Set Up an Effective Offshore Technology Centre (OTC) for Technology Leaders

According to recent research by global staffing firm ManpowerGroup, the talent shortage is reaching unprecedented levels. A staggering 77% of employers worldwide are facing significant challenges in filling job vacancies, marking the highest level of talent shortage in the past 17 years. This represents the highest talent shortage witnessed in the past 17 years, with IT and data ranking as the most sought-after technical skills by employers.

Industries requiring constant digital innovation, such as financial services, are particularly affected by talent scarcity. Despite the growing talent gap, the hiring demand remains strong, prompting more than half (55%) of employers to consider international recruitment options. 

With technology-oriented organizations seeking a significant number of IT workers, the concept of setting up an offshore technology centre (OTC) has gained considerable momentum. OTC offers an attractive solution. This post explores the process of establishing an offshore development centre, shedding light on its benefits and providing valuable insights for businesses considering this approach. 

What is an Offshore Technology Center (OTC)? 

An offshore technology center serves as a fully operational office established in a foreign country, hosting a skilled team of software developers, testers, project managers and many other IT personnel. It operates as a dedicated extension of the organization, functioning under the same brand and adhering to the parent company's corporate policies.

The teams within the offshore innovation centre essentially operate as internal teams, delivering significant value to the organization and aligning with its core business objectives. It enables businesses to tap into global talent and expand their capabilities in different geographical locations with lower costs. 

Checklist to establish an offshore technology centre 

For those new to the concept of ODCs, establishing an offshore technology centre in Vietnam can present certain challenges. To optimize the benefits of OTC, you can consider following the checklist.

1. Select the country to set the OTC

Choosing the location to set up your digital hub is a crucial first step. It involves careful evaluation and consideration of various factors to ensure the success and effectiveness of your OTC. In recent years, Vietnam has emerged as a rising location for digital hubs and offers compelling advantages worth considering.

One key aspect is the country’s business environment and economic stability. Vietnam has made significant strides in fostering a favourable business climate, attracting foreign investment and implementing economic reforms to promote growth. Its stable political environment and pro-business policies provide a solid foundation for OTC operations.

Furthermore, Vietnam has a large pool of highly skilled and talented tech professionals. This talent pool offers a diverse range of skills and capabilities, allowing you to easily recruit and retain qualified personnel for your OTC. English proficiency also increases among the workforce, enabling smoother communication and collaboration with your offshore development team.

Cost considerations are also favourable in Vietnam. The country offers competitive labour costs compared to many other outsourcing destinations, making it an attractive option for cost-effective OTC setups. 

2. Choose the offshore development centre model that best suit your needs

It’s advisable that you carefully evaluate your requirements and objectives before establishing an offshore development centre in Vietnam. This will help you determine the most suitable OTC model that aligns with your business processes. There are two primary models to consider, each offering distinct advantages:

Managed OTC services

This model is designed for clients seeking to outsource a significant portion or all of the IT operations and services. Under this model, clients collaborate with third-party remote vendors to establish offshore technology centres. The technology partner takes complete responsibility for staffing, managing and operating while clients retain the responsibility of providing the project works. This arrangement allows businesses to focus on their core competencies, enhance their productivity and decrease costs.

BOT (Build - Operate - Transfer)

Under this arrangement, you enter into a contract with a technology partner to help you to build the OTC from start to finish. Once it is fully established, the service provider will transfer ownership of the OTC to your business. To help you better comprehend the BOT model concept, we will break down the development cycle into three phases: build, operate and transfer. 

• Build: Clients enlist the services of an outsourcing company in Vietnam to construct their offshore development centre from the ground up, adhering to their unique requirements and needs. This entails the clients defining the desired team structure, sizes, and essential infrastructure necessary to serve their objectives. Subsequently, the intermediary company assumes responsibility for the implementation process, which includes tasks such as talent acquisition, employee training, organizing collaboration processes, and establishing operational units. Ultimately, the objective is to create a fully functional offshore innovation centre that aligns with the client's specifications.
  
• Operate: During the phase, the outsourcing vendor takes charge of the offshore technology centre and brings it in line with the client company's standards, regulations, and systems. Throughout this phase, the vendor handles all aspects of the process, including team composition, management, operation, and maintenance, as well as optimization, until the digital hub is fully operational and prepared for transfer.
  
