Today, many businesses face challenges in their development processes, especially when it comes to rising costs and a shortage of skilled talent. It also weakens the growth and limits the scalability of organizations.
Establishing an offshore software development center in India is a smart way to tackle these challenges. Based on Statista’s report, businesses can reduce operational costs by up to 60%, as developer salaries in India are substantially lower compared to Western markets. With over 28.7 million developers globally in 2024, India is thriving with a young tech workforce, as many of them are based in India.
Altogether, an offshore software development center in India phenomenally reduces operational costs, opens up access to a vast pool of skilled talent, and enables rapid team expansion to drive growth and efficiency.
In this blog, you’ll learn everything about Offshore Development Centers: their importance, a step-by-step guide to get started, comparisons with in-house setups, and practical solutions to challenges for a smooth transition.
What is an ODC?
It refers to an Offshore Development Center (ODC) that includes a dedicated team of software developers, designers, and engineers working remotely for a company from a different geographical location.
These centers are designed to provide businesses with cost-effective solutions while maintaining high standards of work and efficiency.
Why set up an ODC for your software project?
Establishing an ODC for your software project, you will get the best of both worlds! In simple words, you will be able to finish projects with low risk, reduced costs, and higher productivity.
ODCs have in-house technical experts who can help you find innovative solutions to all your technical issues. They are also well-versed in the latest development frameworks and programming languages, ensuring your project is built using modern, efficient technologies.
Pre-setup considerations for an offshore development center
Setting up an offshore development center (ODC) requires careful planning and a clear understanding of your business needs. Several key factors must be considered before you begin the process for a successful setup.
The following pre-setup considerations will help guide your decisions and lay a solid foundation for your ODC in India, where you can work with qualified and highly skilled software developers to meet your project goals effectively.
1. Assess your business goals and readiness
Setting up an ODC for your software project offers the best of both worlds. You can complete projects with lower risk, reduced costs, and increased productivity.
ODCs employ in-house technical experts who can provide innovative solutions to your technical challenges. They are also well-versed in the latest development frameworks and programming languages, ensuring your project is built using modern, efficient technologies.
2. Budget planning and resource allocation
Before setting up an offshore development center, it’s important to assess your business objectives. Are you looking to scale quickly, reduce costs, or access specific technical expertise?
Understanding your goals will help guide critical decisions, such as the size of your team and the resources required for your project.
3. Researching Indian locations for offshore development
India provides various locations, each with unique advantages. It’s important to explore cities that balance talent availability, cost-effectiveness, and infrastructure.
Cities like Bengaluru, Ahmedabad, Hyderabad, and Pune are particularly popular for their skilled tech workforce and relatively lower operational expenses.
4. Understanding legal and regulatory requirements
Before setting your offshore development center, it’s important to familiarize yourself with India’s legal and regulatory landscape. This involves understanding company registration, taxation, and labor law compliance.
Partnering with local experts can simplify the process of offshore software development services and help you meet all necessary requirements without complications.
Step-by-step guide to setting up an Offshore Development Center in India
Setting up an offshore development center (ODC) involves a series of well-planned steps to ensure smooth operations and alignment with business goals. Here's a step-by-step guide to help you get started:
1. Define and document objectives
- Identify the primary goals of your ODC, such as cost reduction or talent acquisition.
- Document objectives to guide decisions on hiring and infrastructure.
2. Create a detailed scope of work (SoW)
- Outline roles, responsibilities, and deliverables for the ODC team.
- Define project scope, timelines, and expected outcomes to align stakeholders.
3. Select the right ODC partner
- Choose a partner with experience and a proven track record.
- Ensure cultural and operational alignment for smooth collaboration.
4. Recruit and onboard top talent
- Tap into India’s vast talent pool to find professionals with the required skill sets.
- Onboard new team members effectively to align with your company culture.
5. Establish effective communication & protocols
- Define reporting structures and set regular update schedules.
- Utilize collaboration tools for smooth communication between teams.
6. Set up cybersecurity and data protection measures
- Implement tough measures like encryption, VPNs, and access control.
- Ensure compliance with regulatory requirements to protect sensitive data.
Following these steps can help you create a well-functioning ODC in India that serves as a valuable extension of your business operations.
