A dedicated development team is a viable approach to software development that comes in handy in various scenarios. Some companies hire dedicated software developers to beat the competition and ship the product as fast as possible. Others use dedicated software development services to cover their sporadic need for development resources. Finally, a dedicated software development model is a cost-effective alternative to an in-house development approach.

The best testament to the success of this model is that companies are actively investing in it. In fact, the revenue in the IT outsourcing market is projected to reach US $512.50 bn in 2024.

A dedicated development model suggests expanding your unit by adding dedicated software developers located in a region with lower development rates, such as Eastern Europe, Asia, and Latin America. Such a team is called “dedicated” because it’s solely dedicated to the client’s project, working full-time. The client usually has direct access to each dedicated software developer. The vendor of a dedicated engineering team takes care of recruitment, employee retention, office space, IT infrastructure, HR support, and employee perks.

Dedicated software development: How it works

As we’ve mentioned before, a dedicated software development approach lives up to its name. It refers to a model where a virtual team is interwoven into a client’s software project, working from the vendor’s office. A dedicated development team is typically gathered by the vendor from the ground up and tailored to the client’s project. While the vendor takes care of candidate sourcing, establishing the workflow and synchronizing external and internal teams rests on the client. Below we dive deeper into the benefits of this model.

READ ALSO: How to Build an Offshore Software Development Center

Advantages of a dedicated development team

  • It’s more affordable than in-house staffing. Accelerance reports that the hourly rates across software development roles increased by 23% in 2022. This highlights the financial benefits of dedicated development. Hiring a full-time software developer in the United States or Western Europe costs between $125,000-$200,000 per year, without recruitment, onboarding, administration, and employee benefits packages. With a dedicated development team, you can avoid added expenses that come with an in-house team, as they are taken care of by the vendor. Moreover, you can source tech talent in such cost-effective regions, such as Central & Eastern Europe or Latin America. 
  • It resolves team scaling problems. The US Bureau of Labor Statistics reports that the demand for software engineers is expected to grow by a staggering 25% until 2032, which is 8 times faster than the average growth (3%). It only means one thing – competing for tech talent is going to be more and more difficult. Fortunately, there’s always an option to scale quickly with dedicated software developers whenever your project requires extra hands. A dedicated team model is best when you need to bring the project up to speed to meet the timeline requirements.
  • You’ll get a jump on time-to-market. Speed is another benefit associated with a dedicated development team. In our experience, you can build one within 2-6 weeks, depending on the number of team members. 
  • You’ll have access to developers with sought-after expertise. According to a recent report by Robert Half, 90% of tech managers say that finding top talent remains a challenge. This brings us to yet another reason to work with a dedicated team – the variety of specialists in the global talent pool. For example, in Eastern Europe, you can find a dedicated software developer with expertise in major verticals, such as healthcare, banking, fintech, and more. A dedicated team based in a skilled tech hub like this can bring the expertise you lack to the table. 
  • Your office will be up and running around the clock. Running a remote team comes with its challenges, but this work model also provides a lot of coverage, given that two teams working 8 hours equals 16 hours a day dedicated to your project. This way, thanks to dedicated development, you can increase your development capacity ×2. 
  • It frees resources to concentrate on your core business. A dedicated software team gives you much more time to focus on your core business and vital processes. It’s proven that by engaging dedicated teams, numerous companies have managed to bring technology solutions that had a transformative power on their business model. 

READ ALSO: Advantages and Disadvantages of Offshore Software Development Services

Disadvantages of a dedicated development team

  • Time zone and communication barriers. The biggest challenges that come with a dedicated development team model is working across time zones. Collaborating with a tech unit located far away means your in-house and remote teams have little overlap for communication at the same time. To overcome this, you need to schedule your meetings around the common time windows. While such communication can be effective, it falls short of face-to-face interaction related to the in-house staff. Thus, a dedicated development team located in a nearshore zone, where time zone differences are negligible, can offer a solution to overcome this obstacle. 
  • Management is more intricate. Running a dedicated development team is more complicated than running an in-house unit. You’ll need to account for time zone differences, culture differences, and work styles in your management approach. One thing you can feel sure about with dedicated development is that team members will be fully dedicated to your project, which is the essence of this model. Selecting the right vendor, and conducting regular meetings and surveys, just as you do with your in-house developers, will simplify your management. 
  • It’s not the most flexible model. Although a dedicated development team offers more agility than in-house staffing, it’s still less flexible than Staff Augmentation (SA) in terms of adaptability. With SA, you can add team members to your project on an as-needed basis – as opposed to the rigid formation of a dedicated development team. Once a dedicated team is formed, integrating new skills can be problematic, as it may impact the entire project. 

Let’s recap this part. When choosing between an in-house and a dedicated team, many companies lean towards the latter, mainly due to the high costs of local developers. A huge stumbling stone with this model can be maintaining communication and team control in a remote setting. The key is in selecting the right tools and setting the right processes. However, it would be better for a manager of a dedicated development team to have relevant experience in managing remote teams. 

READ ALSO: How to Manage Your own Dedicated Development Team

A dedicated development team vs an in-house team: Key differences

“Should I build a dedicated team or a traditional in-house team?” Many tech leaders inevitably come across this question when the need for team scaling arises. Let’s compare the concept of a dedicated development team vs. in-house development across various criteria. 

