With a growing demand for affordable yet skilled IT professionals, the US market faces a talent shortage, making it challenging for businesses to source expertise for software development and maintenance. Consequently, many companies are turning to the option of establishing offshore software development centers. This approach enables them to harness the expertise of Eastern European countries like Ukraine, where Uvik.net is headquartered, to address this talent gap.
Offshore development centers offer cost savings, access to specialized talent, and greater flexibility in scaling up or down depending on your business needs.
Uvik is a staff augmentation company reinforcing development teams working with multiple tech stacks, including Python, Django, React JS, React Native, DevOps, Golang, API, Flask, AI/ML, and Blockchain. And we’ve helped dozens of clients move their technology products to other, more cost-efficient locations.
Read on to see how to set up an offshore development center in Eastern Europe, learn the benefits of offshore development centers, and find out key considerations businesses should keep in mind when building an offshore team.
What Is an Offshore Development Center (ODC) and How Does It Work?
An offshore development center (ODC) is a dedicated team of software developers outside the company’s home country. Typically, an ODC includes developers, project managers, quality assurance (QA) specialists, and other relevant professionals who work together to provide comprehensive software development services. The team is managed by the client company, but the ODC provider handles HR and administrative tasks such as recruiting, payroll, and legal compliance.
ODCs work closely with clients to understand their needs and goals, creating customized software solutions that meet those needs. The ODC and client communication is usually remote, using video conferencing, email, and messaging apps. The biggest benefit of the ODC model is its cost-effectiveness, as it offers high-quality software development services at a fraction of the cost of hiring an in-house team.
When It’s a Good Idea to Set up an Offshore Software Development Center
Setting up an offshore development center (ODC) is a decision that requires careful consideration. There are several benefits that make it a good idea to set up an offshore development center in Eastern Europe.
One of the most common reasons businesses choose to set up an offshore software development center is the lack of high-quality IT talent for an affordable price in their local market. This is especially true in countries like the US, where the demand for IT talent is high, but the supply is limited.
By setting up an offshore development center in countries like Ukraine or India, businesses can tap into a vast pool of highly skilled IT professionals who can work for a fraction of the cost of their local counterparts.
Budget constraints are another reason why businesses opt for offshore development centers. With an ODC, businesses can save up to 60% on labor costs. This is because the cost of living in countries like Ukraine is significantly lower than in the US or Europe.
In other words, businesses can hire more skilled professionals for the same budget, increasing their productivity and output.
Need for scalability
Another common reason why businesses decide to establish an offshore development center is scalability. With an offshore development center setup, companies can easily scale their operations up or down as needed.
The ODC model is highly flexible, allowing businesses to adjust the size of their team based on their current needs. This is especially useful for startups or small businesses that are just starting and must test the waters before committing to a large in-house team.
Time zone differences
Time zone differences can be a problem for businesses that need to work with clients or teams in different parts of the world.
By setting up a dedicated offshore development center in a country with a time zone close to the client or team, businesses can ensure their team is available during their working hours. This way, communication and collaboration between teams becomes much more accessible and efficient.
Access to new markets
Establishing an ODC in a different country can provide a business with valuable insights into local market trends and help it to navigate cultural differences. This can be a significant advantage for companies expanding their reach into new international markets.
Offshore Development Center vs. Other Models
Offshore Software Development Center (ODC) is one of the most popular models for outsourcing software development. However, other models are available in the market, such as IT outsourcing, IT outstaffing, and a dedicated team.
See how ODC compares to these models, highlighting the pros and cons of each.
ODC vs. IT outsourcing
IT outsourcing is a model where a company hires a third-party vendor to handle a specific project or set of projects. The vendor is responsible for all project phases, from development to deployment. While outsourcing can be cost-effective and convenient, it can also be risky, as the vendor may not understand the company’s business goals and culture.
In contrast, the offshoring model offers a more collaborative approach. An ODC is a dedicated IT professional team that works exclusively for the client. The team is responsible for all aspects of the project, from development to deployment, involving the client fully in talent acquisition.
Pros of IT outsourcing:
- Access to a large pool of talent
- Flexibility to scale resources up or down based on project needs
Cons of IT outsourcing:
- Lack of control
- Less flexibility
- No long-term relationship
ODC vs. IT outstaffing
IT outstaffing is a model where a company hires IT professionals through a staffing agency. The company retains control over the project and the team, but the staffing agency handles administrative tasks, such as payroll and benefits. While outstaffing can be cost-effective, it can also be challenging to manage as the team may not be fully integrated into the client’s culture and processes.
Meanwhile, the ODC model offers a more integrated approach. The team works exclusively for the client and is fully integrated into the client’s culture and processes. The team is responsible for development tasks, and the client retains more control over the project.
