An Offshore Development Center (ODC) is a remote development facility established by a business. Companies in developed countries often set up ODCs in developing nations like India and other South Asian countries to leverage skilled resources and IT infrastructure at a significantly lower cost.
According to the latest reports, the offshore software development market was valued at $122 billion in 2024, and it is estimated to grow at a CAGR of 10.13 to reach $283 billion by 2031. This means that top IT firms are investing heavily in setting up ODC centers in countries like India.
The major reason behind this is saving costs. However, setting up an offshore development center in India is not as simple as it looks. You may face various challenges like inefficient management of resources, difficulty in tracking development phases, and more.
In this blog, we will provide you with a proven blueprint on how you can set up an offshore development center in India while overcoming various challenges effectively. So, let’s start.
What are Offshore Development Centers?
Let’s start with understanding the concept of offshore development centers in detail. An offshore development center (ODC) is a remotely located development center that consists of IT professionals, such as software developers, mobile app developers, project managers, UI/UX designers, testers, and others, who work dedicately on the projects of the client company.
The ODCs are usually established in countries where the labor costs are significantly low, allowing clients to develop their projects at less cost without compromising on quality.
Another plus point of offshore development centers is that the client company can access global IT talent who can work on the former’s project in different time zones, ensuring effective development.
How Are Offshore Development Centers Different from Traditional Outsourcing Models?
In this section, we have briefly differentiated the ODCs from the traditional outsourcing models so that you can have a better understanding of the concept.
| Aspect | Offshore Development Center | Traditional Outsourcing Model |
| Meaning | A dedicated offshore team working exclusively for a company. | A third-party service provider handles specific tasks or projects. |
| Control & Management | Full control over team selection, processes, and workflow. | Limited control; the vendor manages resources and operations. |
| Long-term Commitment | Typically a long-term setup with a stable team. | Can be project-based or short-term engagements. |
| Integration with Business | Works as an extension of the in-house team. | Operates independently with limited integration. |
| Cost Structure | Fixed costs, including salaries and infrastructure investments. | Variable costs based on project scope and hours worked. |
| Scalability | Easily scalable with dedicated resources. | Scaling may require renegotiation or new contracts. |
| Security & Confidentiality | Higher security as it operates like an internal team. | Security depends on the outsourcing vendor’s policies. |
| Skill Availability | Access to specialized talent pools in offshore locations. | Depends on the vendor’s existing team capabilities. |
| Communication & Collaboration | Direct communication with the offshore team. | Communication goes through the outsourcing vendor. |
| Performance Monitoring | Direct performance tracking and KPI setting. | Performance is managed by the service provider. |
So, these are the major differences between an offshore development center and the traditional outsourcing model. Now that you know the differences, let’s jump on to the process of establishing an offshore development center in India.
How to Set Up an Offshore Development Center in India
Here is the step-by-step process to set up an offshore development center in India:
1. Define Your Goals
The first step to setting up an offshore development center in India is to define your goals, such as the type of project you want to undertake, the number of members who will be involved, the development phases, and the deliverable timelines.
Also, you need to conduct thorough market research to understand the resources and define your budget accordingly. You also need to determine the working models of your ODC and establish KPIs to monitor the progress of the project.
2. Choose the Right Location
The next step is choosing the right location for establishing your offshore development center. You need to select a location where you can easily find the required IT staff, infrastructure, and other resources.
In India, you can choose any of the following locations to set up your offshore development center:
- Delhi NCR
- Hyderabad
- Bengaluru
- Mumbai
- Chennai
- Pune
At these locations, you can easily find skilled manpower and the IT infrastructure required to complete your project.
3. Partner with a Vendor
To set up an offshore development center in India, you can partner with a local vendor, who will manage the recruitment, office setup, and operations for a specific period. Afterward, you can take full ownership of the offshore development center.
Another option is to outsource the development to a third-party IT service provider in India, who will run a dedicated team exclusively for your company. You can select either option based on your project goals and requirements.
4. Ensuring Compliance with Indian Business Laws
Regardless of the option you select, you need to ensure that your offshore development center complies with the laws and regulations in India. The major ODC legal and regulatory requirements are as follows:
- Companies Act, 2013
- Indian Labor Laws
- Taxation & Financial Compliance
- Data Security & Intellectual Property (IP) Protection
5. Hire and Build a Skilled Team
The next step in setting up an offshore development center is to hire IT professionals and build an offshore development team.
You need to hire software developers, testers, designers, project managers, and other tech professionals from different hiring platforms and set up HR policies, payroll, and benefits.
6. Set Up Infrastructure
While hiring IT professionals, you need to set up the infrastructure for your offshore development center.
This includes leasing offices, and establishing hardware systems with high-speed internet, cloud servers, VPNs, and firewalls to ensure seamless operations and data security.
By setting up an advanced infrastructure setup, you can ensure a seamless development for your project.
7. Implement Processes and Standards
At this stage, you are required to implement processes and standards to ensure efficiency, quality, and seamless collaboration in your offshore development center in India.
You can adopt Agile or Scrum methodologies to enhance your project management and set up different security policies to safeguard your crucial and sensitive data.
8. Facilitate Communication
For seamless communication between your organization and your offshore development center, you can leverage tools like Slack, Microsoft Teams, and Zoom, that enable real-time messaging, video calls, and project discussions.
Moreover, you can set up clear communication protocols, including daily stand-ups and weekly sync meetings to keep your development teams aligned during the project development.
9. Monitor and Optimize
Lastly, you need to take a proactive approach to monitor and optimize your offshore development center (ODC) to ensure that it operates efficiently and delivers high-quality results while staying aligned with your business goals.
