Offshore development centers in Argentina like a service

Finding the perfect blend of talent and affordability has always posed a significant challenge. However, if you're aiming to bolster your software development capabilities in 2024, this challenge is even more daunting. Unfavorable economic conditions, ranging from persistent inflation to soaring interest rates, are amplifying cost pressures across the spectrum. Consequently, clients of software development vendors have either slashed budgets, curbed expenditure, or migrated to more cost-effective alternatives in 2023. Simultaneously, the hiring momentum for tech, information, and media positions in the United States dwindled by a staggering 42.9%, as per LinkedIn’s latest Workforce Report.

Despite these obstacles, close to 90% of tech industry leaders based in the US cite recruitment as a significant or substantial hurdle. Establishing an offshore development center (ODC) could present a viable solution to bridging the talent deficit while capitalizing on lower labor and infrastructure expenses in offshore destinations to enhance cost-effectiveness. However, it's crucial to recognize that this approach isn't a universal fix for tech talent shortages.

Let's delve into what constitutes an offshore development center, its advantages and drawbacks, how it stacks up against outsourcing and in-house development, and the steps involved in initiating an ODC.

What is an ODC?

An offshore development center, or offshore delivery center, serves as a development hub situated in an offshore location, equipped with a dedicated development team, office space, on-site administrative personnel, and all essential equipment and infrastructure for operations. Typically, an offshore location is situated more than three time zones away from your base.

Similarly, the term "ODC" is also used to denote nearshore development or delivery centers, wherein the team, office, and administrative support are situated closer, within up to three time zones from your location. While the high-level purpose and setup remain consistent between offshore and nearshore development centers, the key distinction lies in the time overlap with the in-house team, which tends to be greater for nearshore centers. Additionally, nearshore development centers often entail higher costs compared to their offshore counterparts.

Throughout this article, we'll primarily utilize "ODC" to signify offshore development centers.

What distinguishes an offshore development center from other offshore development services is its customized alignment with your organization's specific requirements. The development team within an ODC is capable of undertaking a wide array of tasks, spanning technical and business support, administrative functions, and end-to-end product development. Conceptualize an offshore development center as an extension of your in-house team, albeit situated offshore.

Setting up an offshore development center can be accomplished independently or through collaboration with a partner possessing an established presence in your desired location. In the latter scenario, responsibilities such as recruitment, accounting, office setup, legal compliance, HR management, local IT support, security, and other administrative tasks are managed by your ODC partner.

Key characteristics

The offshore development center model is characterized by the following key features:

• Tailored to your needs: Security protocols, team composition, infrastructure setup, project management methodologies, and other development aspects are customized to align precisely with your requirements and preferences.
• Built for long-term engagements: An ODC is designed to augment your development capabilities over an extended period, making it ideal for scenarios where you require continuous maintenance and updates for existing products or ongoing development projects.
• Flexible and scalable: You have the flexibility to scale your development team up or down as needed, and modify the scope of work to accommodate evolving project requirements or business priorities.
• Self-contained: An ODC is self-sufficient, encompassing all administrative functions necessary for its operation. This includes tasks such as tax management, HR administration, and project management, ensuring seamless functioning without reliance on external resources.
• Dedicated to your business: The development team within an ODC is exclusively dedicated to your projects. This dedicated focus maximizes their engagement, commitment, and proactive involvement, fostering a sense of ownership and initiative-taking within the team.

Contractor vs. customer ODC model

When it comes to offshore development services, there are two primary approaches, each varying in the level of client involvement:

• Contractor ODC model: In this arrangement, the offshore development center is owned and operated by a vendor. The vendor takes responsibility for establishing and managing local infrastructure, ensuring on-premises and data security, overseeing day-to-day operations, and providing office space. Additionally, the vendor handles recruitment and may even assume product or project management duties if delegated by the client, typically under a managed services or managed delivery engagement model.
• Customer ODC model: Under this model, the client retains ownership of the offshore development center, treating it as a branch of their own company. Setting up an ODC in this manner can involve relocating an existing team or hiring new personnel locally. Generally, all operations, including recruitment, are managed directly by the client, although local vendors may be engaged for certain services. This model is often preferred by large enterprises due to its suitability for accommodating significant scale and complexity.

Regardless of the chosen approach, both models ensure that the client retains full control over aspects such as security, regulatory compliance, and product development requirements. Whether operating under the contractor or customer ODC model, the offshore development center serves as a secure perimeter established and managed according to the client's specified rules and standards.

