Rise of ODCs: Why Startups and SMEs are Embracing Offshore Development

Introduction

With the everchanging requirements of the digital world, start-ups and even small-scale businesses experience ample challenges and consistently seek opportunities to expand their businesses and attain their goals.

While seeking ways to improve and expand, one of the most effective approaches is offshore development services. But what exactly are these, and how are businesses leveraging the power of offshore development centers to scale up their operations?

This blog is focused on sharing comprehensive insights on offshore development centers, their benefits, and other crucial details about them. Read on to learn more.

Demystifying ODCs: Why do your startups need them?

An ODC, also known as an Offshore Development Center, is a specialized team of IT professionals and software developers located in a different country. 

In a nutshell, it's like a branch of the company located in another country with lower costs and a vast pool of talent. 

Not only this but having an offshore development center brings a myriad of benefits to businesses. Let us check out a few of them:

1. Quality and efficiency

ODCs provide a large pool of qualified professionals who deliver high-quality project outcomes on time. They employ the industry's best practices within the projects to ensure the quality of the project outcomes. 

2. Cost savings

ODCs facilitate SMEs and start-ups' reduction of operational expenses by hiring top-skilled talents at lower rates than in their own countries. Having an ODC also eradicates the requirement for investing in office spaces, infrastructure, equipment, and other overhead costs. 

3. Collaboration and innovation

ODCs foster collaboration and innovation for businesses by bringing fresh ideas, data insights, and futuristic perspectives to the table. They also enable SMEs and start-ups to leverage the offshore teams' diversified skill sets, expertise, and knowledge.

4. Scalability and flexibility

ODCs help start-ups adapt to changing business and market requirements and address customer expectations by providing them with the required flexibility to scale up or down their team size. They also enable businesses to select the most suitable engagement models based on their unique project requirements and restricted budgets. 

So these were the topmost benefits that illustrate how beneficial they are to choose the ODC setup. 

Did you know that several start-ups have selected setting up an ODC to fuel their business growth?

Yes! You'll be astonished to know the names! Below are some of the successful start-ups that have gained business growth and popularity in a short period. 

Uber: Uber is one of the most successful ride-hailing platforms, connecting riders and drivers through a mobile application. It has revolutionalized the entire transportation sector, leveraging the benefits of having an ODC in countries like India, Bulgaria, and Poland to improve its tech stack, enhance its operation capabilities, and offer a unique set of features and services to its users. 

Slack: Slack is one of the most popular communication and collaboration platforms. It enables teams to communicate effectively and work together efficiently. Slack has leveraged an ODC setup in industries like India, Canada, and Ukraine to augment its in-house team capabilities. 

These were just a few examples of businesses using an ODC to improve their operational efficiency. Now, let's examine how having an Offshore Development Center can help businesses scale up.

2. Scaling Up with ODCs: Cost, Talent, and Growth

One of the most crucial challenges that businesses often experience is finding a way to scale without compromising on quality, innovation, and efficiency. 

This is also true for expanding to new markets, hiring more employees, and even creating new services or product offers, all of which can be time-consuming and very costly, especially when you have a limited budget, expertise, and resources. 

Well, that is where having an offshore development center comes into the picture!

Yes, you heard that right. Having a dedicated team of IT and non-IT professionals who work remotely to help the company scale is a powerful solution. 

Let us talk about the ways ODC can help businesses scale:

Cost optimization through lower development fees

ODC setup can help businesses save up to 60% on their development costs. The ODCs can do this by leveraging tax benefits, lower labor rates, and operational efficiencies based on the selected offshore location. 

Not only this, but it can also help avoid the costs associated with training, hiring, and training staff by directly onboarding a professional from another country working from a remote location without compromising on quality. 

For instance, if you plan to hire a software developer from India, your hiring would cost as little as $20 per hour compared to the US, which costs $100 per hour. 

Scaling development teams to meet growth demands

The changing markets and business demands require some innovation and even staff augmentation based on the scaling demands. The ODCs can help seamlessly meet those ever-changing requirements of the digital landscape. 