Post-setup ODC strategies for operational success
After setting up your offshore development center (ODC) in India, adopting strategies that promote continued productivity and smooth operations is critical. Here are some key methods to keep your ODC performing effectively:
Focus on team integration and training
- Create opportunities for your offshore and onshore teams to work collaboratively.
- Conduct training sessions to align efforts with company objectives and workflows.
- Encourage open communication to develop mutual understanding and cohesive teamwork.
Monitor and refine performance
- Regularly evaluate team performance using predefined metrics and KPIs.
- Identify challenges or inefficiencies and apply targeted solutions.
- Gather feedback from all teams to improve workflows and refine processes.
Build lasting relationships with your ODC team
- Involve the offshore team in significant decisions to develop a sense of ownership.
- Provide professional growth opportunities to retain skilled team members.
- Cultivate a positive work environment that values contributions and motivates long-term collaboration.
These measures will help your offshore development center remain a valuable extension of your business.
Challenges of working with an ODC
Working with an offshore development center (ODC) can provide numerous advantages, but it also comes with challenges that need to be addressed effectively. Understanding these challenges is key to building a successful and sustainable collaboration.
1. Cultural and communication barriers
- Differences in work culture, communication styles, and language can create misunderstandings.
- To overcome this, encourage open communication, provide cross-cultural training, and use collaboration tools to bridge gaps.
2. Time zone management
- Managing teams across different time zones can result in delays and limited overlap for real-time discussions.
- Use a hybrid work schedule to balance working hours and establish clear schedules for critical meetings.
3. Ensuring consistent quality
- Maintaining consistent quality across offshore and onshore teams can be challenging without proper monitoring.
- Implement tough quality assurance processes and use project management tools to track progress.
4. Reducing employee turnover
- High attrition rates in offshore teams can disrupt workflows and lead to frequent re-training.
- Offer competitive salaries, growth opportunities, and a positive work environment to retain top talent.
Addressing these challenges proactively helps build a strong partnership with your ODC team, ensuring smooth operations and long-term success.
Setting up an ODC vs. building an in-house team
When deciding how to expand your development capabilities, it is important to understand the differences between setting up an offshore development center (ODC) and an in-house team.
Both options have unique requirements, advantages, and challenges. The table below highlights these differences:
| Aspect | ODC setup | In-house setup |
|---|---|---|
| Cost | Lower operational costs due to affordable infrastructure and salaries in offshore locations. | Higher expenses for office space, utilities, salaries, and benefits in local markets. |
| Talent availability | Access to a global pool of skilled professionals, especially in IT hubs like India. | Limited by the local talent pool, which can result in higher recruitment costs. |
| Time to set up | Faster to establish with the help of an experienced ODC partner. | Longer due to the need for hiring, training, and setting up infrastructure from scratch. |
| Scalability | Easily scalable with access to pre-existing offshore infrastructure and talent. | Scaling requires significant investment in facilities and hiring processes. |
| Management | Managed by the ODC partner with shared or delegated responsibilities. | Fully managed internally, requiring dedicated resources for oversight and HR tasks. |
| Flexibility | Teams can be scaled up or down based on project needs, offering high flexibility. | Less flexibility due to fixed resources and long-term commitments. |
| Legal and compliance | ODC partners handle most local compliance requirements, simplifying setup and operations. | Requires thorough knowledge and adherence to local labor laws and tax regulations. |
| Focus on core tasks | Frees up your core team to focus on strategic goals while the ODC handles execution. | Diverts management resources to oversee day-to-day team operations. |
ODCs vs. traditional outsourcing setups
Understanding the differences between offshore development centers (ODCs) and traditional outsourcing is key to choosing right approach for your business. The table below highlights the distinctions in setup and management:
| Aspect | ODC setup | Traditional outsourcing |
|---|---|---|
| Traditional outsourcing | Full control over the team and processes. | Managed entirely by the outsourcing partner, with minimal client input. |
| Team setup | Dedicated team aligned with your business needs. | Teams are shared across clients, reducing exclusivity. |
| Infrastructure | Infrastructure is set up with assistance from the ODC partner. | Fully managed by the outsourcing vendor without client involvement. |
| Long-term focus | Built for ongoing collaboration and scalability. | Best suited for short-term or one-time projects. |
| Customization | Processes and workflows customized to your specific requirements. | Limited flexibility, as predefined vendor methods are typically used. |
| Integration | Team integrates with your tools, culture, and methodologies. | Limited integration, often operating independently of your systems. |
| Cost | Cost-effective for businesses with continuous, long-term needs. | May be cheaper initially but could lead to higher costs for ongoing projects. |
| Knowledge retention | Expertise and knowledge stay within your ODC team. | Skills and knowledge are often lost once the project ends. |
| Communication | Direct collaboration with the team, enabling smoother workflows. | Communication is filtered through the vendor, which can slow progress. |
| Scalability | Easily adaptable to changing project demands. | Expansion depends on vendor capacity and can take longer to implement. |
Read more: Ultimate Guide to Evaluating a Software Development Partner
Best countries for Offshore Development Center
When selecting an offshore development center's location, businesses must assess factors such as talent availability, cost advantages, infrastructure, and regulatory support. While several countries offer potential benefits, India stands out due to its unique strengths.