• Transfer: The outsourcing company facilitates the transfer of legal ownership of the complete offshore technology centre to the client. Following the completion of this process, the outsourcing vendor continues to offer support as an IT partner, ensuring the clients' full autonomy and providing assistance until they are self-sufficient with their OTC.
  

3. Select the suitable offshoring partner 

Once you have determined the most fitting OTC model for your business requirements, the subsequent step entails identifying a prospective service provider in Vietnam capable of delivering your project successfully.

Each of technology providers possesses their own unique strengths, and it is essential for you to make a well-informed selection based on your specific needs. If you are still uncertain about how to choose the right outsourcing partner for OTC setup, consider the following crucial factors before making your decision:

• Technical expertise: This is the primary factor contributing to the effectiveness of an OTC. As the service providers will be responsible for recruiting IT talent and establishing the offshore development team, these companies must possess a comprehensive understanding of the technical requirements of your project, along with practical experience in OTC management. Additionally, they should demonstrate the ability to maintain work quality and meet project deadlines.
• Track record: To assess the technical expertise and experience of outsourcing vendors, it is important to review their portfolios. Consider the following questions when reviewing their portfolios or interviewing potential partners:

- Do they have experience in your industry?
- What types of outsourcing services have they provided for their clients?
- Are there any clients with project requirements similar to yours?
- How satisfied are their customers with the quality of work delivered by the OTCs managed by the vendor?

• Technical Support: The chosen outsourcing partner should offer comprehensive technical support throughout the entire project lifecycle, encompassing pre-project assistance, ongoing support during development, and post-project maintenance. The vendor should possess a team of skilled professionals capable of effectively resolving any unforeseen issues
• Working style: Compatibility between your vendor's working style and yours is paramount. Since the outsourcing vendors hold primary responsibility for building the innovation centre and recruiting employees, they often tend to implement their own working style within the newly established team. Therefore, it is vital to understand the working style of the outsourcing company and how they shape the OTC, allowing you to determine if their approach fits your own requirements. Additionally, you can proactively communicate your desired work style for your future OTC team to the vendors, fostering a more collaborative and compatible working relationship.

4. Facilitate integration between your offshore team and your in-house team

Efficient communication is the cornerstone of successfully integrating the offshore development team with your in-house team. Several key elements directly impact communication between the OTC and in-house teams are:

• Time zone: Ensuring a substantial time difference between the offshore development team and the in-house team is vital. This allows for sufficient overlapping working hours, enabling real-time communication and prompt decision-making. Assigning a project manager to act as a liaison between the offshore and the in-house development team facilitates smooth collaboration and coordination
• Language: Select a vendor whose team members possess fluent English communication skills. This minimizes the risk of misunderstandings or miscommunications during the project development process. 

5. Track performance & feedback

As you near the completion of setting up your offshore innovation centre, it’s suggested to establish a system for regular performance tracking. Tracking the performance of your OTC team and providing feedback is to ensure that their work meets your expectations.

It also enables the early identification and resolution of any potential issues. Evaluating their performance requires detailed reports that provide an accurate overview of their work quality. It is the responsibility of the services provider to assign project managers who will regularly report on the progress. These reports should be comprehensive, easy to understand, and include key performance indicators (KPIs) and metrics.

By actively monitoring their performance and providing feedback, you can maintain the desired level of quality and drive continuous improvement within your offshore development centre.

Conclusion

Overall, setting up a technology centre can bring numerous benefits to businesses, from a vast talent pool to cost-efficiency and enhanced scalability. These empower enterprises to harness the power of technology, talent, and innovation, driving growth, competitiveness, and success in the dynamic digital era.

With a remarkable 14-year track record in providing IT consulting services, KMS Solutions possesses the proficiency and expertise required to assist businesses in establishing offshore technology centres. Operating offices across the United States, Australia, and Vietnam, we possess a deep understanding of the critical elements necessary for running successful OTCs.

Furthermore, our company has successfully incubated and launched three software products, gaining exceptional recognition within the industry. This achievement is a testament to our technical prowess and our ability to deliver innovative solutions that truly make an impact.

Get in touch with us today and embark on an exciting journey together!