To achieve this, you can set up key performance indicators (KPIs) like project delivery time, code quality, and team productivity to track the progress of your development team. You can also give performance reviews and feedback frequently to keep your project on track.
With these steps, you can successfully set up an offshore development center in India. It might look like a time-consuming and hectic process, but there is a solution that makes it easier.
You can partner with a leading software development company in India to set up your ODC, and they will take care of the infrastructure setup, compliance with laws, hiring professionals, communication, and other aspects. This will half your burden and allow you to solely focus on your core business processes.
Benefits of Setting Up Offshore Development Centers in India
The following are the top advantages of establishing offshore development centers (ODC) in India:
1. Cost Savings
The major benefit of setting up an offshore development center in India is the cost savings. Businesses can reduce significant costs by accessing resources at lower costs in developing countries like India.
Moreover, businesses can save other costs related to recruitment, setting up infrastructure, and operational expenses, making ODCs a cost-effective solution for businesses seeking efficient software development and IT services.
2. Access to Global Talent
By setting up an offshore development center in India, you can get access to a vast pool of skilled professionals, including software engineers, AI specialists, and data scientists.
Thanks to ODC in India, you can hire top-tier talent without geographical limitations, ensuring expertise in emerging technologies.
This access enhances innovation, accelerates development, and strengthens your business’s competitive advantage in the global market.
3. Scalability and Flexibility
Establishing an offshore development center in India offers you scalability and flexibility benefits. With ODCs, you can easily expand or reduce your development teams based on your project needs.
Moreover, with an offshore development center in India, you can effectively allocate your resources and optimize costs while maintaining agility in response to market demands and your business growth.
4. Round-the-Clock Operations
By setting up an offshore development center in India, you can enable your teams to work in different time zones to achieve round-the-clock operations.
As your development team works 24/7, you can achieve continuous development, and seamless project execution, and gain a competitive edge in delivering products and services efficiently.
5. Focus on Core Business Activities
Last but not least, you can free up your internal teams to focus on core business activities while delegating the development tasks to the teams at your offshore development centers in India.
By reducing the burden of technical work, you can enhance your team’s efficiency, drive business growth, and allocate resources more effectively to achieve your long-term business goals.
Offshore Development Center Working Models
Offshore Development Centers (ODCs) operate under different engagement models based on business needs, project scope, and control requirements. Here are the key working models of ODCs.
1. Dedicated Team Model
The dedicated team model is an ODC working model that provides a full-time offshore team that works exclusively on a company’s projects.
Under this model, the team ensures deep integration with business objectives, offering long-term collaboration, flexibility, and scalability.
Moreover, businesses can maintain direct management control, enabling seamless communication, faster development cycles, and a cost-effective solution for sustained software development needs.
2. Build-Operate-Transfer (BOT) Model
The Build-Operate-Transfer (BOT) model allows businesses to establish an offshore development center with minimal risk.
In this working model, the offshore development center service provider builds and operates the center, managing recruitment, infrastructure, and processes. Once the center is stable, the ownership is transferred to the client.
3. Project-Based Model
As the name suggests, an offshore team is hired for a specific project with a predefined scope, timeline, and budget, under the project-based working model.
This offshore development center (ODC) working model is ideal for short-term needs, ensuring cost-effectiveness and quick delivery.
Businesses benefit from expert resources without long-term commitments, making it a flexible and efficient solution for software development.
4. Hybrid Model
Lastly, the hybrid model is the combination of a dedicated team and a project-based approach, meaning you can benefit from two working models in this.
By implementing a hybrid working model, businesses can maintain a core offshore team for ongoing work while scaling up with additional resources for specific projects.
This model offers flexibility, cost efficiency, and seamless resource allocation, ensuring adaptability to evolving project and business needs.
Best Practices for Managing Your Offshore Development Center in India
Here are the 10 best practices for managing your offshore development center in India once it is set up.
- Ensure new offshore team members understand your business goals, workflows, and expectations.
- Set clear job roles, responsibilities, and reporting structures to avoid confusion and ensure accountability within the offshore team.
- Schedule regular meetings, use collaboration tools, and create clear documentation to bridge the gap between offshore and onshore teams.
- Encourage teamwork, cross-cultural understanding, and virtual team-building activities to create a unified work environment.
- Adopting Agile and DevOps methodologies enhances flexibility, accelerates development, and ensures continuous integration and deployment.
- Track progress using key performance indicators (KPIs) such as project timelines, code quality, team efficiency, and issue resolution rates.
- Invest in employee training, certifications, and workshops to keep your offshore team updated with the latest technologies and best practices.
- Regularly audit security policies, enforce NDAs, and comply with data protection regulations to safeguard sensitive business information.
- Retain top talent by providing fair salaries, performance incentives, and growth opportunities to enhance job satisfaction and loyalty.
- Conduct periodic evaluations of workflows, identify bottlenecks, and implement process improvements to enhance efficiency and effectiveness.
Conclusion
The offshore development center is an extension of the in-house development team that is located in a location where the resources and IT infrastructure are available at comparatively lower costs.
Most businesses in countries like the USA choose India to set up their offshore development centers in India, where they get access to a wide pool of IT skills, who can work dedicatedly on their development work, while the former can focus on their core operations.
In this blog, we have explained the process of how you can also set up an offshore development center in India and unlock benefits, such as cost savings, scalability, 24/7 development work, and flexibility. If you are also interested in setting up your ODC in India, then reach out to us.
Quytech is a trusted vendor that has helped top clients from different parts of the world to set up their offshore development centers in India and enabled them to undertake their development projects. More details on www.quytech.com.