Offshore Software Development Center: A Reliable Classic or Your Next Big Move?
The IT market is becoming increasingly globalized. Many companies nowadays prefer to hire international staff, as outsourcing to third-party vendors across the globe has proven to be lucrative and easy. Geographic location is no longer a problem, and it is proven by the numbers: 59% of companies outsource software development internationally. As recent statistics show, an increasing number of software development customers prefer setting up offshore development centers rather than hiring in-house team members. Long story short, let’s discover the peculiarities, advantages, and drawbacks of the ODC model. Interested to learn how your business can benefit from opening an ODC in Ukraine? Let’s dive right in!
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.
An offshore development center handles a variety of other responsibilities, including accounting, tax preparation, human resources administration, and many more, since it typically functions as a company's branch in another nation.
The Pros and Cons of Offshore Development Centers
We can’t stress this enough: the ODC model is one of the most lucrative decisions a business dedicated to digital tranformation and outcompeting others can do. Here’s the list of benefits the model offers:
Cost-effectiveness. As we were trying to explain, with an offshore software development center selected for the project, you save on 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 $63,576, which is much more cost-effective than other popular destinations.
Flexibility. Want a full flexibility in project management? We’ve got your back. Since cooperation is handled on an 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 great pool of well-educated and highly professional tech talents. According to the latest data, this pool in the country is over 200,000 experts! Naturally, it's critical to emphasize that, on average, reduced labor costs do not equate to worse quality. The IT business has expanded by 60% in the last few years, and the number of IT specialists working in the field is rising by over 20,000 every year. Ukraine seems to be among the most trustworthy offshore locations, offering customers the best caliber of labor.
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 several 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 poor knowledge of English. However, most Ukrainian developers have a good level of English since this language is among the 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 IT sector in Ukraine has shown itself to be among the most dependable and innovative globally. The nation is listed among the best places to outsource services. This is the reason why: the steadily rising quantity of software developers with formal training. In Ukraine, there are currently over 200,000 software developers, and by 2025, that number is predicted to have doubled. The US, India, and the Philippines are the only countries behind the nation in the global IT industry. Compared 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, and 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 2024 statistics, Ukraine holds the 45th 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 most clients are more than satisfied with their ability to communicate using the foreign language.
Fewer cultural differences and convenient time zones. 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 several 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
Why has the offshore development center model has been praised so much? Because it can be a perfect answer to talent shortage. Plus, it takes a huge load off of one’s shoulders, ensuring you keep working as you did before. Chances are, once you choose this model, you’rre noit coming back. But only if you choose a trustworthy partner! At Yojji, we’ve been helping companies operate and transform for years, and our expertise is the perfect instrument for your growth. Check out our portfolio and contact us today!
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