CriteriaDedicated development team In-house development team
Location of the teamThe team works in a remote office, often located in offshore/nearshore regions, for example, Latin America, Central and Eastern Europe, etcThe team works in your local office
CostDedicated development is more cost-effective, mainly due to lower software development rates in offshore/nearshore zonesIn-house staffing is more expensive due to expenses associated with permanent staff and overhead
Team controlThe client runs the team remotelyThe client has direct, immediate access to the team
Developer availabilityAccess to the pool of global tech talentConfined to the local job market
CommunicationCommunication can be impeded by time zone differences and a language barrierFace-to-face communication
CulturePotential challenges associated with cross-cultural cooperationMore possibilities to build a unique company culture

What is the structure of a dedicated team?

The roles within a dedicated development team resemble those within an in-house unit, although you may want to backfill some of them with in-house staff. Let’s explore key roles in dedicated development.

  • Project Manager (PM) 

PM is an expert who drives the software development process and supports your dedicated development team throughout the project. They will ensure your project stays on track and report to you on its progress.

  • Business analyst (BA)

The role of a BA is to align the software development process with your business goals. Oftentimes, BA serves as a bridge between stakeholders and a dedicated development team. The key task of a BA is to ensure your business needs are translated into tech specifications. 

  • Software Architect

A software architect is the mastermind behind your project. They design the overall structure and guide your dedicated development team on how to build and integrate different components of a software product.

  • UX/UI designers

User Interface (UI) and User Experience (UX) experts will craft the design and usability of your software product. Their job is to create a user-friendly, intuitive, and attractive design for users. 

  • Software Engineers

A development team, consisting of front-end and back-end experts, is the backbone of every project. These roles are the most costly on your dedicated development team. 

  • Quality Assurance (QA)

QA experts are on guard for your software quality. They thoroughly check if your software meets the standards of usability, security, and performance before it goes live. 

  • DevOps 

DevOps engineers focus on automating and refining processes aiming to enhance the speed, efficiency, and quality at every stage of software development.

Dedicated software development: Cost

Now that we’ve analyzed the key roles, let’s dive into the cost aspect. Below, we compared the rates of various tech roles in North America with rates for the equivalent roles in nearshore/nearshore zones. We believe this information may be useful for you to make an informed decision when selecting the location to build your team. You can see that opting for LATAM or CEE for dedicated software development is more cost-effective than in-house staffing in North America.

RoleHourly rate, North AmericaHourly rate, Latin AmericaHourly rate, Central & Eastern Europe
Project manager$96–$123$59–$82$53–$78
Business Analyst$109–$154$56–$68$57–$81
Software Architect$139–$182$72–$96$71–$95
UX/UI designer$79–$100$48–$75$53–$71
Senior developer$143–$172$65–$82$68–$76
Intermediate developer$119–$144$53–$66$47–$65
Junior developer$75–$91$41–$53$35–$53
Quality Assurance expert (Automated)       $167–$74$35–$72$32–$74
Quality Assurance expert (Manual)$139–$62$66–$34$61–$26
DevOps$148–$114$59–$82$62–$79
Source: Accelerance: 2023 Global Software Outsourcing Trends and Rates Guide

How to build your own dedicated development team: Step-by-step guide 

When building a dedicated software team, you want to source dedicated software developers with the right skills to bring your project to success. There are two major parties involved in this process: Customer and Provider. The responsibilities are typically divided in the following way: 

The provider takes care of: talent acquisition, IT infrastructure, office space, dedicated software developer retention, administration, payroll, paperwork, team building, and employee benefits. 

The customer is responsible for: providing Project Scope, team effectiveness measurement, communication, and company culture.  

Now that we’ve outlined the responsibilities of each party, the next question would be where to start? 

Step 1. Define your requirements

Before contacting the vendor, your team should decide on a tech stack and prioritize features so that a vendor can build a dedicated development team based on your needs. Giving information about your company will help find developers who would be a good fit in terms of company culture.

Step 2. Interview candidates

Typically, the hiring process includes several rounds of interviews. The candidates are initially verified by the vendor’s team, which involves technical and HR interviews. Then, the candidates who’ve made the cut are forwarded to the client for client interviews.

During the hiring process, you may want to take the provider for a spin. Take notice of their company culture, communication style, and ability to meet your requirements. That will allow making an informed decision. With nCube, there’s no need to pay upfront until you are ready to hire a dedicated software developer. We also are open to signing a non-disclosure agreement before we start our cooperation.

Step 3. Launch your team

If you have chosen the team members carefully, chances are high that your dedicated development team will be a success. At this point, a lot depends on your involvement in the project. Set up the processes and communicate with team members regularly. If you choose nCube, you’ll be working with developers from CEE or LATAM who have high technical proficiency, a problem-solving mindset, and strong communication skills.

Dedicated software development team: Where to build it?

These are regions that are the most comfortable for launching your dedicated software development team. 

Eastern Europe

When it comes to the best countries to launch your dedicated development team, many Eastern European countries (Ukraine, Poland, Romania, etc) are globally recognized as hotspots for this activity. 

