How to Set Up and Run an Offshore Development Center

Offshore Development Centers (ODCs) have become strategic growth engines for companies looking to scale quickly and cost-effectively. They are not just about saving money. They’re about unlocking new capabilities, accessing specialized talent, and creating global development ecosystems. Let’s explore how your business can build, run, and optimize an offshore development center to achieve lasting competitive advantage.

What is an Offshore Development Center?

An offshore development center is a dedicated, remote team of software developers and IT professionals, typically located in a country with a lower cost of living. It operates as an extension of your existing team and integrates with your development workflows and company culture.

Why are ODCs gaining popularity? Because they help you do more with less. Companies are constantly looking for ways to remain agile in a competitive global landscape. ODCs offer a powerful solution for achieving speed, flexibility, and innovation — all while managing costs.

Key benefits include:

• Reduced operating costs
• Access to a wider talent pool
• Greater flexibility and scalability
• Improved focus on core business activities

Who should consider building an ODC? Tech companies, startups, scaleups, and enterprises with aggressive growth goals and complex software development needs. If you’re facing talent shortages or rising development costs, this model may be your next move.

Why Set Up an Offshore Development Center?

Cost Efficiency

Hiring and infrastructure costs are significantly lower in popular ODC destinations like the Philippines, India, and Latin America. According to Deloitte’s 2022 Global Outsourcing Survey, 57% of executives indicate that cost reduction remains the primary driver of traditional outsourcing strategies. 

Explore how companies are unlocking massive savings in the Philippines.

Access to Global Talent

With over 28.7 million software developers worldwide, the global talent pool is vast and growing. ODCs enable you to tap into niche technical skill sets that are hard to find or expensive to hire locally.

Scalability & Flexibility

Whether you need to grow your engineering team fast or adjust to changing priorities, ODCs give you operational agility. You can scale resources up or down without the long lead times and overhead costs of local hiring.

Faster Time-to-Market

With time zone coverage and 24/7 development cycles, your team can continuously move projects forward — even while you sleep. This accelerated workflow helps reduce release cycles and gives you a competitive edge in fast-moving markets.

Offshore Development Center vs. Traditional Outsourcing

While outsourcing typically means handing over project ownership to a third party, an ODC is fully integrated with your business.

Key differences:

Key Factor	Offshore Development Center (ODC)	Traditional Outsourcing
Control	Direct oversight and management; full alignment with company goals.	Limited control; project managed externally by a third-party provider.
Customization	You choose the talent, tech stack, tools, and workflows.	Predefined team structures and processes; limited flexibility.
Cultural Alignment	Teams adopt your company’s culture, values, and operating style.	Often operate independently with their own internal processes and communication norms.
Cost Efficiency	Requires upfront investment, but delivers higher long-term ROI and operational value.	Lower short-term cost, but may lead to hidden fees and inefficiencies.
Integration	Functions as an extension of your internal team — not just a vendor.	Operates as a separate entity with minimal integration into your core business operations.
IP & Risk Management	Offers better protection of intellectual property and reduces dependency risks.	Greater risks around IP, data security, and vendor lock-in.

If you want to maintain intellectual property, streamline communications, and avoid dependency risks, ODCs offer a better path forward.

Choosing the Right Offshore Development Center Model

There are two widely-used models for ODCs:

1. Contractor ODC Model
Your offshore partner handles recruitment, HR, office space, and admin operations. You focus on project and team management. This model is ideal if you want to avoid operational headaches.

2. Customer ODC Model
You own everything — from hiring to infrastructure. This model gives maximum control but requires greater effort and internal resources.

At Penbrothers, we offer a hybrid approach. We manage legal compliance, payroll, HR, and workspace needs, so you can focus on building a high-performing team in the Philippines without the red tape.

Key Steps to Setting Up an Offshore Development Center

1. Define Objectives & Scope
   Clarify what roles you need, the team size, the skills required, and your long-term business goals. A clear scope ensures your offshore team is purpose-built to support your product roadmap and business strategy.
2. Select the Right Location
   Look for regions with strong English proficiency, cultural compatibility, and competitive cost structures. The Philippines is often top-of-mind for these reasons. The Philippines ranks 22nd in the 2024 EF English Proficiency Index, ensuring strong communication skills for global collaboration.
3. Legal & Compliance Considerations
   Every country has its own employment laws, data privacy rules, and tax codes. Failure to comply can result in penalties, reputational damage, or even suspension of operations — making expert guidance essential.
4. Choose the Right Hiring Model
   Consider whether you’ll build from scratch, work with an agency, or partner with a staffing provider like Penbrothers. Each option affects your speed to launch, cost structure, and level of control — so align your choice with your business maturity.
5. Infrastructure & Tools Setup
   Your ODC should be equipped with the right tools, tech stack, cybersecurity protocols, and communication platforms for smooth collaboration. Ensure compatibility with your existing systems to avoid integration delays or misaligned workflows. 

Explore how top companies optimize remote infrastructure.

Challenges in Establishing an Offshore Development Center (And Solutions)

Cultural & Communication Barriers

Different work styles can lead to misunderstandings. Provide cultural onboarding and train leaders to foster empathy and clarity Consistent feedback loops and inclusive communication practices help bridge cultural gaps over time.

Time Zone Differences

Overlap working hours and use asynchronous tools like Loom or Notion to maintain productivity. This enables smoother collaboration without the need for constant real-time availability.

Legal & Compliance Risks

Local labor laws and tax codes vary. Partner with providers like Penbrothers who handle compliance and reduce your risk exposure.
Staying compliant protects your business from legal penalties and ensures ethical employment practices.

Knowledge Transfer & Alignment

Make onboarding seamless. Document processes clearly. Assign mentors to help offshore teams ramp up quickly. Effective knowledge transfer builds long-term consistency and minimizes disruptions in project delivery.

Best Practices for Managing an Offshore Development Center

Clear Communication Strategies

Daily standups, weekly syncs, and transparent project management tools (like Trello or Notion) keep everyone aligned. Reinforce shared goals and encourage open dialogue to minimize misunderstandings.

Set Expectations & KPIs

Align on timelines, quality benchmarks, and individual roles from the start. Performance tracking keeps teams accountable. Well-defined KPIs create a shared sense of ownership and direction.

Ongoing Performance Monitoring

Regular feedback loops, 1-on-1s, and team reviews allow you to make continuous improvements without micromanaging. This approach encourages growth while maintaining autonomy.

Invest in Culture

Celebrate wins, recognize talent, and promote collaboration across geographies. Make your offshore team feel like a true part of the company. Stronger team culture leads to better retention, engagement, and output.

Conclusion & Next Steps

The offshore development center model isn’t just a cost-cutting tactic — it’s a growth enabler. When done right, it brings together the best of global talent, operational efficiency, and scalability.

Penbrothers makes this process seamless. We help global companies set up, run, and scale offshore teams in the Philippines — without the hassle. From hiring to payroll to retention, we handle the back office so you can focus on building what

Success Story: Servantex’s Offshore Success
Servantex, a U.S.-based workforce management firm, needed to scale internal support as their business rapidly grew. By partnering with Penbrothers, they built an offshore service center in the Philippines — starting with one accounting specialist and expanding to over 30 professionals handling payroll, billing, and CRM tasks.

Through our Hypercare model, which provides tailored onboarding and ongoing support, Servantex achieved 69% savings on labor costs while improving operational efficiency. Their offshore team didn’t just fill roles — they became a seamless extension of their U.S. workforce.

Ready to explore the offshore development model? Let’s build your global team, together.