Some of the popular offshore development destinations are:
| Location | Key advantages | Consideration |
|---|---|---|
| India | Large talent pool, competitive costs, tough IT infrastructure, strong English proficiency. | Ideal for long-term projects, but requires managing time zone differences. |
| Eastern Europe | High-quality developers, cultural proximity to the West, strong technical expertise. | Higher costs compared to Asia, limited scalability for large teams. |
| Southeast Asia | Affordable labor, growing tech expertise, proximity to APAC markets. | Smaller talent pool for niche technologies, varying experience levels. |
| Latin America | Close time zones to the U.S., strong collaboration for nearshore projects. | Higher rates for certain skills compared to Asia. |
| Africa | Affordable services, emerging tech hubs, expanding IT talent pool. | Infrastructure development and experience levels may vary. |
Why India is a preferred choice for offshore development?
- Vast talent pool: India has one of the largest pools of IT professionals with expertise across various technologies and methodologies.
- Cost advantages: Affordable rates paired with high-quality output make it an appealing option for businesses with long-term projects.
- Strong infrastructure: Established IT parks, reliable connectivity, and supportive government initiatives create a conducive environment for development.
- Cultural adaptability: Indian developers integrate well with international teams, facilitating smooth collaboration.
Why Peerbits is an ideal partner for your ODC in India?
Peerbits is a reliable choice for establishing Offshore Development Centers. We assist entrepreneurs and global businesses in accessing the right talent, skills, and technology to create high-quality software solutions.
Our team of experienced and dedicated professionals is skilled in tackling complex technical challenges with creativity and precision. With extensive experience in delivering impactful results, we work closely with your business to drive the success of your projects.
Reach out to our team for more details on how we can support your next software development initiative.
Conclusion
Establishing an offshore development center (ODC) in India offers businesses an opportunity to scale operations and cut costs effectively.
Carefully evaluating pre-setup factors, addressing challenges, and applying effective post-setup strategies will help your ODC become an extension of your in-house team.
India’s large talent pool, competitive pricing, and developed IT infrastructure make it an attractive destination for setting up offshore teams. Success, however, depends on regular communication, a deep understanding of cultural differences, and effective team integration.
Choosing the right ODC provider can simplify the process, making your offshore team a valuable asset for business growth.
FAQ's
The team size largely depends on your business goals and project requirements. Small startups might begin with a team of 5–10 developers, while larger enterprises often scale up to 50–100 professionals. Start small, then scale as needed based on project demands.
Setting up an ODC usually takes 3–6 months. This includes defining objectives, selecting a location, finding the right partner, recruiting talent, and establishing infrastructure.
Industries such as IT services, healthcare, fintech, e-commerce, gaming, and telecom benefit significantly due to India’s diverse technical expertise and cost-efficient workforce.
Compliance with India’s labor laws, tax regulations, and data protection laws (such as the Indian IT Act and GDPR for international businesses) is important. Consulting with legal experts or your ODC partner can ensure all legalities are handled efficiently.
When setting up an ODC, ensure clear intellectual property agreements are in place with the partner, outlining data and confidentiality protocols.