In Eastern Europe, developers have vast experience working on global software development projects and excel at diverse technologies. Particularly, Ukrainian and Polish developers are well-versed in JavaScript, Java, C#, Python, PHP, Swift, and C++ as well as in-demand fields, such as Data Science, IoT, Blockchain, and AI/ML. 

When you go for dedicated team development in this region, you can rely on a repository of nearly 1 million expert IT specialists. Dedicated team development in this region is also a lucrative option thanks to a convenient time zone, no-barrier communication, and minimal cultural discrepancies. So, when sourcing dedicated software developers from Eastern Europe, you can optimize your budget without any trade-offs. 

READ ALSO: Offshore Product Development: Eastern Europe, Latin America or Asia? 

LATAM

LATAM is currently a growing tech hub, where such countries as Mexico, Argentina, and Brazil stand out as the most popular destination for dedicated development. LATAM is also a preferred region for US-based companies seeking nearshore opportunities. 

Akin to Eastern Europe, LATAM offers affordable software development rates compared to North America. LATAM nations are close to the US when it comes to the time zone, so many businesses prefer to launch dedicated software development teams in this region. Besides that, providers in LATAM are laser-focused on North American projects, which allows them to have a deep understanding of their inner workings, requirements, standards, and goals.

We at nCube focus on both of these regions and will help you set up your own dedicated development team in the destination of your choice. 

READ ALSO: Why is LATAM Software Development Thriving? 

A dedicated development team: Is it the right approach for your business?

To summarize our post, we’ve gathered a few scenarios where adopting a dedicated development model may be a suitable choice for your business. 

  • Your organization lacks software development expertise;
  • You need to rapidly scaly up your development capacity because of an increasing workload;
  •  You need a sustainable development team for projects with long development cycles;
  • You want to accelerate time-to-market by building a skilled development team fast;
  • You want to add skilled technologists without delegating team control and SDLC to the vendor;
  • You lack specific skills for a particular stage of SDLC, for instance, Quality Assurance;
  • You want to shift the focus of your core team toward strategic initiatives rather than stick to a day-to-day development routine. 

At the end of the day, there is no universal recipe for developing software. In some scenarios, it’s best to go with an in-house software development team. In others, a dedicated team can be a good solution, especially when you want to scale your internal team fast and prune the extra costs associated with an in-house team. Together with a dedicated development team from nCube, you can build long-term relations with the best tech talent in Eastern Europe and LATAM. Let’s connect.

What do Gitlab, BaseCamp, InVision, Zapier, Trello, American Express, and Hubstaff have in common? All of them are powered by remote teams.

Last year, Gartner found that 58% of companies have at least some tech talent working from another country. This is a twofold increase since 2019. 

What is a remote development team? In the tech sector, remote development engagement means building a software development team abroad. This team typically operates in a different time zone, leveraging technology to synchronize and collaborate with your local staff.

It looks like remote teams are here to stay. In this post, we’ll share six key reasons why you may want to commit to a remote-based model in 2024. 

You want to be more agile when staffing projects

Remote teams are often associated with as-needed hiring. For instance, if you need a Python developer and a Quality Assurance expert to add to your Data Science project, but aren’t sure if your team needs those roles in the long run. Hiring a full-time employee in such a scenario might be costly. That’s where a remote development team steps in. You can create one on-demand, without the burden of in-house staffing like overhead and employee retention services. After the project is done, you can enjoy the freedom to continue working with your remote team or disband it.

READ ALSO: Benefits of Agile Nearshore Development 

You want to trim your software development budget

The grueling truth is that there’s been a 23% increase in hourly rates for software development in North America, according to Accelerance. So, if you’re looking for ways to save, building a remote team can be the best financial decision you’ll ever make. That’s because one of the significant advantages of this model is cost efficiency. Hiring developers in a location where salaries are much lower doesn’t strain your budget as much as a home-based team does. 

Another reason for going with a remote team is that an in-house team typically comes with additional expenses you can trim, including overhead costs, employee benefits, and more. At nCube, our model is based on a fixed rate, meaning the client only pays for a full-time employee, while we take care of an employee’s insurance, taxes, motivation program, and HR support. 

Many businesses hope to grow their profits thanks to the transition to remote development in 2024. A recent study from Accelerance shows that partnering with a remote development firm can save a company from 40% to 70% of overall costs, making it an excellent reason to consider having a remote development team as an option. Here’s a look at software development rates by region:

Source: Accelerance 2023

Finally, building a remote team is a lucrative solution for many because it’s a good way to save money for marketing and business analysis, which are vital for increasing your profits. Thus, it’s reasonable to state that companies expect their remote teams to impact their bottom lines in a positive way. 

You want to reduce time-to-hire

Besides being known as high maintenance, it can also be time-consuming to assemble an in-house team. You can spend months looking for strong candidates in your location. In the fast-paced nature of our world, making the right decision quickly is key to beating the competition. Hiring outside your geographic location allows you to tap into an ocean of talent and staff your team without costly delays, given the variety of talent up for work. 

