Globally, businesses are experiencing huge talent scarcity, especially in the IT sector. Experts predict that by 2030, organizations around the globe risk losing $8.4 trillion in profits if they don’t find a solution.
Nearly 57% of global companies hire offshore developers seeking to focus on their core business activities. According to the same study, about 70% of respondents claimed that outsourcing proved to be an excellent cost-cutting tool, and another 40% admitted that outsourcing provides organizational flexibility to cope with the challenges, especially those caused by the pandemic.
Dedicated Development Office Setup: Definition, Concept, and Models
99% of C-suite executives and HR leaders of technology projects now recognize the benefits of remote teams, with 3 out of every 4 (75%) reporting an increase in staff productivity. That’s a clear indication that concerns about remote teams have all but disappeared.
Frustrated by the high costs associated with maintaining a team and its infrastructure and the difficulty of finding IT specialists? There is a solution designed to optimize these processes while maintaining high-quality standards and saving valuable time - Dedicated Development Office.
What Is an Offshore Development Center?
DDO (Dedicated Development Office) setup is a process of IT infrastructure development, i.e. ensuring the scaling of the process and the company's development to the required turnover, with the possibility of further differentiation and refocusing between other dedicated teams or specialized development offices.
The service provider assists enterprises in setting up and maintaining dedicated development centers abroad. These companies handle end-to-end management, including hiring human resources, setting up infrastructure, training and mentoring developers, and monitoring team performance. With the cost-plus pricing model, the service company provides the lowest price relative to its location (operational processes, rent, engineers).
The main goal is to quickly build a team of specialists on the service provider's infrastructure.
Along with Dedicated Team and Team Augmentation, a Dedicated Development Office Setup ensures faster time-to-market through a stable team (guaranteed for 3 years), prospective talents hiring and the best students optimally nurtured in the boot camp.
Offshore Development Centers Engagement Models
Creating a dedicated offshore development center (ODC) involves selecting from different service delivery models. Depending on your specific needs and business objectives, you can opt for one of the following two models:
- Product Engineering Offshore Development Center Model (ODC). Under this model, the client scales company operations by hiring dedicated offshore developers for the ongoing project.
Its extension Build-to-Scale allows the creation of a dedicated team of developers and experts who work as an extension of the internal team, effectively becoming a subsidiary.
- Build-Operate-Transfer (BOT) Offshore Development Center Model involves setting up a fully functional business operation in a foreign market under its brand. To ensure success, the service provider manages the operations for the first few years, after which ownership of the office is transferred to the client company.
ODC is a versatile option that allows one to start with just one team member and expand the team as the project grows.
How Does Dedicated Development Office Setup Model Work?
Initiation
The service provider analyses the client company's policy for compliance with the expectations and culture of the company and the ability to form a team of 15 engineers within 3 years concerning the client's needs. The next step is the team, office infrastructure, and data security requirements clarification.
Team Recruitment
Based on the technical and non-technical requirements, the vendor offers specialists who meet all the needs of the customer's business and will be paid in the proportion of 0.5\1\2 (Senior\Middle\Junior) to guarantee the delivery of stable releases on the project. The client approves each candidate and gives the green light to invite them to join their team. Thus, they get a fully staffed back office with a team and management in 24 days.
Office Setup
The vendor is responsible for setting up the office, operational resource management, financial and legal services, and IT infrastructure support. It also launches the necessary processes, fully manages all day-to-day operations related to the project, and provides staffing and training support to the client's team. The client's responsibility is to monitor the team's performance, maintain communication with management, receive project status reports, and participate in the monthly NetLS 360 Review and weekly NetLS Projects Touchpoint.
Office Integration and Launch
After the dedicated office is on the go, the team goes through a norming stage, and the service provider ensures that new team members are involved, connected, and familiarised with all procedures. Once the office is up and running, the vendor is responsible for technological integration, team building, monitoring, and maintaining the level of satisfaction and engagement of executives according to the Gallup Q12 indicator (for NetLS, it is 82.73% at the time of writing), as well as establishing and monitoring effective communication.
