Offshore Development Center Set-Up

Cost Factors to Consider for Offshore Development Center (ODC) Setup

What benefits can ODC (offshore development center) bring to your business?

First, let’s face it: the face of software development has changed drastically. Previously, the companies had to invest hundreds of thousands or millions of dollars to build their own in-house development teams. Today, endless nearshore and offshore development possibilities are right at their fingertips. And with the remote work soaring in 2020 because of the coronavirus pandemic, companies are even more open to hiring remote team members. This also means that they don’t mind considering offshore developers for temporary or even full-time projects (as such IT professionals can work closely with the core team if there’s a need, and you may agree for the time-zone overlap that is convenient for both sides).

With this in mind, most companies realize that paying in-house software developers can be quite costly compared to the ODC model. This is especially true if the app or product only complements your main product, or if there is minimal need to keep dozens of staff after the product is rolled out. Since technology is changing at an ever-increasing speed, it is ok to not wish to digress your attention to software development or app-building only.

“When it comes to the success of your business, efficiency is key”

Thankfully, there is a large IT outsourcing market. Offshore software development presents an opportunity for clients looking for software building solutions away from their domicile countries. Some regions offer specialized development teams and a vast pool of talent at a surprisingly inexpensive rate. This effectively reduces the amount to be spent on keeping in-house teams, compared to more affordable yet specialized offshore teams. It is proven by our data that, for example, an offshore Angular development developer may cost you only $22/hour. It’s hard to find such rate in the US or UK.

“Offshore development reduces bottlenecks of keeping extra staff in your own office, eliminating factors such as payroll, bookkeeping and health benefit costs”

When do ODC (offshore development centers) become the best alternative?

The world has all but adopted an agile methodology to software and application development. The rollout of a product begins at the client brief, research & development phases, and beta testing, with code forming only part of the byproduct. This means that software development cost can get extremely high and unfeasible, especially if the plan is to rely on in-house development teams.

Granted, medium to large scale companies and enterprises can maintain a dedicated development team for product testing, delivery, and maintenance. However, this is usually the case when the company is itself development-based, such as Facebook, Twitter, Uber, or Apple.

For those companies that are not looking to focus on software development as a core mandate, it becomes quite practical to outsource their services. Such companies can benefit from the lower contractual costs for offshore development centers.

“Since ODCs are specialized in a specific application development framework, they don’t need any extra training to start out”

Usually, ODCs are experts in a specific runtime environment, like Swift or JavaScript. That’s why they can tackle jobs where only these skills are demanded.

An offshore development center setup can also open the door to a variety of other essential services:

  • UX/UI development and testing
  • SEO content creation
  • project management
  • design development

Having a multidisciplinary dedicated team brings you additional cost savings, offering a wide range of services to be delivered in a centralized and timely fashion. You can also train these developers to use your tools and adjust to your hours or company culture. Having these ODCs understand your product or brand can help build a healthy and long-term working relationship. It would be of great assistance to your business, especially in the long run.

Offshore Development Center

Choosing an ODC | Tackling the Cost Perspective

With the massive rise of Eastern and Central Europe, India, and Southeast Asia as regional hubs where even the most specialized tech problems can be solved remotely, having a successful rollout of your product boils down to choosing the right offshore software development company. When it comes to the final selection, the cost is ultimately the determining factor. However, there are other considerations that should be given to the company offering you offshore development services, such as:

  • expertise in a particular development language
  • project portfolio
  • working mobility between your own office team and the offshore staff

Ideally, you’ll also want a dedicated team that you can communicate throughout the development process with at any time, without any language barriers.

Depending on the agreed-upon contract, you may need to cater for other expenses, such as travel, testing, office space, taxes. Some contracts may request to include a project manager who will be making sure your team gets things done on time, and also will be responsible for smooth communication between you and your remote team of programmers. This can be especially convenient when you’re working from a time zone completely on the other side of the world.

As already mentioned, Eastern Europe is playing a pivotal role in the promotion of ODC as a viable software development alternative. Below, we explore three countries in this region that are at the forefront of popularizing ODC and the relative costs of offshore development center setup.