Pros of IT outstaffing:
- Dedicated resources for the client company
- Access to a larger pool of talent
- Flexibility to scale resources up or down based on project needs
Cons of IT outstaffing:
- Lack of control over the development process
- Communication and cultural differences
- Difficulty in maintaining knowledge transfer and domain expertise
ODC vs. dedicated team
A dedicated team is a model where a company hires a team of IT professionals to work exclusively on a specific project or set of projects. The client retains complete control over the project. While a dedicated team can provide a high level of customization, it can also be costly as the client takes care of all administrative expenses.
The ODC model, on the other hand, offers a more cost-effective approach. The ODC handles all administrative tasks, such as payroll and benefits, allowing the client to focus on the project’s strategic aspects. It also provides more scalability as the team can be expanded or contracted as needed.
Pros of dedicated teams:
- No communication or cultural barriers
- Ability to maintain knowledge transfer and domain expertise
Cons of dedicated teams:
- Limited access to a pool of talent
- Higher cost for setting up and maintaining infrastructure
- Difficulty in scaling resources up or down based on project needs
Overall, ODCs are a preferable solution for companies that want to work collaboratively with a dedicated team of IT professionals. It offers a more integrated approach than IT outstaffing and a more cost-effective approach than a dedicated team. It also provides more customized solutions than IT outsourcing. Overall, the ODC model provides high control and flexibility, making it an excellent choice for businesses of all sizes.
9 Steps to Establish an Offshore Development Center
Setting up an ODC can be a complex process, but following a structured approach might simplify the process and ensure that the offshore development center functions correctly from the beginning. Here are the steps a business should consider:
- Define your business needs and goals: Evaluate your cost savings, access to skilled talent, or faster product time-to-market long before setting up an ODC.
- Choose a location: Consider such factors as cost, time zone differences, cultural fit, and language proficiency when choosing a location for your ODC. For instance, you might be drawn to Asian countries like India for their inexpensive labor, but eventually choose East Europe for higher quality, reliability, and data protection.
- Find a reputable ODC provider: your partner should have a proven track record in setting up ODCs, has a good reputation, and is financially stable. Look for a provider that can handle all aspects of establishing and managing the ODC.
- Select the right people to manage the ODC: Your team might include a project manager, team leads, and developers, but everyone should have the right skill and experience to meet your project requirements.
- Establish communication channels: Agree on the ways in which you’ll communicate with your team, like video conferencing, email, chat, or other communication tools. This way, you’ll ensure everyone stays on the same page.
- Set up the necessary infrastructure for the project: your ODC partner will need to provide the team with the necessary hardware, software, and any other tools to achieve your project success.
- Develop a plan for knowledge transfer: Ensure that knowledge transfer occurs smoothly between the business and the ODC team, providing documentation, training, and mentoring.
- Establish a project management process: Set up a process to manage the project, including timelines, milestones, and regular progress updates. This way, you’ll ensure the project is completed on time, within budget, and to the desired quality level.
- Monitor and evaluate performance: Regularly monitor and evaluate the performance of the ODC team to ensure that the project is on track and that the team is meeting expectations.
By following these steps, a business can start an offshore development center to achieve its business goals and provide access to skilled talent at a lower cost.
7 Common Mistakes When Setting Up an Offshore Development Center
- Poor communication
Communication is the key to successful outsourcing. Lack of communication can lead to misunderstandings, delays, and, ultimately, a project failure. To avoid this mistake, establish clear communication channels, schedule regular meetings with your offshore team, and ensure everyone stays on the same page.
- Overlooking legal and security issues
When ODC, it’s important to consider legal and security issues, such as data protection and intellectual property rights. For example, the European Union has strict data protection laws, such as the General Data Protection Regulation (GDPR). The Information Technology (IT) Act and rules govern data privacy and security in India. Ensure you have a robust legal framework and that your offshore team partner follows industry data security and protection standards of your region.
- Lack of proper planning
One of the biggest mistakes companies make when establishing an ODC is not planning adequately. Establishing an ODC is not a one-time event but an ongoing process. It requires proper planning, execution, and management. Lack of proper planning can lead to missed deadlines, cost overruns, and poor-quality work.
- Inadequate knowledge transfer
Another mistake companies make when establishing an ODC is not transferring enough knowledge to the offshore team. Companies must ensure that the offshore team understands the company’s culture, values, goals, and overall business objectives. Lack of adequate knowledge transfer can result in poor quality work, missed deadlines, and misunderstandings.
- Lack of team-building activities
Building a strong team culture can be challenging when working with a remote team. Companies must take proactive steps to create a sense of team spirit and foster collaboration among team members. This can include virtual team-building activities, regular meetings, and recognition and rewards for team members.
- Overreliance on technology
While technology is essential for working with remote teams, companies should not over-rely on it. Besides video calls and virtual team-building activities, you might want to pay regular visits to your offshore team and even invest in the offline corporate event that will bring you all together. Face-to-face interactions with team members are essential to build the right team for years to come.
- Not monitoring performance
Finally, companies must monitor performance regularly to ensure the offshore team meets their expectations. This includes tracking productivity, quality of work, and adherence to schedules. Without proper performance monitoring, companies risk missed deadlines, poor-quality work, and cost overruns.
