Offshore Dedicated Centers: a popular trend in outsourcing

8/9/2019 Offshore Dedicated Centers: a popular trend in outsourcing

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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 existingbusinesses

- can run one or several software engineeringprojects simultaneously

- can include one or several softwaredevelopment 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’sexperience 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 adminroutines are being resolved by the outsourcing services vendor in parallel

ODC features

- possibility to effectively keep, reduce orincrease ODC staff when the customermerges with another company or sells thebusiness

- 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; areplication of existing customer environment at the vendor’s side issuggested. Otherwise the vendor sets up the environment and workflows.

maintainedby vendor

security

disaster recovery

data backup

no additionalcosts




For the customer:

- quick set up and quick cancellation

- reduced costs as compared to onshore laborcosts

- 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 isnot mandatory, though)

- new experience in customer’s businessdomain




- requires intensive communication due to large geographic distances; poorcommunication makes ODC use its resources inefficiently & increase overall costs

- requires regular assessment of the team to perform necessary HRadjustments

- 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 outsourcingservices 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 workswith multiple clients is the vendor’s obviously having a pool of talents that might be used in ODC temporarily orpermanently, hence, cutting down the time for hiring.

Flip sides and challenges

- business requirements are always on customer’s side: ODC only deliverssoftware, 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-termemployees

contractors for shorterperiods 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)

meetingschedule

reportingpersonal

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

Budget components, estimate




Monthly budget **:

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

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

** details available upon request

Budget components, estimate

Timing:

- build a 10 … 30 engineers ODC→

1 … 3 months




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

months

normali

zed

costs,%

Initial cost of infrastructure,purchase, noemployees

Infrastructure is ready,a small number of employees, startedhiring process

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

Production finalrelease. Supportstarted

Support with thesame staff whostarted the initialdevelopment

The product is stable.Support costs arelower




- regular model:

Operational models

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

- independent engineers model: →

- mixed

TL

senior

developers

developers

+QA manager testers

intensive communication




Typical ODC model structure

customer it consultant vendor

seniordevelopers

teamleaders

developers

testers




What the customer can do:

- review all and any costs, cost analysis, suggestions and negotiationsfor 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 thecustomer 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 legalfee payments, vacation and holidaymanagement

- 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 securitysteps

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 anddata management, SEO

- remote system administration

independentpartially

independentvs.dependent on

customervs.




Level of ODC professionalism and success:

- highest level capabilities (desirable level): gather functionalrequirements, do system design, coding, QA planning, design and runtest cases, final delivery, acceptance testing. ODC strives to take a

leadership role in as large area of responsibilities as possible. It istypical for Ukraine and Russia.

- middle level capabilities (ok level): system design, coding, testcases creation, testing, final deliveries

- lower level capabilities (ok only for particular cases): coding, testcase execution or either of them. It is typical for India and China.

ODC service levels

Business analysis and business requirementsare always done on customer side.




Thank you!

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

www softheme com » Outsourcing to Softheme™

Questions? → [email protected]

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Offshore Dedicated Centers: a popular trend in outsourcing