How To Setup an Offshore Development Center in India?

Economic challenges and a shortage of IT talent in Western countries have pushed companies to look for cost-effective offshore outsourcing solutions. They need reliable options to keep up with changing market demands and to manage their IT needs effectively.

Offshore development centers (ODCs) have become increasingly popular, and India is now a top choice for businesses from the U.S., UK, Canada, Europe, and Australia. Companies are drawn to India for its skilled workforce and cost advantages.

If you’re interested in learning how to build a successful and scalable Offshore Development Center in India, this article will provide a clear, step-by-step guide. We’ll walk you through everything you need to know to set up and manage an ODC effectively.

IT Outsourcing in India Market Size

Source: statista

• Revenue in the IT Outsourcing market is projected to reach US$10.51bn in 2024.
• Revenue is expected to show an annual growth rate (CAGR 2024-2028) of 17.58%, resulting in a market volume of US$20.09bn by 2028.
• The average Spend per Employee in the IT Outsourcing market is projected to reach US$19.98 in 2024.
• In global comparison, most revenue will be generated in the United States (US$185.50bn in 2024).

Why set up an ODC for your Software Project?

In today’s fast-changing market, businesses need to keep updating their systems, processes, and technologies to stay competitive. Expanding the in-house team can be costly, especially for companies in the US, UK, or other Western nations.

As a result, many businesses are choosing to outsource their development projects. Here’s why:

• The USA outsources about 300,000 jobs each year.
• 45% of companies plan to increase their outsourcing.
• 24% of small businesses outsource to improve efficiency.
• 50% of Fortune 500 companies rely on offshore outsourcing partners.

So, why are companies setting up offshore development centers (ODCs) for software development? Offshore centers are cost-effective and give access to a global talent pool. They also speed up time to market and help build a global presence.

These benefits make offshore operations appealing to enterprises worldwide. Offshoring your software development can provide a significant edge in today’s volatile market. However, choosing the right location for your offshore development center is crucial.

Why set up an offshore team in India?

Setting up an Offshore Development Center in India for your software project offers many benefits  that make it a compelling choice for businesses looking to simplify operations, access top talent, and drive cost efficiencies. Here are several reasons and benefits of Offshore development center in India for your software project:

• India is known for its large pool of skilled IT professionals, offering businesses a wide range of expertise in various technologies.
• Software development costs in India are much lower than in developed countries, helping businesses save money without sacrificing quality.
• Major cities in India have top-notch IT parks, technology incubators, and modern facilities that support software development.
• India has a strong reputation as a global outsourcing hub, with many multinational companies successfully running offshore development centers (ODCs) there for years.
• The flexible dedicated developer market in India allows businesses to easily adjust their teams based on project needs, helping them respond quickly to market changes.
• Outsourcing software development to an offshore development center in India lets businesses concentrate on their core strengths and strategic goals, boosting productivity and driving innovation.

10 Key Steps to Set Up an Offshore Development Center in India:

Setting up an offshore development center (ODC) in India can be a smart move for companies wanting to access skilled talent, cut costs, and grow their global presence. Here are 10 key steps to set up an ODC in India successfully:

Step 1: Define Your Business’s Vision and Needs

The first step to setting up a dedicated offshore software development center is understanding the IT infrastructure & software development needs of your business and defining the purpose of the Offshore Software Development Center.

Step 2: Conduct Market Research

To get a clear picture of the Indian market, including legal rules, business practices, cultural differences, and competition, do detailed market research. Find the best location for your offshore development center by looking at factors like talent availability, infrastructure, and how close it is to major cities.

Step 3: Choose the Right Location

India is a top choice for IT offshoring. While many Indian cities have become tech hubs in the past 20 years, the distribution of tech talent varies greatly.

For simpler software projects needing basic coding and a small team, a tier 2 city can be a good fit. For more complex projects requiring a large team, a tier 1 city is better.

Here are key factors to consider when choosing a location for offshore development center:

• Availability of resources across different tech stacks
• Developer rates
• Government foreign direct investment (FDI) policies
• Rules about data breaches and intellectual property (IP) theft
• Political and geographical stability
• Local infrastructure

Step 4: Legal and Regulatory Compliance

You need to follow Indian laws and regulations when you build an offshore team in India, including rules on foreign investment, taxes, employment, and intellectual property. To stay compliant, get advice from legal experts or consultants who are familiar with Indian corporate laws.

Step 5: Establish a Legal Entity

Choose the right legal structure for your offshore development center in India, like a wholly-owned subsidiary, joint venture, or liaison office, based on your business goals and legal needs. Register your company with the Ministry of Corporate Affairs and get the required licenses and permits to operate legally in India.

Step 6: Infrastructure Setup

When setting up an offshore software development center (ODC), pay close attention to the infrastructure. Check the IT equipment carefully to ensure smooth operations and clear communication with your offshore team.

Define your infrastructure needs by considering:

• The systems you will use
• Internet bandwidth requirements
• Communication channels and technologies
• Server backup plans
• Management policies
• Data security measures
• Data access and exchange protocols
• Knowledge transfer processes

Step 7: Recruit and Onboard Talent

Hire skilled software developers for your offshore development center to access India’s large talent pool. Attract top talent in software development, engineering, design, and project management by using job portals and other recruitment channels. Create a strong onboarding process to help new hires fit smoothly into your company’s culture and workflows.

Step 8: Establish Communication and Collaboration Channels

Set up reliable communication channels and collaboration tools to ensure smooth interactions between your offshore development center and your headquarters. Invest in technologies like video conferencing, project management software, and collaboration platforms to connect teams across different locations and encourage effective teamwork.

Step 9: Implement Robust Security Measures

Put strong security measures in place at your offshore development center to protect your intellectual property, data, and confidential information. Make sure you follow data protection laws and industry standards. To reduce risks and keep your sensitive assets safe, use encryption, control access, prevent data loss, and conduct regular security audits.

Step 10: Build a Strong Organizational Culture

Encourage teamwork, creativity, and employee involvement both at your offshore development center and headquarters to build a strong company culture. To create a unified work environment and keep top talent over time, invest in employee training, cultural integration, and team-building activities.

Conclusion

Setting up an offshore development center in India involves careful planning, precise execution, and understanding local rules and business practices. By following the steps in this guide, you can successfully establish an offshore presence in India. This will help you tap into its large talent pool and cost benefits, driving growth and innovation worldwide. With the right approach, an offshore development center in India can become a valuable asset in your company’s expansion.