Delivering high-quality outcomes can help improve project quality, provide faster time to market, and enhance customer satisfaction and retention rates. 

For instance, if you would like to add new features to your existing product but do not have sufficient time and expertise access at the moment, having an ODC can remove this barrier by assigning the task to a professional and letting you focus on your core business activities. 

Accessing specialized talent not readily available locally

This is one of the foremost benefits of having an ODC. Having access to professional talents with the desired expertise and knowledge of the trending tech stacks can be challenging to find locally and even in nearby locations. AN ODC provides easy access to the top tier talented professionals, which is not available locally. 

3. Navigating the challenges: Common pitfalls and solutions

While setting up an Offshore Development Center (ODC) offers numerous benefits to startups and SMEs, it also poses several challenges. Like many worthwhile endeavors, setting up and managing an ODC comes with its share of initial challenges. There are several common pitfalls that one may encounter while working with an ODC.

Communication barriers

Working with an ODC can be challenging as it introduces communication barriers. It can sometimes be complicated to manage the same communication levels that are generally used while working with in-house teams. So, communication barriers are one of the foremost pitfalls that most organizations discuss. 

Certainly, these communication barriers cost businesses a lot. The graph below highlights the cost of poor communication that businesses often face.

Not only do productivity, quality, and employee retention suffer, but businesses also start losing the prestigious clients they have worked with.

Don’t believe us? Check out the numbers in the graph below, and you’ll get your answers!

Although it can be challenging, it can be avoided by establishing frequent and clear communication channels with the offshore development team, such as regular meetings, chat platforms, and video calls. Incorporate effective communication strategies and include them in the activities with your in-house team. 

Time zone differences

When you hire a team of developers overseas, challenges associated with timezone differences and languages are pretty common. Since the team works in different time zones, collaboration gets complicated. Lack of coordination can affect the entire performance and outcome of the project. 

However, this challenge can now be managed by planning a time overlap window, forming an agile scrum, and offering the required work flexibility. 

Legal barriers

Some countries prohibit foreign companies from establishing businesses within their borders, making it difficult to register new legal entities. Therefore, company leaders must conduct thorough research on offshore countries beforehand to determine if they have open policies regarding foreign companies.

Security risks

Keeping confidential information safe at a distance can be a challenge, as data leakage is a real risk. Moreover, the government of the offshore company's location may demand access to restricted information, potentially leading to serious consequences.

Ensure that you find an offshoring destination that complies with government laws and regulations while partnering with you.

Cultural differences

Cultural barriers are among the most common challenges experienced by an offshore team. Cultural gaps are common when working with a remote team overseas, which sometimes may create some friction between offshore and in-house teams. Ultimately, this affects communication and quality outcomes. 

However, understanding the cultural diversity of the team, their emotional quotient, and beliefs can help mitigate the cultural barriers. Cultural sensitivity training can also be an effective way to make the work more productive with the offshore team. 

For more information on the offshore development center challenges, talk to the YTII experts. 

4. Building a strong foundation: Choosing location, partner, and team

Have you planned to establish an offshore development center for your startup? That's a great decision. However, it's crucial to carefully consider how to select the right location, offshoring partner, and team for your ODC.

Setting up an ODC is a complex task that requires thorough planning. Therefore, we have compiled some best practices to assist you in establishing your offshore development center.

Select the right location

When planning to establish your own ODC, location plays a crucial role. It significantly impacts operational efficiency. Therefore, along with the professional's skills and expertise, check out the location as well to make an informed decision. Select the following factors to ensure the right decision.

• The expertise of the developers
• The country they are residing in (Cost of living and wages)
• Cultural and language compatibility
• Infrastructure 
• Connectivity
• Tax and legal regulations 
• And economic stability

Let us take an example: You are a US-based startup and want to select a location with a compatible timezone, like Latin America, to encourage real-time collaboration. Alternatively, you can choose a location with a large time difference, like India, to benefit from round-the-clock developments. 

