Setting up an Offshore Development Center in Ukraine
Are you searching for an opportunity to turn the crisis into an excellent solution to cut costs and relocate a development center to Ukraine or another suitable for your needs country? Then this article will be of great help to you.
During today’s challenging times with the COVID-19 pandemic and the remote boom, the solution of opening the offshore development center (ODC) has become more actual than ever before. The companies that have relied only on an internal team are now considering offshoring business as the most profitable and reliable one.
In the post, we will observe in detail the ODC benefits and value for the business. Above all, you will discover the ways of building the center in Ukraine, and the most common engagement models.
- Why opt for offshore development in Ukraine?
- What is an Offshore Development Center?
- How Does Offshore Development Center Model Work?
- Solutions of bringing own Offshore Development Center into the life
- The variety of Offshore Development Center models
- What are the drawbacks of interaction with software development offshore companies?
- FreySoft is ready to help you
- FAQ: How to Build an Offshore Development Team in Ukraine
Why opt for offshore development in Ukraine?
Foreign countries get the enormous interest in Ukraine as the country for running offshore development centers. To illustrate, Ukraine was chosen by over 100 companies from the Fortune 500 list. Also, there are more than a hundred research and development centers of foreign companies in Ukraine, including Google, Samsung, Siemens and Huawei. So what are the reasons of such a great attention?
The major motivation of hiring offshore developers in Ukraine is that you will have access to one of the largest pools of technical talents in Eastern Europe and, the next most attractive moment, is the Ukraine’s low rates. The savings can reach from 40% to 70%. For example, the average hourly rate for a senior developer in the USA is $60-130, while in Ukraine it is about $30- $60.
Expertise and services of Ukrainian engineers is on a high level since the country and IT companies care about the niche quality greatly. In particular, about 35 thousand technical specialists graduate from Ukrainian technological universities annually. Most programmers in Ukraine have a bachelor’s degree and speak English at the Intermediate and Upper-Intermediate levels.
What is an Offshore Development Center?
An ODC is a division or extended group of your company with development, design, software support, testing, and other engineering tasks. The center is primarily located in a foreign country you choose based on your intentions. Many organizations are opening the ODCs in countries with welcoming business conditions, top engineering talent, relatively low living costs, and taxes.
ODC is usually a more autonomous, independent unit than just a dedicated group of IT specialists. The development team represents the company’s image, its values, shares its corporate policies, management methodologies, and more.
Among major ODC advantages, we can distinguish the next:
- Ownership and management
The occupancy and control of the ODC are in full scale yours. You set up your corporate methodology and management processes, hire team members, and manage them the way you see.
When searching the country for setting up the ODC, you can choose the one with low tax policies and a favorable business climate. This allows you to further reduce costs.
- Best tech talent
You select and recruit a team of needed specialists with the right skills, not being limited by geographic location. After careful research, you can set up an ODC in the country with the best talent pool and value for money.
- Creation of a legal entity in a foreign country.
ODC is an opportunity for a large company to have a physical presence in a foreign target market.
How Does Offshore Development Center Model Work?
As we mentioned before, ODC is a model in which the development or support of systems is almost completely outsourced and which implies a long-term partnership between the contractor and the customer. Thus, such a collaboration may imply the implementation of not one, but a set of projects, or the complete transfer of the whole process to the outsourcer.
Within the framework of an offshore development center, the outsourcer takes into account the needs of the client company and selects a required new team of IT specialists. Further, on the basis of one of its departments, the IT vendor creates the necessary infrastructure for developers’ work.
The formed team concentrates exclusively on work for this customer. The set and scope of services provided by the center is chosen by the client: it can be the development of new solutions, the functionality of existing information systems, migration to other platforms, testing, software support, etc.
The client and vendor relationships highly depend on each other. Such cooperation opens up opportunities for creating transparent and mutually beneficial partnerships. To illustrate, here the client depends on the outsourcer, since it has transferred the major functions for the development of its information systems. In turn, the outsourcer is associated with the customer, since in the event of a break in relations, it has a formed team of specialists and the infrastructure of the center on his balance sheet.
Further, with properly built interaction processes within the offshore development center model, there are practically no communication risks. This helps to avoid additional financial costs for the elimination of problems in the project and ensure higher productivity of the work of specialists.
Solutions of bringing own Offshore Development Center into the life
The process of setting up your own ODC in Ukraine involves the next following steps:
- Applying for a local legal advisor to help you with administrative matters
- Legal entity issues (registering the company according to the local law system)
- Solving the office issues (searching and selecting the most suitable option, renovating and furnishing the place)
- Checking out your local tax system
- Interviewing and recruiting HR, administrative and support staff
- Hiring developers
Alternative ways of opening ODC:
- Outstaffing provider.
When you hire developers through the outstaffing vendor, you have complete control over the development process. Plus you don’t spend time and resources on the issues related to recruiting, office space, dealing with local laws and regulations. All the matters are on the outstaffing provider.
The IT outstaffing companies like FreySoft can provide you with as many developers as you need. We can fulfill all your changeable requirements.
- Transferring model
The offshore provider opens the ODC on your behalf. When certain targets are met and pre-negotiated goals are achieved, the vendor will transfer the ODC ownership and management to you.
To open an ODC on your own and within the transferring model are quite challenging and time-consuming solutions. If you possess massive software and are ready to go through all setting up steps mentioned in these models, then it’s worth a try. However, if you need to recruit between one and forty offshore IT specialists and want to be free of the HR, administrative, and lawing issues, then an outstaffing model of cooperation best suits your needs.
