Offshore Software Development Center (OSDC): Everything You Need to Know

In a time of geopolitical turbulence and economic shocks, businesses are searching for ways to build resilience, remain afloat, and keep on growing. Certainly, digital systems and software solutions play a great deal in achieving these objectives. As such, tech companies are more inclined toward opening their offshore software development centers (OSDC) nowadays.  

In short, an offshore development center provides cost-efficiency and guarantees access to a talent pool abroad. Read this article for more details on the OSDC notion, functioning, benefits and pitfalls.

What Is an Offshore Development Center, and How Does It Function?

The term offshoring refers to some activities that take place in foreign countries. Offshore software development means that a company hires a team of developers and other IT specialists in countries with a welcoming business climate. This model is the way to go for those who want to expand their production, but don’t have enough resources to do this on-site.

Definition: An offshore software development center is a dedicated unit located outside the client’s country. This unit specializes in creating, maintaining, and supporting software solutions, and has established processes, the required equipment and office amenities. 

OSDC functioning principles:

• Providing competitively priced software services to customers in other countries.
• Operating as a separate entity, with a dedicated team comprising software engineers, project managers, quality assurance specialists, and other experts.
• Customizing software development to specific business requirements.
• Communicating with the client’s in-house team through regular meetings and progress reports.
• Scaling the team size up or down depending on the project needs, thus optimizing expenses.

Offshore Development Centers vs. Outsourcing: What’s the Difference?

An OSDC and outsourcing are two approaches to obtaining software services. While they share some similarities, there are key differences between the two.

• Location. We’ve already mentioned that offshore software centers imply hiring experts in foreign countries. Outsourcing, on the other hand, is a business practice that involves collaboration with third-party vendors regardless of their location. Hence, an OSDC is one of the outsourcing models. Outsourcing can be either onshore or offshore.
• Dedication. An offshore team works exclusively on the client’s project and is committed to meeting its goals and timelines. Meanwhile, an outsourcing vendor may have a team of developers working on multiple tasks, and the client’s project is just one of them.
• Personalization of services. Offshoring provides a customized approach to software development, tailoring products to all specific requirements. Outsourcing usually involves working with a vendor’s standard processes and procedures.
• Communication. Offshore development is most suitable for projects that require active collaboration, while outsourcing is best for well-defined tasks that can be accomplished with minimal interaction.
• Control. The client has greater supervision over the operations and management of the offshore location. With outsourcing, the level of client involvement is much lower, since this model implies relinquishing some control to the external vendor.

As you can see, an OSDC provides a more customized and dedicated approach to software development, while outsourcing is a more general business practice that can be used for delegating a variety of functions.

Four Signs You Need Offshore Development Center Services

How can you know that you need to hire an offshore team? Here are the four main indications.

1. Your business has special data security requirements

OSDCs often have well-established QA processes and best practices that guarantee the quality and reliability of your custom tech solutions. Industry leaders – like SaM Solutions – even build strong security governance frameworks that cover all aspects of data privacy, including policies, processes, and technologies. Additionally, ongoing training and awareness programs ensure that all OSDC staff understand their responsibilities and handle sensitive data securely.

All this can help you reduce the risk of errors and bugs and deliver products that meet or exceed customer expectations.

2. You require custom tech expertise

Finding and recruiting software experts in some countries is challenging, either due to their scarcity or extremely high costs. Offshore software development gives you access to a wider talent pool of skilled professionals with specialized expertise, including in emerging technologies and niche areas, at affordable prices. This way, you achieve faster time-to-market without spending a fortune. 

3. Your project is extremely large

Big projects need ongoing support and the ability to grow without limits. Keeping an in-house team for these purposes is unwise, because expenses will exceed revenues. A dedicated offshore development center can help as it allows you to have a central location for continuous updating and scaling, all within the allocated budget.

4. You want to achieve more by spending less

Many companies are experts in their fields, but software development is not their core competence. Let’s suppose an insurance agency decides to develop a website, a mobile app or another digital solution. Without outsourcing or offshoring, they will have to gain insight into the subject, hire a team, build infrastructure, establish development processes, and continue maintaining it. It’s a colossal waste of time and resources. Also, the result will likely be far from ideal and disproportionate to the budget spent.

