What is an EDC?
An Extended Development Center (EDC), as the name suggests, refers to an outsourced development center cumulated by a company to expand its existing software development capabilities. Companies that require additional resources for software development projects or maintenance and support generally establish EDCs.
Software engineers, project managers, quality assurance specialists, and other technical professionals who work on projects for the parent firm often staff the EDC. These development centers can be created based on three scenarios:
- A wholly-owned subsidiary of the leading corporation
- A collaborative unit between the parent company and a local partner
- A separate business unit
An EDC that is a subsidiary of the parent company at an offshore location is known as an Offshore Development Center (ODC). ODCs are a much popular option that also allows space to create a stronghold in a place foreign with respect to the parent company.
According to a 2022 report by Verified Market Research, the global market for offshore software development services is expected to grow from $122.258 billion in 2021 to $283.46 billion by 2030, at a compound annual growth rate of 10.13% from 2022 to 2030. This is fueled by increasing demand for cost-effective premium software development services.
Offshore Development Center (ODC) vs. Outsourcing
| ODC | OUTSOURCING | |
| Location with respect to parent company | Different country | Same country or different |
| Subsidiary of the parent company | Yes | No |
| Team management and operation is controlled by the parent firm | Yes | No. The team works for the enterprise the parent has outsourced its work from. |
| Conflict of interest | No, as all brand values are aligned with the parent company | Yes, are usually mismatched |
Reasons to establish an EDC
The main benefits of establishing an EDC include the following:
- Access to a broader talent pool: An EDC in a country with a high concentration of skilled engineers and technical personnel means a broader talent pool than an in-house development center.
- Improved software development quality: An EDC means access to a broader talent pool and improved software development quality.
- Cost savings: The cost of living and salaries vary from country to country, which means an EDC is a perfect solution to get a broader perspective, thereby creating a better software development team maintained at lower costs.
- Improved competitiveness: Exposure to the latest software development technologies and processes implies reduced time-to-market products and services and, thus, improved competitiveness.
- Dedicated team for scalability: Maintaining an EDC means direct management of a dedicated team for all software requirements and any demands to scale the project are easily met.
- Confidentiality: Extended centers are dedicated to the parent company’s core values. Thus, sharing insider information and misuse of resources are highly non-likely. The team is primarily interested in yielding profits, which means added benefits.
“Master your strengths, outsource your weaknesses.”
~ Ryan Khan, Founder of The Hired Group
Challenges associated with establishing an EDC
- Cultural differences between the parent company and the EDC:
It is essential for companies to have a clear understanding of the cultural differences between the two entities and to have processes in place to address any cultural challenges to effective communication and collaboration.
- Time zone differences:
Companies should have dedicated communication channels or schedule regular video conferences to facilitate communication and collaboration that can address the problem of time zone differences.
- Language barriers:
Dedicated communication channels or providing language training to staff in the EDC can aid companies in addressing language barriers between the parent company employees and team members of their EDCs.
- Different working practices:
Companies should have processes to address different working practices, such as having transparent processes and procedures or providing training to staff in the EDC on the company’s working practices.
India – a hotspot for EDCs
A study by Deloitte indicates that the use of EDCs has increased drastically over the past couple of years and concludes that more than 59% of companies outsourcing their projects have their EDCs established in India. The primary reasons behind companies outsourcing their projects to India are
- Low cost of labor
- An abundance of talent
- No communication barrier, for most of the Indian population is multilingual, with more than 10% of the population speaking English.
- Indian government encourages foreign companies to set up their EDCs with lucrative prospects such as tax benefits, investment incentives, low-cost development grounds, etc.
TechVariable has a dedicated, skilled group of software engineers involved in services related to staff augmentation. We have handled multiple large-scale projects that have been outsourced by prominent clients residing in the U.S., Canada, and Dubai. There are multiple other organizations in India such as ours, who dedicatedly work on outsourced projects from companies such as Clinify, Pfizer, Amazon, Meta, etc.
Conclusion
Thus, we can conclude that setting up an Extended Development Center (EDC)as a concept is very popular and has multiple benefits. Cost savings and access to a broader pool of talent are the main drivers for companies establishing an EDC, with India, China, the Philippines, and Eastern Europe being the top locations for offshore software development. However, companies must be prepared to address the challenges associated with establishing an EDC and ensuring its smooth maintenance. Companies must have transparent processes in place.
