The costs of in-house software development can mount quickly. Staff salaries, overheads, software licenses, hardware maintenance, and so on, can make the bottom line tumble. For some time now, companies have been outsourcing their software teams to third parties, be it through specialized agencies, overseas contractors, or other means. But outsourcing itself comes with its own drawbacks. Language barriers can sometimes hamper the progress of specific projects. Timezone differences, technological issues, even detrimental effects to the company's reputation for 'taking jobs elsewhere' can make outsourcing a tricky proposition.
In more recent times, software development has seen a novel concept develop: the Offshore Development Center (ODC), a facility that provides the complete infrastructure and staff to fulfill the client's software development requirements. This article delves deep into the ODC concept, exploring its usefulness and position in the market, and how ODC differs from pure outsourcing.
Let's break down the concept fully. Software development requires programmers, of course. But it also needs support staff (HR, administration, catering, etc.) An ODC offers all these elements at an offsite location, sometimes in the same country as the client, sometimes elsewhere in the world. The location itself is unimportant. What matters is that an ODC includes the whole range of services needed for a software development team to work effectively, working on a client's behalf. Typically, a Project Manager would be in overall charge of running an ODC, and liaising with the client through Account Managers. This close relationship between an ODC and a client is a key differentiator to the traditional outsourcing model. Whereas outsourcing simply engages a third party contractor or freelancer to do the work (the contractor might be working for multiple clients, which means that clients have limited control or supervision of how the project work is done), an ODC is 'set up to order.' In other words, the ODC follows the client's specific requirements and methodologies, and the client enjoys full supervision of the project.
The ODC is a relatively recent concept, but has already proven a popular one (insert graph/stats here)
Setting up an ODC brings in a range of benefits, both from the client's and the development teams' perspectives:
A fully operational ODC enables the client company to focus on its core business goals while accessing a vast talent pool abroad (i.e., increased choice of skilled professionals)
Greater control and supervision of the project, from inception to delivery
Costs are greatly reduced (up to 40%)
An ODC becomes a new branch for the company abroad, which might lead to further business development
Even though they're offsite, ODCs are self-contained office facilities, which means no compromise on the security of the project material
A safe, secure, and comfortable working environment
Greater opportunities for professional growth
Access to international companies
More competitive remuneration & benefit packages
They say variety is the spice of life. Within the confines of ODC, there are three modalities: full-time equivalent (FTE), build operate transfer (BOT), and mixed.
In this modality of ODC, the client has access to a team working on the project full-time. This modality is better suited for longer-term projects (typically 6 months to a year, or longer) that require flexibility and scalability.
When working with a BOT model, the remote team does software development and also takes care of setting up the client's IT systems and business processes. When the setup of the ODC is complete, the contracted firm transfers the ODC and intellectual property back to the client. This modality is better suited for start-up companies that intend to own the rights of their IP.
An ODC might be set up as either FTE or BOT models, but halfway through the lifetime of a project, a change might be required for operational, or any other reason. In this case, an additional set of specialist developers might be hired on a temporary basis to accommodate this circumstance.
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