By choosing a remote development team, you can focus on hiring the best person for the job, rather than looking for someone willing to relocate. Besides, when your search is limited to one city, finding the right candidates, especially on short notice, can be problematic. On the other hand, when you can choose from various locations around the globe, you have the opportunity to staff your remote team with the brightest minds and do it faster than with traditional recruitment.

You want to excel at navigating uncertainty

Remote development teams can be the antidote to economic turbulence. They provide agility without locking you in long-term financial commitments of permanent staff. Thus, it’s a flexible solution for companies looking to build or augment their tech team. The possibility to scale up or down as needed lets companies respond to uncertainties that may lie ahead. 

You want to access less competitive markets with better talent

Talent over location is the motto behind an entire remote team trend. For example, there are nearly 1.3 million software engineers in Eastern Europe, making the region a true powerhouse for tech talent. Not only can you find specialists with more general technological backgrounds, but you can also hire for more sought-after tech skills, from AI, Cloud, Data Science, and IoT engineers to DevOps and Blockchain specialists. With over thousands of graduates joining the workforce annually, in our experience, with the right approach, it’s possible to set up a full-fledged remote development team in Eastern Europe in as fast as 4-6 weeks.

READ ALSO: Offshore Development Center vs. In-House Team: Which one is Best for You?

You need a source of fresh ideas

The downside of a co-located team is that when people work in a shared space for a long time, their creativity can abate. Team members tend to get used to each other (and their surroundings as well) and begin to think alike, and thus may struggle to produce original ideas. This is especially true for close-knit teams that have been working together for years. 

Adding remote team members can bring a wealth of fresh ideas to the table. More often than not, remote teams include people from many walks of life and of various backgrounds. Thus, they can come up with solutions to otherwise unraveling tasks. Thus, we can say that a remote team presents diverse thinking patterns, leading to the benefit of diverse viewpoints. 

To sum up 

When the first wave of lockdown hit, remote teams were commonly perceived as a necessary evil. A few years later, many companies see remote teams as an infinite source of profit, innovation, and talent. While we don’t expect Silicon Valley to become a ghost town any time soon, we can be sure that remote teams are the new norm. 

As a remote team provider, here’s what our approach includes:

  • Direct access to your remote team

Our approach lets you communicate with each team member directly and manage the SDLC yourself. Your remote team members will work under your management, report to you directly, and become an indispensable cog in your operations. 

  • Focus on 100% dedication

Your remote team will be solely dedicated to your project. The team members we provide will work full-time as if they were your in-house employees. 

  • Only skilled software developers

We pull together remote teams of software developers that match your requirements in full. That includes tech skills, soft skills, culture fit, domain expertise, and English proficiency. No matter the competencies you’re looking for in a candidate, we’re always ready to go the extra mile. 

  • Access to vast pools of tech talent 

Central & Eastern Europe and Latin America are the most skilled tech hubs in the world. We have a network of over 125,000 developers located across these regions. You can launch your team in the time zone of your choice. 

Let’s connect to discuss the opportunities for remote development in 2024 for your organization and how nCube can help you augment your local team. 

Software development experts are the cornerstone of your success, especially when embarking on the journey of opening R&D capabilities. It’s essential to keep them at the forefront of your considerations. Focus on curating an environment that not only addresses their needs but also fosters a comfortable workspace, fueling their drive for groundbreaking achievements. Ultimately, it’s the people who drive innovation and a conducive work atmosphere that catalyze unlocking their limitless potential.

Data shows that between 2011 and 2021, the number of full-time equivalent researchers in the EU climbed from 1.38 to 2.00 million, a gain of more than 45%. 

But why should you care about the integration of software R&D teams? Because the role of R&D teams in a company is indispensable. From driving innovation and product development to staying ahead of technological trends, providing competitive intelligence, creating intellectual property, and improving operational efficiency, R&D teams can be the architects of a company’s future success. Their contributions not only shape the present but also position the organization for continued growth and resilience in an ever-changing business landscape.

The more people work in R&D, the harder it is to manage them. This article will provide you with a detailed overview of software R&D team integration, and how to do it in the most efficient way possible. 

READ ALSO: Operating an R&D Engineering Center: Steps to Take to Succeed

The role integration of R&D in a company

The source of innovation. At the core of the R&D team’s mission is the pursuit of innovation. These teams serve as the engine for generating novel ideas, technologies, and solutions. By exploring uncharted territories and pushing the boundaries of existing knowledge, R&D teams contribute directly to a company’s ability to stay ahead in dynamic markets. They foster a culture of creativity, encouraging team members to think outside the box and explore unconventional approaches to problem-solving. Tesla’s R&D efforts in electric vehicles and renewable energy technologies exemplify how innovative thinking can redefine entire industries, driving the company’s success and influencing the global automotive landscape.

Product and service development. R&D teams are instrumental in the development of new products and services. They work closely with other departments, translating conceptual ideas into tangible, marketable offerings. This involves conducting feasibility studies, prototyping, and refining designs. The successful launch of products resulting from R&D efforts not only expands a company’s product portfolio but can also open new revenue streams and enhance the organization’s competitive positioning. Apple’s consistent introduction of groundbreaking products, such as the iPhone and iPad, is a testament to the pivotal role played by R&D in shaping consumer technology trends.

