As businesses expand and digital demands grow, many organizations begin to explore new ways to scale their software development capabilities. Establishing an offshore development center (ODC) has become a popular way to benefit from offshore development services.
An ODC is more than just a cost-saving approach—it’s a strategic way to build dedicated development teams abroad while maintaining full control over operations, quality, and alignment with business goals.
In this guide, we break down what an offshore development center is, how it differs from other cooperation models, and how to set up an offshore development center successfully.
What is an offshore development center?
An ODC is a dedicated team of software engineers, designers, and other professionals located in a different country, working exclusively on a company’s projects. Unlike traditional outsourcing, an ODC operates as a remote extension of your internal team and is typically aligned with your brand, goals, and processes.
A typical offshore software development center has the following characteristics:
- Dedicated team structure: The ODC team works solely for one client, ensuring focus, continuity, and alignment.
- Long-term engagement: It is built for ongoing collaboration, not short-term or transactional projects.
- Operational control: You, as a client, retain control over workflows, tools, deliverables, and team priorities.
- Cultural and brand alignment: The offshore team operates in line with your values, standards, and company culture.
- Time zone distribution: Strategic time differences allow for near-24/7 development cycles and faster time to market.
Setting up a dedicated offshore development center is a strategic choice in the following scenarios:
- When you need to onboard from 20 to 40 professionals quickly;
- When your project is large, complex, and requires diverse technical expertise;
- When you manage multiple products that require specialized, independent teams;
- When you develop security-sensitive software that demands strict oversight and compliance;
- When you aim to establish a long-term presence in international markets.
In other words, this model is a perfect option for large, complex projects that require a lot of experts.
If you still doubt whether you should nearshore or offshore, take a look at Nearshore vs Offshore: What way to go for success?
How to set up an offshore development center? Complete checklist
1. Define business goals and project scope
Start by aligning the ODC setup with your organization’s strategic objectives. Clearly define what you aim to achieve—whether it’s accelerating product development, reducing time to market, optimizing costs, or accessing specialized talent. Establish measurable goals and KPIs to track performance over time.
Next, outline the scope of the project in detail. This includes the types of services the ODC will provide (e.g., software development, QA, DevOps), key responsibilities, etc. Identify core technologies, business domains, and systems the team will work on. Clarify how the ODC will integrate with your internal teams, including communication protocols, reporting structures, and collaboration tools.
Finally, articulate your long-term vision—whether the ODC is a temporary initiative to scale resources quickly or a strategic, long-term partnership aimed at innovation and continuous delivery. This clarity upfront will help guide partner selection, resource planning, and governance.
2. Choose the engagement model
Select between the contractor and customer models based on your need for control and resource ownership. In the contractor model, the service provider manages the team and handles day-to-day operations and delivery processes. This model offers a low-effort setup and fast ramp-up, making it a suitable choice for companies that want to scale quickly without taking on the administrative overhead. However, it comes with less operational control and may lead to dependency on the vendor.
In contrast, the customer model allows the client to manage the offshore team directly, while the service provider offers support in areas like legal compliance, HR, and infrastructure. This model provides greater autonomy and allows for custom processes aligned with the client's internal standards. On the downside, it requires a higher level of responsibility for team governance and operational management.
3. Pick an offshore location
Start by evaluating countries based on the availability of skilled talent in your required tech stack, industry domain, and seniority levels. Consider the depth of the talent pool, education system quality, and competition for resources.
Next, assess cost efficiency—not just salaries but also operational expenses such as office space, infrastructure, and local taxes. Balance cost savings with the quality of expertise and the value delivered.
Time zone compatibility is another key factor. Look for regions that offer a workable overlap with your core business hours to enable real-time collaboration, faster feedback loops, and fewer delays in decision-making.
Evaluate the country’s legal and regulatory environment. Strong IP protection laws, data privacy regulations (e.g., GDPR compliance), and political stability are essential to mitigate risks and ensure long-term cooperation.
Finally, factor in cultural alignment. Consider language proficiency, communication style, and work ethic. A good cultural fit helps improve team collaboration, trust, and overall productivity.
You might also want to look into the presence of major tech hubs, existing ecosystems of global IT companies, and government support for the tech industry—all of which contribute to the maturity and reliability of the location.
