How to Build an Offshore Development Center in India?

Global companies are increasingly choosing India for setting up an offshore development center.

The reason? Abundant talent availability, cost-efficient, tech-advanced infrastructure, and a lot more.

However, to choose the right model for an offshore development center in India, you need to be strategic, research the local market, and choose the right location.

Feels daunting? Don’t worry. We’ve just the right guide for you to learn these in detail.

In this blog, we’ll cover:

• • What does an offshore development center in India mean?
  • The different ODC models you can choose from.
  • How does the ODC compare to traditional outsourcing?
  • The challenges companies usually run into.
  • A clear step-by-step process for setting up your ODC.
  • Why India continues to be a strategic tech hub?
  • How to run and manage your Indian ODC smoothly?

So, let’s start without any further delay. Shall we?  

What is an Offshore Development Center in India?

An Offshore Development Center (ODC) in India is a dedicated, remote team of IT professionals that acts as an extension of a company’s in-house staff, but is located in a different country.  

It’s a team that works only for your company, managing everything from software development to IT services, just like your in-house crew back home.

The best part? You keep full control while cutting costs big time.

Key Features of an ODC in India

• • You Own the Team: The ODC isn’t shared. The people there work only for you. They understand your systems, your culture, and your goals. They’re practically part of your company, just working out of India.
  • Effective Cost Savings: Setting up an offshore development center in India can slash expenses by 40–70%. You get the same quality of work but pay less for salaries, infrastructure, and everyday operations.
  • Access to Top Talent: India is packed with skilled engineers and tech pros who are experts in AI and data engineering to cloud, and cybersecurity. You’ll never run out of good talent here.
  • Built to Scale: Need to ramp up a project fast? Or scale down for a few months? No problem. The ODC model gives you that flexibility without repeated hiring or layoffs.
  • You Stay in Charge: You call the shots on how the team works, the quality standards, and the project direction. The ODC partner simply handles the boring bits like HR, payroll, and compliance.

So, ODC India is where global companies find the perfect mix of control, cost efficiency, and access to world-class talent, all in one setup.

What Are the Different Types of ODC Models in India?

Businesses setting up offshore development center in India look for 2-3 main checkpoints as their deciding factors. 

They’re namely ownership of the team, day-to-day operations, and team flexibility. Let’s see how the different models are divided based on these factors:

Managed ODC Model

This one’s for companies that want results and not the daily grind. You tell your offshore development center in India what needs to be done regarding goals, timelines, KPIs, and related details.

Accordingly, the vendor follows your instructions. They build the team, manage execution, and handle delivery while you stay focused on core business. You’ll mostly connect through an account or project manager who keeps you updated.

This model works best when the tasks are well-defined, or you simply don’t want to micromanage.

Captive ODC Model (Global Capability Center – GCC)

Here, you go all in. A captive ODC is your own fully owned setup in India.

It has the same characteristics and the same control as your parent company. 

You take intricate decisions like hiring your team, managing infrastructure, and protecting your IP like you would at home.

It is like an internal department, just based in India. This model fits large corporations betting long-term on India as a strategic base for R&D, innovation, and scaling.

Learn why global companies are building GCCs in India through an EOR.  

Product Engineering Model

This one’s built for tech-first companies. Instead of just adding people, you build a dedicated product team.

This team owns everything from concept through design, development, testing, and beyond.

Your ODC India team works hand-in-hand with your product heads, constantly improving the platform.

This model is ideal for SaaS firms, product startups, and companies that want innovation baked into their offshore setup.

Shared Model

This model serves the budget-conscious founders.

As the name suggests, here infrastructure and, sometimes, even talent like QA experts or network admins are shared across multiple clients.

The vendor manages coordination and keeps things running smoothly. It’s cost-friendly and flexible.

Also, it’s great for short-term or non-continuous projects where saving money matters more than full control.

Dedicated ODC Model

A dedicated ODC works exclusively for you and is the ideal choice if your goal is to expand your team in the long term.

It helps in knowledge retention, IP protection, and offers transparency and stability for your business.

Build-Operate-Transfer (BOT) Model

The BOT model lets you ease into an offshore setup. Your provider builds the team, runs the operation, and eventually hands you the keys. 

