The Buzz - Offshore Development Center

There is some buzz surrounding software testing outsourcing services to Asian hubs, and people refer to it in many ways – Business Process Outsourcing (BPO), Offshore Outsourcing, Offshore Software Development, Offshore Lab, Offshore Development Center (ODC), and more variations.

These variations reflect the reality that businesses are increasingly taking advantage of outside resources in many forms depending on their business needs or how their in-house teams are structured. In fact, according to a report by a market watch, despite the pandemic crisis, the global IT outsourcing market was estimated at $342.9 billion and projected to reach $410.2 billion by 2027. Changes in how workers engage with work during covid pushed companies to reconsider how best they can insource and outsource talent. For more and more SMEs, hiring people remotely or outsourcing is becoming a viable option to secure the right resources for success.

What is an Offshore Development Center?

While simply the word “outsourcing” has no geographical implications, Offshore Development Center (ODC) denotes hiring a software development company that supplies you with a team of dedicated developers or related services in a foreign country – usually locations with lower wage levels. But the word Offshore Development Center and Offshore Delivery Center can be used interchangeably.

And through the ODC model, technological service providers, especially in Asia and Eastern Europe, have enabled businesses worldwide to render business agility in a competitive world by fulfilling software development work, business operations, security audits, etc. Depending on the service providers/staffing agencies can be accounted for the entire project or just specific features or phases in the product life cycle.

The main benefits of this ODC outsourcing practice are access to a flexible resource pool and cost reduction, but why should you choose an offshore development center (ODC) as a solution to strengthen your business? And how do you ensure that your ODC is set for success?

ODC or Offshore Outsourcing Benefits

Thanks to ODC providers, instead of hiring and training people at a high cost, experienced engineers and developers would be assigned to complete security audits, software testing, and application development work – whichever line of work you need to be executed.

Specialized solutions such as software development using blockchain, quality assurance and testing for the airline industry, and software testing automation for data analytics requires the right talents with the right skills. And for SHIFT ASIA, our niche is software products that demand high-quality development and product development teams that need extra hands for time-consuming test designing, execution, and even automation.

An example is a SaaS company based out of the US well adapted to a global delivery model with supporting resources spread out between the US, Japan, Vietnam, and India to take advantage of wage differences, localization capability, favorable governmental policy, and a bigger talent pool. To maintain the motivation of their engineers, they hired an in-house QA lead that worked with product teams and outsourced repetitive testing and security testing that would have been otherwise very expensive in US or Japan.

Often for products available in numerous languages/locations, owner companies decide to use multiple vendors to assess which company has the most updated technical stack and skilled resources with local language capability. Even in this case, as long as requirements are set right and there is someone to verify the output, it is almost easy to realize high-quality production while working with multiple vendors.

Well-managed ODCs offer cost savings, efficient resource allocation, increased internal team motivation, access to the latest technology, and many other benefits.

Top Offshore Software Development Companies

FPT Software

Year of establishment: 1999
Offices: Hanoi, Vietnam (HQ), North America, Europe, Eastern Europe, Africa, Asia-Pacific
Revenue: 500 million USD (2020)

FTP Software is now known as one of the biggest software outsourcing companies in the world with 29,000 employees and 30 offices around the globe. The company focuses on delivering core services such as IT outsourcing, analytics, IoT, mobility, and cloud services, as well as digital consulting, and has helped about 700 clients digitize and innovate their solutions.

FPT Software owns Citus Cloud Suite, Citus Cobol Suite, Emobiz, akaBot, akaWORK, akamins, and AkaDOC — cloud and automation digital products.
Industries: Automotive, Banking & Finance, Media & Entertainment, Healthcare, Logistics, Manufacturing

Belitsoft

Year of establishment: 2004
Offices: Belarus
Revenue: 2 million Euro (2020)

Belitsoft is a company from Belarus with world-class software development services. that focuses on web portals and applications, e-commerce, and more. The Company provides a full cycle of software development services from project idea to product deployment, integration, support, and maintenance. Home to over 50 domain specialists, the company has left its footprint in various industries such as healthcare, e-learning, finance, and telecommunications, etc.

SHIFT Group

Year of establishment: 2005
Offices: Japan, Singapore, and Vietnam
Revenue: 300 million USD (2020)

Founded in 2005, specializes in manufacturing and business process improvements. In 2007, it entered the software testing industry by undertaking consultancy work for the improvement of E-commerce testing and Gaming. 2009 and onwards, the company then grew so rapidly to be listed on the Tokyo Stock Exchange Mothers market in 2014. The group and its core business have a market capitalization of 143 billion yen which makes it the largest of the listed Japanese companies specializing in software testing and quality assurance services.

Industries: Manufacturing, Finance, Insurance, Healthcare, Entertainment, E-commerce, Automotive, ERP, and more.

LTS Group

LTS Group’s Introducing Content
Year of establishment: 2016
Offices: Hanoi, Vietnam (HQ), Japan, US
Revenue: Undisclosed

Founded in 2016, LTS Group (Lotus Technology Services) has built a strong reputation in Vietnam’s IT outsourcing industry. Their core focus lies in providing exceptional services: software development, software testing, and digital BPO. With a track record of successfully delivering outstanding services to over 60 clients across diverse domains around the globe, LTS Group takes pride in maintaining an exceptional 96% customer satisfaction rate. Thanks to industry-specialized IT solutions and a pool of experienced, dedicated IT engineers, LTS Group has expanded its global footprints in over 10 countries with a presence in Vietnam, Japan, and the U.S.

