

  • The top three locations for offshore development;

  • How to get started with an ODC.

What are the Offshore Development Centers?

An offshore software development center is a software studio in a foreign country. These hubs are common in countries that have the skilled and technical labor force and have a low cost of living.

Overseas companies will leverage these skilled workforces while paying less. 

So how is it different from outsourcing or Traditional outsourcing?

A lot of companies think outsourcing and offshoring as the same but they are two different things.

According to the Business Dictionary, outsourcing is obtaining services or products from a third party vendor. That is sourcing accounting for the manufacturing services of a certain company. In other words, outsourcing is done to any company located anywhere. In this case, the location is never important.

Offshoring is receiving services or products from another country. For instance, a car manufacturer in Sweden opens a  factory in Thailand to manufacture certain parts offshore.

In other words, Offshore software development centers (ODC) are built by native companies and contracted to oversee companies.

The main difference here from normal outsourcing is that the foreign parent company has access to a fully dedicated team. ODCs are there to save foreign's company time, money, and administrative resources.

When a company starts to create an ODC, it will start by first finding a suitable location, hire employees, and run the center while adhering to the local tax compliance, labor, and hiring laws. That way, the company will have total control of ODC's operation and low the cost.

If you compare it to different offshore models, you will notice that ODC is dedicated and transparent. In other words, ODC providers are dedicated to the client’s operations schedule and management.

In a typical business environment, small companies will receive lots of benefits if they outsource their work to an ODC, while big companies will receive great benefits if they create their ODCs.

Benefits of Offshore Development Center Model

  • Access to skilled developers

  • Eliminate the need for hiring outsourcing companies.

  • Provide and manage office space, human resources, and technical resources;

  • Cheaper than hiring developers in local countries.

Top 3 Countries for Your Offshore Software Development Centres

India

India has an excellent reputation as an offshoring destination, IT hotspot, and software development hub. The following statistics prove that India is a great place:

  • The business and technology service industry in India has gone from $4 billion to $58 billion in 10 years.

  • In the last 5 years, we have seen 15,000+ companies outsource their project to India.

  • India is home to big technology and software companies like Microsoft, Oracle, Dell Cisco, Alphabet, and IBM

  • Companies have saved an estimated cost of at least $500 billion.

India's biggest strength is in a low-cost workforce. The average hourly wage you will pay a developer in India is $15. That is much lower than what you will pay an American developer. The only challenge is, this workforce is big, and it will take you time to find the specialists or IT experts.

China

China is the second popular destination. Here are some stats about China:

  • Outsourcing revenue in China has gone from $1.38 billion to $106.46 billion in 10 years.

  • China is home to the Foxconn Technology Group. This is the company that creates Apple iPhones. They produce at around 500, 000 iPhones per day.

  • Fast response time even for big contracting jobs.

  • Home to Major technology brands like Tencent, Huawei, Alibaba, and Baidu

  • China also hosts a global technology brand like Google

China has an excellent labor force that's cheap. They can work from 12 to 16 hours per day with shifts. When it comes to the software industry, expect to pay a Chinese programmer 30 to 50% than an American programmer.

Chinese companies are also known to adapt to changes in the technology industry which are great for Software development.

The only challenge Chinese have is intellectual property (IP) protection. A lot of companies fear the risk of Chinese vendors leaking software or rebranding and distributing it. Unless China solves these challenges, software companies will find it hard to outsource their project.

Ukraine

Ukraine is becoming the go-to destination for offshore development despite its political challenges. Here are the stats to back up Ukraine:

  • Ukraine has grown its GDP from 0.06% to 3.3% and it is valued at $5 billion.

  • Ukraine has more than 90,000 IT specialists

  • The workforce is educated with 84% having at least a bachelor’s degree.

  • A lot of the population speak English

  • Ukraine has the biggest workforce in central and eastern Europe.

Since Ukraine has an educated workforce, that means, you can expect to pay higher wages. For instance, in 2015, the average Ukraine worker took home a salary of $1,600/month or $19,000 per year. 

What that means is, Ukraine's workforce is a bit more expensive than China and India. The good thing is, Ukraine is geographically located to US and European clients. Since most of its large force speaks English, it is more accessible.

Key Members in Any Offshore Software Development Centers.

If you want to create an offshore software development center you must understand the key members you need to run it smoothly. Here are the major roles for any companies that are starting:

Account Manager – They will manage the relationship between the clients and ensure their needs are fulfilled.

Project Manager – They will handle the entire project from planning to execution. Most importantly, they will ensure all the resources are utilized well.

Designers and Developers – Their roles will be to design, install, test, and maintain the software.

Test Engineers – Their role will be to check the quality and integrity of the final product.

Usability Engineers –  Their role will be to conduct tests and evaluate the user-friendliness of the product.

Content and Technical Writers – They will create tutorials and instructions for the software.

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