What is an Offshore Development Center?
Offshore development center (or ODC) is a physical space or office opened by businesses or corporations to expand the development of software products and/or services. ODCs are usually set up in countries with a massive pool of tech talent, favorable business climate, good price-quality ratio and lower cost of living.
How to Set Up Own Offshore Development Center:
- Hire a local legal consultant to help you with administrative issues
- Register your company as a legal entity
- Find and rent an office
- Renovate and furnish the office
- Get to grips with the local tax system
- Hire recruiters
- Hire administrative and support staff (office managers, system administrators, accountants, etc.)
- Run a brand-building campaign to establish yourself as a good employer in the new location
- Recruit developers
When Does It Make Sense to Open Your Own Offshore Development Center in Ukraine:
- You develop a large software solution;
- You intend to hire at least 40 offshore developers;
- You have a security-sensitive software;
If neither of these reasons is your case, going through the process of opening your own office may not be worth the hassle.
Alternative Solutions of Opening Your Own ODC:
- Hire developers through an outstaffing vendor (also referred to as extended team, staff augmentation or outstaffing). It is like having your own offshore development center but without the need to spend on office space, support staff, and recruitment, deal with the local legislation system or rules. It is the only way of cooperation that gives you full control over the development process. Moreover, companies like Daxx are able to hire as many developers as you need, so you don’t have to limit yourself.
- Hire a Project Outsourcing Provider, which works through a dedicated team cooperation model. Within this model, you can also hire as many developers as you need, yet each one will be hired by the vendor, not you, according to your exact requirements.
- Working through the Build-Operate-Transfer model, which means hiring an offshore vendor to open an office on your behalf. When the defined metrics have been achieved, the vendor will transfer ownership and operation of the offshore development center to you.
Either you open an office by yourself or work through the BOT model, it will take you a lot of months before your development team is ready to get to work.
If your software is truly massive and/or security-sensitive, it may well be worth the wait. But, if you only need to hire between one and 40 offshore developers, the extended team is likely to be a much smarter choice.
Discover what cooperation models are the most common among Ukrainian software development companies, how they function, and what pros and cons you can expect in each case.
Outsourcing Cooperation Models in Ukraine
Time and Materials
Potential risks included in price
Personal interviews with developers
Direct communication with developers
High developer commitment
1. Extended Team
An extended team (also referred to as staff augmentation and outstaffing), the cooperation model we offer at Daxx, works exclusively for you on a full-time basis. Each developer in an extended team is hired by the vendor with your exact requirements in mind. You don’t work with the vendor’s existing employees, you get new ones hired specially for you.
Type of Contract: Cost+
Cost+ means that you pay your developers’ monthly salaries and a fixed fee for the vendor’s services. These include payroll, taxes, office infrastructure, workstations, and support staff for your extended team.
- None of the members in an extended team are people from the vendor’s bench. The vendor pre-screens developers based on your specific needs, after which you can personally interview them and choose the best ones.
- You, your CTO, tech lead, or someone else you choose will manage the extended team directly, with no middlemen involved. This direct communication often results in higher team commitment, which in turn leads to better team performance and outcomes.
- When you work with an extended team, the responsibility for time, cost, and quality is entirely yours. You’re the one who picks the team members, and you’re the one who manages them. If something goes wrong, you won’t be able to blame the vendor and get your money back.
2. Project Outsourcing
Project outsourcing is a cooperation model that works as a turnkey solution when the outsourcing company takes care of all the aspects of software development. It is the most popular cooperation model offered by Ukrainian software development companies.
Type of Contract: Time and Materials
Within the time and materials (T&M) cooperation model, the client pays only for the hours developers actually spend working on the project. T&M is the most common contract type used in project outsourcing.
- The biggest advantage of the T&M model is its flexibility. You’re free to adjust requirements, shift goals, replace features, and even stop the development process altogether at any moment.
