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How to Set Up a Dedicated Offshore Development Center

How to Set Up a Dedicated Offshore Development Center

In today's globalized business landscape, companies are constantly seeking ways to maximize efficiency, minimize expenses, and maintain their competitive edge. And one strategy that has proven to successfully assist businesses in achieving such goals, and that has gained significant traction in recent years, is that revolving around the establishment of a dedicated offshore development centre (ODC). The latter enables organizations to access a pool of talented software engineers, reduce development costs, and accelerate product development. However, setting up a dedicated offshore development centre is a complex process, and in support of businesses undertaking this ambitious mission, we have crafted a thorough guide on successfully navigating such a challenging endeavour.

In this comprehensive guide, we will delve further into the intricacies of establishing a dedicated offshore development centre, from the initial planning stages to ongoing management. Whether you are a start-up looking to scale your development team, or an established enterprise seeking cost-effective software development solutions, this guide will provide you with the essential insights and steps to successfully set up your ODC. So, allows us to begin our journey by briefly explaining the concept behind an offshore development centre.

What is an Offshore Development Centre (ODC)?

An offshore development centre (ODC) is a dedicated facility or team located in a foreign country, typically in a low-cost destination, that is established by a company to handle software development, IT operations, or other business processes. ODCs can function as an extension of the company's in-house team or as a separate entity, depending on the organization's goals and requirements.

What Are the Advantages of Setting Up an ODC?

One of the biggest benefits of setting up a dedicated offshore development centre, is the potential for significant cost savings. For establishing a dedicated offshore development centre, comes bundled with reduced expenses in terms of labor, infrastructure, and operational costs, as living and labor costs are typically lower in offshore countries.

Then there is the access to skilled talent, given that ODCs allow companies to tap into a global talent pool, taking advantage of the highly skilled professionals who can accelerate product development.

And it doesn’t stop here, as businesses considering setting up a dedicated offshore development centre, also need to learn that such a solution can help them concentrate on their core competencies and strategic objectives, since non-core functions will be outsourced to the ODC.

Moreover, ODCs enable round-the-clock development, speeding up project delivery and time to market and giving companies the opportunity to gain a competitive edge, and stay ahead of their rivals.

Diving into The Process of Setting Up a Dedicated Offshore Development Centre

Identifying Needs and Objectives

Once companies have decided to establish a dedicated offshore development centre, it is crucial that they first and foremost, define their business objectives and the specific needs they aim to address through outsourcing. For having a clear understanding of their requirements, will guide their decision-making throughout the setup process. “What are the core functions you want to offshore”, “are you looking to augment your existing team or create a dedicated remote team”, or “what are your short-term and long-term goals for the ODC”, are some of the questions that businesses should have the answers to, before going ahead and taking the next step in their dedicated offshore development journey.

Selecting the Right Location

Choosing the right offshore location is a critical decision, therefore companies must take their time and conduct thorough research before picking out a destination. From the cost of living and labour rates in potential locations, to the political stability, time zone differences, and cultural compatibility, such factors must be given great attention, in order for hiring businesses to ensure that they enjoy a smooth collaboration, effective communication and minimal risks.

Defining Budget

Developing a comprehensive budget is essential for effective cost management, and will also help companies make informed decisions during the setup process. To define their budget, businesses should be mindful about costs surrounding infrastructure, salaries, benefits, and bonuses for offshore team members, utilities, legal fees and compliance-related expenses.

Legal and Regulatory Considerations

Compliance with both local and international regulations is paramount when setting up a dedicated offshore development center, and businesses wishing to avoid complications, should adhere to data protection regulations in both their home country and the offshore location. Furthermore, companies should define clear IP ownership and protection clauses in contracts, be aware of any export control laws that may apply to their software or technology, and understand the tax implications of their offshore operations.

Finding the Right Partner

Deciding between outsourcing and insourcing a dedicated offshore development center is a fundamental choice. With outsourcing, businesses will be partnering with an established offshore development company that provides infrastructure, talent, and expertise. This option is cost-effective and minimizes administrative responsibilities. By choosing insourcing on the other hand, companies will build their dedicated offshore development centre from scratch, which includes recruiting talent, setting up infrastructure, and handling all administrative tasks. This offers greater control but requires more time and effort.  

When outsourcing, businesses must select an offshore development company (ODC) carefully, and consider the following factors:

Reputation and Experience: Researching the ODC's track record, client testimonials, and industry reputation is essential when seeking an offshore partner.

Technical Expertise: The ODC's expertise in the technologies and domains relevant to your projects is a prerequisite for a fruitful partnership.

Communication Skills: Businesses should evaluate the ODC's communication skills, as effective communication is vital for success.

Scalability: The ODC must be able to effortlessly scale its team in order to meet their clients’ changing needs.

Setting Up Infrastructure

Throughout this phase, hiring companies must decide whether they want their ODC to work from a physical office space or as a remote team. When choosing the first scenario, the office space will provide a dedicated and controlled environment, however, it may incur higher infrastructure costs. A remote team on the other hand, offers flexibility and cost savings, but requires robust communication and collaboration tools. In this context, hiring companies should Invest in tools and technologies that facilitate video conferencing, real-time communication, project progress tracking, and collaboration. Data security measures must also be taken, so that businesses can protect data during transmission, restrict access to sensitive data to authorized personnel only, or encrypt sensitive data to safeguard it from unauthorized access.

Recruiting and Building the Team

Once companies have chosen an ODC model and a vendor, they need to carefully select their team members. When hiring for their ODC, businesses should look for developers with the skills and experience that they need, as well as with a strong work ethic and a positive attitude. It's also important that companies consider the cultural differences between their location and that of the dedicated offshore development center, therefore they should make sure that they hire developers who are comfortable working with people from different cultures. Going further, businesses can also organize cross-cultural training sessions to foster understanding and collaboration and promote diversity and inclusion to create an inclusive work environment.

Project Management and Workflow

Whether companies choose agile methodologies or the waterfall approach, they must bear in mind that the methodology they decide upon must align with their project's complexity and requirements. To ensure success, hiring businesses must establish clear communication channels, schedule regular video meetings to discuss project updates, maintain clear and comprehensive project documentation, and create feedback loops to gather input from team members as well.

When it comes to project tracking and reporting, companies should define KPIs to measure their project’s progress and use issue tracking systems to address and resolve project-related issues promptly.

Performance Evaluation and KPIs

To measure the performance and effectiveness of their dedicated offshore development center, companies must set key performance indicators. They should focus on tracking metrics such as project completion time, defect rate, and code quality, and collecting feedback from clients and end-users to evaluate satisfaction levels. Conducting regular performance assessments to identify areas for improvement is also an important step, as well as using performance data and assessments to drive continuous improvement, for the latter is a cornerstone of ODC success, allowing teams to adapt and excel in a dynamic environment.


From the initial planning stages to the day-to-day operations, the establishment and maintenance of an ODC demand attention to detail, commitment to best practices, and a focus on building a cohesive and productive team. However, such efforts are well worth it, as setting up a dedicated offshore development center is a strategic move that can bring significant benefits to organizations of all sizes.

Work with us

Backed by 500+ IT consultants, over 350 Agile projects delivered and an expertise of over 15 years in creating successful project teams for customers in various industries, TechTalent is the go-to company when deciding to to set up a dedicated offshore development center.