In today’s world, offshoring and outsourcing have become staples of any global business. The main questions have shifted from “Why should we offshore?” to “How to offshore successfully?” and “How to take advantage of offshoring?”.
As a result, offshore delivery center (ODC) has become an emerging concept in recent years.
As a matter of fact, even in the pre-Covid era, organizations worldwide have adopted and implemented this idea in their business practice. So, it is not something new, especially in the IT and accounting sectors. Yet, we still need a clear definition to understand the concept.
What Is An Offshore Delivery Center?
If you come from an IT background, chances are that this term is no stranger to you. Also, for the scale and purpose of this article, we will only discuss this concept under the scope of the IT sector.
To put it simply, an offshore delivery center is a company tasked with software development and other delivery services while located in another country (hence the word “offshore”). It is important to note that an ODC is a subsidiary, or an extended part, of the parent company.
So while offshore delivery center meaning closely resembles software outsourcing company, they are not the same. An outsourcing company is a third-party organization that delegates different company tasks to improve productivity.
At the same time, an ODC focuses on maximizing the bottom line by taking advantage of the exchange and cost differences between countries.
Furthermore, a delivery center does not always mean it must be offshore. There are also onshore delivery centers to serve different market purposes and optimize the market’s growth.
Another related term is offshore development center. The terms are used interchangeably in the IT sector, but an offshore development center emphasizes software and product development tasks.
However, an offshore software delivery team can also implement support services, deliver services and products, or even build-operate-transfer (BOT), hence the word “delivery” as in project delivery.
Advantages and Disadvantages of Offshore Delivery Center?
Even in the pre-Covid era, organizations have realized the potential of ODC with the growth of remote work on an international scale. The surge of remote work post-Covid only makes the trend more and more visible and profitable.
Companies realized that the offshore delivery center model is cost-efficient and has added benefits to battle macro challenges and an ever-changing competitive environment.
- Like outsourcing, ODC takes advantage of a larger talent pool in the target countries while reducing facility, salary, logistics, and operating costs.
- Being present in the target countries also means the company has many chances to extend the market and improve sales volume. With a native-based staff, understanding customers’ needs is also simpler.
- More confidentiality: An ODC office established in the target market further improves brand awareness and credibility.
- Improved productivity: A dedicated team being in charge of different missions and development processes will facilitate a project’s management and efficiency, especially for designated markets.
However, the ODC model is not perfect.
- A significant challenge parents companies have to face is the difficulties in choosing the location and setting up an establishment. Due to political or social instability and bureaucracy, some nations are more restricted to foreign businesses.
- The difficulties in communication with the ODC are also at play because of cultural differences, time zones, lack of in-person interactions, and challenges in QA/QC.
- Finally, there are risks of data breaches, regulation constraints, or skills shortages.
Why Should We Build ODCs In Vietnam?
Promising Land For Offshore Development
As an emerging land of talent in South East Asia and social stability, Vietnam has become one of the most trusted places for offshoring and outsourcing in recent years. That should not come as a surprise, as for the primary purpose of ODC, namely reducing costs, Vietnam is hard to beat.
The market is still relatively young, and labor cost is much lower than in India and China (30-50%). We witnessed a visible trend of companies shifting their investment and production from those two countries to Vietnam in the post-Covid era.
In terms of time zones and distance, Vietnam is one of the closest emerging markets to countries like Korea, Japan, and Australia. Even in countries as far as the EU and America, the national telecommunication and internet systems have become so developed to eradicate the boundaries.
Well-Educated Labor Source
Vietnam is a potential country for software development with one of the larger talent pools in the world, with 25,000 qualified tech engineers and over 80,000 IT graduates each year. About 1 million active personnel are also working for tech businesses.
Equipped with skills and ever-improving work ethics, the Vietnamese make one of Asia-Pacific’s most competitive labor forces.
How To Set Up An Offshore Delivery Center In Vietnam
Establishing an ODC in Vietnam is not that complicated, especially when you can have aid from a professional in offshoring and outsourcing like TECHVIFY. Here are some notes you need to consider before setting out, though.
Setting up an ODC in larger cities like Hanoi and Ho Chi Minh City is an excellent idea since they are the IT hubs of the country and gather a much more competitive talent pool. Also, the work environment and communication are worth it for a higher cost.
Costs remain the main benefit of ODCs. Consider the operating, logistics, development, and labor cost, among other fees for service partners and communication. Choosing a reasonable-priced development partner will help you save a lot from the beginning.
Planning And Launching
The actual work begins after you have done the research and considerations. It is important that you follow these steps flexibly:
- Reconstruct the organization: Ensure that the in-house and offshore teamwork is integrated and be aware of their core missions.
- Recruitment: Seek out talents to fill in job vacancies. Local job sites like TopCV or Indeed are excellent sources.
- Plan and launch your ODC with a development partner. This is when a local partner becomes valuable as they can evaluate your goals to consult and help you build a stable guideline, as well as set up the infrastructure, support, security, and other services.
- Manage and thrive. Ensure your in-house team and offshore team keep working in harmony, maintain clear communication, and keep an eye on the business’ growth and security in the future.
Overall, having an offshore delivery center will prove to be a wise investment for the time to come as it becomes more and more of an emerging trend in the tech industry. To be successful, you must always keep the management in check and preferably have a valuable partner in the establishment process.
As CEO of Techvify, a top-class software outsourcing company based in Vietnam, I focus on pursuing my passion for digital innovation. Understanding the customer’s pain points to consolidate, manage and harvest with the most satisfactory results is what brings the project to success.