Did you know that research and development is the one expense that companies seem to be happy to spend a lot of money on, although the return on investment for the money spent is not guaranteed?
In 2020, Alphabet, the parent company of Google, spent $ 27.57 billion on R&D alone! This represented about 15.1% of the company’s revenue for the year.
It’s not news that other multi-million dollar companies also spend billions on R&D every year.
Research and development is a tool to which companies pay particular attention, probably because of its importance in strategic decision-making and innovation. To stay relevant and keep up with the competition, companies invest generously in R&D centers where their development team can come up with new or improved ideas for the business.
Companies are even ready to invest in R&D centers that are not located in their country. These centers, known as offshore research and development centers, are quickly becoming the norm in the business world. But first, let’s start with the basics.
What is an R&D center?
A research and development center is a department of a company or an external authority dedicated to discovering the knowledge that will lead to innovation and the company’s competitive advantage. R&D centers can improve business processes, technologies, services and products.
Types of research and development centers
Companies can have two types of R&D centers. They can be:
- Internal / internal research and development center, or,
- External research and development center.
Some companies choose to have both external and internal R&D centers, while others work with only one type.
Offshore Research and Development Center
Offshore R&D centers are an example of external research and development centers. They are development centers located in a foreign country with a large pool of development resources and talent.
Due to shorter product life cycles, increased innovation costs and technological advancements, this approach to research and development is increasingly popular. Even Google opened an offshore R&D center in Ukraine in 2020.
Approaches to opening an offshore research and development center
Before you jump on the offshore R&D center bandwagon, you need to know how to open one. The establishment of an R&D center abroad can be done in two ways:
In this scenario, the company itself manages everything related to the opening of the center: location management, employee recruitment, onboarding, accounting, finance, etc.
2. With the help of a salesperson
Here an expert offshore development company is hired to set up the R&D center.
Now, we’ll take a look at these two approaches in depth.
Independent Offshore R&D Center
Some companies choose to open their offshore development centers this way because of certain concerns. Some of the requirements of this approach are:
In-depth research in the foreign country
A thorough study needs to be done as there is no expert opinion in the relocation county. This study confirms that the country has high growth potential and the large amount of available talent needed for a development center.
Research is also being carried out to determine whether there might be any cultural or ideological barriers that would hinder the establishment of an R&D center.
Legal issues and business registration
The legal requirements for setting up an offshore R&D center must be taken into account and managed. Any business registration must also be done.
Office space for the center
An office space located in a strategic part of the country is necessary for the growth of the center.
Talent acquisition process
The company must be well equipped to find, recruit and integrate developers from the foreign country.
Means of knowledge transition
New employees should receive orientation or training to be informed about the goals and culture of the company. This is so that they know how to best use their skills to reach them.
Robust communication system
A communication system should be established between the company and the offshore development team. Weekly reports, monthly evaluation meetings, etc. are some of the ways to communicate effectively with an offshore team.
Some of the specialists needed for an independent R&D center are:
- A project manager in the field of the company.
- A site manager hired from the offshore country.
- An assistant project manager from an offshore country.
- A state-of-the-art recruiting team, best from an offshore country.
- Specialist in local law and finance.
Depending on your business needs, other specialists in IoT, AI, RPA, and AR / VR technologies may need to be hired.
Possible scenarios your company would encounter when setting up the independent R&D center.
- Linguistic and cultural barriers
- High cost of recruitment and onboarding
- Hire a team with insufficient skills
- Make the wrong choice of location
Most of these problems are due to a lack of expertise and knowledge in the management of an offshore R&D center.
Offshore R&D center assisted by suppliers
Of the two approaches, this is by far the better. In partnership with a seller in an offshore country gives your business time to focus on other aspects of the business while a knowledgeable team takes care of development. There are also more advantages to this approach.
Benefits of the supplier-assisted approach
When you partner with an offshore development team, you find that they already have all the technical know-how and requirements to function as an effective development team.
A long-term partnership with an offshore software team also saves you the amount of money typically spent on recruiting and onboarding new employees. This is because the supplier has already established all the processes for finding and hiring candidates in their market, so it takes much less time than an independent search.
The offshore team has the required skills
Partnering with a vendor can allow you to build an offshore software development team with the skills to carry out R&D for your business.
You will find that in addition to software development skills, a vendor will provide more savvy teams with technologies that make it easier to collaborate with clients in different locations.
Already existing work structure
Supplier-assisted offshore development centers are equipped with an already tested and reliable organizational structure. Plus, they provide offshore development teams that work in harmony to provide your business with the innovations you need.
The offshore development center takes care of all the legal formalities for setting up an office in a foreign country. All legal issues and risks arising from project management will also be dealt with by them.
The above reasons are more than sufficient to allow a vendor to configure and maintain its offshore development centers.
When working with offshore software development centers, many companies are concerned about safety, cultural and temporal differences, and the quality of the work provided.
However, these concerns are effectively eradicated by process which break down into three fundamental steps.
- Communication of needs and requirements:
As a customer, your opinion will always be the priority. You will share your goals and business goals with your partner, along with the type of programmers you need and the software services you need. This is done so that a team of dedicated software developers, specially selected to meet your needs, are organized for you.
This first step is done to eradicate any problem that might arise due to cultural differences or the quality of the job.
- Formation of a personalized proposal:
At this stage, the offshore recruiting expert will provide you with a proposal with all the details needed for the partnership – the cost of the service, the company’s cooperation model, etc. Everything is streamlined according to your budget, of course.
This step ensures transparency between the two parties, thus building trust on both sides.
- Kick-off meeting and legal negotiations:
This last step involves a meeting, virtual or offline. Here the terms of the long term partnership are signed and you will be provided with an offshore software team. You can now manage the team and achieve your innovative goals.
This final step takes care of any data security concerns you might have. At this point, the offshore software development team is assigned to you to manage and oversee, ensuring that no data breaches can occur.
Newxel CEO Andrey Bezruchko has this to say about our cases:
“Newxel has worked with multiple clients, and at every turn, our team has exceeded expectations. Offshore development centers are the new solution to the fast-paced world that technology has become. Cost effective, fast and of high quality. It really is a turning point in the recruitment and management of software teams.
An offshore R&D center just might be the advantage your business needs to go beyond your industry.
Opening an offshore R&D center can be easy with the help of a trusted supplier in the foreign country. You can simply fill out a form if you need offshore software development services. You will be contacted and soon the plans for your offshore center will be well advanced.