What Is ODC — Offshore Development Center? How To Set Up An Offshore Software Development Center in Vietnam?
ODC — Offshore Development Center
As the demand for software development increases worldwide, offshore software development centers are popping up and rising higher and higher in recent years.
If you’re working in the IT industry then the term “offshore software development center” is probably not something unfamiliar to you.
These centers become top choices for many enterprises due to the benefits they bring.
So what is an Offshore Development Center?
If you have ever considered outsourcing your IT or software development projects, an offshore development center (ODC) might be an option for you.
An offshore development center is a development company that provides you with software development services but located in another country. It is deemed that this type of company is a subsidiary of your main company.
The country in which ODC located has much lower living standards compared to the country in which the holding company is located.
So how is it different from outsourcing?
ODC is slightly different from software outsourcing. ODC provides services or products and it’s located in another country while outsourcing is a service that offers some certain services or products from a third party company, the geographical location is not a critical factor.
The main purpose of outsourcing is to increase productivity and focus on other important tasks while saving cost can be one of the reasons but it is not the fundamental cause. On the other hand, ODC’s primary cause is to help reduce the company’s expense by utilizing the cost difference between the two countries.
However, both ODC and outsourcing (especially offshore) share the same interest: get access to a large talent pool with lower costs for development services, allows enterprises saving funds and speeding up the productivity in recruiting, optimizing accounting, human resource, and office budgets.
ODC can provide various services like building a software development team based on your requirement, project-based development, testing services, setting up separate ODCs for clients.
An ODC usually includes all sorts of specialists you might need: developers, QA engineers, project managers, product managers, DevOps engineers, designers, copywriters, UX/UI specialists, marketing specialists.
They also have your back when it comes to additional problems like taxing, bookkeeping, HR management, and so on.
There are several development models that you can have a look at:
- Software ODC trust: for clients who demand top-notch security levels in their design models. This model is suitable for those whose software is one-of-a-kind and needs to be confidential.
- Software ODC classic: the most popular software development model employed by ODC. The model includes a dedicated team who has the necessary technical skills to be able to deliver the project as required is supervised by a project manager. This kind of model is useful for projects that have a wide variety of tasks such as updating and expanding the older software, its support, migration to other platforms, or writing new code.
- Software ODC branded: the best option for businesses and corporations that want to be extremely active, involve, and control the process and its development process.
- ODC Full form: also known as private ODC. This model allows customers to get their own development centers in other countries. The team employed is based on the client's requirement that will plan, research, analyze, design and manage tasks in close cooperation with the client's headquarters.
Benefits of ODC
There are multiple benefits that ODC can bring. Here are some rationales behind it:
- Cost reduction: like we have mentioned earlier, because ODC are often placed in countries that have lower living costs compared to the one in which the headquarters are located. They can utilize the cost dissimilarity to reduce costs in materials, labors, while increasing sales, or shift the main focus to other factors.
- Cheaper Facilities: establishing an offshore development center in the center of the economy in a much cheaper country not only is beneficial to enterprises in terms of reputation, and sales but also is likely to reduce office rent, maintenance, internet costs manifold.
- Expand the market to a foreign country: being on another country’s marketplace is a way to increase the sales volume, reputation, get closer to the customers, and understand their needs better. This is also a way to be physically present in the target market, at the same time reducing logistics costs.
- Large team with a different set of skills: if you want to set up a team of 50+ members, vendors can establish a separate office in which all your developers, PMs, QAs, and marketing specialists will work here for you with employee branding.
- Access to the Talent pool: having your company in a different country equals getting access to the talent pool of that specific country to enrich your company working cultures and enhance the skills in general. When job seekers see that they will work in a “foreign company’s office”, they will likely take the jobs.
- Improving confidentiality: ODC likely hosts several teams working on several projects side by side most of the time. It’s always a nice idea to ask your ODC to establish a separate office for your team.
- Product localization: If you want to reach the oversea market, ODC is a nice choice since it does not only bring your enterprise closer to that one specific market but also help in localizing your products. For example, you want to bring your products to Vietnam, then having your ODC there is a smart move since all of your developers are locals, they can help input some ideas which localize your product for their market.
However, you shouldn’t overlook the risks lying in ODC. Have a look and thoughtfully consider:
Wrong choice of Location
If your aim is to save cost, improve sales then have a look at your ODC’s location. You should avoid going to small cities with too few specialists available in your specific domain and less potential.
Have a look at the 2020 Global Talent Trends to get some insights about the future working environment landscape and the future of work in Europe, Africa, ASEAN, and so on to find the opportunity land.
Hardship with registration at a distance
Some countries are unfriendly to foreign business and pose certain challenges, legal and bureaucratic hurdles for setting up a new business. Having a network in that one specific country in which you will have your ODC is a good idea, someone there can give you some insights about how to register as a legal entity.
Along with benefits, of course, there will be risks and challenges. Here are some challenges that you might come across while having an ODC
- Hiring the core team without assistance: the process of recruiting the new team in the location of your ODC may be costly and ineffective if the foreign recruiters fail to understand the market and proper channels for candidate search.
Remote team management challenges:
- Security risks: having a distant office is at risk of data leakage, raids of law enforcement officers and criminal groups
- Cultural differences: the cultural differences such as language barriers, working culture, attitudes to communication, conflict management, communication channels are still there.
- In-house team vs them: there is a big difference between hiring an in-house team and a remote team. Will all of your employees be sitting in the office? Some of your employees will be remote for sure when it comes to ODC, but what are your main communication channels? Will everyone be in the same office all the time so that you can reach anyone you need once you call or email them?
