Offshore Development Center: Essentials You Need To Know

The IT market is getting more and more globalized. A lot of companies have shifted to international cooperation as it has become a lot easier to outsource a number of tasks to third-party vendors from around the globe. The geographical location is no longer an issue. Instead of it, companies have put their main focus on the services a particular partner offers. As the recent statistics show, software development customers prefer setting up offshore development centers rather than hiring in-house team members. In this article, we are going to be talking about offshore development center nuances, advantages, drawbacks, and how your business can benefit from an ODC in Ukraine.

What Is an ODC and How Does It Work?

As you have already figured out, an ODC stands for an offshore development center. In a nutshell, it is a software development department of a company’s headquarters that is located in an offshoring country. So, instead of hiring tech specialists in your country you search for a destination with a wider talent pool, lower labor costs, more beneficial tax-saving opportunities, and build a team there. All of the mentioned is possible due to the lower cost of living in an offshore country, like Ukraine. The offshore development center team can include various specialists a software project requires. These can be:

Software engineers;
Web designers;
QA engineers;
Copywriters;
Technical and customer support specialists;
Project managers.

Since an offshore development center usually operates as a company’s branch in another country, it also takes care of a number of other tasks among which are HR management, accounting, taxing, and many more.

The Pros and Cons Offshore Development Centers Have

Being one of the most popular business models in the IT-sphere these days, building a dedicated ODC team in countries like Ukraine offers quite a few benefits:

Cost-effectiveness. As we were saying, by choosing an offshore software development center, you get to reduce expenses on things like office space rent, electricity bills, office maintenance, and, most importantly, salaries and taxes. If we take Ukraine as an example, the average annual salary of a senior web developer is around $24K per year as opposed to the average annual salary of $65,420, $73,123, $55,123 in Germany, Israel, and the UK respectively.

Flexibility. Unlike other business models, the ODC model provides companies with more flexibility in terms of project management. Since cooperation is handled under the outstaffing basis, a customer company gets to gain more control over a product development process. The scope of work and requirements can be changed depending on what a project needs. On top of that, a customer can get in touch with the ODC team at any time.

A wider tech talent pool. Ukraine can boast of a big pool of well-educated and highly professional tech talents. It is worth noting that lower labor rates don’t mean poorer quality. During the past couple of years, the size of the IT industry grew by 60% and the number of IT specialists keeps increasing by almost 20,000 each year. Ukraine has proven to be one of the most reliable offshore destinations and it provides clients with the highest quality of work.

The high level of security. Hiring a dedicated offshore team makes sense if you want to prevent any data leaks. All the information about your project is secure because all the members of a team are committed to one goal.

While setting up an offshore development center has a number of advantages, there are still certain risks and drawbacks you need to be aware of:

Low English language proficiency. Depending on the destination you pick for building your offshore development team, you may face the issue of the poor knowledge of English. However, most Ukrainian developers have a good level of English since this language is among compulsory subjects in schools and universities. Therefore, there's no need to worry about miscommunication.

The pricing. Despite the overall cost-effectiveness, ODCs still come out more expensive than regular outsourcing solutions. You need to get acquainted with the pricing of different companies and pick the best bid.

The Arguments in Favor of Hiring an ODC Team from Ukraine

The Ukrainian IT industry has proved to be one of the most reliable and cutting-edge in the world. The country is on the list of top destinations for outsourcing services. Here's why:

The constantly increasing number of professional software engineers. At the moment there are more than 160,000 software developers in Ukraine, and this number is expected to double by the year 2025. The country holds the leading positions in the world’s IT industry staying behind only India, the Philippines, and the US. Comparing to the overall cost of living, the salaries in the Ukrainian IT sphere are high. Due to this, a lot of young tech talents are eager to be a part of it.

Flattering taxation system. The Ukrainian government has created a favorable tax environment for software development services exempted businesses from paying VAT, and the tax rate is only 5%.

High level of trust. A lot of big tech corporations such as IBM, Samsung, Apple, Microsoft, to name a few, have opened their R&D offices in Ukraine proving that Ukraine is a reliable IT destination.

Good level of English language proficiency. According to 2019 statistics, Ukraine holds 49th position in the EF English Proficiency Index table. However, the level of knowledge of English among IT specialists is a lot higher, most of them are fluent in English and are very good at communication.

Fewer cultural differences and convenient time zone. Ukrainian software engineers follow the European business etiquette standards so the chance of misunderstandings on a cultural background is little to no. People are, in general, open-minded, tolerant, and easy-going. On top of that, the convenient time zone provides you with the opportunity to communicate with your team during work hours.

Looking for a reliable ODC team? Contact Yojji!

A Go-to Guide to Opening an ODC in Ukraine

In case you are already convinced that setting up an offshore software development center in Ukraine is worth it, take a look at the main steps this process requires:

Search for a local consultant who will be able to deal with the administrative questions.
Register your offshore company and make it a legal entity.
Find an office for renting.
Get acquainted with the taxation system.
Make sure you have a trustworthy brand-building campaign to attract the best tech talents.
Start the recruitment process.
Hire the administrative staff and developers.

However, if this process doesn’t meet your needs, there are a number of alternatives to an ODC model. You can choose the outstaffing (in other words staff augmentation) model which means you opt for the services of an outstaffing vendor that hires developers for you. Or, there is the Build-Operate-Transfer model allowing you to hire an offshore vendor that will do all the work like opening an office on behalf of your company.

Working with Yojji

If you are willing to find out more about what benefits you can reap from offshoring, don't hesitate to contact our consultants. We always provide our partners with the most favorable conditions and cutting-edge software solutions. All members of our team have deep expertise in the field they specialize whether it is software development, web design, QA, or digital marketing. Our teams can also guarantee a high level of English proficiency and full commitment to the project.