An offshore development center is an IT developing and operations managing unit whose location is well apart from the headquarters of the parent corporation. This model produces high-quality solutions at low costs by combining all local expertise with offshore resources.
The global IT outsourcing industry is projected by ReportLinker to increase from $526.6 billion in 2021 to $682.3 billion in 2027; this further supports the offshore development center concept. Proceed to learn more about the various types of offshore development centers and how they can benefit companies from a strategic perspective.
1. What is an offshore development center (ODC)?
An Offshore Development Center is a type of remote facility positioned in another country, functioning as part of an organization’s IT team. There are various types of Offshore Development Centers, each tailored to specific business needs, but their core functions typically include software development, testing, maintenance, and support.
Read more >>> How to Hire Offshore Development Teams: A Step-by-Step Guide
2. 4 Types of offshore development center models
Offshore Development Centers (ODCs) offer flexibility to meet different business requirements. Below is an overview of the types of offshore development centers model, along with their pros and cons:
2.1 Project-based ODC
A project-based ODC is very effective for those businesses that have clear scope, objective and timeline defined in each project. A team is dedicated to a specific skill for the project. So that all possible resources would focus on achieving the desired outcome.
Project-based ODCs have an assigned scope and milestones for resource allocation and monitoring of progress. Perfect for projects such as custom mobile app development or custom building enterprise systems or website launches, this model encourages streamlined communications, managed costs, and focused delivery.
Project-based ODCs are highly critically significant for time-sensitive projects where high quality is expected. They suit various sectors like Fintech, E-commerce, Healthcare, Logistics, and even more. This reduces the rigour of businesses in terms of achieving objectives most efficiently, of course, flexibly and with maximum control throughout the developmental period.
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2.2 Dedicated development team ODC
In its purest sense, this means a Dedicated Development Team ODC, which is a collaborative pattern where a company hires a full-time team of software developers solely for that company. The team is then absorbed into the internal working processes and culture of the company, making it work as an extension of in-house staff.
Just producing custom solutions available for developing new software applications or upgrades to existing systems, and ongoing technical support, using the dedicated team approach touches most demands. Unlike a project-based model, this does not end with one-off project contracts but allows the fostering of long-term partnerships, allowing flexibility to continually evolve to new project requirements and to embrace multiple projects.
If a business requires a particular type of technology, then this is the best because it provides the opportunity to scale-down costs, find technical expertise consistently, and maintain the project for a long time. This is because a lot of in-house development costs and all its management would be avoided, allowing companies operating in fast-paced sectors such as Fintech, Healthcare, E-commerce, and Telecommunications to cater effectively for their ever-changing technological needs.
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Read more >>>> How to Manage Offshore Development Team in 2025
2.3 BOT (build-operate-transfer) ODC
The vendor will be responsible for all functions of creating an offshore development center for its client in a fully BOT Offshore Development Center (ODC) model. This includes everything from infrastructure to recruitment and everything else in between.
The BOT model typically contains three different phases:
- Build: Carefully configure ODC by the vendor according to the customized requirements of the client about resources, technology, and staffing.
- Operate: The vendor manages and takes care of ODC operations-from recruitment to talent management and project delivery-under a completely transparent relationship with the client.
- Transfer: The ownership and operational management of the ODC created would be transferred to the client after some specified time or once mature enough for full operations.
The BOT model is indeed a great proposal for those who are looking for long-term offshore representation without the headache of stand-alone installation and ongoing operations. All operations can be scaled-up easily, there is effortless access to specialized expertise, and one is no more burdened with the inherent risks of managing an offshore-center under this arrangement.
This would be ideal, especially for large enterprises similar to banking, fintech, e-commerce, and telecommunications-critical industries, where effective offshore solutions need to be built in a way that they are scalable and sustainable.
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2.4 Hybrid ODC
A Hybrid Offshore Development Center (ODC) follows a flexible and effective model through different outsourcing methods. The model comprises a dedicated team incorporated for ongoing constant activities along with a project-based teaming that caters only for specific short-term requirements.
This is a way of balancing in-house control against the external expertise. Because this way, companies will have strict control over core functions while bringing in specialized talents from the vendor to address dynamic needs. The Hybrid ODC adds to the agility and scalability of capital allocation and holds up much for fast-moving, ever-changing markets.
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3. Factors to consider when choosing an ODC model
Selecting the right offshore software development model is crucial for aligning your business objectives with the capabilities of your ODC. Here are the key factors to evaluate:
3.1 Project requirement
Evaluate the extent, complexity, and duration of a project. In the case of short projects, you may consider software development outsourcing through a project-based ODC. However, for longer projects, dedicated models or hybrid models will be best suited.
3.2 Budget
Budget plays a very important role in adoption of the most suitable offshore development center setup guide. Models like Vendor Partnership are usually economical for smaller budgets, whereas dedicated ODCs or BOT models need higher initial investments, but they prove more valuable in the long term.
3.3 Level of control
Dedicated or build-operate-transfer ODCs provide full scale offshore development center management by the company intending to maximize its control, while in cases such as Vendor Partnerships, operations are more vendor led.