Building an offshore development center requires proper planning, execution, and ongoing management. Companies must be aware of common mistakes and proactively avoid them. By addressing these challenges head-on, businesses can establish successful ODCs that provide significant cost savings, increased productivity, and access to a global talent pool.
How to Avoid Mistakes and Risks of Setting Up an ODC
To avoid the common mistakes and risks of setting up your own software development centers, here are some solutions:
- Clearly define goals and objectives: Before setting up your ODC, make sure you have outlined clear goals and objectives. Define your project requirements, expected outcomes, and timelines upfront. It will help you stay focused and avoid unnecessary delays or deviations.
- Invest in effective communication: Communication is critical when working with an offshore development team. Language barriers can cause delays, errors, and misunderstandings. Effective communication channels tools, such as project management software, and scheduled updates will add to your project transparency and eliminate potential misunderstandings in a team.
- Provide clear instructions: To ensure that the offshore development team lives up to your expectations, it is essential to share your knowledge base with them, including technical specifications, project requirements, and design guidelines. Clear instructions can help avoid misunderstandings and ensure the final deliverables meet the business’s expectations.
- Implement quality control measures: Quality control is critical when working with an offshore development team. To ensure that the final deliverables meet the business standards, implement quality control measures throughout the development process, such as regular code reviews, testing, and debugging.
- Have a well-thought-out project management process: Assign a dedicated project manager with experience managing offshore teams who is familiar with the cultural nuances of your offshore team.
By following these solutions, businesses can avoid common mistakes and mitigate the risks of setting up an offshore development center.
Why Choose Eastern Europe for Offshore Development Centers?
According to Statista, the IT outsourcing market in Central and Eastern Europe is expected to reach $4.17 billion by 2022, with Ukraine, Poland, and Romania being the top three countries for IT outsourcing.
Eastern Europe has become a popular destination for offshoring development centers due to a number of factors, such as high-quality technical education, favorable time zones, cultural affinity with Western countries, and offshore software development rates.
One of the reasons why Eastern Europe is a top destination for ODCs is the high-quality technical education available in the region. Many universities in East Europe offer technical degrees, and the curriculum is often very rigorous, producing highly skilled software engineers.
Another factor is the time zone. Eastern European countries such as Ukraine, Poland, and Romania are only a few hours ahead of Western European countries and share a similar time zone with many Western countries, making communication and collaboration between the teams easier.
Additionally, there is a cultural affinity with Western countries, which helps to create a shared understanding of business practices, work ethics, and communication styles.
Cost-effectiveness is also a significant factor that attracts businesses to establish ODCs in Eastern Europe. The average hourly rates for software development in Eastern Europe are lower than in Western Europe and North America, while the quality of the work remains high.
Some of the best destinations for offshore development centers in Eastern Europe include
- Ukraine: Ukraine has a highly skilled IT workforce, with over 285,000 software developers. The country is known for its software development, artificial intelligence, and machine learning expertise. Ensure you know everything to hire software developers in Ukraine.
- Poland: Poland has a growing IT industry and a highly skilled workforce. It is proud of its software development, cybersecurity, and game development expertise.
- Romania: Romania is another popular destination for ODCs. It has a highly educated and skilled workforce known for its software development, IT support, and testing expertise.
Overall, Eastern Europe provides an attractive combination of high-quality technical education, cultural affinity, time zones, and cost-effectiveness, making it a top destination for businesses looking to build an offshore development center in Eastern Europe.
At UVIK Software, we have a wealth of experience in establishing and managing offshore development centers for our clients. Our expertise covers various technologies and industries, and we have completed numerous projects for clients worldwide.
One of the key areas we specialize in is Python development. As an offshore development company, we provide custom software development to team augmentation and IT support services. We have worked with clients across a range of industries, including finance, healthcare, and eCommerce, providing Python team extension services for a variety of projects.
For example, in our Python team extension for the data protection platform case study, we have developed an ERP platform from MVP to an early-stage beta version. Still, we provide IT ongoing support with multithreading, multiprocessing and data collection and processing for this project.
At UVIK Software, we have a proven track record of success in providing offshore development services to our clients. UVIK is dedicated to delivering high-quality results that meet the needs of our clients. While UVIK has strong expertise in Python consulting and team augmentation services, we also offer a wide range of development services, including but not limited to React JS, React Native, DevOps, Golang, Django, API development, Flask, AI/ML, and blockchain development.
Offshore development centers (ODCs) are becoming increasingly popular due to their many benefits, including cost savings, access to a global talent pool, and flexibility in project management. However, establishing an ODC can be challenging, and businesses must be aware of the common mistakes and risks involved.
To avoid these pitfalls, businesses should consider working with an experienced offshore software development partner like UVIK who can guide you through the process and help you avoid costly mistakes. Our team of skilled developers can provide you with offshore IT services. We have helped worldwide businesses of all sizes establish ODCs or augment in-house teams with top-level talent.
Contact us today to learn how we can help you set up a successful offshore development center.