Technology advancement and adaptation. Staying abreast of technological advancements is crucial for any modern company. R&D integration helps businesses monitor industry trends, evaluate emerging technologies, and integrate relevant innovations into the company’s operations. This proactive approach ensures that the organization remains technologically competitive, agile, and capable of adapting to the rapidly evolving business landscape. Google’s continuous development of cutting-edge technologies, from search algorithms to artificial intelligence applications, showcases the company’s commitment to staying at the forefront of the tech industry through its R&D endeavors.

Competitive intelligence and market analysis. Integration of software R&D teams contributes significantly to a company’s strategic decision-making by providing insights into market trends, consumer preferences, and competitor activities. Through market research and competitive intelligence, R&D teams help leadership make informed choices about where to invest resources and how to position products or services in the marketplace. Pharmaceutical companies, such as Pfizer and Moderna, rely heavily on R&D integration for market analysis and competitive intelligence to guide the development and deployment of life-changing vaccines.

IP and patents. Integration of R&D often results in the creation of intellectual property, including patents, trademarks, and trade secrets. These assets not only protect the company’s innovations but also represent valuable strategic advantages. Integrated R&D teams work closely with legal departments to secure and defend intellectual property, creating barriers to entry for competitors and establishing the company as a leader in its field. IBM consistently leads in the number of annual patents granted, a reflection of the company’s strong commitment to R&D and innovation across various domains.

Cost reduction. Beyond innovation, R&D integration contributes to cost reduction and operational efficiency. Through continuous process improvement and optimization, these teams identify ways to enhance production methods, reduce waste, and streamline operations. This focus on efficiency directly impacts the company’s bottom line, making processes more cost-effective and environmentally sustainable. Toyota’s renowned Production System, developed through extensive R&D integration, revolutionized manufacturing by emphasizing efficiency, quality, and waste reduction.

READ ALSO: R&D Tax Credit Rates for Software Development in LATAM & Central Europe

Integration of software R&D teams: things to consider

In the ever-evolving landscape of technology, the seamless integration of software R&D teams is paramount for sustained innovation and productivity. Delving into this crucial aspect requires a holistic approach encompassing organizational goals, policies, collaboration tools, human resources, cultural alignment, and proactive management.

Define the goals and structure of your R&D team

Establishing clear goals and a robust structure for your R&D is the bedrock of successful integration. It involves not only defining the objectives of research initiatives but also structuring the team for optimal efficiency. Taking inspiration from Google’s X, which embarks on ambitious “moonshot” goals, organizations can encourage R&D teams to pursue groundbreaking projects. This approach not only sets clear objectives but also fosters a collaborative and efficient working environment, where each team member understands their role in achieving these ambitious goals.

Create comprehensive company policies for R&D integration

Crafting comprehensive policies specifically tailored for the integration of software R&D teams integration is instrumental in ensuring consistency and coherence across the organization. 

Atlassian, a prime example in this regard, has implemented detailed policies for code review, knowledge sharing, and cross-functional collaboration. These policies go beyond standard operational guidelines and delve into fostering a culture of innovation within R&D teams. They emphasize communication protocols, knowledge-sharing mechanisms, project management methodologies, and intellectual property protection, providing a comprehensive framework for a conducive R&D environment.

Use tools to integrate R&D collaboration 

Leveraging cutting-edge tools like Jira and Slack is not just about adopting them but strategically implementing them to facilitate seamless integration and R&D collaboration. 

For instance, Jira’s extensive usage by major corporations such as NASA, eBay, and Spotify goes beyond project management and issue tracking. It involves tailoring these tools to streamline communication, enhance project tracking, and optimize knowledge sharing. This strategic use ensures heightened productivity, timely information dissemination, and effective collaboration among team members.

Foster culture and align with company vision in R&D

As your R&D integration scales, establishing a localized Human Resources (HR) team becomes pivotal. 

Microsoft’s approach serves as a pertinent example, where significant investments are made in building HR teams at various locations. This localized HR presence is instrumental in understanding and catering to the diverse needs of a growing R&D workforce. The team plays a multifaceted role in recruiting top-tier talent, managing employee relations, and ensuring a supportive work environment conducive to innovation.

Instill culture and company vision in your R&D

Cultural alignment is not just a buzzword, but a crucial element in fostering creativity and collaboration within R&D teams. 

Taking inspiration from Apple’s R&D culture, characterized by secrecy and a relentless pursuit of perfection, organizations need to actively promote and nurture a culture that encourages risk-taking, learning from failures, and a shared commitment to the company’s overarching vision. This involves not only stating cultural values but also implementing practices that embody and reinforce these values in daily operations.

Implement proactive management strategies for R&D

Regular check-ins and proactive management are essential for the sustained success of integrated R&D teams. 

Agile methodologies, such as Scrum and Kanban, have been widely adopted by leading tech companies like Spotify and Facebook to manage their R&D projects. Implementing these methodologies, conducting retrospectives, and fostering a feedback loop contribute to continuous improvement and adaptability.

How can we help you with R&D integration?

