| According to Gartner research, growing number of | | | | * Quick return on investment |
| European businesses seeks possibilities to benefit from | | | | * Consistent and flexible team |
| global sourcing of software development services. In | | | | * Competitive rates and flexible pricing |
| the recent years, more and more companies are | | | | * Readily available technical and office infrastructure |
| getting involved in nearshore outsourcing partnerships | | | | * Accumulation of customer-specific business process |
| – contracting vendors from lower-wage countries, | | | | knowledge |
| which are relatively close in distance and time zone. | | | | * Joint venture and Build-Operate-Transfer options |
| They prefer nearshoring over offshoring mainly for | | | | * Strong service delivery and methodology practices |
| benefits associated with cultural, geographic, time and | | | | There are several types of DDC engagement options |
| linguistic dimensions of proximity. | | | | catering for different needs of the customers. |
| Companies that are interested in long-term outsourcing | | | | Staff-based dedicated team model is probably the |
| for satisfying their growing software development | | | | most common for clients that possess outsourcing |
| needs may consider the following three alternative | | | | experience and utilize solid offshore/nearshore delivery |
| models: project-based, dedicated center and captive | | | | practices. In this case vendor only provides necessary |
| operations. | | | | facilities and allocates a team that works only on |
| Some businesses that find typical project-based | | | | account’s projects (client has full operational |
| outsourcing to be unsuitable to their needs may decide | | | | control). |
| to establish captive facilities in attractive nearshore | | | | Certain types of dedicated centers address more |
| locations (namely Eastern European countries) and | | | | specific needs associated with technology and vertical |
| conduct work there as a part of their own operations. | | | | expertise as well as the purpose of the project. They |
| However, this model has tangible disadvantages in | | | | are tailored to custom business models. Term "tailored |
| terms of risk, investment, operational efficiency and | | | | DDC" covers the following: product development |
| organizational issues. Thus, it can be applied mostly by | | | | center, product competence center, project center, |
| large companies and multinational corporations that are | | | | research and development center, software |
| ready to invest heavily, take calculated risks and | | | | maintenance and support center, application |
| allocate necessary management resources. In this | | | | reengineering center, quality assurance center etc. |
| respect, nearshore dedicated development center | | | | Joint venture DDC may be considered as a transitional |
| (DDC) engagement appears to be a viable alternative | | | | stage to establishing captive operations in the |
| for businesses with expected long-term need for | | | | nearshore location. Since it is funded by both vendor |
| software outsourcing. | | | | and customer, this contributes to risk sharing and |
| Project-based model is regarded as the most | | | | improved performance tracking/reporting. |
| appropriate for development of rather big and | | | | "Build-Operate-Transfer" option basically means that |
| well-defined applications or their modules. Alternatively, | | | | vendor sets up necessary infrastructure, hires people, |
| dedicated center caters for software with changing | | | | establishes and operates dedicated center for a |
| requirements, maintenance and support of large | | | | predefined period of time. Afterwards this facility is |
| systems, research and development, testing as well as | | | | fully transferred to the client. At the initial stage vendor |
| other types of complex tasks. DDC is about having | | | | assigns technical experts and managers who become |
| full-time cost-effective developer resources allocated | | | | the core of the future organization, adopt and |
| to work exclusively on client’s projects for a | | | | implement customer-specific processes and practices, |
| prolonged period of time. It serves as an extension of | | | | conduct staffing and training of the personnel. At the |
| customer’s organization in the nearshore country. | | | | transfer stage client becomes the owner of a stable |
| In DDC type of engagement, vendor is responsible for | | | | captive software development facility staffed with |
| providing necessary facilities and setting up a software | | | | appropriate specialists and operating with minimal |
| development team that correspond to client’s | | | | supervision by parent company. Benefits of this type |
| methodologies, practices, management style and even | | | | of engagement are lower overall infrastructure costs |
| business culture. Nearshore partner also undertakes | | | | and having turnkey captive operations staffed with |
| administrative functions, support of technical and office | | | | well-established team of developers. |
| infrastructure, staffing, human resources management | | | | Methodology of establishing a nearshore dedicated |
| and ensures service delivery standards. | | | | development center |
| Advantages of nearshore dedicated center model | | | | Outlined below are steps that most of software |
| * Cultural and geographical proximity | | | | development vendors generally follow to set up |
| * No or insignificant time zone difference | | | | nearshore dedicated center and ensure its optimal |
| * No long-term initial investments | | | | performance in accordance with customer’s |
| * Full operational control | | | | existing practices and project objectives. |
| * Mitigation of business risks | | | | |