What Is an Offshore Development Unit?

An offshore development unit is a dedicated remote extension of a company’s in-house team located in another country. It operates under the company's supervision but leverages local labor cost advantages and skilled technical professionals.

Offshore Development Teams: Structure and Function

Offshore development teams typically include:

  • Software engineers

  • Quality assurance testers

  • UX/UI designers

  • Project managers

  • DevOps specialists

These teams integrate into existing workflows using agile or hybrid models and align with the same KPIs and goals as onshore teams.

How Offshore Dev Teams Reduce Costs

Key Cost-Saving Drivers:

Factor

Description

Savings Range

Labor arbitrage

Hiring in countries with lower wage indexes

40%-70%

Infrastructure

No need to invest in local office space

$50,000+ annually

Recruitment

Vendors manage sourcing, saving hiring costs

Up to $15,000 per hire

Retention

Less turnover in emerging markets

20% less churn on average

Example:

Hiring a senior developer in the U.S. costs ~$130,000/year. In an offshore development unit in Eastern Europe or South Asia, the same role may cost $35,000–$60,000, depending on the country and skillset.

Where Offshore Development Units Provide Maximum Value

ODUs add significant value for companies that:

  • Scale digital products fast

  • Require niche tech expertise (e.g., AI, blockchain, IoT)

  • Face domestic hiring challenges

  • Prioritize rapid time-to-market

High-Impact Use Cases:

  1. Product startups launching MVPs

  2. Enterprise IT teams offloading maintenance tasks

  3. Software companies seeking 24/7 development cycles

  4. Fintech firms automating internal workflows securely

Managing Offshore Development Teams: Best Practices

1. Align Goals Early

Define shared goals, KPIs, and delivery expectations. Use clear documentation and regular planning cycles.

2. Implement Robust Communication

  • Use Slack, Jira, and Confluence.

  • Hold daily stand-ups, sprint planning, and retrospectives.

  • Align time zones where at least 3–4 overlapping hours exist.

3. Build a Cross-Cultural Mindset

Train in-house teams in cultural awareness and establish inclusive policies to ensure mutual respect.

4. Ensure Clear Role Ownership

Define responsibilities using a RACI matrix. Avoid blurred lines between offshore and onshore roles.

5. Leverage Nearshore Where Time Zones Matter

For North America, consider Latin America. For Western Europe, Eastern Europe fits better.

Offshore Development Units vs. Freelancers vs. Outsourcing

Model

Integration

Control

Scalability

Best Use Case

ODU

High

High

High

Long-term, core product dev

Freelancers

Low

Low

Low

Short-term, low-risk tasks

Outsourcing

Medium

Medium

Medium

Non-core functions

An offshore dev team within an ODU model offers more control and long-term integration compared to outsourcing or freelancers.

How to Set Up an Offshore Development Unit

Step-by-Step Process:

  1. Define your goals: Cost, skillset, timeline

  2. Choose the location: Based on skill availability, costs, and time zones

  3. Select a vendor/partner: Verify portfolio, client testimonials, and security practices

  4. Build the team: Align hiring with your tech stack and culture

  5. Set up infrastructure: Tools, repositories, security protocols

  6. Onboard and integrate: Include offshore developers in all agile ceremonies

Where to Set Up Offshore Development Units

Top Offshore Destinations (By Cost Efficiency and Talent Pool)

Country

Avg Dev Cost (USD/year)

Tech Talent Size

Notable Strengths

India

$25,000–$45,000

5M+

Java, .NET, cloud

Ukraine

$30,000–$50,000

300,000+

Blockchain, AI

Poland

$40,000–$60,000

400,000+

Enterprise software

Philippines

$20,000–$35,000

200,000+

Support and web dev

Mexico

$35,000–$55,000

150,000+

Nearshore for U.S.

Key Metrics for Offshore Dev Team Performance

Track performance using measurable indicators:

  • Velocity: Story points completed per sprint

  • Code quality: Defect density, code coverage, code churn

  • Deployment frequency: Weekly or daily releases

  • Team satisfaction: Retention and feedback

  • Business impact: Features delivered, ROI achieved

How to Ensure Data Security in Offshore Units

Compliance and Security Measures:

  • Use ISO 27001-certified vendors

  • Enforce VPN, SSO, and zero-trust network policies

  • NDAs and IP protection agreements

  • Role-based access control (RBAC)

  • Regular security audits and code reviews

Legal and Contractual Considerations

When building offshore development teams, protect your IP and ensure compliance:

  • Create a Master Services Agreement (MSA)

  • Include SLAs for uptime, support, and delivery

  • Define termination clauses

  • Confirm GDPR, HIPAA, or other relevant compliance

How Offshore Development Units Drive Innovation

Offshore dev teams can do more than just execute. They innovate by:

  • Bringing fresh perspectives across markets

  • Leveraging emerging tech in local ecosystems

  • Supporting A/B testing and prototyping with rapid cycles

  • Providing multilingual, multi-platform development

Offshore Units and Agile Development

Agile-Compatible Team Extension

ODUs work best when integrated into agile environments. They:

  • Participate in daily scrums and sprint reviews

  • Use shared JIRA boards and CI/CD pipelines

  • Align with product owners on user stories and feedback loops

This reduces friction and maintains velocity across distributed teams.

Scaling Offshore Development Units

To scale an offshore dev team effectively:

  • Use a hub-and-spoke model: centralized leadership, distributed execution

  • Introduce delivery managers for coordination

  • Create knowledge bases for faster onboarding

  • Build long-term roadmaps with training, upskilling, and retention incentives

Benefits of Partnering with a Trusted Vendor

A capable partner like Tkxel enables:

  • Fast ramp-up of specialized teams

  • Process maturity (ISO, Agile, DevSecOps)

  • Full-cycle product engineering from ideation to deployment

  • Transparent engagement models and SLA-driven execution

Common Challenges in Managing Offshore Development Teams

Challenge

Solution

Time zone mismatch

Overlap core hours, asynchronous updates

Misaligned expectations

Use clear SLAs, regular reviews

Language barriers

Choose English-proficient regions

IP concerns

Sign enforceable NDAs and MSAs

Team disengagement

Foster inclusive culture, offer growth paths

FAQs About Offshore Development Units

What is the difference between outsourcing and offshore development units?

Outsourcing transfers ownership of tasks. Offshore development units extend your internal team with full integration and control.

How much can I save with an offshore dev team?

Savings range between 40%–70% depending on location, team size, and roles.

What countries are best for managing offshore development teams?

Top regions include India, Ukraine, Poland, and Mexico for cost, skills, and ease of communication.

How do I manage communication with an offshore development team?

Use daily stand-ups, shared project tools, overlapping work hours, and clear documentation.

What legal protections exist when hiring offshore developers?

Use binding contracts like MSAs, NDAs, and jurisdiction clauses, and ensure vendor compliance with IP and data laws.

Can offshore development units deliver high-quality code?

Yes. Quality depends on vendor maturity, your processes, and performance KPIs—not the team’s location.

What You’ll Read Next

Next, explore how to build long-term strategic partnerships with offshore vendors and compare nearshore vs offshore models in terms of productivity and team retention.