As a seasoned player in the software development arena for the past 15 years, nCube stands as a trusted ally in steering companies through the intricacies of research and development integration. Our extensive experience, marked by the successful launch of five R&D initiatives since 2019, positions us as a reliable partner for those seeking a seamless and efficient R&D integration process.

Proven experience in building R&D centers

nCube brings a wealth of experience to the table, having spearheaded the launch of multiple R&D initiatives since 2019. This track record underscores our commitment to not only understanding the dynamics of software R&D integration but also consistently delivering successful outcomes. Drawing from a diverse range of industries and project scopes, we leverage our experience to tailor integration strategies that align with your unique goals and challenges.

Access to specialized talent from LATAM and Central & Eastern Europe

One of nCube’s key strengths lies in our ability to connect companies with suitable specialists for their R&D hubs, particularly from the dynamic regions of Latin America (LATAM) and Central and Eastern Europe (CEE). Our extensive network and partnerships ensure that you have access to a pool of highly skilled professionals, fostering a collaborative environment that fuels innovation within your R&D teams.

READ ALSO: An R&D Hub for Your Business: 10 Best Locations

Rapid and efficient launch processes

Time is of the essence in the fast-paced world of technology. nCube is adept at facilitating fast R&D launches, ensuring that your integration journey is not only efficient but also timely. Our streamlined processes and proactive management approach expedite the setup of your R&D operations, allowing you to focus on harnessing the full potential of your team from the outset.

Scalability tailored to your needs

Understanding the dynamic nature of businesses, nCube offers scalability solutions that adapt to your evolving requirements. Whether you are in the initial stages of R&D integration or planning for future growth, our strategies are designed to be flexible, ensuring that your R&D initiatives can scale seamlessly in response to market demands and organizational expansion.

Comprehensive HR Presence in CEE and LATAM

Navigating the complexities of human resources is integral to successful R&D integration. nCube provides comprehensive HR support with a localized presence in both CEE and LATAM. This ensures that your recruitment, employee relations, and cultural alignment efforts are conducted with an understanding of the specific dynamics and nuances of each region, fostering a harmonious and productive work environment.

At nCube, we understand that R&D integration is not a one-size-fits-all endeavor. With our proven experience, access to specialized talent, efficient launch processes, scalability solutions, and comprehensive HR support in key regions, we are your dedicated partner in ensuring that your software R&D team integration journey is not only successful but also sets the stage for continuous innovation and growth.

Our commitment to understanding the dynamics of R&D integration is not just theoretical; it’s backed by tangible outcomes. Leveraging diverse industry experiences, we tailor integration strategies that align seamlessly with your organizational goals. Our approach prioritizes the heart of innovation—the people. Whether referred to as individuals, professionals, or experts, they are the driving force behind our collective success.

Contact us to learn more about integrating seasoned professionals into your team and launching a robust R&D center.

Research and Development (R&D) centers stand as pivotal drivers of the future within the technology sector. These centers are hubs of innovation, propelling companies to substantial advancements in their pursuits, and fostering the development of novel technologies, projects, and products. Furthermore, they serve as employment catalysts, contributing to a reduction in the unemployment rate within the population. Such an effect could not have failed to receive a corresponding treatment from the governments around the world.

In 2022, 33 of the 38 OECD countries granted favorable tax treatment to industry R&D spending at the central and/or subnational government level, up from 19 OECD countries in 2000. It seems like opening an R&D center is lucrative on both ends: while the center helps your business innovate and grow, the government supports you with improved taxing conditions. In this post, we will provide an overview of R&D tax incentives specific to the LATAM and Central Europe regions. We will focus on the specific incentives offered by the governments of Chile, Argentina, Poland, Romania, and other countries. Let’s kick off!

What is a research and development tax credit? 

A research and development (R&D) tax credit is a government measure to encourage companies to engage in research and development initiatives. The purpose of these tax credits is to stimulate innovation, technological advancement, and economic growth by providing financial relief to companies engaged in qualifying R&D endeavors. 

READ ALSO: Research and Development Centers in LATAM: Key Hubs, Pros, and Cons

Types of projects that can qualify for research and development tax credit

Eligible endeavors for the Research and Development tax credit encompass a range of activities, such as the creation or enhancement of:

  • Products (both tangible and intangible);
  • Processes (including manufacturing and technical processes);
  • Software (designed for external or internal use);
  • Formulas;
  • Techniques;
  • Inventions (activities subject to patentability).

The R&D tax credit covers a diverse range of eligible activities, such as developing and enhancing products, improving manufacturing processes, creating software for sale or licensing, and experimenting with formulations. These activities aim to drive innovation, enhance efficiency, and contribute to the overall advancement of technology and processes. The credit recognizes the value of research and development across various industries, encouraging businesses to invest in inventive projects and technological improvements.

Global R&D incentives in LATAM and Central Europe

Argentina

Measures like the knowledge-based economy, biotechnology, R&D, and training programs are the main integration points for Argentina’s tax policy pertaining to R&D incentives. They provide tax credits, exemptions, accelerated depreciation for income tax, and reimbursements for value-added taxes. Despite their existence for several years, utilization by taxpayers remains underexplored, partly due to caps imposed by the national government based on annual budgets. 