Read more about the best offshore software development countries
4. Find a reliable ODC partner
Look for a partner with a proven track record of successfully building and managing dedicated offshore teams—especially in your industry domain and preferred technology stack.
Evaluate their technical expertise, delivery capabilities, and domain knowledge. Review case studies, client testimonials, and references to understand how well they’ve handled similar projects. If possible, speak directly with their existing clients to get a sense of their performance, transparency, and responsiveness.
A strong ODC partner should offer a mature delivery model, including robust processes for recruitment, onboarding, knowledge transfer, and quality assurance. They should also be able to provide access to senior engineers, solution architects, and tech leads—not just junior developers.
An important indicator of reliability is the partner’s ecosystem of alliances and certifications. Partnerships with major cloud providers and other trusted technology companies often reflect a provider’s technical maturity, adherence to best practices, and ability to deliver at scale. For example, N-iX is a certified partner of AWS, Microsoft, Google Cloud, Snowflake, SAP, and OpenText, which enables the company to offer deep expertise in cloud services, data engineering, enterprise platforms, and AI/ML solutions. Such partnerships also ensure that the ODC partner has access to the latest tools, training, and support from leading vendors—further enhancing the quality and efficiency of their services.
Consider their infrastructure, security standards, and compliance capabilities, especially if your project involves handling sensitive data or falls under strict regulatory requirements (e.g., HIPAA, GDPR).
Learn more about how to find a reliable offshore partner
5. Plan legal and compliance framework
A solid legal and compliance framework is essential to protect your business and ensure smooth collaboration with the offshore development center. Start by clearly outlining data protection and cybersecurity requirements, especially if your project involves handling sensitive customer data, financial information, or personally identifiable information (PII). Ensure your partner can meet relevant security standards (e.g., ISO 27001, SOC 2) and has strong internal controls in place.
Define how intellectual property (IP) rights will be managed. Establish clear contractual terms to ensure all code, designs, and documentation developed by the offshore team are fully owned by your organization. Include clauses on confidentiality, non-disclosure, and IP transfer to safeguard your innovations.
Understand and account for local employment laws in the offshore country. This includes labor regulations, termination procedures, employee benefits, and notice periods. If your ODC partner hires talent directly, make sure their employment practices are fully compliant with local regulations and aligned with your standards.
Finally, consider any industry-specific regulations that apply to your business—whether it's PCI DSS for fintech or other sector-specific requirements. Choose a partner with experience in maintaining compliance in regulated environments and the ability to implement the necessary controls.
Proactively planning this legal and compliance framework reduces risks, builds trust, and lays the groundwork for a sustainable, long-term ODC engagement.
6. Establish a hiring and onboarding plan
To build a high-performing ODC, you need a well-structured approach to hiring and onboarding. Start by defining the recruitment strategy in collaboration with your ODC partner. Clarify the roles you need, skill levels (junior, mid, senior), tech stack requirements, and preferred experience—both technical and domain-specific.
Set clear criteria for candidate selection, including technical qualifications, problem-solving ability, communication skills, and cultural fit. Determine who will be involved in the interview process from your side and what evaluation steps are needed (e.g., technical interviews, coding challenges, behavioral assessments).
Align with your partner on time-to-hire expectations, approval workflows, and quality benchmarks to ensure the right talent is brought on board efficiently.
Once the experts are vetted and hired, implement a structured onboarding plan to integrate new team members into your existing workflows.
7. Set up collaboration tools, infrastructure, and workflows
To ensure seamless collaboration and high productivity in your offshore software development center, establish the right technology stack, infrastructure, and processes from the start.
Begin by selecting the collaboration and communication tools that will serve as the foundation of daily operations. Here are the options for key critical processes:
- Messaging & meetings: Slack, Microsoft Teams, Zoom;
- Project management: Jira, Trello, Asana, Azure DevOps;
- Documentation: Confluence, Notion, Google Workspace;
- Version control: GitHub, GitLab, Bitbucket.
