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The Balancing Act: Challenges and Considerations When Selecting an Offshore Development Center (ODC) Vendor

April 23, 2024


Offshore Development Centers for Banking and Finance

Having trouble keeping up with the pace of technological advancements in the finance sector? The right offshore development center can help.

In an increasing digitalized and global world, staying ahead of the competition can be tough. While the largest banks and FIs have the resources needed to keep pace with the advancements in digitalization and technology, small and medium-sized FIs often struggle. This is where Offshore Development Centers (ODCs) come to the rescue. Partnering with ODCs can help bridge the technology and skills gaps that hinder the growth of banks and other FIs. The caveat, however, is to choose the right vendor – one that can facilitate value realization. Let’s take a deeper dive into the strategies to choose the right ODC for a rewarding partnership.

Why Partner with a Reputed ODC

An ODC is a dedicated development unit established in a foreign country, typically offering expertise and resources at a competitive price point.

The trend towards ODCs is driven by several factors.

Cost Optimization: ODCs tend to entail lower development costs than an in-house team due to factors like currency exchange rates, and potentially lower talent costs in certain regions.

Talent Pool Expansion: These vendors can tap into a broader pool of talent with specialized skill sets that might be scarce in your domestic market.

Scalability and Flexibility: ODCs offer the ability to scale development teams up or down quickly and on-demand.

24/7 Development Cycle: Since they are located across different time zones and often have remote teams, ODCs can extend development cycles, leading to faster project completion.

However, selecting the right ODC vendor is crucial for a successful software development experience. Several challenges need to be addressed for a fruitful partnership.

Challenge #1. Communication and Collaboration

One of the biggest hurdles of working with an ODC is ensuring effective communication and collaboration across geographical and cultural barriers. Time zone differences, language variations, and differing communication styles can lead to misunderstandings and delays.

40% of partnerships between banks and financial technology providers fail due to poor strategic alignment and execution planning.

Challenge #2. Quality Control

The FinTech space is heavily regulated and complex. Plus, when you want to establish a global footprint, the diverse regulations across jurisdictions add to the complexities. Then there is the need to maintain consistent code quality and ensure adherence to project specifications, which can be a challenge when working with a remote team

75% of banks are unable to establish governance frameworks to assess the performance of the partnership.

Overcoming the Challenge

Well-Defined QA Parameters

Set clear quality assurance (QA) parameters upfront, outlining testing procedures, documentation requirements, and defect management processes. Also, establish reliability parameters, such as Mean-Time-To-Repair (MTTR) and Mean-Time-Between-Failure (MTBF). Don’t forget to also establish maintainability parameters, such as Mean-Time-To-Change (MTTC), to quantify progress.

Automated Testing 

Implement automated testing tools, in combination with manual testing programs, to streamline the QA process and identify bugs early in the development cycle. In addition, ensure comprehensive assessment at regular intervals.

Regular Code Reviews

Establish a system for regular code reviews, conducted by both the onshore and offshore teams to maintain coding standards. Also, ensure reliability and standardization across the coding and development processes.

Ongoing Performance Monitoring

Monitor project progress closely and implement performance metrics to track quality and identify areas for improvement. But make sure that quality metrics and KPIs are defined in the initial stages.

Challenge #3. Intellectual Property (IP) Protection

Banks and FIs store and manage huge data volumes. This includes client data, as well as data related to internal processes, products and services. So, protecting such sensitive intellectual property (IP) is a major concern when working with an ODC. The complexity increases when different countries have varying IP laws and enforcement mechanisms.

64% of banks find identifying and prioritizing partnership goals challenging.

Challenge #4. Project Management

Effective project management is essential for any software development project. It becomes even more critical when collaborating with an ODC. For FinTech, considering the abstraction level of technology and extent of involvement of remote teams is paramount. Additionally, mutually undertaking time and cost planning may instil greater trust between both the teams.

50% of banks do not have adequate business models to optimize the value of their technology partnerships.

Overcoming the Challenge

Agile Methodology

Partner with an ODC that employs agile development methodologies. This facilitates iterative development, rapid feedback loops, and better adapting to changing requirements.

Clearly Defined Scope of Work

Clearly define the scope of work, project deliverables, timelines, and milestones in the contract to ensure that everyone is aligned on the project scope and expectations.

Regular Project Status Discussions 

Conduct regular project status meetings to track progress, address roadblocks, if any, and ensure that both teams are working toward the same goals.

A Partnership that Delivers Value

Selecting the right ODC vendor can significantly enhance your technology development capabilities while offering numerous other benefits. Effective communication, robust quality control measures, ironclad IP protection, and strong project management are the cornerstones of a successful ODC partnership. To harness the potential benefits of ODCs, it is critical to focus on forming transparent partnerships through careful partner selection, onboarding, strategic and operational alignment, technology implementation, and value measurement.

Speak to the experts at Opus Technologies for a proactive approach to your ODC vendor choice. With 26+ years of experience in the banking and payments space, Opus offers exceptional consultation and technology transformation services through cloud-based platforms that help extract optimal value for your business.

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