Dedicated Offshore Development Centers: a popular trend in outsourcing

Offshore Dedicated Centers

www.softheme.com

a popular trend in outsourcing

ODC features

Benefits, flip sides and challenges

Set up steps

Budget components, estimate

Sample cost dynamics

Operational models

ODC service levels

Table of Contents

www.softheme.com Outsourcing to Softheme™ Software Offshore Dedicated Centers

Offshore Software Development Centers (ODCs):

are good for both startups and existing businesses

can run one or several software engineering projects simultaneously

can include one or several software development and QA teams with different skills


Why an Offshore Development Center

are set up and supported by an outsourcing service provider usually at their premises and with the vendor’s experience and existing infrastructure

serves as a technology and software engineering extension of customer’s main facility

allows the customer focus on business specifics while the admin routines are being resolved by the outsourcing services vendor in parallel

ODC features


possibility to effectively keep, reduce or increase ODC staff when the customer merges with another company or sells the business

customer’s 100% ownership

staff replacements within from a week to a month, no special costs

recommended contract term: from 6 months to several years upfront payments are not requested unless a large volume of equipment is required to be purchased ownership: the outsourcing services provider may or may not participate security measures:

ODC features


workflow is adjusted in order to meet the one hosted by the customer; a replication of existing customer environment at the vendor’s side is suggested. Otherwise the vendor sets up the environment and workflows.

maintained by vendor

security

disaster recovery

data backup

no additional costs

For the customer: quick set up and quick cancellation reduced costs as compared to onshore labor costs reduced costs as compared to offshore full time development team transparent (“aquarium” vs. a “black box”) simplified accounting no problems to visit

Benefits


For the vendor: additional jobs additional income possible % in ownership (negotiated and is not mandatory, though) new experience in customer’s business domain

requires an intensive communication due to large geographic distances; poor communication makes ODC use its resources inefficiently and increase overall costs requires regular assessment of the team to perform necessary HR adjustments ODC members are not native English speakers in the most cases; lack of other European language speakers may require additional trainings in customer’s business domain time difference

Flip sides and challenges


may need mutual adjustment of processes, e.g. work out identical views, accepted by the customer and the outsourcing services vendor, on:

team management motivation quality control, etc.

the customer may need to get familiar with local HR markets, their specifics, levels of salaries and professionalism to make effective HR decisions if he wants to startups often don’t have solid development processes: the outsourcing services vendor has to analyze, recommend and implement average time to hire talents **:

** An advantage of dealing with an outsourcing team provider who already has an existing infrastructure and works with multiple clients is the vendor’s obviously having a pool of talents that might be used in ODC temporarily or permanently, hence, cutting down the time for hiring.

Flip sides and challenges


business requirements are always on customer’s side: ODC only delivers software, meets deadlines and quality. The customer extends it to the market.

create and discuss an estimation for the monthly budget

consider a particular model of building the team: based on existing vendor’s employees or hiring new ones or a mixed model


Steps of ODC creation

figure out requirements to the talents expertise, identify the needs of:

plan infrastructure:

permanent long-term employees

contractors for shorter periods of timevs.

budget sign off

build a team: hiring processes

set up knowledge transfer, requirements gathering process, training

set up communication process:


Steps of ODC creation (continued)

meeting schedule

reporting personal communications

set up workflows, management systems

achieve success

Typical regular budget expenses are:

salaries, bonuses

office space costs

collective taxes

telecommunication costs

bank expenses

a fee to the vendor



Monthly budget **:

10 ... 30 engineers, no equipment purchase needed $23k … $70k

10 … 30 engineers, equipment purchase $40k … $110k

** details available upon request



Timing:

build a 10 … 30 engineers ODC 1 … 3 months

Sample cost dynamics of a startup based on one of the existing ODCs

months

norm

alize

d co

sts,

%

Initial cost of infrastructure,purchase, no employees

Infrastructure is ready, a small number of employees, started hiring process

Full staff, a number of short-term sub-contractors. Pre-release efforts. High costs

Production final release. Support started

Support with the same staff who started the initial development The product is stable. Support

costs are lower


regular model:


Operational models

In any case the process is overviewed by the outsourcing service provider’s representatives.

independent engineers model:

mixed

TLsenior

developers

developers +

QA managertesters

intensive communication


Typical ODC model structure

customer it consultant vendorsenior developers

team leaders

developers

testers

What the customer can do:

review all and any costs, cost analysis, suggestions and negotiations for cost reductions or additional expenses HR activities such as:

conduct interviews make hire decisions make firing decisions motivate – bonuses


ODC service levels

project management: yes, if the customer wishes, and may be hidden if the customer wants so visits to ODC: yes, any time

What is hidden from the customer:

local accounting reports, tax and legal fee payments, vacation and holiday management

micro cash flow management, payroll

initial resume screening, HR, replacements, training

sys admin support, office equipment

disaster recovery support and data management

physical, network and data security steps


ODC service levels

Types of activities supported by ODCs:

box software development custom application development gathering requirements:


ODC service levels

system design QA and testing tech writing marketing research, content and data management, SEO remote system administration

independent partially independentvs. dependent on

customervs.

Level of ODC professionalism and success:

highest level capabilities (desirable level): gather functional requirements, do system design, coding, QA planning, design and run test cases, final delivery, acceptance testing. ODC strives to take a leadership role in as large area of responsibilities as possible. It is typical for Ukraine and Russia. middle level capabilities (ok level): system design, coding, test cases creation, testing, final deliveries lower level capabilities (ok only for particular cases): coding, test case execution or either of them. It is typical for India and China.


ODC service levels

Business analysis and business requirements are always done on customer side.

Thank you!

2010 | Softheme Team | Kyiv, Ukraine | Software Outsourcing Solutions

www.softheme.com » Outsourcing to Softheme™

Questions? → [email protected]

Dedicated Offshore Development Centers: a popular trend in outsourcing

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