Next, configure development environments and infrastructure to match your in-house setup. This could involve setting up:
- Cloud environments (AWS, Azure, GCP) with the necessary access rights and resource quotas;
- CI/CD pipelines for automated testing, builds, and deployments;
- Secure VPNs or virtual desktops for access to sensitive systems;
- Monitoring and observability tools like Prometheus, Grafana, or Datadog for real-time insights into application performance.
8. Define KPIs and success metrics
To ensure your offshore software development center delivers measurable value, define clear KPIs and success metrics aligned with your business goals. These metrics will help you track performance, identify areas for improvement, and ensure accountability across teams.
Start by identifying productivity metrics, such as:
- Velocity: Story points or tasks completed per sprint;
- Cycle time: Time taken to move tasks from development to deployment;
- Throughput: Number of features, bug fixes, or deployments in a given time frame.
For quality assurance, consider metrics like:
- Defect density: Number of bugs per line of code or per release;
- Test coverage: Percentage of code covered by automated tests;
- Mean time to detect and resolve bugs;
- Customer-reported issues post-release.
You should also assess team performance and collaboration using:
- Team satisfaction or engagement surveys;
- On-time delivery rates;
- Code review turnaround time;
- Adherence to SLAs or delivery timelines.
Beyond technical metrics, focus on business alignment indicators, such as:
- Progress toward strategic goals (e.g., faster time to market, reduced development costs);
- ROI of the ODC based on output vs. investment;
- Innovation contribution, which stands for the number of new ideas, POCs, or product enhancements driven by the offshore team;
- Client satisfaction or stakeholder feedback.
Make sure these KPIs are tracked consistently through dashboards or reporting tools and reviewed regularly in retrospectives or governance meetings. Most importantly, align metrics with incentives—use them not just to measure but to guide behavior, improve processes, and recognize high performance.
Why partner with an IT outsourcing company to set up an offshore software development center?
Establishing an ODC independently involves significant time, cost, and risk—especially across legal, HR, and administrative areas. That’s why many companies choose to work with experienced IT outsourcing partners who can streamline the process.
A reliable tech vendor can help you:
- Accelerate recruitment through a strong employer brand and established talent pool;
- Offload HR, legal, and administrative responsibilities;
- Reduce management overhead;
- Scale teams up or down quickly based on project needs;
- Mitigate compliance and security risks through well-structured contracts.
Partnering with an IT outsourcing provider allows you to focus on your core business while the vendor handles everything from office setup and talent acquisition to onboarding and team management. You retain full control over the selection process—interviewing key roles or the entire team as needed—while gaining flexibility and scalability.
Where to establish an offshore software development center?
When it comes to outsourcing, businesses usually consider three major locations: Latin America, CEE, and Asia. We will compare these destinations in terms of the talent pool, tech expertise, English proficiency, and more.
Here are the most popular locations where you can find an outsourcing vendor.
Set up an offshore development center in Latin America
Latin America is rapidly gaining popularity as an offshore development destination, especially for North American companies seeking closer time zone alignment and strong technical talent. Countries like Colombia, Argentina, Brazil, and Mexico are emerging as top choices due to their growing developer communities, competitive costs, and cultural compatibility.
Latin America boasts a highly educated workforce, with thousands of graduates entering the IT sector each year. English proficiency is generally high, particularly in tech hubs such as Bogotá, Medellín, São Paulo, and Mexico City. Additionally, government-backed digital transformation initiatives have helped improve connectivity, infrastructure, and access to cloud services across the region.
Establish a dedicated offshore development center in CEE
Central and Eastern Europe is one of the most established regions for offshore software development, offering a combined talent pool of over 1.1M skilled developers. Global enterprises such as Microsoft, Samsung Electronics, and NetCracker have set up ODCs in the region, attracted by its strong technical education system, proximity to Western Europe, and high-quality delivery standards.
Leading destinations in Central and Eastern Europe (CEE) include:
- Poland: The country boasts the region’s largest IT talent pool and is known for strong engineering universities and a vibrant startup ecosystem.
- Ukraine: Recognized for its deep expertise in software engineering, especially in areas like AI/ML, embedded systems, and cybersecurity.
- Bulgaria: A mature outsourcing market with stable business conditions and EU-aligned legal frameworks.
- Romania: A top EU tech hub with a multilingual workforce and significant foreign investment in R&D.
