Outsourcing has slowly evolved into a well known strategy within this digitized world, that has been used by companies time and again resulting in a reduction of costs, upgraded efficiency and an access to specialized talent. An outsourcing mode known to be the most effective for this particular outcome is the Offshore Development Center (ODC).
In order to bring about a change from the traditional outsourcing models, ODCs have incorporated a calculated approach to outsourcing which puts forward a range of benefits. A recent survey states that nearly 78% of companies that use ODCs report cost savings of up to 50%, while 67% report improved productivity and quality. These statistics not only indicate the value of ODCs in the current competitive business landscape.
A brief research and selective but important insights are provided along with a comprehensive guide to using them for outsourcing. Almost everything from the basics of ODCs to the steps involved in setting up and managing an ODC has been discussed.
What are ODCs?
Offshore Development Centers (ODCs) Typically includes a team of dedicated offshore developers who offer a number of services, ranging from software development, testing, and maintenance. ODCs are typically located in countries with lower labor costs, such as India, China, and the Philippines. They are established as a subsidiary of the parent company or as a separate entity. ODCs are designed to work exclusively for the parent company, providing a dedicated team that is focused on the company's specific needs and requirements.
ODCs offer a certain level of superiority over traditional outsourcing models. One of the main benefits is cost savings. ODCs are typically located in countries with lower labor costs, resulting in significant cost savings for the parent company. Additionally, ODCs provide access to specialized talent that may not be available locally. This is particularly important for companies that require specific technical skills or expertise. ODCs also offer improved communication and collaboration, as they are dedicated teams that work exclusively for the parent company.
Why use ODCs for outsourcing?
ODCs have evolved as a top choice for outsourcing for several reasons. The principal advantage being cost savings. A recent survey has depicted 78% of companies that use ODCs report cost savings of up to 50%. Solely because ODCs are generally placed within countries with lower labor costs, which can result in significant cost savings for the parent company.
Another advantage of ODCs is access to specialized talent. ODCs provide access to a large pool of skilled developers, testers, and project managers who usually lack in a local field. Henceforth ,it proves particularly important for companies that require specific technical skills or expertise.
ODCs also provide better communication and collaboration. As dedicated teams that work exclusively for the parent company, ODCs are able to provide a high level of communication and collaboration. This is particularly important for companies that need ongoing software development needs and wants a dedicated team to work on their projects.
When to use ODCs for outsourcing?
- Companies that have ongoing software development needs can always go for ODCs. For example, there is a software company that has some ongoing work in it. A dedicated team can be offered by ODC so that they work in tandem with the parent company effectively ensuring success.
- Companies who wish to scale their development team quickly would also be advantageous if they go for ODC.
- Even companies who are witnessing a sudden increase in software development needs can get a dedicated team from ODC that can quickly ramp up to meet your needs.
- For companies that are in need of specialized skills that are not locally available ,ODCs can be their one stop solution.
- ODCs would be of great help for companies that are in need of specific technical skills or expertise. ODC offers access to a large pool of skilled developers, testers, and project managers who may not be available locally.
- Companies that require a high level of communication and collaboration with their development team can also obtain technical assistance from ODC. ODC can provide a dedicated team that is focused on the project and can work closely with the parent company to ensure that the project is completed successfully.
How to set up an ODC?
Setting up an ODC involves several steps, including choosing the right location, hiring and training staff, and setting up infrastructure and processes.
Steps involved in setting up an ODC:
- Choosing the right location: Firstly you need to select the right location when setting up an ODC. When selecting a location you must look for a suitable business environment. It should consist of a stable political climate, good infrastructure, and a large pool of skilled talent. India, China, and the Philippines are few of the well known locations for ODCs.
- Hiring and training staff: After the location has been set, the staff needs to be hired and trained. Talented developers, testers, and project managers are the ones who are typically recruited and after that they have to go through a particular course of training and resources. In order to ensure that the recruited people will perform their tasks effectively, clear job descriptions and performance expectations for each team member needs to be set up.
- Setting up infrastructure and processes: Proper infrastructure and processes must be offered to the ODC team. This includes hardware, software, and communication tools that are necessary for the team to work effectively. It's important to establish clear processes for communication, collaboration, and project management, and to ensure that the team has access to the necessary resources and support to perform their roles effectively.
How to manage an ODC?
Managing an ODC requires a different approach than managing an in-house team. Effective communication and collaboration are key to success, as the ODC team is located in a different country and time zone.
Best practices for managing an ODC include:
- Setting clear goals and expectations: Layout distinct goals and expectations for the ODC team which would be shortly communicated to them in detail. By doing this it is most certain that everyone is working towards the same objectives and that there is a shared understanding of what needs to be achieved.
- Providing regular feedback: In order to make sure that the ODC team is effectively carrying out its role. Regular feedback is extremely important , they act as constructive criticisms and stress on areas that can be improved if worked on. It's important to provide feedback in a timely manner and to ensure that it is actionable and specific.
