Offshore Development Center: From a practical perspective

As I have done in the past, on this topic also I am going to present a completely practical perspective. Offshore Development Centers come in different flavors. When a services organization sets up a dedicated development unit for a large customer, it is known as an offshore development center. Sometimes companies set up offshore development centers (ODC) on a Build-Operate-Transfer basis. However, I am going to focus completely on the in-house ODC setup by US product companies in India. Additionally, I will restrict myself to small sized setups involving 100 people at the most. This narrows down the field but the observations will appear more relevant.

There are well defined stages in the life cycle of an ODC. The best approach to discuss about ODCs is to follow the life cycle and elaborate each stage as we move forward.

Teething troubles:  The first step is setting up and ODC involves identifying the real estate and setting up the infrastructure. This is a tough phase as the people involved are under tremendous pressure to show progress. The important aspects to pay attention at this stage are the location of the real estate and the services offered by the owner. Usually the major promoters will offer a standard pack of services but if you are settling down with a promoter who does not operate in a large scale, then it is important to lay down all the terms and conditions in clear and unambiguous terms. All support and maintenance activities should be clearly agreed upon at this stage. As far as the location is concerned, setting up a development center completely away from the city center may cause some disinterest in prospective employees as well as result in higher recurring costs in terms of providing transportation facilities to employees.

Once the real estate is set up, the next thing would be about setting up the office infrastructure. This involves significant amount of work regarding the furniture, cubicles and interior decoration. The trick here is to get things set up in the earliest possible time. One should contract highly skilled professionals and reputed service providers for this purpose and even if it means a little extra cost initially, it is better to get a good quality work done at this stage. This reduces a lot of rework and recurring expenditures at a later stage. Involving a Facility Management company at this stage may be a good idea. It takes away a lot of supervision overhead.

The most important component of infrastructure setup is probably the IT infrastructure. This involves setting up the servers and the network access. At this stage it is very important to recruit a key IT person, possibly the one who would be responsible for running the IT infrastructure in future.

In parallel with setting up the infrastructure, certain other areas need attention. The most important is setting up the accounts and payroll mechanism. My personal belief is to outsource this to an organization which specializes in this area. At this point of time it is also important to set up a hiring process. This involves recruiting at least one key person in the team, possibly an HR Manager and tie up with various recruiting agencies. Top one or two managers for the organization are also recruited in this stage in some cases. This gives good results since the top managers develop a sense of ownership and bonding with the organization, being associated from the very beginning. However, recruiting in this stage is a big challenge as it takes a great deal of selling to get the right people to join.

With these steps, the preparation for the war is done.

Learning to walk: The war starts now. The first battle is to hire in volume and bring up the organization strength to the target level in a short span of time. Usually product companies need highly skilled manpower and very often in niche areas. By definition, in such areas getting the high volume in a little time is extremely difficult. One has to be highly innovative at this stage. We need to keep in mind that people work in teams to deliver projects. So we should look for a balanced group of people in terms of skills and experience. For a niche area of expertise we may recruit and experts and at the same time hire some bright fresher guys who can be mentored by these experts. Contrary to popular belief these fresher guys can outperform seniors once they are properly trained and mentored. We should also gauge the mental makeup of the candidates and their ability to survive in a startup environment should be ascertained. The chaotic environment of a startup can frustrate even the smartest of the guys at times.  

At this stage, it helps if the organization has a globally recognized brand name but this would not be the case most of the times. So it is important for the recruitment team to create awareness about the organization by all possible means. The task is somewhat easier these days because of the various social networking tools available, but still needs a focused effort.

Once the basic team is in place, it becomes important to get the onsite-offshore communication going. In the initial days lack of communication with the US team can jeopardize the morale of the offshore team to a great extent. If the communication channels are not established quick enough the offshore team starts to lose the faith in the organization, the faith which was painstakingly built up during the interview process.

While establishing the channels of communication it is important to define the roles and responsibilities on both sides of the ocean as well as the mapping between individuals and teams. Today’s organizations are essentially matrix organizations. Therefore, it will not function clearly until and unless the matrix is clearly defined. One key factor to success would be to establish the role of a Global Program Manager at onsite. The primary job definition for this role would be to coordinate with all teams and keep the onsite and offshore synchronized.

The Marathon begins: It may look surprising that I have jumped straight from the “first steps” to the “Marathon”. But that is the reality for Offshore Development Centers. As soon as you have the people on board, you will be expected to start yielding results. There are various factors in the parent organization that propel the necessity to show results in offshore from the very early stages. Usually in the parent organization there would be strong resistance to offshore setup in certain quarters. The senior management needs to show concrete results and the value of an offshore development center to meet the resistance effectively. Moreover, the senior management is answerable to the Investors / Board of Directors and need to satisfy them with tangible results coming out of an offshore development center. So offshore development center needs to get its act together rather quickly, and move forward.

Once the journey begins there will be many obstacles on the way and many battles to be won. The destination will seem to be far away and only the nearest milestones may be clearly visible. But then if one concentrates on making the journey perfectly, the destination will be eventually reached.

It will be another place and time when I would go into details about these obstacles and how to get past them. For now, I conclude.