These countries also offer favorable legal environments, robust data protection laws, and high cultural alignment with Western clients.
Set up a dedicated offshore development center in Asia
Asia remains a powerhouse in offshore software development thanks to its large-scale engineering workforce, cost efficiency, and technological specialization. Countries like India, the Philippines, Vietnam, and Sri Lanka are popular choices for businesses looking to scale rapidly.
- India is the most prominent destination, offering a vast IT talent pool and deep expertise across all tech domains. It's home to hundreds of global R&D centers.
- Vietnam is gaining traction due to its lower costs, improving infrastructure, and a growing number of highly skilled developers.
- The Philippines is often chosen for business process outsourcing (BPO) and front-end development.
While Asia offers significant scale, it’s essential to account for time zone differences and invest in strong project governance to ensure seamless coordination.
Now, let’s find out how to choose a reliable IT partner and what legal aspects to consider if you want to set up an offshore software development center.
7 critical aspects that the ODC contract needs to cover to protect your business from potential risks
1. Penalties for non-compliance
The contract should clearly outline penalties or remedies in the event of non-compliance with the agreed terms by either party. This may include failure to meet SLAs, missed deadlines, or breach of confidentiality. Well-defined penalty clauses help ensure accountability and minimize project risks.
2. Liability clauses
Include liability provisions that specify the extent of each party’s responsibility for damages, losses, or third-party claims. This section should define the limitations of liability (e.g., capped liability amounts) and address indirect or consequential damages. It protects both you and the vendor from unclear or disproportionate claims.
3. Warranty clauses
Warranty clauses guarantee that the vendor’s services will meet certain quality and performance standards. These may include fixing bugs for a specific period post-delivery at no extra cost, ensuring the software is free from defects, and maintaining agreed SLAs. This protects your investment and ensures service reliability.
4. Notice periods
Define notice periods for different actions such as termination, scaling the team up or down, or changes in scope. Vague or undefined time frames can disrupt project timelines, so it’s crucial to agree on clear, realistic notice terms to maintain operational continuity and minimize project delays.
5. Data protection rules
Given the importance of data security, the contract must include specific clauses around data handling, especially if sensitive or personally identifiable information (PII) is involved. Cover aspects like data anonymization, deidentification, reidentification prevention, storage policies, encryption standards, and compliance with regulations like GDPR or HIPAA (if applicable).
6. Intellectual property (IP) rights
Ensure the contract grants full ownership of all deliverables, including source code, documentation, and related assets, once they’re completed and paid for. Include clear IP transfer clauses to prevent disputes and guarantee that all work created by the offshore team belongs to your organization.
7. Governing law and jurisdiction
If the partnership spans multiple countries, specify the governing law and jurisdiction that will apply in the event of a dispute. This reduces ambiguity and ensures that legal proceedings (if needed) follow a clear and agreed-upon framework.
Wrap-up
Setting up an offshore development center comes with complexities, but the right outsourcing partner can help you navigate them successfully. With a trusted provider, you gain access to top engineering talent, flexible scaling options, and faster innovation.
If you're considering establishing a dedicated development center, our experts are here to help—reach out to start the conversation.
Why should you choose N-iX to implement an offshore development center model?
With over 22 years of experience in building and scaling development centers, N-iX is a trusted technology partner to leading enterprises and Fortune 500 companies worldwide. Here’s why businesses choose N-iX to implement their ODC model:
- Proven track record: N-iX has successfully established offshore development centers for global leaders in telecom, fintech, manufacturing, healthcare, retail, and other industries.
- Large and diverse talent pool: With 2,200 professionals across 25 countries, we offer access to highly skilled engineers, architects, DevOps experts, and domain specialists covering a wide range of technologies and business domains.
- Strong partnerships: As a certified partner of AWS, Microsoft, Google Cloud, Snowflake, SAP, and OpenText, N-iX ensures enterprise-grade service quality and access to the latest tools and best practices.
- Scalable and flexible engagement: We offer flexible team scaling and transparent cooperation models tailored to your needs, whether you're starting small or building a full-scale ODC.
- End-to-end support: From recruitment and onboarding to infrastructure setup, knowledge transfer, and delivery governance, N-iX handles the full cycle so you can focus on your core business functions and strategic goals.
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