back Offshore outsourcing Strategy

Offshore Development Center v/s In-House Teams for Start-Ups

An offshore development center is a team of highly skilled professionals, usually, web developers and programmers working for your company located at an offshore destination. It is a dedicated team that works solely for your project as per your instructions. Unlike offshoring, you have a greater control over these development centers as you have a right to specify the hardware and software to be used in order to maintain same quality standards as in your in-house team. Offshore development centers are established on the grounds of relationship, trust, compatibility and shared goals between two companies.

Salient features of an offshore development center

• Provide 24×7 administration
• Highly skilled professionals with a right set of expertise available cheaply
• Resilient to suit your needs
• Ready to invest in research and development
• Provide testing and quality assurance services
• Invest in new technologies
• Provide maintenance and support
• Dedicated online communication and collaboration with your in-house team
• Provide consultation and study requirements
• Conduct data analysis and modeling

How is it different from in-house team?

Offshore development center offers a hybrid model of development that works in collaboration with your in-house development team. In case, you don’t have an in-house team, you can still have a dedicated offshore development center. Usually, many start-up companies prefer to operate only through offshore development centers by hiring expertise at a cheap rate.

Moreover, they help the start-up companies to keep their budget in control and deliver the project on time. They even offer a flexibility of small scale organizations so they are always prepared to accept changes and challenges. Many Asian countries like China, India, Philippines, and Vietnam serve as an excellent offshore destination for its US-based clients.

On the contrary, in-house development teams find it difficult to keep the budgets in control owing to high risk factor involved. Continuous technology upgrades and changing business-user requirements make it unviable for start-up companies to invest in in-house development teams. Though being under your direct supervision, in-house teams are capable enough to deliver high quality product for your clients.

In-house teams work directly with you and understand your business closely but they are marred by constant distractions. The result is they lose time and increase your cost of production; and not to overlook, the salaries paid to in-house team members is very high as compared to that in offshore development centers.

Benefits of offshore development center

• Increase productivity – You need to invest a lot of time, money and energy to lead your inexperienced in-house developers’ team to success. As a start-up company, you don’t afford that leverage of spending lavishly. Offshoring allows restructuring your in-house resources, thereby, increasing the overall productivity; and your partners in offshore development centers have a vast experience in the industry with tried & tested models of operation. They quickly sense your business requirement to deliver the best possible product. Encourage seamless co-ordination between your in-house team and the offshore development center to get maximum output.
• Reduce operational expenses – As you are aware, technology involved in IT/ITES industry changes rapidly, it becomes practically impossible for you to micro-manage it. Moreover, it starts affecting your core business operations. Relocating suitable roles to offshore development centers helps you to significantly reduce operational cost. Besides hiring a highly productive workforce, you save on infrastructural investment in office space and administrative expenses. As a result, you need to invest a lot of money into buying licensed software and compatible hardware. Added to that, employees need continuous training on the updated technology, which incurs an extra cost. As an offshore development center can utilize the same equipment and software for other clients after your project is over, it is easier for them to achieve faster return on investment.
• Leverage offshore talent- A leader can obtain maximum output from his followers, when he is aware of their potential. There is a plenty of talent available in the development centers. They are professionals with superior knowledge and a creative mind-set.

Moreover, being located in the developing world, their aspiration level is quite high and they are willing to give their best output provided they get a favorable environment for working. Make sure that your partner invests appropriate energy in retaining talent. Share this knowledge with your in-house team to facilitate better collaboration.

• Greater visibility and predictability in the development process – Offshore development centers with their vast experience are able to look into the project through a different perspective. A new perspective gives you an opportunity to differentiate your services from the clutter. 

Furthermore, we have seen that risk factor involved in IT projects is quite high due to highly volatile market conditions. Development centers assist you in taking calculated risks involved in project failures so that it is not the end of the road for your business.

• Used as a market entry strategy or to increase presence in a market – Offshore development centers are often established with the idea of exploring a new market. They allow you to study the local environment including clients’ requirements, Government support, labor market and availability of talent. It helps you to gain experience in a new market so that you can take strategic decisions related to expansion. 

On the other hand, it is quite possible that your efforts to succeed in offshore market have yielded limited results through in-house team. Offshore development center makes it easier for you to increase your presence there. Local presence increases confidence of your clients and they are willing to invest in your services.

• Use global resources and offshore talent to meet time-bound objectives –

Risks associated with offshore development center

While there are numerous benefits with developing an offshore center, it involves certain risk factors. It is the responsibility of the team leader to mitigate these risks by intervening and developing favorable environment.

1. Cultural differences – The problem with cultural difference is communication. People from two different cultures find it difficult to relate and devise a common style of communication. It often leads to frustration and confusion, which hampers the progress of your project.
2. High attrition rate – There could be a number of reasons why employees change job in offshoring. Some of them include that they do not find the project challenging, they are often burdened with work, there is lack of clarity in what they are doing but mindlessly working and they do not find any growth prospects.
3. Cost saving only focal point – When cost saving becomes the only point of satisfaction, then the quality of the project starts suffering. The offshore development partner only focuses on cost saving by using outdated software and hardware. They start hiring employees with average skill-set.
4. Poor processes – Methodologies of working have to be evolved with time. At times, your outsourcing might be unaware of the new processes or is reluctant to change its current processes. You need to be aware of how poor processes can affect your end product quality and when to stress upon change. Never leave it to the offshoring partner to take critical decisions.

Which is better? Offshore development center or in-house team

Starting afresh with an in-house development team is impractical owing to high investment cost and inexperience. If your long-term business goal is to have an in-house development team, then you must gain sufficient experience with offshore partner. Being a start-up company, offshore development center will offer you a win-win strategy for your business. Develop a hybrid model of operation wherein your in-house team works in tandem with the development team in the center. There need not be any time lag in exchanging critical information.

There is a procedure to select an offshore partner that suits your business requirements. But it is common to find that the performance of the vendor is not up to the mark even after careful selection. More so, it is the case with almost every vendor. Developing an offshore center is like a marriage, which needs continuous nourishment and exchange of ideas to make it successful. Offshore development center goals need to be aligned with your business goals.

Ultimately, customers judge your team not on the basis of their smooth operation, ability to sense business requirements and project management but rather on how well their products and applications meet their business goals. Quality and satisfaction are the biggest game changers to find acceptance among new clients.