Industries: eCommerce, Education, Automotive, Construction, Healthcare, Banking & Finance.

Science Soft

Year of establishment: 1989
Offices: US, Finland, UAE, Latvia, Belarus,
Revenue: $79 million USD (2020)

Founded in 1989, ScienceSoft is a provider of IT consulting and software development services with a history. Having started as a small AI product company, switched to IT services in 2002, and ever since the company has helped non-IT organizations and software product companies improve business performance and quickly win new customers.

Industries: 23+ industries, including healthcare, manufacturing, banking, retail, telecommunications, education, oil and gas, and more.

Communication is the key

ODC teams always strive to meet deadlines with flexibility in resource utilization. Besides, compared to fully outsourcing it to a 3rd party company, with ODC mode, the customer has greater control and visibility into the project’s progress. Although the offshore vendor is entrusted with the work, the ODC teams will still follow the company’s guidance and work as a team that feels much closer

Assessing the outsourcing partner’s capabilities and cultural fit

Good communication guarantees the project’s success, therefore things like time zone differences, employees’ qualifications, and the company’s cultural fit that may impact the overall communication should always be taken into consideration.

SHIFTASIA receives inquiries from all over the world, but we don’t always say yes because we want to make sure it’s a win-win partnership after our client considered all important aspects.

Factors we always recommend potential clients consider:

• Language capability
• Case studies of relevant projects
• Engineers’ qualifications – Years of experience in agile, ISTQB certification for example
• Time zone difference
• Contracts – time and material, fixed, etc.
• Quality assurance scheme – whether they have QA specialists to work with developers

We have summarized a checklist you can immediately use to compare the pricing range per region and factors like the ones just mentioned. Check out our offshore outsourcing guide.

Key Contributors in Offshore Development model

As you establish a dedicated offshore development team, you would want to consult with your partner/vendor company about the optimal setup in order to avoid excess and also lacking support.

# Role & Responsibilities

1. Account Manager – Relationship management, billing, and alignment on business goals
2. Project Manager – Project management to oversee that milestones and deliverables are met
3. Scrum Master – Plan sprints, create tickets, and ship changes to meet scrum milestones
4. Designers – Product and interface design suitable for selected tools
5. Developers – Architecture design, coding, and maintenance work
6. Test Engineers / QA Specialists – Test plan, design, and execution to verify bugs fixes
7. Usability, UI/UX consultants – Work with designers, developers, and project managers to improve the usability

・Here you can also read about How to effectively manage offshore QA teams

Evaluate Cost-effectiveness

As we know, one of the reasons businesses turn to offshore software development is cost reduction, so the decision-making can be solely made on how much money they can save vs. hiring someone domestically. But does the cheapest solution always achieve a high yield?

According to Kearney’s 2019 Global Services Location Index research report, Vietnam is among the top 5 IT service providers. Even big corporations like Intel, IBM, Samsung, Nokia, and Microsoft continue to select Vietnam as an attractive location to invest in for their growing population of skilled workforce. Japan and Korea are the country’s most prominent investors in IT, and Vietnam currently has 20,000 employees working for Japanese companies in this capacity. So, you would naturally assume prices are going up year by year as the country’s workforce gains popularity and experience. Here is a good article from DesignRush on custom software development rates.

So, what usually happens is you reach out to about eight different vendors then you receive various price offers:
Two companies offer low cheap rates – because they are out of touch with reality and don’t have the best talents.
Four companies offer moderate rates – because they are middle players who offer not best-in-the-field services at a mediocre price.
Two companies offer higher rates – because they have won clients and have differentiators, they sell with confidence.

So which one is most cost-effective? Knowing which group can bring out the best value depends on your objective.

Offshore Vendor Selection Steps

The person in charge of looking for potential partners to build offshore delivery locations differs from company to company. Sometimes, the head of software himself must do the research, project manager, vendor management controller, finance manager, or even business admin. Whoever you are, whether you are planning to outsource your project long-term or short-term, following these steps will ensure that you find the closest to best match company for your objectives.

• Identify business objectives
• Outline product requirements, expected outcome, and problems you want to solve using offshore resources
• Determine the right range of solutions you want to use (how many operations you want to outsource of the product life cycle)
• Research companies and list up to 5~10 companies to get in touch with
• Request information (Easier to have RFI or RFP)
• Communicate security requirements/checklist
• Compare proposals and start trial

In our offshore selection guide, we have listed the complete list of steps to take.

Ending notes

We have dedicated this article to help anyone understand the steps to finding a reliable partner when setting up an offshore delivery center. Finding the best offshore development company certainly is a lot of work.

Most importantly, ensure you can comfortably communicate, align on objectives, and work with offshore teams that appreciate the industry specifics, development style, and coding language you wish to use on your project. For example, the standard coding languages we get asked today are JavaScript, Python, SQL, C++, Ruby, React Native, etc. At the same time, popular development styles include scrum, continuous development, unified agile model, and agile testing.

SHIFT ASIA works with many clients in the finance, manufacturing, and ERP industries to help transform their quality assurance scheme into something modern and comprehensive. Need consultation? Feel free to contact us.