Law No. 23,877 introduces a competition-based Research and Development tax credit system, capped annually, providing entities with a certificate worth 10% of R&D payments, up to US $83,000. The program covers projects like business plan development, human resources training, and R&D initiatives. In Buenos Aires, the Technology District encourages innovation by granting exemptions on local taxes, replicated in other provinces like Buenos Aires, Cordoba, and Santa Fe to foster technology and software activities.

READ ALSO: Your Guide to Nearshoring in Argentina

Brazil

The Brazilian Government has been a staunch advocate of Research and Development (R&D) activities since 2006, offering robust tax incentives to drive technological and product innovation. These incentives include expedited depreciation on qualified R&D assets, financial support for new R&D investments, and super deductions ranging from 160% to 200% for acceptable R&D expenses. The R&D deduction applies to costs paid by Brazilian companies and emphasizes improved R&D operations along with technological and product innovation. Taxpayers are required to produce tax clearance certificates, and even though R&D deductions are non-refundable, they do promote innovation in the nation. 

Manufacturers of digital products are eligible to receive a tax credit of up to 12.97% of incentive product billing. Although Brazil lacks dedicated technology or innovation zones offering incentives for research and development, the government’s all-encompassing strategy attempts to promote and strengthen R&D projects in many industries.

Chile

In Chile, the government actively supports Research and Development investments through a multifaceted approach. For pre-certified R&D cash expenditures, corporate taxpayers receive a 35% tax credit, with the remaining amount being deductible as an expense. To further promote technological innovation, the Ministry of Economy, through the Chilean Economic Development Agency (CORFO), implements programs attracting entrepreneurs, fostering R&D investments, and connecting Chile to global technology markets. The tax credit, which offers flexibility and annual caps, is applicable to R&D-certified contracts with registered research centers as well as internal R&D projects. 

Various incentive programs, such as the Technological Contracts for Innovation and the Technological Prospecting Program, further encourage R&D initiatives by providing co-financing and support for technological development. The overarching plan of the government is to establish Chile as a center of innovation and entrepreneurship for the LATAM region.

READ ALSO: Why Outsource Software Development to Chile?

Colombia

Colombia has witnessed a surge in interest and project approvals for Research and Development (R&D) investments, driven by tax benefits. The 2016 tax reform plan replaced the previous 175% tax deduction with a 25% tax discount, fostering increased participation. R&D activities in Colombia align with OECD definitions, emphasizing systematic efforts to augment knowledge. The government, through the Ministry of Science, Technology, and Innovation (MCTI), offers benefits such as a 25% tax discount and a 100% tax deduction for eligible projects. 

Notably, the country aims to elevate science, technology, and innovation investments to 1.5% of GDP, reflecting a strategic shift. Various initiatives include discounts, VAT exemptions for imports, and tax deductions for income derived from research and development projects. Eligible projects include science and technology investment, software engineering, patents, and strategic programs. While there are no specific technology or innovation zones, Free Zones enjoy special benefits, including a 20% rental rate and exemptions.

Mexico 

The Mexican government fosters technological innovation via the R&D Tax Credits Program, overseen by the National Council of Technology & Science (CONACYT). Annually, the council releases public calls for financial assistance or fiscal incentives in the form of tax credits, available only during specific periods. As outlined in the 2020 Mexican Income Law, a 30% tax credit is provided for R&D expenses and investments, computed based on the three-year average. Eligible companies incorporated in Mexico can claim up to MXN 50 million, with expenses covering external investigator fees, fieldwork, experimental tests, training, equipment purchases, and more. 

Fulfilling administrative prerequisites entails submitting technical, legal, and fiscal documentation. Oversight of the incentive is entrusted to a dedicated committee, which includes representatives from CONACYT, the Ministry of Economy, the Mexican tax authority, the Tax Ministry, and the Mexican presidency. It’s noteworthy that there are no designated technology or innovation zones offering R&D measures in Mexico. Overall, all the measures aim at enhancing productivity and competitiveness as well as attracting investments while contributing to the domestic market.

READ ALSO: An R&D Hub for Your Business: 10 Best Locations

Poland

In recent years, Poland has undergone significant changes in its R&D grants and incentives landscape, seeking to attract new investors and spur further innovation among existing companies. Notable transformations include enhanced R&D tax relief, allowing for the deduction of up to 100% of eligible expenses associated with research and development activities. This mechanism encompasses a wide array of costs, including wages, materials, depreciation, and administrative expenses related to patents. The introduction of the Innovation Box regime in 2019 further sweetens the deal, offering a preferential 5% tax rate on profits derived from qualified intellectual property rights.

Additionally, Poland’s R&D incentives extend to cash grants from EU funds, reimbursing a substantial portion of R&D costs. Through initiatives such as the Multi-annual Support Program (MASP), providing monetary incentives for extensive and strategically vital endeavors, and the Polska Strefa Inwestycji (PIZ), granting Corporate Income Tax (CIT) exemptions spanning 15 years across Poland, the country actively encourages fresh capital injections. The all-encompassing strategy, which combines financial grants, tax breaks, and assistance initiatives, presents Poland as a more appealing and competitive location for business owners and organizations involved in R&D.