The variety of Offshore Development Center models
The most common models of cooperation with ODC are the following:
Project outsourcing with a fixed cost
The ODC and its client agree on pre-negotiated terms of specific payment and a time frame within which the ODC must complete the project. The vendor is fully responsible for managing the entire work process. And the client’s in-house staff isn’t involved in the outsourcing project at all.
This model is more suitable for predictable development processes, such as creating a landing page or a corporate website. If the task is quite difficult and demands constant revisions, outsourcing with the fixed price would be not a good option. It is the least flexible model among all introduced here. In addition, if the project takes more time for its completion than was planned, the ODC will not get the additional incomes for overwork done.
What is more, compared to all engagement models, fixed price outsourcing is the most expensive for the client. The ODC usually adds an extra 30 percent to the actual price to cover the risks related to the operational and management resources.
Time and Materials project outsourcing
This model is more flexible than the fixed price outsourcing since the customer can adjust requirements, change tasks, replace the needed features, and even completely stop the development process at any time.
The entire project is over the ODC’s control and responsibility while the client pays the vendor on an hourly basis. However, to accurately predict the actual number of hours required to complete the project is almost impossible. As a result, the customer can’t define the exact amount of money he will end up spending.
Outstaffing, the engagement model we provide at FreySoft, means recruiting software specialists that will work exclusively for a client’s project on a full-time basis. Taking into account customer’s requirements, the vendor hand-picked professionals who will form a completely new team for the client’s business needs. The customer himself can also take a part in interviewing and selecting his team members.
The enormous benefit of the model is the direct involvement of the client in the staff augmentation processes and the opportunity to manage and communicate with its selected team of engineers. In turn, this leads to superb team engagement, increased productivity, and excellent results in performance.
The customer’s payment includes the pre-negotiated monthly basis fee to its developers and a fixed cost for the vendor’s services.
The ODC is responsible for the formation of the full-time team of offshore software developers, specifically for the business needs of the clients. In contrast to the outstaffing model, here an ODC selects the engineers for the client’s project from its existing staff. Usually, the customer is not involved in team creation.
In addition, the client has no direct communication with the developers. The intermediate would be the project manager appointed by the offshore software company. He will take care of the project process and report the ongoing results to the client.
Based on the pre-negotiated rates for the involved developers, the customer provides the monthly basis payment to the ODC.
What are the drawbacks of interaction with software development offshore companies?
When hiring offshore software development team, consider all aspects, both pros and cons. In particular, the possible drawbacks that you as a client may face are:
- Language barriers
Make sure your offshore developers have upper-intermediate and advanced level of English in order to easily communicate between. You will often engage in lengthy conversations using a variety of methods such as email, direct messaging, telephone, or live chat. You must be able to understand each other.
- Law issues
Each country has its own characteristics and legislation, which is suitable for certain business purposes. It is at the stage of choosing an offshore company that any business owner needs expert advice so that a legal problem does not turn out. An experienced vendor will take into account all your wishes and show you where they can be realized at the most affordable prices.
- Time zone differences
The time zones differences with your vendor may be from 1-12 hours, thus, it’s better in advance to consider this issue. Besides, these timing differences can lead to long project time delays as both companies struggle to satisfy each other. Thus, make sure your offshore development team will be adjusted to your business hours, or you agreed on mutually suitable time.
FreySoft is ready to help you
Whether you present a growing startup or a multinational enterprise, we can help you in your way. Hiring offshore developers with FreySoft, you get:
- Top IT talent.
Based on your requirements, we precisely choose the tech specialists for your offshore development center. In addition, you can personally take part in interviewing and approving the final members of your team.
- A dedicated manager.
We provide you with the dedicated contact person for building effective working relationships with your offshore developers. Your contact manager is always in touch with you, and ready to answer your questions, integrate new revisions or help in case of unexpected emergencies.
- Direct management.
You use your preferred methods, and tools to personally manage your offshore development team. The employees work full time for you, not being engaged in other clients’ projects. As a result, the delivery performance would be on the highest and the most committed level.
- No hassle with a back office.
For a fixed monthly fee, we handle issues related to the office management, HR, retention, payroll, taxes.
FreySoft knows how to meet all your needs and fulfill the highest requirements for an offshore development center. Choosing our support and partnership, we guarantee to provide you with a qualified Ukrainian offshore team of developers and the first-rate service. Contact us today and see how we can help you form your dream team.
FAQ: How to Build an Offshore Development Team in Ukraine
When turning to us with the request of establishing an offshore software development center, FreySoft team ensures the following services:
– a local legal advisor to help you with administrative matters
– solving legal entity issues – registration of the company according to the local law system
– solving the back-office services – we handle issues related to the office management, HR, retention, payroll, taxes
– administrative and support staff
– hiring the best pool of developers and dedicated managers for building effective working relationships with offshore talents.
There are three key ways of creating an offshore software development center in Ukraine:
– setting up an ODC by yourself;
– turning to outstaffing provider;
– transferring model;
To open an offshore software development center on your own and within the transferring model are quite challenging and time-consuming solutions. The best way is the outstaffing model. Here your vendor takes care about HR, administrative, and law issues, in particular selects the needed IT specialists taking into account your needs and priorities. The IT outstaffing companies like FreySoft can provide you with as many developers as you need – this way, we fulfill all your changeable requirements.
Offshore programmers are the engineers specifically in IT niche, usually located in the regions with cheaper labor to the development process. That, in turn, can significantly reduce the cost of the client’s product development. The term “offshore” emphasizes the significant geographic distance of the performers and gives a connotation of freer handling of employment and tax laws.
Typically, offshore programmers engineer complex and time-consuming projects and the vendor is a specialized company. The services the offshore developers provide are of different expertise, from software/web/mobile app development to AI/ML solutions and maintenance.