By hiring an offshore team, you can avoid the hurdle of building an in-house team and get high-quality software at reasonable prices and within set time constraints. Moreover, you can build long-term relations with such a team and involve it in your future projects.

Benefits of an Offshore Software Development Center

Cost savings

Not every business has an opportunity to hire and support a team of talented and experienced developers. By outsourcing software services to an offshore location, you can benefit from improved productivity and the lower cost of resources, infrastructure, and labor without compromising on quality.

Suppose an entrepreneur from the US intends to work with an offshore software development center located in South Asia or Eastern Europe. By factoring in all the expenses, the total costs will only reach half of what it would’ve cost with an in-house US-based team. This is because developing countries generally have a lower labor cost. Despite this cost advantage, the quality of service provided by many offshore teams is on par with, or perhaps even better than, that of their Western counterparts.

Access to a larger pool of skilled developers

Recruiting software engineers in developed countries is costlier and overall more problematic because of the imbalance between supply and demand on the labor market. In other words, you’ll be constantly on the hunt for the best specialists, but often to no avail. 

OSDCs provide access to a larger pool of skilled offshore professionals, who may not be readily available in your domestic market. This helps you find and hire developers with the right skills and expertise much quicker. 

Increased efficiency

By leveraging time zone differences with offshore centers, companies can boost their productivity. For example, if the location of an OSDC is several hours ahead of your home office, developers can work on the project while your working day hasn’t started yet. This results in faster turnaround times. 

24/7 availability

Most offshore software centers offer round-the-clock support and development services. This feature, which stems from the time zone differences and the need to adjust to the working environment of clients, helps companies shorten project timelines and accelerate time-to-market.

Flexible scalability

An essential advantage offered by offshore centers is the flexibility to scale up or down as needed, allowing companies to respond rapidly to ever-changing market conditions and project requirements. For example, if at some point a team needs to be expanded, an OSDC can quickly provide the necessary resources without the need for a lengthy hiring process. Similarly, if a project is nearing completion, an offshore center can quickly scale down the team to reduce costs. This helps companies save time and money, and be more agile in responding to market changes.

How to Choose an OSDC

1. Define your project requirements

Finding the right offshore software development center can be a daunting task, but it all starts with defining your project requirements. You need to determine for yourself what you want to see as a result and set clear goals for candidates to understand what tasks they will have to tackle.

Start with identifying your business needs and the project scope (its size and complexity), setting the deadline, assessing the budget, and defining the technical expertise your project requires.

2. Choose OSDC location 

Choosing the location of an offshore development center is an important aspect of the decision-making process. When considering locations, you should take into account factors such as time zone, political and economic stability, and labor cost. 

Time zone is particularly crucial as it impacts communication and collaboration with the development team. Political and economic stability also plays a critical role in ensuring that your project is not disrupted by unexpected events. Additionally, you should consider the cost of labor, as it can vary widely in different regions, and other factors, including  language skills and cultural compatibility. 

3. Search for potential offshore software development centers

Once you have a clear understanding of your project requirements and a list with possible locations of your future partner, you can evaluate all the candidates in the region. Conduct research on the internet, check various ratings of software development companies on platforms like Clutch.com, view the vendors’ websites and profiles on LinkedIn. Complete this step by shortlisting 5-10 most suitable providers. 

4. Assess vendor capabilities 

Each vendor on your list should be thoroughly assessed: check their references, view portfolio, and verify their technology stack. If possible, try contacting their previous clients to gain insights into the vendor’s work quality, reliability, and competence. Looking through portfolios can help you see the type of projects the companies have worked on, and verifying their technology stack will let you see if they have the necessary skills and resources to meet your project requirements. 

5. Review vendors’ management practices and data protection policies

It’s essential to ensure that the vendor has clear collaborative processes and communication channels in place. Ask about their established management practices, opting for those that use agile methodologies.   

