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Unlocking Growth and Innovation with Strategic Offshore Development Centers

Discover how Offshore Development Centers can be strategic assets for agility, innovation, and global business leadership.

April 17, 2024 - 12:33 PM

Unlocking Growth and Innovation with Strategic Offshore Development Centers
Overview

Conventionally, outsourcing was looked at more as the solution to cost reduction. However, ODCs have grown to become a vital part of business operations over the years as they have become key drivers for speed for development, access to highly skilled professionals, and better service offerings.

What started as a way for some of the world’s largest corporations to improve operational efficiency with captive offshore development operations in the mid-80s and early 90s has become a full-on movement. Businesses of all sizes today can leverage the benefits of economies of scale, scale up rapidly with access to diverse skills across the globe, and build strategic capability.

While the traditional role for offshore centers was around application development and outsourcing of some non-core processes, over the past two decades, it has evolved to address even the most sophisticated strategic initiatives. A rapidly changing business environment has made it imperative for business leaders to look at offshore options to launch their digital initiatives faster, cut down release cycles, manage risks better with a distributed team, and lower costs at the same time.

Building Competitive Advantage with Offshore Development Centers

Dedicated Offshore Development Centers go beyond the Team Outsourcing and Turnkey Project models in giving you flexibility, control and strategic capability for a longer planning horizon.

  1. Access to Domain Knowledge and Technical Skills When you choose the right partner for setting up your offshore development center, you leverage deep skills and the domain knowledge that the provider would have in your area of operation.
  2. Flexible Resourcing Options Choose your team strength and team members based on your unique needs. Some providers give you the option for your team to work alongside the team members in a co-working model.
  3. Zero Capital Expenditure A key feature of the ODC model is that it gives you access to the People, Processes, and Technology needed to support a team without any capital expenditure. The provider typically takes this up as a part of its ODC offering.
  4. Significant Operational Cost Savings In addition to the labor cost arbitrage that exists with countries like India, most ODCs are built with a cost-plus model which gives you much better control over the costs and scales the ODC team strength in line with changing needs. All other operational costs like recruitment, training, staff motivation, and skill-ups are a part of the ODC arrangement.
  5. Build Strategic Capability With the ODC model, you get to build strategic capability for the long-term, with employees that are dedicated to your business and processes. While you focus on building your business, your ODC team adds strategic technology and business process capability. The ODC model is the option to go for when the drivers for setting up your offshore presence is not just cost, but technical and other critical skills.
  6. Reduced Time to Market When businesses move at the “speed of thought,” new ideas and innovations need to get to the market quickly. By working with a skilled, trained, and dedicated team with processes and technology aligned with your organization, you can reduce time to market with access to defined frameworks most providers can give you access to, leverage the ‘follow-the-sun’ model to work in a 24×7 mode.
Typical Offshore Challenges

No business model is free of its own set of challenges. Typical challenges that organizations face in offshore environments include:

  1. Communications and Collaboration Having well-established communication and collaboration protocols is of paramount importance when you’re working across the oceans. It’s not just about the language; this liaison occurs within a defined framework. When you set up an ODC, you have enough control to define the communication and collaboration protocols your team follows. This is a make-or-break issue that can potentially avoid a lot of problems later.
  2. Project and Program Management Having defined project and program management practices is an imperative for working with your own team in an offshore environment. This can significantly improve outcomes and reduce release cycle time significantly as you transition your technology and process initiatives offshore. This facet is best managed in the ODC model, where you have operational visibility over key metrics of the outsourcing program.
  3. Delivery Capability You need to be sure the provider you choose has the capability to deliver on the promises. For countries like India, Special Economic Zones have been established by the Government of India to facilitate some of the best companies in India to offer their services to a global audience. Choosing a reputed, experienced provider with a successful track record in setting up ODCs, will stand you in good stead as you take the first steps.
  4. Cultural and Political Differences This is an oft-overlooked facet of setting up ODCs. A stable political environment with democracy at its core, deep cultural affinity, and languages is of utmost importance when you look at the possible locations for your offshore development center.
  5. Knowledge Management Defined processes for managing knowledge are perhaps the most overlooked facet of management. Knowledge management and transfer play a crucial role in the success of any outsourcing relationship. These processes should be defined during the planning stage and followed throughout the project life cycle to deliver knowledge from the offshore team to the client and vice versa.
Finding the Right ODC Solution for your business

Finding the right partner to navigate offshoring challenges is a necessary first step to the long-term success of your ODC initiative. Although first impressions last, they may not be reliable. Dig deep and see if the provider and the solution being offered are really a fit. These elements are often missed in a rush to roll out ODCs and can be quite costly as you move ahead.

  1. Opt For The Right Location Building an offshore center needs the right location. Besides cultural and political reasons, good connectivity by air, availability of high-quality talent, and a vibrant technology ecosystem are all important factors in choosing the right location. This ensures you have a steady pool of innovation available to you as your ODC matures and grows.
  2. Starting up Right ODC solutions work for you best when you plan for the long term. It takes time to ensure your processes are replicated and consistently followed. Defining governance structures and knowing the people and their work practices must be budgeted for within the ODC rollout plan.
  3. Maturity of Risk and Disaster Management Plans We live in times of extraordinary change and uncertainty. A provider that has the systems and the processes you need for your ODC to keep running in times of crisis is the one that’s right for you. Being able to manage risk denotes a high degree of maturity in the overall processes with your provider.
  4. Data Security Practices Defined practices to ensure the security and confidentiality of your data are paramount in an offshore environment. With businesses moving to the cloud for all their data-processing needs, your provider needs to ensure your data and apps stay secure and with authorized personnel only.
  5. Institute Metrics Programs Early On You can manage what you can measure. Having defined metrics to measure the success of your ODC initiatives is extremely important. Customized KRAs and KPIs need to be defined for each role, transparently communicated to the team and carefully monitored for deviations. You need to be alert even though your provider is the one driving the engagement in most cases.
Final Thoughts

The outsourcing market is growing in terms of size, as well as complexity. ODCs give you the control and the means to craft winning digital initiatives. With some long-term planning and careful execution, ODCs can save time, money and improve the quality of deliverables at the same time.