Select the right offshoring partner

If you're already familiar with the resources, you can proceed as they are. But what if you don't know that? Well, in that case, partnering with a reliable service provider can help!

An experienced partner with a proven track record of delivering high-quality solutions and a strong reputation in the market. 

To verify the offshoring company's reliability, ensure to check the following requisites:

• Reputation of the company
• technical capabilities
• Frameworks and methodologies they use
• Skilled team they have
• Word of mouth
• Client testimonials 
• Robust security and data protection policies

For instance, let's say you need to develop a web application using React. So, searching for an offshore partner who has experience in React and other tech stacks like MongoDB, GraphQL, and Node.js can be beneficial. 

Select the right team

Once you have figured out the location and the partner, you will have the requirement to find the right team for your project. The success of an offshore development center largely depends upon the performance and skills of the offshore development team. Work closely with your selected partner to define the roles and responsibilities clearly. Don't forget to share the expectations to ensure the selection of the best candidates for your project. 

Pro-Tip: If you have FinTech-related project requirements, choose developers with prior experience working in the financial industry. 

5. Communication, collaboration, and monitoring: Keys to success

One of the main challenges when working with an offshore development team is ensuring effective communication, monitoring, and collaboration among the remote team. This is crucial for the project's success as it helps businesses align with goals and user expectations. 

Managing a team and maintaining effective communication with them is one of the most difficult aspects of having a remote team. Therefore, businesses must embrace industry best practices that can help overcome these communication barriers and foster a strong bond with offshore teams.

Here are some tips that you can follow:

Use effective collaboration tools

Collaboration tools are essential for maintaining effective communication with remote teams. Businesses can use tools like Google Meet, Slack, Zoom, and more to foster a productive communication environment.

Have a clear communication

When working with a remote team, clear communication is essential for conveying your business goals properly. To avoid any confusion, make sure to communicate effectively with the team by sharing your project requirements, milestones, expectations, and feedback in detail.

Employ regular monitoring

It is essential to monitor offshore teams to ensure performance and quality. This helps businesses identify and address any risks or issues that may arise during project execution. Monitoring methods can include testing, reports, code reviews, and feedback surveys. It is important to ensure that the monitoring process is transparent and fair.

Recommended Read: Tips to manage offshore team 

6. Launching your ODC: Getting started and what to expect

By now, you must be familiar with the challenges, benefits, and other crucial details about offshore development centers and how they can help you scale your business. Since everything is noted well, one question that arises here is: How to set up your offshore development center? How to get started with it? And what can you expect from the process? 

Well, don't worry—we have compiled the data for that as well! Here are some of the points to guide you with that!

Define your requirements and goals clearly

Before setting up an ODC, ensure you have a clear idea of what exactly you want to achieve with the setup. What type of skills and expertise are required? For instance, do you want to set up a completely dedicated team from scratch for your project or extend your existing team?

Having a well-defined vision and scope of the requirements and projects can help you find the right partner. 

It is essential to note here that you must set realistic expectations for your project. 

Partner selection and team building

Once you have clearly defined the vision, scope, and goals, it is time to select the right partner and choose the right team to complete the project. Choose the offshore development partner based on the criteria discussed before and build a team with the desired expertise for your project. 

Set up communication and collaboration tools

As discussed earlier, communication and collaboration are crucial when working with remote teams. In fact, they are one of the significant challenges that businesses often experience. 

According to a recent report by The State of Business Communication in 2023, conducted by Harris Poll on behalf of Grammarly, 72% of business leaders believe that effective communication has increased their team's productivity.

Online collaboration tools increase productivity by 30%, while effective communication boosts talent retention by 4.5 times.

Therefore, businesses should employ effective communication and collaboration tools to enhance productivity and engagement.

Bottom Line!

We hope that this blog has provided you with all the essential insights about Offshore development centers and how they can benefit start development. Offshore development centers are not something that can work on a "One Size Fits All" proposition; it is crucial to plan a strategic and personalized solution to set up your ODC.