- Time Zones: This is one of the significant challenges you need to overcome when having an ODC. Most of the companies will help you to schedule and warn developers if there is a specific request from the client to make communication easier
- Communication and management: when online communication is taking place, there is a huge loss since you can’t see someone’s facial expression or body language. Therefore, clear and instructive communication is crucial to compensate for the gestures. Make sure to unified the means of communication and working styles.
- Team concerns: it’s necessary to inspire and treat the remote team fairly since they might feel themselves as a second team. Occasionally visit them in their country if you can or invite them to the main office to get to know each other better in person.
- Scalability: this is more like a benefit than a challenge. But since you have your ODC in another affordable country, you can easily scale up your team size while still staying within your budget.
How to set up and manage an ODC team
- Select the right vendor by having a look at the vendor’s working culture, ask for their case study, and analyze the skillsets.
- Explore track records, references
- Ask other customers for their experience and advice.
When you’ve already done with choosing your vendor, talk to them about your organizational structure and culture. It is essential that you all work together in harmony, and they understand what is their responsibility, their roles, and distribute tasks equally as well as help each other.
When hiring new employees, remember to create job descriptions for all vacant positions in order to help them know their roles and responsibilities better. And pay attention to soft skills while interviewing your potential employees besides qualification and education.
Giving them a clear instruction and a place on your project infrastructure. Your team members should understand what is their role, who they will communicate with, and whom they will come to when issues occur. Individually they should know how to report problems and manage them as soon as possible.
The next step is to plan your ODC security measures: who can access which parts of the project, what is their responsibility, followed by selecting your methodology, communication channels, and communication frequency?
How often your team should talk to you, what is the due date and how they should deliver to you. Asana or Jira can be an option for you to set up a project-tracking and management suite.
If you have several teams, be clear about the responsibility areas between them, or blend different human resources on one part of the project if necessary. Offshore teams and in-house teams should be coordinated and cooperative, not disturbing each other.
By understanding the challenges, you will be well prepared for the upcoming when starting an ODC. By choosing the right vendor with the right skill sets and flexibility, your vendor can be your right hand.
Your ultimate guideline/checklist for running an ODC
To help you not to miss any points, here is the checklist you need to ensure the success of your future ODC.
- Research the market and living standard of which country you want to have your ODC in
- Plan the facilities you will need
- Register to the local government as a legal entity
- Find and rent an office, if you have big budget then the center of the city is always a right choice, near river area is also a good choice
- Interior design
- Renovations in office
- Buy and install furniture
- Prepare workstations and connect workstations to internet
- Set up security signal system
- Equipment for your employees and office like printer, scanner
- Pantry area, snacks, water, coffee machine, medicine box
- Hardware and software tools for developers’ work
- Purchase all required equipment and office supplies
Now moving on to the team:
- Hire a core team
- HR manager
- Any additional staff for your center’s daily functioning
Now to inspire, unite and consolidate the team, you might want to:
- Establish / Bring together your brand
- Office branding, working culture
- Branded T-shirts, cups, pens, notebooks, etc, depending on your budget and how much you want to expand your business
These factors help in gluing the team together and increasing your employees’ commitment and job satisfaction.
When your team is ready to work, it’s time for you to sit down to:
- Plan corporate and cultural activities with HR Manager
- Plan team-building activities and pizza parties
- Set up a benefits package for your employees
- Plan when is the right time to give your team a visit
These steps can help keep talent loyal to your company.
Popular location for your ODCs
A - Asia
This is a region that offers a wide range of benefits of rapid technological growth and advancement. Most Asians have a decent level of English and at the same time, there are plenty of developers and software engineers in this continent.
Asia is deemed to be the next destination for outsourcing and offshore development because of the skill sets, convenient time zone, many of them have already become mature outsourcing markets.
- India, an indispensable name in the IT industry when it comes to offshore outsourcing or ODC. It’s the pioneer in the market and has been active since the 1980s. There are currently 3 million engineers in this country.
- China: country of billion residents. China has a much younger IT outsourcing and offshore development market. But there is an exponential growth within the past 5 years and promises further growth.
- Philippines: after India and China, the Philippines is the next most preferred country due to its strong work ethics, state-of-the-art infrastructure, and a large pool of talented resources.
- Vietnam: If the main reason for outsourcing and establishing an ODC is to cut cost, then Vietnam will be your top choice since the market is still relatively new; therefore, with 30-50% less in terms of costs of operations compared to India and China, many businesses consider Vietnam as a destination to do software development outsourcing business now and in the future.
B - Eastern Europe
Eastern Europe has a large number of highly-qualified professionals, with affordable development rates, and availability of all required infrastructure like high-speed Internet access.
With convenient geography, small travel distances and minor cultural differences, this region has always been an offshore destination.
- Poland: with low living costs, cheap tech education and high level of English, Polish programmers are highly beneficial. The country has over 250,000 experienced engineers and developers.
- Ukraine: With more than 160,000 programmers across the country, the market growth rates exceeded 30 percent per year, it is expected that the labor supply in Ukraine will soon equal to Poland.
TP&P Technology is a leading software development company in Vietnam, it’s our pleasure to be your partner. We offer multiple benefits like hiring developers or any specialists you need (e.g., marketing specialists, HR, accountants, sales, etc), accounting service, consulting, office perks, creating an appealing package of workplace benefits for your employees, and so on.
With TP&P Technology, you will never experience any hardships with getting a development center setup and running.
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