You should also verify that the vendor is compliant with data protection laws and has robust security measures. These may include:

• Communicating via secure channels, such as virtual private networks (VPNs) and encrypted email, to prevent unauthorized access to confidential data.
• Protecting infrastructure with the help of firewalls, intrusion detection and prevention systems, and antivirus software.
• Implementing strong access control policies and mechanisms (e.g., two-factor authentication, password expiration, role-based access control) to ensure that only authorized personnel can view sensitive data.
• Using secure coding languages, conducting regular code reviews, and leveraging automated tools to detect vulnerabilities.
• Maintaining compliance with applicable data protection regulations, such as GDPR, HIPAA, and CCPA, depending on the type of data used and processed.
• Conducting regular security assessments, such as vulnerability scanning and penetration testing, to identify and remediate security weaknesses.

You can also ask potential partners about their hands-on experience with handling data breaches or security incidents. This will help you choose an offshore software development center that will be ready to assume all responsibility for your data integrity.

6. Consider costs and contract terms

Review the vendor’s cost structure and billing rates to ensure that their pricing aligns with your budget. Pay attention to any hidden costs and don’t hesitate to ask about them.

In the end, check contract terms for aspects such as intellectual property rights, confidentiality agreements, termination clauses, and liability limits. Have your legal counsel make sure that these points are fair, protect your interests, and give you the opportunity to mitigate any possible risks. And confirm that you have a clear understanding of your contractual obligations.

What Risks and Challenges May Arise?

Despite the advantages mentioned above, there are also potential risks and challenges associated with offshore software development, including language and cultural barriers, timezone issues, and a complicated managerial process. 

Communication pitfalls

Effective communication is crucial in any software development project, but it can be particularly challenging when working with an OSDC. Differences in language proficiency, communication styles, and accents can lead to misunderstandings and delays in project timelines. You need to leverage efficient contact channels and protocols, such as regular meetings, project management tools, and documentation, to ensure that all stakeholders are on the same page.

Cultural differences

Understanding the cultural background of the country you are outsourcing to is a must. People from other countries may have different work styles, attitudes towards deadlines, and communication norms. These and other peculiarities can pose a challenge and lead to conflicts if not properly addressed. That’s why you should build cultural awareness for both in-house and offshore teams to maintain mutual understanding and respect.

Time zone differences

Working with an OSDC in a different time zone can lead to challenges in scheduling meetings, resolving issues, and delivering projects on time. Teams may need to adjust their working hours or establish overlapping shifts to accommodate different time zones. It is required to establish a clear schedule and workflow to ensure that all teams are working together efficiently.

Management and coordination

Guiding an offshore team can be an uphill struggle, requiring effective leadership, project management and cross-cultural communication skills. You should organize and support a streamlined workflow. External and internal teams should work closely to maintain consistency in project standards and quality control, keep track of the current status, and collaborate on issues in both directions.

How SaM Solutions Solves These Challenges

As an offshore software development vendor, SaM Solutions takes the following measures to minimize the potential risks and allow our clients to reap the full benefits of an OSDC:

Establishing clear communication channels

Utilizing specialized collaborative and management tools, including Zoom, Teams, Slack, and Jira, we organize regular video conferencing or scrum meetings and allow all parties to keep track of the progress. We also set up protocols that specify response times and other communication standards. 

Building a strong team culture

We strive to overcome cultural differences and promote effective collaboration between in-house and offshore teams. To achieve this, we conduct various training sessions, team building activities, and create opportunities for knowledge sharing and cross-cultural exchange. Additionally, SaM Solutions develops the internal culture of inclusivity and respect, where each team member and their contributions are highly valued. 

Implementing effective project management strategies

Our company establishes a strong project management framework that promotes transparency, accountability, and continuous improvement. We clearly define project goals, milestones, and timelines, specify everyone’s roles and responsibilities, and regularly review progress and performance based on agile methodologies.

Enabling visits to the offshore center

To build trust and strengthen relationships with clients, we can arrange visits to our development centers. Such in-person meetings can positively affect the entire project, contributing to better understanding of the company’s culture, goals, and processes.

About SaM Solutions

Founded in 1993, SaM Solutions has since become a leading player on the software development services market. Our team comprises over 800 specialists who work in offices across Western and Eastern Europe as well as in the US. Our expertise lies in IT consulting, software development and modernization, integration, testing and QA, maintenance and support, with a particular emphasis on ecommerce, mobile, cloud, IoT and embedded projects.