8/9/2019 Offshore Dedicated Centers: a popular trend in outsourcing
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Offshore Dedicated Centers
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a popular trend in outsourcing
8/9/2019 Offshore Dedicated Centers: a popular trend in outsourcing
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- ODC features
- Benefits, flip sides and challenges
- Set up steps
- Budget components, estimate
- Sample cost dynamics
- Operational models
- ODC service levels
Table of Contents
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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
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- 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
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- 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
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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
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- 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.
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- 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.
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- 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.
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- 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
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Typical regular budget expenses are:
- salaries, bonuses
- office space costs
- collective taxes
- telecommunication costs
- bank expenses
- a fee to the vendor
Budget components, estimate
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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
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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
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- 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
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Typical ODC model structure
customer it consultant vendor
seniordevelopers
teamleaders
developers
testers
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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
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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
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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.
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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.
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Thank you!
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