It’s great for enterprises that want a long-term base in India without jumping straight into the deep end. 

You get lower upfront risk and a clean transition, but expect more paperwork and a longer commitment.

Project-based Model

The project-based model is simple: you give the vendor a clearly defined project, and they run with it. 

It’s great when you need something delivered, on time, on budget, without hovering over them. 

The only flip side is you can’t tweak the scope much later, and whatever they learn stays with them, not you.

Employer of Record (EOR) Model

Want to hire in India fast, without setting up a company? The EOR model is your shortcut.

A local EOR employs the talent legally on your behalf, handling payroll, taxes, and compliance.

You still direct the work; they manage the HR and admin for you. This model is perfect for companies testing the market before fully setting up an offshore development center in India. 

ODC India is confused with yet another model.

Let’s see what that model is and why it is often confused.

Offshore Development Center vs Outsourcing in India

Let’s get one thing clear, an offshore development center is in no way similar to outsourcing. 

ODC India is the extension of the same parent company, built for expansion. 

Outsourcing is handing over certain tasks to a third-party vendor. 

Let’s further clarify how the two models are different from each other.  

So, the two models are wildly different from each other from aspects like cost structure, work mode, integration, team dynamics, etc.  

Challenges of Setting Up an Offshore Development Center in India

Building an offshore development center in India isn’t always a dreamy journey. You also have to face some inevitable challenges in this diverse country. 

Cultural Differences

Work culture in India isn’t a copy-paste of the West. Hierarchy, tone, and even how people say “no” can feel different. 

It’s easy to misread these traits, resulting in communication barriers. Hence, you should build cultural awareness on both sides early.

Hiring and Retention

Finding good developers? Easy. Keeping them? That’s the tough part. India’s tech market is buzzing, and switching jobs is common. 

A sense of belonging and fair rewards go further than flashy perks here.

Read the guide to hire international employees. 

Quality Control and Delivery

Remote work makes it harder to monitor minute issues and disparities. A clear project flow with daily standups, version checks, and honest feedback keeps things up and running smoothly.

Initial Setup Complexities

Setting up an offshore development center in India is not a ready-to-use process.

You’ll have to face entity registration, labor laws, tax paperwork, and a pile of compliance forms. Without local help, it feels like a riddle.

Data Security and Compliance

Sending sensitive data overseas? That’s risky business. Your ODC India setup needs airtight data handling, privacy rules, and legal coverage under GDPR or HIPAA. One weak link, and your data will be in danger.

Infrastructure and Operations

Reliable internet, power backups, and secure systems are mandatory checkpoints while setting up an offshore development center in India.

Any carelessness here can cost you productivity and business growth.

Permanent Establishment (PE) Risk

If you structure your ODC wrong, tax authorities may treat it as a full-fledged Indian entity. That’s quite an expensive misunderstanding.

Employee Benefits

Indian law takes worker benefits seriously.

PF, health insurance, gratuity, and retirement bonus are non-negotiable deals here. You need to manage these well to keep your team loyal and compliant.

Hence, before setting up an offshore development center in India, make sure you carefully consider all these factors. 

How to Set Up an Offshore Development Center in India

Setting up an offshore development center in India needs proper research and planning. You need to build a team that is strong in both ethics and productivity.

Define Your Goals First

• • Clarify the need for your expansion. Is your ultimate goal to save costs, attract more tech talent, or run projects across the globe?
  • Decide what your international team will handle: the core product work or support functions.
  • Decide on the team structure, their KPIs, and the expansion budget first.

Select the Suitable Model for Your Business

• • Wholly-Owned Subsidiary: This will be your own legal entity. However, it has a huge upfront investment cost and is time-consuming.
  • Employer of Record (EOR): This is the most efficient and fastest option of all. You can hire and build your team legally without setting up an entity here.
  • ODC Partner: This is the easiest model if you want someone else to handle hiring, office space, and admin. You focus on work; they manage the rest.

Decide on the suitable Setup Location

• • Apart from the metro cities, Tier 2 and Tier 3 cities in India are also rising as talent magnets now.
  • Before choosing a location, research the costs, infrastructure, and talent availability in the target area.
  • Compare each city’s tax incentives and tariffs to estimate the budget.

