ODC (Offshore Development Center)

Offshore Development Center (ODC) is hiring a remote team of dedicated developers and IT talent to augment the on-premises team for the development, operation, testing, and maintenance of numerous business processes of a client company geographically located elsewhere [1]. The above mentioned ODC definition explicitly reveals the concept of what is an offshore development center and how it works for businesses and enterprises globally. The ODC has become a very commonplace word in the modern outsourcing industry.

Contents

1. Brief History of ODC
2. Dedicated Offshore Development Center Models
2.1 Contractor Model
2.2 Customer Model
3. Global Size of ODC Industry
4. Advantages and Challenges of Hiring an Offshore Development Center
4.1 Advantages
4.2 Challenges
5. Companies That Used ODC Successfully
6. ODC Service Cost Comparison
References

Brief History of ODC

The term ODC has evolved over the decades. Primarily, the ODC meaning was associated with just outsourcing the development, which dates back to the 1960s when major companies in Silicon Valley started their outsourcing centers in the State of Jalisco, Mexico [2]. In the 70s and 80s of the twentieth century, the outsourcing sector progressed a little slowly, but the major boost in offshoring came after the advent of modern internet technologies after 1990 [3].

General Electric opened its first IT offshore development center in India in 1996. Since then, many big corporations have already opened their development centers in different offshore locations like India, Ukraine, Russia, China, the Philippines, and others. The ODC is one of the most popular models of outsourcing of IT development. Earlier models of outsourcing were based on ad-hoc hiring of tech-talent and were not specifically dedicated to a single project, task, or client. The model of ODC IT services is a fully dedicated team of remote engineers that are fully integrated with an on-premises team for IT development.

Dedicated Offshore Development Center Models

The popularity of building a dedicated ODC team for IT development is increasing substantially. Numerous companies are opting for different ODC models that are suitable for their respective business needs. Those custom versions of making an ODC team are based on the needs of the project either from the customer perspective or from the contractor perspective. In general, the building of a dedicated offshore development center can be divided into two major categories [4].

Contractor Model

In this model, the ODC company offers a comprehensive team of IT specialists that are required for a particular project. This model is fully managed by the remote team and fulfills numerous activities and processes, such as planning, designing, developing, testing, and implementing, required to complete a project successfully. This model is very useful for small businesses and startups who need comprehensive development services.

Customer Model

This model of offshore development center costs more than the contractor model. This model is great for those big companies that work in a narrow domain of knowledge. The other major processes like management, analysis, designing, and decision making are performed by the on-premise teams and the offshore team focuses on a particular domain knowledge like coding, testing, or operations.

Global Size of ODC Industry

ODC is one of the most important domains of outsourcing development services that encompasses all major domains of development including software, designing, research, and other components of industrial processes [5]. The size of the ODC industry is continuously growing due to numerous offshore development center advantages offered to global enterprises. The total market size of outsourcing services worldwide amounts to about $92.5 billion in 2019 [6] about $6.9 billion higher than the previous year. The ODC costs much lesser than on-premises development worldwide, especially in the North American, and Western European countries due to the scarcity of tech-talent, higher living costs, and the competitive market demand. It has been found that more than 80% of the top 500 [5] companies in the world choose to use the ODC model for the development of software and other technical processes. The top two contributors to this industry are the US and Europe respectively. The major sectors that contribute to the ODC industry significantly include IT, healthcare, HR, FinTech, and customer care [7].

Advantages and Challenges of Hiring an Offshore Development Center

Offshore development center ODC has become a gold rush for all types and sizes of enterprises in recent years due to huge cost-saving and productivity [8]. Meanwhile, the enterprises have to face offshore development center challenges that pose a risk to achieve the desired benefits. All enterprises need to cope with those challenges to materialize the upsides of ODC.

The major benefits and challenges of having an offshore development center ODC [9] are given below.

Advantages

  • Reduced development cost – The cost of development through ODC is much lower than the same in the major industrialized countries like the US, Western Europe, and others.
  • Access to a large tech-talent pool – ODC allows the enterprises to leverage a large pool of tech-talent with the desired skills and qualifications.
  • Faster development – Having offices at two or more locations allows development round the clock resulting in faster development.
  • Better scalability – Easy to scale the project team through ODC.

Challenges

  • Higher upfront cost – Opening dedicated ODC costs huge as an upfront investment.
  • Culture barrier – Different cultures pose a challenge for the team to establish a great work relationship.
  • Remote team management – Managing remote team is comparatively difficult.

Companies That Used ODC Successfully

Having an offshore development center ODC has been a major attraction for large enterprises for over three decades now. But nowadays, with the evolved model of ODC powered by numerous professional IT companies have opened up new horizons for medium and small enterprises worldwide [10]. With the customized contractor based ODC solutions, many SMBs are opting to open dedicated ODC in the most popular destinations of the world like Ukraine, India, Poland, China, and others.

The major companies that have their dedicated ODC centers in different locations of the world include:

  • Apple Inc
  • Google Corporation
  • Facebook
  • Cisco Systems
  • Capgemini
  • Alibaba Corporation
  • Huawei Technologies
  • Tencent Corporation
  • IBM Corporation
  • General Electric Inc
  • Microsoft Corporation
  • Siemens AG
  • Oracle Corporation
  • Accenture Corporation
  • Tata Consultancy Services
  • And many more

ODC Service Cost Comparison

The ODC model of remote development got traction due to the difference in cost in different countries. The countries with lower development costs and larger availability of the tech-talent pool emerged as a popular destination. The average annual salary of an ICT engineer in different countries is mentioned in the following table.

USA UK Switzerland Denmark Japan Ukraine
cost per year ($) $104,138 [11] $47,630 [12] $99,605 [13] $68,916 [14] $111,768 [15] $14,184 [16]

The average cost of an ICT engineer in Ukraine is the lowest among all major countries in the USA, Japan, and major European countries.

See Also

References

  1. https://www.pmi.org/learning/library/managing-talent-offshore-development-centers-1407
  2. http://newtechmag.net/2018/12/10/the-new-tech-state-of-jalisco
  3. https://www.slideshare.net/insointernational/offshore-outsourcing-history
  4. https://mobilunity.com/blog/offshore-development-center
  5. https://www.iuemag.com/u19/ed/5-benefits-of-choosing-offshore-development-center-in-2019
  6. https://www.statista.com/statistics/189788/global-outsourcing-market-size
  7. https://www.statista.com/statistics/189795/global-outsourcing-industry-revenue-by-region
  8. https://www.makeitinua.com/posts/how-much-money-can-outsourcing-software-development-offshore-really-save-me
  9. http://www8.cs.umu.se/education/examina/Rapporter/AtluriNalli.pdf
  10. https://www.softwaredevelopmentcompany.co/offshore-software-development-companies
  11. https://www.ziprecruiter.com/Salaries/ICT-Engineer-Salary
  12. https://www.itjobswatch.co.uk/jobs/uk/ict%20engineer.do
  13. https://www.payscale.com/research/CH/Job=Systems_Engineer%2C_IT/Salary
  14. https://www.glassdoor.com/Salaries/copenhagen-engineer-salary-SRCH_IL.0,10_IM958_KO11,19.htm
  15. http://www.salaryexplorer.com/salary-survey.php?loc=107&loctype=1&job=1&jobtype=1
  16. http://www.salaryexplorer.com/salary-survey.php?loc=226&loctype=1&job=1&jobtype=1
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