McKinsey identifies a lack of tech talent as the primary constraint to growth: nearly half of future tech trends require rare skills. Gartner, in turn, emphasizes the need for investing in IT headcount in 2023. Meanwhile, the hiring & operational costs are staggering in the USA, Canada, and Western Europe, not to mention possible recession concerns. So, is there a way to navigate the storm?
I’m Dmytro Ovcharenko, CEO at Alcor, a software R&D services and IT recruitment company in Eastern Europe and Latin America. We’re experts at bridging US clients with skilled coders and have already helped People.ai, Sift, ThredUP, and many others to benefit from their own R&D centers.
In this article, I’ll fill you in on what a software R&D office is, the benefits and components of this solution, top locations for setting up your own R&D branch, and the most convenient way to achieve fully balanced IT R&D services management for your company.
What Is a Software R&D Office?
A software R&D office is a branch of a tech product company in a foreign country where an offshore team of programmers contributes to developing your product.
Benefits of Building an R&D Office
Launching a turnkey research and development office is an excellent way to take care of your product in the long run. All because R&D coders have a product mindset and tend to deliver strategic value that will derive revenue to the company rather than hit temporary milestones and get paid strictly by the hour, like in the IT outsourcing model.
Your own R&D office will operate under your company’s brand from the start, as opposed to being part of the provider’s workforce. R&D developers will blend in with your in-house team, embrace your corporate culture, and be more dedicated to your product as a result.
IT stars from LatAm and Eastern Europe deliver top-notch development results as these regions even outperform the USA and Canada regarding innovation and high-quality computer science education. Once such outstanding expertise meets a product-oriented mindset and nurturing corporate culture in your own software R&D center, your software development can be cheaper, faster, and first-rate.
Room for Cost Savings
Other markets might be more lucrative to develop your product in terms of labor cost differences. Thanks to considerably lower taxes and salaries, you can cut costs with your development team performing at its highest.
Direct Team Control
Another perk of having an offshore R&D department is full control over your team and product development. Unlike in the Build-Operate-Transfer model and IT outstaffing, a team in a software development office belongs to you from the very beginning and doesn’t have to be bought out or transferred back at the end of the cooperation.
R&D offices have one more significant upside as a model. Essentially, with a trusted provider, you won’t have to hire numerous operational managers to handle different stages since this service includes everything. In the next section, you’ll learn more about what it covers.
Components of an R&D Office
The first step towards setting up your own R&D office is to hire a professional team of software engineers. To begin with, you should choose a location and find a trustworthy software R&D services provider. Next, your provider’s IT headhunters will create ideal candidates’ profiles, employer value proposition & job descriptions, source the candidates of your choice, e.g., Java or Node.js developers and others, pre-screen them, then interview the most suitable ones, and leave the final decision up to you. Experienced recruiters usually factor in cultural peculiarities and national mentality to select the candidates whose work ethic matches yours. At Alcor, it takes us 3-6 weeks to hire a suitable candidate, so how fast you obtain the result largely depends on your provider.
To become more known to local software developers and attract star Senior/Lead talents who are desired by other companies, you’ll need employer branding. It involves establishing your presence in social networks, local media, and IT communities. A solid brand will also help you prevent offer rejections, as it did for Sift, a US online fraud detection company. To conduct an effective campaign, Alcor shot a video with Sift´s Hiring Managers and took up social media management. The results astounded both sides — Sift hired 30 programmers in a year!
Employer of Record
Employer of Record, or EoR, is an indispensable service while opening your software office abroad. All because with EoR, you won’t need to open your legal entity in a foreign location or several locations if you have plans to expand to a number of countries. Instead, your software R&D center solution provider will legally employ your software developers, pay their salaries, handle accounting, manage all paperwork, and help you provide benefits so your software R&D branch complies with local laws.
To successfully run a software research and development office, you need further help in legal and compliance matters. Their local lawyers will handle tax planning, assist you in applying available tax incentives, take care of employment contracts, NDAs & other agreements, protect your commercial confidentiality and intellectual property, provide support for opening business visas, and prepare everything for any inspection. As a result, your offshore software center will fully abide by foreign laws.
Often, legal compliance cannot go separate ways without expertise in R&D management. So the best case scenario is when your provider’s experienced enough and you don’t have to worry about anything. This is exactly what People.ai — a US-based machine learning company that opened a turnkey R&D office with Alcor experienced. Check out how it went:
Physical or Remote Office & Infrastructure
Along with all recruitment, EoR, and legal stages, it is high time to think about a comfortable office and IT infrastructure for your business. If you opt for a physical office, it should have enough space for your employees (in Ukraine, it’s 6 sq.m. per employee by law), good sunlight, heating and air conditioning, a kitchen, cleaning service and security, as well as nice Internet, of course. A bonus would be a spacious parking lot and different restaurants, cafes, shops, and maybe a fitness center nearby. Everything to make working conditions for your software developers comfortable.
With a reliable IT R&D partner, that’s not sweat at all. Typically, a real estate manager and a lawyer help figure out rent and sign an office lease agreement, while a financial manager calculates total costs, files invoices, and is in charge of accounting. Finally, an IT manager procures and sets up necessary equipment and software, as well as ensures data security for your research & development office.
Another important aspect is to keep differences in mind. On the one hand, you can save up on renting a software R&D center in Eastern Europe — in Kraków, you pay €24 per square meter a month as opposed to €38 of the European average. On the other hand, an office in Ukraine costs €17 per square meter with €5 for operational payments but may go unfurnished, so it will be wise to add procurement costs to your plans. Learn more about other destinations below.
Destinations to Set up Your Own R&D Office
This country abounds with 53,000 software engineers and 3,000 annual tech graduates. Slovak developers are exceptionally skilled in Python, PHP, Microsoft ASP.NET, and Node.js. What’s more, Slovakia incentivizes research and development: companies with software R&D offices can benefit from a special tax regime.
Despite its size, Colombia boasts a considerable 150,000 talent pool and a bilingual higher education system that prepares 13,000 more tech specialists a year. Its well-developed IT hub and tech park infrastructure promote startup culture, resulting in 300 startups and counting. Colombian work ethics is highly collaborative, result-driven, and expertise-based, making the country just the place for a software research & development office, especially if you’re looking for Java, Python, SQL, C#, or Ruby programmers.
Argentina is your go-to choice for data science skills: it’s unparalleled in LatAm and made it to the global top 30 in Python, SQL, TensorFlow, and NLP. In addition to 100,000+ tech experts on the market, the Argentinian government develops incentives to prepare 25,000 more yearly. Coupled with the highest English proficiency levels in the region and over 1,000 startups, Argentina is a promising location for talent investment.
Chile is a booming startup location and tops the innovation charts in LatAm. Its software engineer talent pool amounts to 61,000 specialists, prized for their knowledge of ASP.NET, Java, Perl, PHP, and Python. Around 5,000 tech graduates join the ranks of Chile’s workforce every year. With its 122 startups, the country is a great location for products connected to data analytics and mobile development.
Open Your Own Software R&D Office with Alcor
Alcor is your trusted partner for every single stage of your turnkey software R&D office launch, be it IT recruiting, employer of record, legal & compliance, office lease & WFH support, employer branding, or others.
Numbers speak volumes of our approach: we need just 8 CVs to get 1 accepted job offer, while 98.6% of our candidates pass the probation period and stay on after onboarding for 2.5 years on average. Excited to try? We’re waiting for your message!