7 Reasons Why to Rely On Dedicated Development Office Setup
- Long-term partnership. Instead of hiring freelancers or relying on outsourcing services, you need to be able to plan long-term project development and control intellectual property. The partner relies entirely on a set-up office to reduce the likelihood of unforeseen incidents and reduce software development costs due to NetLS' location and tax benefits.
- Keep OpEx and Overhead to a minimum. It is more beneficial for a company to work with talented developers and engineers at their location (in cities with a population of up to 1 million) than to plan their relocation to the headquarters, which will offset the cost of infrastructure development, reduce salary costs (by 30% compared to the US and European regions), but maintain the same high quality of development due to teamwork in the development center, which in turn will reduce the tax burden on the client due to the location of the office in the Ukrainian jurisdiction.
- Opportunities. The need for technical specialists with spanerse industry experience to be able to implement a wider range of projects. A solution that allows faster development of new digital products and shorter time to market due to the accumulated experience and necessary operational processes to start a new project that will have a full development cycle and fast delivery of software to the client in one place.
- Expertise in the regional market. Vendor personal brand development that provides quality service in the Western Europe region and has a functional unit economy with minimal risks. Opportunity to cooperate with educational institutions and receive a funnel of 100 potential interns for an internship/vacancy.
- A flexible cooperation model. The client has the opportunity to build a cooperation model under a non-solicitation and partnership agreement or on a white-label basis and operate both within the legal entity NetLS in the jurisdiction of Ukraine and the country where its main activities are registered.
- A team with different skills and abilities. If the partner needs a team of more than 7 people, the vendor will provide a separate office where all developers, PMs, and QAs will work. Most importantly, the process component will be provided by the vendor so that the client can focus on his core business.
- Technology stack. But it is not limited to this. After all, if a client needs a team of 7+ highly specialized engineers, the vendor can launch a training course at the client's request, followed by the selection of the best for an internship to the project under the mentorship of the project leader at a price 20% lower per specialist compared to the client's region.
Big Players’ Dedicated Development Office Setup Use Cases
Delegation of tasks is becoming an important part of advancements, but the benefits are perceived differently by different organizational leaders. While HR executives see cost savings as the main benefit of outsourcing (48%), CTOs see outsourcing as the key to flexibility and rapid scaling (42%).
Multiple successful cases prove that offshore development centers are a viable solution for startups, SMEs, and large enterprises (Google, BaseCamp, Alibaba, GitHub, Skype, IBM, etc). Let’s discuss those, who didn’t go wrong.
Slack is certainly a powerful example of the most successful offshoring cases. To save money, the company outsourced application design and development services to remote teams at the beginning of its existence. This approach has allowed them to rapidly develop and release new iterations of their product, which has contributed to their current valuation reaching $27 billion. Their story is a great example of how startups have been able to succeed by taking advantage of the Dedicated Development Office Setup.
The example of the well-known Alibaba service (an outsourcing method of manufacturing) would also be relevant here. The company's ability to connect brands with cheap sources of production, usually located in China, makes their website so successful and attractive. By outsourcing web development to dedicated teams, Alibaba's revenue reached more than $5 billion in the second quarter of 2017. In his autobiographical novel Alibaba: The Inside Story Behind Jack Ma and the Creation of the Largest Online Marketplace, Jack Ma described the company's decision to outsource websites in the early years as a way to reach a bilingual audience. By localizing his website for both English and Chinese audiences, he laid the foundation for a multinational business that has allowed Alibaba to become the success it is today.
Summing Up
Now that you know the ins and outs and have defined the key project requirements, desired levels of control, and involvement you seek for a long-term collaboration, you are ready to make an informed strategic decision about opening an international development research center. Taking responsibility for the project outcome, consider partnering with a reliable service provider. Take advantage of NetLS' experience.