In short: an offshore development center is a team abroad that works only for you, usually managed by your own leads. It pays off for large teams, because a site lead, an office and an entity cost the same for ten engineers as for forty. A captive centre takes months to set up; an offshore dedicated development team at Azendo is hired in four weeks from signing.
How an offshore development center works
The ODC model splits the work between two sides. In ODC software development, the provider handles everything local: recruitment, employment, office space, equipment and compliance. The client gets a team that works only on its products, usually under its own direction and processes.
You get an engineering office abroad that works only for you, without having to register a company there first. The team is permanent. It keeps the same people, builds up knowledge of your product and grows with it.
Two kinds of offshore development center, and a third route
A captive centre is owned outright by the client. It offers full control, the highest setup cost and a multi-year commitment before it pays back.
A provider-run ODC is operated by a third party for the client. It’s faster to set up and comes with a standing fee.
Build-operate-transfer sits between the two. A provider sets the centre up and runs it for an agreed period, then hands the team and the legal entity over to the client. The start is faster than a captive centre and it ends in ownership. It needs a clear agreement from the first day on when the transfer happens and what it costs.
All three usually leave day-to-day management with the client. A managed team is the alternative: you hire remote software developers through a provider that also manages them.
How an ODC is set up
- Decide who will run it. Your own engineering leadership, a site lead you hire locally or the provider. Everything else follows from this.
- Choose the location. Look at the size of the engineering talent pool, the overlap with your working day and English in the workplace. Check how straightforward it is for a foreign company to operate there.
- Choose the structure. Captive, provider-run or build-operate-transfer.
- Recruit the first team. Leads first, so they can help select the engineers who follow.
- Set up the workplace. Office, equipment, network and the access rules your security team expects.
- Connect it to head office. The same tools, the same sprint rhythm and clear reporting lines.
A captive centre adds a legal entity, local employment contracts and local compliance before the first hire, and most of the months go there. A provider that already has the entity, the office and the recruiters removes those steps.
What an offshore development center costs
An ODC has more cost lines than a salary list. These are the ones to budget for:
- salaries and the local employment costs on top of them
- recruitment for every hire and every replacement
- the office, equipment, licences and network
- local management: a site lead, HR and IT support
- the legal entity, accounting and compliance, for a captive centre
- the provider’s fee, for a provider-run ODC
- your own managers’ time, and the travel that comes with running a site abroad
Several of these are fixed. A site lead, an office and an entity cost the same for ten engineers as for forty. That’s why ODCs are usually planned for larger teams.
A managed offshore team spreads those fixed costs across the provider’s whole operation. You pay one fixed monthly fee for an agreed capacity. At Azendo, full stack, backend and frontend developers start from USD 2,200 per developer per month, at junior level, full time and fully managed. Day-to-day management, recruitment, the office and equipment, training, HR and payroll are all inside that figure. See how the monthly fee is built for each role on our pricing page.
Benefits and drawbacks of an offshore development center
An ODC brings real advantages to the companies it suits:
- a team that works only on your products and builds up knowledge of them year after year
- control over hiring, tools, processes and culture, close to what you have at head office
- lower salaries than at home, and a talent pool your local market can’t supply
- a permanent engineering base abroad that grows with the product and, in a captive or build-operate-transfer setup, ends in ownership
It also comes with drawbacks to plan for:
- high fixed costs: a site lead, an office and, for a captive centre, a legal entity, whatever the team size
- a slow start, since a captive centre takes months before the first engineer writes code
- the management load, because an ODC usually leaves day-to-day management with you, across a time difference
- commitment, since fixed costs often bring a minimum term and a minimum team size, which make it harder to scale down
The balance tips toward an ODC as the team grows and the horizon lengthens. For smaller teams, the fixed costs and the management load usually weigh more than the control. Small teams tend to start with a staff augmentation agency or a managed offshore team instead.
Where companies set up an ODC
India is the largest and longest-established ODC market. Eastern Europe is a common choice for companies that want to stay close to the European working day, and Latin America for companies on US time. The Philippines has built its strength in customer service and back-office work.
Southeast Asia has grown into an engineering location in its own right, and Thailand is where Azendo has worked since 2010. Our offices are in Chiang Mai and Bangkok, and we’re registered with Thailand’s Board of Investment. People stay, too: 3.3 years with us on average. For a company in Europe, your morning is the team’s afternoon. For a company in Sydney, a large part of the working day overlaps. You can read more about why we deliver from Thailand.
An offshore development center compared with outsourcing and a managed team
Scroll the table sideways to see every column.
| Compared | Offshore development center | Project outsourcing | Managed offshore team |
|---|---|---|---|
| Who manages day to day | Usually the client | The provider, inside the scope | The provider |
| Who follows up on performance | The client | The provider, inside the scope | The provider |
| Typical size | Usually a larger team | Whatever the project needs | From one specialist upward |
| How long the people stay | As long as the centre runs | Until the project ships | As long as you keep building |
| Setup time | Several months | Weeks, once the scope is agreed | Four weeks to hire |
| Fixed costs | Carried by one client | Inside the project price | Shared across the provider's operation |
| Best fit | Large, long-running programmes | A build with a clear end | Product work of any size |
Project outsourcing sits furthest from an ODC. You buy a defined deliverable, and the provider manages the work inside that scope. After handover the people leave for the next client. It suits companies that outsource software developers for one build with a clear end.
Who runs your ODC decides how it performs
An ODC is a structure: an office, contracts and a team. What it delivers depends on who plans the work, who checks the quality and who deals with it when an engineer resigns.
In a client-run centre, that’s your engineering leadership, working across a time difference. It works when you have a site lead you trust and managers with hours to spare for a second location.
In a provider-run ODC, read the agreement closely. Some providers supply the people and the building and leave delivery to you. That’s the same split as staff augmentation, at a larger scale.
In a managed team, the provider manages the people and names a service delivery manager as your contact. That person follows how delivery is going and checks in with you regularly, and the provider handles a replacement when one is needed. The priorities and the code stay yours.
Who the ODC model suits
An ODC suits organisations large enough to justify a permanent engineering function abroad and ready to manage it. If you’re planning a team of thirty and have an engineering director prepared to run a site in another country, it’s a sound structure.
A managed offshore team suits companies that want the capacity with the management included, or that need eight people instead of eighty. Companies use it to hire remote developers without opening a site of their own.
A provider-run ODC and offshore staffing can look alike on a rate card and differ completely on who is responsible for the work. When what you need is a team, a dedicated development team gives you the same capacity without the fixed overhead of an entity abroad. If you only need a few engineers, see offshore IT staffing.
Questions to ask an ODC provider
Who manages the team day to day, and who answers for the output? This is the question the rest depend on.
Is there a minimum team size or a minimum term? Fixed costs often bring both.
Who employs the engineers, and can the team transfer to us later? If ownership is the goal, agree the transfer terms at the start.
What happens when an engineer leaves? Ask who recruits the replacement, who pays for it and how the handover is planned.
Where does the team work, and who employs them? The provider’s own office gives you more control over security and continuity.
What’s in the fee, and what’s invoiced on top? Setup, equipment, management and recruitment are the usual extras.
How long from signing to a hired team? A captive centre takes months. A managed team provider with offices and recruiters already in place should be able to name a number of weeks.
An ODC is one of several arrangements sold under the same heading. Our guide to IT outsourcing compares them side by side.