Ukraine

While Ukraine has suffered considerable political unrest in the last two decades since the collapse of the Soviet Union, this hasn’t stopped it from becoming the number one IT outsourcing destination in Eastern Europe where many Western-European, Scandinavic and American IT companies prefer to hire developers.

Today, there are over 1,000 global IT brands, hundreds of R&D testing centers, and offshore development companies operating in Ukraine, with hundreds of more new software-based startups being founded each year. The education system emphasizes math, engineering, and the sciences which means a gross pool of IT specialists is entering the job market each year, larger than anywhere else in Europe.

“Ukraine is one of the most affordable ODC destinations in the world, with hourly rates for a software developer starting at $25-$50”

This figure can go from $25 up to 200$/hour depending on the unique expertise and skills set of a developer, and the exact location (for example, the rates between Kharkiv and Kyiv and Lviv may differ). Ukrainians are known to be agile and enterprising as opposed to some of their Asian counterparts, who therefore expect a picture-perfect product. Lately, Ukraine has not been associated with lower costs but been associated with the good talent.

YouTeam is a prime example of a Ukrainian company that facilitates the easy set-up of an offshore development team focusing on a host of developer toolkits such as Java, front-end and back-end, blockchain, cloud-computing, C#, etc. For example, you’re looking for offshore angular development, you can send your requirements, and we’ll help you find the best team from our talent pool of 200+ development agencies in less than a week.

Poland

Its population is highly specialized in math, IT and engineering functions, with software developers favoring JavaScript, Swift, and other front-end and back-end development platforms such as Angular and React.

“Consistently ranked among the best countries in the world for outsourcing software developer functions, Poland is suitable for clients looking for specific coding expertise and experience”

It will cost you about $30 to $120 hourly to hire an experienced software developer in Poland, although this cost may not include such items as taxes and payroll processing. Yet, Poland is one of the most attractive destinations for the offshore software development center setup.

Russia

C, C++, and C# coding may not be what regular SMEs that are looking for simple mobile and web applications are in the market for.

“Having probably the most specialized and advanced project teams of the entire region, Russia has distinguished itself as the home of good old-fashioned C, C++ and C# coding, for enterprise-grade applications and gaming”

This makes Russia quite costly to hire a development team, as you may be charged $70-$300 hourly for an experienced software specialist. Moreover, you may not get comprehensive services beyond raw code, say in such a scenario where you also need UI/UX specialists or product managers.

Unparalleled Benefits of Choosing an ODC

Working with offshore (dev/tech) teams has been proven to drastically reduce the cost of designing, testing, and launching. Companies including Dell, Samsung, Microsoft, and Amazon have launched ODCs in countries such as Israel and India because of their specialization in such IT niches as cybersecurity, back-end and database design. Limited testing or automation budgets, expensive DevOps and legacy systems, and inability to scale and port/convert between different developer platforms all make companies choose to have an offshore development office rather than maintaining in-house teams.

Eastern Europe is rapidly becoming a popular offshore development centre. Below you can find the list of top-3 ODC destinations with detailed development costs for each:

    • Ukraine ($25-50/hour)
    • Poland ($30-120/hour)
    • Russia ($70-300/hour)

As you can see, the development costs between these ODC hubs differ. Luckily, the expertise and quality of offshore development services remain consistently high there. If you want to optimise your expenses, you may choose the destination for your offshore center setup based on the development cost structure that works best for you. But remember that cost-efficiency is not the only factor to rely on. See our checklist for all the factors to consider when hiring an offshore software development team, no matter where from — Philippines, Vietnam, or Ukraine or Mexico or Costa Rica.

With this knowledge in mind, IT companies may explore the option of ODC as a provider of both affordable and quality development solutions, or you may stick with traditional outsourcing, or even with just hiring freelance software engineers, it’s all your choice. 

Perfert team, we verify skills

Written by
YouTeam Editorial Team

We love featuring verified solutions to outsourcing problems and coverage of remote work trends. We want our blog to be a source of inspiration for tech entrepreneurs and product people who are looking to build distributed development teams across continents.

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