- Low budgeting control. With this cooperation model, you can’t accurately predict how much money you’ll end up spending.
- Charging for “idle time”. An ‘idle time’ is a period when developers are unable to work on a project as they’re waiting for client feedback. So despite being very cost-efficient, a T&M contract might require you to pay for the time the developers are essentially doing nothing.
Type of Contract: Fixed Price
Fixed-price contracts are a single-sum agreement. The development company is fully responsible for completing the project and meeting all the client’s requirements within the agreed timeframe.
- Fixed price cooperation models are very predictable in terms of budget and timing. However, this only works when your project’s requirements and specifications are easy to predict, and if you’re able to clearly explain your vision of the desired outcomes to developers.
- A landing page or a corporate website are both good examples of projects that work well with a fixed price arrangement.
- Even if the development ends up taking longer than expected, the extra time developers have to spend on your project comes at no cost to you (provided the initial scope of work hasn’t changed).
- Not so flexible. Any changes to the project scope you want to initialize after the contract has been signed will trigger additional charge. More often than not, these changes will shift the deadline, which also becomes your responsibility.
- The fixed price cooperation model often turns out to be the most expensive for the client, without them realizing it. This is because vendors are aware of the fact that project development can take longer than initially planned, so they add an extra 30 percent to the project’s real cost to cover the risks.
- Developers who work within this model usually juggle several projects at the same time. As a result, they aren’t fully committed to any of the projects, which can hurt the end result.
3. Dedicated Team
The dedicated team cooperation model works for clients who are interested in long-term cooperation because their projects require a significant volume of work. Within the dedicated team model, the vendor provides you with all the staff required to complete your project, and they work on it full time.
Type of Contract: Rate Card
By Rate Card agreement, the vendor gives you a list of monthly rates for the developers who will be involved in your project, and bills you on a monthly basis.
- You don’t overpay because the offshore development company doesn’t need to add any risks to the total cost — you pay for a full month of work anyway.
- You also get a team of full-time developers that work exclusively on your project, so they’re much more involved than they would be in standard project outsourcing projects. And you don’t have to spend time and money on recruitment — the developers are already employed by the vendor.
- You don’t have much say in deciding which developers are assigned to your project, so it’s hard to judge how well they actually fit your needs. Usually, the dedicated team model doesn’t allow you to communicate with the development team directly. Instead, you get to talk to a project manager, who then passes your requirements on to the team.
- This isn’t a disadvantage if you have little interest in personally managing the development process in the first place. If you do, however, having a middleman between you and the team can lead to miscommunication and significantly slow down the team’s progress. If this is the case, you may want to consider the next cooperation model.
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Hiring Offshore Developers in Ukraine With Daxx
We’ve been helping clients from all over the world hire skilled Ukrainian offshore developers for over 20 years. We know exactly what it takes to set up an efficient offshore development center.
Our clients include small, medium, and large businesses operating across a number of different industries. Whether you’re a small startup or a multinational corporation, we can help.
Here’s why over 85 companies have chosen to hire offshore developers with us:
- Top tech talent. We thoroughly pre-screen developers based on your requirements. You then personally interview and approve the best candidates as members of your offshore team.
- Direct communication. You personally manage the offshore team using your preferred methods and tools.
- Commitment. We don’t share your developers with other clients. Your team works exclusively for you, and they’re motivated to deliver high-quality work.
- Dedicated contact person. You work with a dedicated HR/Client Manager who helps you build effective working relationships with your developers. They are always there in case of questions and emergencies.
- No back-office hassle. For a flat monthly fee, we handle payroll, taxes, workstations, office management, HR, and retention.
- No upfront payment. You don’t have to pay us anything until you decide to hire software developers with us.
- Flexibility. You can increase or decrease the size of your offshore team with only one month’s prior notice.
If you’d like to explore the opportunities that hiring offshore developers with us can bring, sign up for a free consultation below. Simply fill out the contact form, and we’ll get back to you as soon as possible.