Measure Legal Checkpoints

• • Complete the registration process with the Ministry of Corporate Affairs (MCA).
  • Apply for mandates like PAN, TAN, and GST numbers.
  • Stay updated with FEMA, labor laws, and the Digital Personal Data Protection Act, 2023.
  • Don’t take NDAs, contracts, and payroll documentation casually. They can pose a great threat later.

Set Up the Infrastructure

• • Decide if you want a leased office or managed coworking. Go with what fits your scale and budget.
  • Get fast, secure internet and VPN access.
  • Invest in reliable systems and data protection tools from day one.

Hire and Onboard Smartly

• • Partner with local recruiters who know the talent market in and out.
  • Compare salary compensation and career growth opportunities before making an offer.
  • Onboard your new team in India by personally connecting and bonding with them. Indian employees place great value on emotions.

Track your Performance Metrics Regularly

• • Monitor employee performance and regularly set new goals.
  • Use tools like Slack, Jira, or Trello for effective communication.
  • Build a culture of rewards and recognition within the team. This builds motivation and challenge to learn new skills every day.

Let’s move on to our next section where we discuss India as a strategic destination to build ODC India. 

Why Choose India for Setting Up an Offshore Development Center in India?

The usual perks of setting up an offshore development center in India are cost savings, talent, and friendly government policies.

But, there’s a lot more going on beyond that.

For starters, ODC India sits inside one of the world’s most mature tech ecosystems. The country has over half of the global outsourcing market.

Hence, you get a ready-made support system, experienced partners, and tried-and-tested models.

Quality isn’t an afterthought either. Most teams follow Agile, Scrum, and security standards like ISO 27001. So you get cleaner builds and fewer complications.

One big attraction? Abundance of knowledge.

ODCs work as long-term extensions, not as temporary vendors. So, you retain context, culture, and technical understanding without constant re-onboarding.

IP protection has tightened significantly, too. This is especially true with the DPDP Act, aligning India with global data norms.

Plus, an ODC often becomes the first step toward a full-fledged GCC. It helps companies scale into R&D, analytics, and other strategic functions.

Local insight is another underrated factor. Your India team understands regional markets and user behavior. It’s very important if you’re planning a long-term expansion.

With niche skills and a massive pipeline of certified tech talent, ODC India becomes a long-term strategic move, not just a budgetary call.

How to Manage Your Offshore Development Center in India?

Managing an offshore development center in India requires a little extra care and attention for your team. 

Let’s see what are they.   

• Employee bonding: When you run an offshore development center in India, treat the team like your people, not some “faraway branch.” That shift alone changes the perception of your team.
• Team handling: In any ODC India setup, ditch the urge to micromanage. Let the local leads manage the minute details.Set a few clear metrics, keep a dashboard handy, and you’ll know exactly what’s happening without sitting on their heads.
• Smart interview process: Hiring needs a bit of street-smart thinking. You need to mix technical tests with emotionally intelligent conversations.Plus, you need to lean on local recruiters who has database of top-quality talent.
• Smooth onboarding: Once they join, don’t let them figure out everything. Give them an onboarding routine that is friendly and practical.
• Effective communication: Agile helps keep cross-border work up and running. Scrum, Kanban, and honestly, whatever gets people talking often and fixing things fast works fine.
• Time zones: And yes, the time zones. They can prove to be difficult to work with.So, try to schedule for real-time chats and let tools take care of the rest. This way, any important work doesn’t get halted.

These are the little things that go a long way when it comes to expanding your team and business in India in the long term.    

Conclusion

So, building an offshore development center in India offers multiple benefits, such as speed, skilled talent, lower costs, and long-term stability.

Once you choose the right model, get your legal requirements on point. Treat your India team like an actual extension of your company. By following a few simple steps, the whole thing can start working beautifully.

Yes, you’ll hit a few bumps; everyone does. But India rewards the companies that invest with clarity and consistency.

Do it thoughtfully, manage it well, and your ODC will become your biggest competitive advantage in the Indian business market.

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