3.4 Scalability needs
If scalability is something you need, then hybrid ODC or dedicated development teams provide flexibility for scaling resources, making them suitable for organizations with plans for large scale expansion and for an organization that has to deal with fluctuating demands for IT outsourcing.
3.5 Long-term vs short-term goal
For long-term strategies, investing in a dedicated or BOT ODC ensures alignment with your operational goals, while Project-Based ODCs or nearshore development models are better suited for short-term, focused projects.
4. Benefits of using an offshore development center
Unlock the full potential of your IT operations with these offshore development center benefits:
- Cost savings: Reduce labor and operational expenses significantly.
- Proven impact: Save up to 70% on development costs by leveraging ODCs in key locations. (Source: Accelerance)
- Access to global talent: Tap into a worldwide pool of skilled developers with specialized expertise.
- Focus on core business: Allow your in-house team to prioritize strategic goals and high-value tasks.
- Enhanced efficiency: Benefit from 24/7 development cycles to speed up project timelines.
- Scalability and flexibility: Adjust team size and expertise effortlessly to meet dynamic project demands
5. Challenges of using an offshore development center
Utilizing an offshore development center is like navigating a ship across the ocean. While it holds the promise of substantial rewards, it also comes with significant risks if not carefully prepared and managed.
An offshore development center offers many opportunities yet creates many challenges. Most importantly, there are language and cultural barriers. Sometimes, due to lack of understanding of the nuances of their communication and collaboration, unfortunate misunderstandings occur.
Among them is the time zone difference, which creates barriers to coordinating work and solves issues timely. Data security is of paramount importance when it comes to sharing sensitive information with a team from another country.
In addition, product quality is something that must be maintained, prompting a rigorous establishment of a well-organized quality control mechanism to meet all requirements. Final impact of different work styles adopted by cultures ends conflicts and timelines set for projects.
6. Best practices for managing an offshore development center
Running an offshore development center (ODC) can be challenging. Yet, with the right strategies, it can succeed. Here are 5 best practices to make your offshore development center part of your team:
- Clear communication: Set up good channels and rules for everyone to stay aligned.
- Well-defined processes: Establish clear methods for managing projects, assigning tasks, and reporting to prevent confusion.
- Collaboration tools: Use tools like Slack, Jira, and Confluence for better communication and teamwork.
- Regular monitoring: Check progress often, give feedback, and solve problems quickly.
- Cultural sensitivity: Foster respect by understanding and embracing cultural differences in your team.
7. Conclusion
An ideal offshore development center can transform your business in remarkable ways. Moreover, it would provide exceptional access to global talent, enhance cost efficiency, and offer remarkable scalability. To maximize impact, choose the best types of offshore development center (ODC) for your unique needs from among three options: project-based, dedicated development teams, and hybrid models. The key to a successful offshore development project is overcoming obstacles through open dialogue, close teamwork, and cultural understanding.
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8. FAQs about Type ODC
What is the difference between an ODC and a dedicated development team?
An offshore development center is a comprehensive setup located in another country, designed to enhance an organization’s IT operations, including infrastructure, management, and a dedicated team. A dedicated development team is a crucial component of a larger picture, consisting of developers who focus exclusively on the client’s needs. Typically situated in one Offshore Development Center (ODC), this team benefits from the vendor’s infrastructure and operational management, ensuring seamless collaboration and efficiency.
How much does it cost to set up an ODC?
The cost of setting up an ODC depends on factors like location, team size, infrastructure requirements, and operational complexity. Companies can save 60-70% in development costs, on average, by using outsourced teams instead of in-house ones in developed countries. Initial setup costs typically include recruitment, office space, technology infrastructure, and compliance with local regulations.
What are the most popular destinations for setting up an ODC?
Popular ODC destinations include:
- India: Known for its vast talent pool and cost efficiency.
- Vietnam: Emerging as a hotspot due to its skilled workforce and competitive rates.
- Ukraine: Renowned for high-quality developers and proximity to Europe.
- Philippines: Favored for its English proficiency and customer support expertise.
- Poland: A preferred nearshore destination for European companies with excellent technical skills.
What are the key legal considerations when establishing an ODC?
Key legal aspects to consider include:
- Intellectual property protection: Ensure strong NDAs and contracts explicitly outlining IP ownership.
- Data privacy compliance: Adhere to regulations like GDPR or CCPA if handling sensitive user data.
- Labor laws: Understand local employment laws, tax obligations, and benefits requirements.
- Contracts and dispute resolution: Define clear terms for scope of work, payment, termination, and conflict resolution.
How can I ensure the success of my ODC?
To ensure your ODC’s success:
- Define clear goals: Align the ODC’s objectives with your business strategy.
- Establish strong communication: Use collaboration tools and regular updates to maintain alignment.
- Hire the right talent: Focus on recruiting skilled developers and support staff.
- Adopt best practices: Implement clear workflows, Agile methodologies, and quality control processes.
- Foster cultural understanding: Build mutual respect and understanding within the team.