Benefits

Enhanced risk mitigation and security

Compared to outsourcing, opting for an offshore development center provides unparalleled advantages in the realms of security and risk management. This model affords you complete control over security protocols and risk mitigation practices, empowering you to establish robust measures for both physical premises security and data protection. Moreover, it enables you to ensure compliance with regulatory requirements and maintain business continuity by upholding stringent standards for processes and output quality.

With an offshore development center, you have the flexibility to mandate specific network security standards and tailor the local infrastructure to align with your risk management objectives. However, it's essential to acknowledge that if your security, compliance, and business continuity needs cannot be adequately addressed in the chosen offshore location, establishing an ODC may not be the optimal choice for your organization, regardless of potential cost efficiencies. 

Access to the global talent pool

​​Recruiting developers possessing the requisite skills continues to pose a significant hurdle for 50% of businesses, as reported by Deloitte. Offshoring presents a solution by eliminating geographical limitations and broadening the talent pool, thereby streamlining and expediting the recruitment process.

Furthermore, venturing into offshoring destinations enables organizations to tap into a diverse talent pool rich with experts in cutting-edge technologies. This includes emerging fields such as deep learning, computer vision, and extended reality, offering access to specialized skills that may be scarce or in high demand locally

Cost savings

Cost pressure remains a primary concern for companies seeking to expand their software development capabilities. According to Accelerance, opting to hire a development team offshore can yield substantial cost savings ranging from 39% to 72%, contingent upon the location, compared to hiring an onshore team in a high-cost area like Seattle, Washington.

There are several factors contributing to the cost efficiency of setting up an offshore development center (ODC). Offshore locations typically boast a lower cost of living, resulting in reduced labor expenses. Additionally, infrastructure costs, such as office rent, tend to be more economical offshore. Furthermore, certain jurisdictions offer tax incentives aimed at bolstering the tech sector, further driving down overall operational expenses for companies establishing ODCs in these regions.

Facilitated recruitment and management

Opting to directly hire offshore developers to establish a remote team entails navigating various challenges and investments. Initially, you must allocate time and resources towards recruitment efforts, spanning both developers and administrative staff. Subsequently, you'll need to establish the necessary infrastructure to support the team's operations effectively.

However, collaborating with an offshore development service vendor can streamline this process significantly. These vendors shoulder the responsibility of vetting specialists' skills, although you retain the autonomy to make final hiring decisions if desired. Moreover, they handle day-to-day operations management and ensure compliance with local regulations, alleviating the burden of studying jurisdictional tax codes or addressing HR-related issues. This partnership allows you to focus your resources on core business objectives while entrusting the intricacies of offshore team management to experienced professionals. 

Local expertise

Absolutely, leveraging the insights and expertise of your dedicated offshore development center (ODC) members can be invaluable when expanding your business into new markets or regions. Here are some specific tasks your ODC can undertake to facilitate this process:

• Localizing your product: ODC members can assist in adapting your product to resonate with local preferences, languages, and cultural nuances. This may include translating content, adjusting features, or customizing user interfaces to better suit the target market.
• Conducting market and user research: Your ODC can conduct comprehensive research to gain a deeper understanding of the local market landscape, consumer behaviors, and competitor analysis. This research can inform strategic decisions and tailor your offerings to meet the specific needs and preferences of the target audience.
• Adapting product design to local trends: ODC members can collaborate with your design team to incorporate local trends, aesthetics, and user experience preferences into product design and development. This ensures that your offerings resonate with the target market and stand out among competitors.

By leveraging the local expertise and capabilities of your ODC, you can enhance your market expansion efforts and increase the likelihood of success in new regions.

Continuous coverage

Indeed, one of the significant advantages of having an offshore development center (ODC) is the ability to extend operational coverage beyond standard working hours. Acting as an extension of your in-house team, an ODC can seamlessly take over tasks when your local team's workday concludes. This continuity ensures uninterrupted progress on projects and accelerates time-to-market for new features or products, as development efforts can proceed around the clock.

Continuous coverage provided by an ODC also proves advantageous for maintenance and support tasks. By entrusting these responsibilities to your offshore team, you can ensure that critical functions are monitored and addressed at all times, regardless of time zone differences. Moreover, an ODC can play a pivotal role in swiftly identifying and responding to security incidents or breaches, bolstering your organization's overall cybersecurity posture and minimizing potential disruptions to operations.