- Using collaboration tools: Collaboration tools such as video conferencing and project management software can help to facilitate communication and collaboration between the ODC team and the parent company. These tools can help to ensure that everyone is on the same page and that there is a shared understanding of what needs to be achieved.
- Establishing a strong relationship: It's important to establish a strong relationship with the ODC team and to ensure that they feel like a part of the parent company. This can be achieved through regular communication, team building activities, and other initiatives. It's important to ensure that the ODC team feels valued and that their contributions are recognized.
- Managing cultural differences: Managing an ODC requires an understanding of cultural differences and how they can impact communication and collaboration. It's important to be aware of these differences and to take steps to ensure that they do not become a barrier to effective communication and collaboration.
- Ensuring data security: When operating on an ODC,a critical aspect is data handling. You must make sure that data is protected and that there are appropriate measures in place to prevent data breaches. This includes ensuring that the ODC team is aware of data security policies and procedures and that they are followed rigorously.
How to measure the success of an ODC?
The measurement of success of an ODC includes certain key performance indicators (KPIs) such as cost savings, productivity, and quality. Other metrics to consider include customer satisfaction, employee satisfaction, and project delivery time.
- Cost savings: One of the primary reasons companies choose to set up an ODC is to save costs. To measure the success of an ODC in terms of cost savings, you can compare the cost of the ODC team to the cost of an in-house team or a traditional outsourcing model. It is generally advised to maintain a record of the cost savings achieved over time and compare them to the initial projections.
- Productivity: Productivity is another important component to consider when calculating the success of an ODC. The productivity of the ODC team can be marked by the number of tasks completed or it can also be measured along with the quality of the work, and the time taken to complete tasks. You can also compare the productivity of the ODC team to the productivity of an in-house team or a traditional outsourcing model.
- Quality: Quality is an analytical factor in the success of an ODC. To measure the quality of the work produced by the ODC team, users can track the number of defects or errors in the work, the number of rework requests, and the customer satisfaction ratings.
- Customer satisfaction: An integral aspect for measuring the success of an ODC is customer satisfaction. Methodical or feedback sessions with customers results in betterment of the overall services and also helps in keeping the customer satisfaction in mind.
- Employee satisfaction: For measuring the success of an ODC employee satisfaction is another key factor that needs to be taken into consideration. Employee satisfaction can be tracked by conducting regular surveys or feedback sessions with the ODC team and analyzing the feedback received.
- Project delivery time: In order to obtain success of an ODC project delivery time is yet another critical factor. You can track the time taken to complete projects and compare it to the initial projections for measuring the success of an ODC.
Offshore Development Centers (ODCs) are undoubtedly the most calculated way to outsourcing that provides several advantages over traditional outsourcing models. Being thorough with this platform would certainly grant you an upper hand in properly utilizing this platform. It is extremely crucial to have an idea about features like when to use ODCs for outsourcing, how to set up an ODC, how to manage an ODC, and how to measure the success of an ODC, one can then figure out if an ODC is the right choice for their business and ensure that it is performing its role effectively.
Companies that have ongoing software development needs and require a dedicated team to work on their projects can opt for ODCs as it stands as the best platform out of the lot. Companies that need to scale their development team quickly or require specialized skills that are not available locally might also receive a lot of advantages from ODCs. ODCs are particularly useful for companies that require a high level of communication and collaboration with their development team.
Frequently Asked Questions (FAQs)
What is outsourcing and why is it important for businesses?
Outsourcing refers to the practice of contracting certain business processes or services to external vendors or third-party organizations, instead of handling them in-house. It is important for businesses as it offers several advantages such as cost savings, access to specialized skills and expertise, increased efficiency, and the ability to focus on core competencies.
What are ODCs and how do they differ from traditional outsourcing models?
ODC stands for Offshore Development Center, which is a dedicated facility in a different country that provides IT development and support services to a client organization. ODCs differ from traditional outsourcing models in that they establish a long-term, strategic partnership between the client and the vendor, allowing for greater collaboration, customization, and control over the outsourced functions.
What are the benefits of adopting a strategic approach to outsourcing through ODCs?
By adopting a strategic approach to outsourcing through ODCs, businesses can experience benefits such as improved quality and productivity, faster time to market, reduced costs, scalability, flexibility, and the ability to tap into a global talent pool. This approach also allows for better alignment with the client's business goals and objectives.
What factors should businesses consider when choosing an ODC partner?
When choosing an ODC partner, businesses should consider factors such as the vendor's reputation and track record, their technical capabilities and expertise, the cultural fit between the client and the vendor, the location of the ODC, infrastructure and security measures, communication channels, and the flexibility to scale resources according to business needs.
How can businesses effectively manage and control their ODC operations?
To effectively manage and control ODC operations, businesses should establish clear communication channels, set project goals and expectations, define key performance indicators (KPIs), establish regular reporting mechanisms, conduct periodic performance reviews, implement governance structures, ensure intellectual property protection, and foster a collaborative and transparent working relationship with the ODC partner.