Full control over every aspect

In a customer-owned dedicated offshore development center (ODC), you wield complete control over every facet of its operations. This level of autonomy empowers you to customize the ODC to align precisely with your unique needs, processes, quality standards, and best practices. For instance, if stringent security protocols must be maintained, the ODC team will adhere to your specifications. Beyond security and compliance, you have the flexibility to establish standards and practices for maintaining output quality, optimizing communication channels, and mitigating business disruptions.

Similarly, in a vendor-owned ODC, you can still exert significant control over its operations. However, the primary allure lies in the vendor's capability to handle the heavy lifting associated with managing communications and implementing quality control processes. By leveraging the expertise and resources of the vendor, you can streamline the day-to-day management of the ODC while retaining oversight and direction over strategic decisions and objectives. This arrangement enables you to focus on core business priorities while entrusting operational intricacies to experienced professionals.

Challenges of working

ODC vs. in-house team: What’s the difference?

Setting up an offshore development center differs from hiring an additional in-house team in several key aspects:

1. Location: While an in-house team is typically based in one of your current locations, an offshore development center is situated more than three time zones away from your primary base. This geographical difference can impact communication, collaboration, and operational logistics.
2. Costs: In-house employees entail various additional costs, including recruitment expenses, benefits, payroll taxes, office space, and equipment. Real employment costs are typically 1.25 to 1.4 times higher than the salary alone. Conversely, while an offshore development center may involve some similar expenses (e.g., infrastructure), they are generally lower offshore. Moreover, certain costs like payroll taxes may not apply if you partner with a vendor to establish the ODC.
3. Speed: Partnering with a local vendor to set up an offshore development center can expedite the process significantly. Vendors often have a pre-existing pool of specialists ready to join the ODC, enabling you to assemble your team more rapidly compared to in-house recruitment efforts.

Despite these differences, an offshore development center can still offer a level of involvement and commitment akin to an in-house team, as the ODC team exclusively caters to your business needs. Therefore, in terms of dedication and engagement, the two approaches may not differ significantly.

Key aspects of setting up

If you're considering setting up an offshore development center, here are eight key considerations to guide your decision-making process:

1. Define your needs and goals: Identify the tasks the offshore development center will undertake and clarify your objectives. Determine the level of control you desire, your budget, and the preferred ODC model.
2. Consider feasibility: Conduct a feasibility analysis, weighing opportunities, strengths, weaknesses, and threats. Assess talent availability, legal and compliance constraints, risks, and financial costs.
3. Settle on the ideal location: Compare potential locations based on expertise availability, security and compliance standards, labor and infrastructure costs, cultural differences, time zone disparities, internet connectivity, exchange rate stability, geopolitical factors, and English proficiency.
4. Decide on the DIY vs. vendor approach: Choose between establishing the ODC independently, which entails handling legal, accounting, recruitment, and infrastructure setup, or partnering with a company like inbybob_ to delegate these tasks.
5. Set up the infrastructure: Ensure the infrastructure supports productivity and security. Implement backup systems, secure the network, and enforce permission-based access to sensitive data and premises.
6. Select the team: If establishing the ODC independently, manage the recruitment process from job postings to candidate selection. Alternatively, leverage your ODC partner's internal talent pool for streamlined recruitment.
7. Onboard the team: Align the offshore team with your in-house operations, values, standards, and protocols. Clearly define communication tools, project management processes, roles, responsibilities, and knowledge transfer methods during onboarding.
8. Monitor performance: Establish key performance indicators (KPIs) to evaluate the offshore team's performance. Communicate these metrics, track progress, and assess the team's effectiveness in meeting your needs.

If you’re not certain where to start with your location selection, here are the two prominent offshoring destinations for businesses based in the US or Canada that you may want to consider for your offshore development center:

In conclusion, establishing a dedicated offshore development center presents opportunities to capitalize on lower costs and enhance development capabilities, particularly for organizations with specific needs and objectives. However, it's essential to recognize that this approach may not suit every organization and requires careful consideration of various factors.

Offshore development centers are most beneficial for organizations that:

1. Have sufficient scale and resource requirements to justify the investment.
2. Prioritize strict data security measures and compliance with regulations.
3. Seek access to cutting-edge technological expertise not readily available locally.
4. Desire a level of commitment and involvement akin to an in-house team.
5. Anticipate utilizing ODC services for long-term, large-scale projects.

Despite the potential benefits, there are caveats to setting up an offshore development center. Organizations must thoroughly understand their legal and compliance obligations and invest time in establishing infrastructure and recruiting team members.

By weighing these considerations and aligning them with organizational goals, businesses can make informed decisions about whether establishing an offshore development center is the right choice for their needs.