READ ALSO: Nearshoring to Poland: Similarities and Differences with Ukraine

Romania

Romania has implemented robust R&D incentives, including a corporate income tax exemption for exclusive R&D engagement lasting ten years. Despite lacking comprehensive guidelines, this incentive aligns with a 50% super deduction for qualifying R&D expenses, complemented by accelerated tax depreciation for the first year of asset use. Since August 2016, salary income tax exemption targets have been applied to R&D and technological development activities. Romania’s four distinct R&D incentive programs enhance its appeal. However, clarity in legislative provisions and application norms is still to be found. Eligibility requirements ensure beneficiaries focus on specific R&D activities, fostering an environment conducive to innovation and technological advancement.

READ ALSO: IT Companies in Romania: Expertise and Client Focus

Czech Republic

The Czech Republic’s R&D landscape has witnessed significant enhancements through legislative amendments effective in 2019. The Income Tax Act, amended in April 2019, aims to simplify R&D deduction rules and reduce administrative burdens. Notably, a pre-project notification requirement has been introduced. The Investment Incentives Act amendment, effective in September 2019, brings changes in approval processes, especially for small and medium-sized enterprises. The country offers a distinctive R&D deduction, allowing double deductions for eligible costs, with a potential increase to 110% for incremental expenses. 

In addition, R&D centers can benefit from subsidies for employment creation, a ten-year corporate income tax vacation, and real estate tax deductions. National R&D programs and European Structural and Investment Funds (ESIF) provide additional funding options in the form of cash awards for different sectors. Eligibility requirements for R&D deduction encompass a notification before project commencement, while R&D center incentives include conditions related to investment and job creation.

Slovak Republic

The country has significantly revamped its investment incentive framework to foster an investment-friendly atmosphere. Amendments include a clarified definition, stricter deadlines, and a robust approval process. The Income Tax Act implemented a “patent box,” providing exclusions for the commercial use of chosen intangible assets. The super deduction for Research and Development (R&D) costs surged to 150% in 2019 and further increased to 200% from 2020, enabling a significant reimbursement. Despite previous undercapitalization, the Slovak Republic

 has attracted foreign direct investment, stimulating innovation. 

The 2009 Research and Development Incentives Act provides tax credits or cash grants to promote R&D. With an additional incremental deduction, the “super tax deduction” enables a 200% deduction for eligible R&D costs, returning 42 euro cents for every EUR1 invested. Along with guidance for future investments and particular qualifying requirements, the Slovak Republic also provides income tax relief and R&D subsidies. Through the corporate income tax return, the patent box regime offers partial tax advantages for income from intangible assets generated in the country.

Hungary

Hungary’s government actively supports R&D investments through a comprehensive incentive regime. With the corporate income tax (CIT) rate reduced to 9% in 2017, the country provides a lucrative and tax-efficient environment for R&D initiatives. The incentive system includes a VIP Cash Grant, offering nonrefundable cash grants for investments; a Corporate Tax Credit, reducing CIT liability; and a Double Deduction of R&D Costs, allowing deductions twice for CIT purposes. 

Additionally, Hungary offers tax credits for employing specific professionals. The Corporate Tax Exemption, allowing a 50% deduction on royalty revenue, and the Reduced Local Company Tax Base and Innovation Contribution Base permit the deduction of research and development expenses from the local business tax base. Eligibility requirements vary, with state aid qualifications for certain incentives and minimum investment values applying in specific cases.

READ ALSO: How to Source Hungarian Developers

Summary

R&D is fundamental for global economic growth, so LATAM and Central Europe governments take various measures to encourage R&D taxes credits within their borders. These procedures are critical for fostering innovation, with specific programs ranging from lower tax rates for innovative revenue to support for intellectual property protection and collaborative relationships between firms and academic institutions.

Whether you’re new to the intricacies of R&D or an experienced professional familiar with regional tax credits, nCube guides you seamlessly into the dynamic realm of technology. We are a seasoned provider of R&D development centers in CEE and LATAM, so you can partner with our knowledgeable teams, dedicated to turning your aspirations into reality. With over 15 years of expertise in software development, nCube can be the reliable provider you’ve been looking for. Reach out to us, and let’s innovate together!

The mere mention of an ‘R&D Engineering Center’ often conjures images of a massive and daunting entity to many. A common perception is that it’s challenging to establish, resource-intensive to maintain, and frequently results in substantial time and financial losses. While these concerns are justified, at least to some extent, it’s not always the overarching reality. Indeed, opening and managing such a center requires careful consideration. However, with a savvy approach and the strategic selection of a seasoned R&D service provider, success is achievable. The key lies in navigating the complexities wisely and making informed choices, ensuring that the venture becomes a triumph rather than a struggle.

In 2022, total worldwide R&D expenditures amounted to over 2.5 trillion US dollars (after local currencies are adjusted for purchasing power parity). With R&D spending of roughly 680 billion US dollars and 550 billion US dollars in 2022, the United States and China are by far the two greatest spenders. 

As R&D expenditures go up each year, it’s evident that businesses are increasingly recognizing the imperative of investing in cutting-edge technologies and revolutionary products. To stay competitive, the time to act is now. If you sense that your business is ready for this transformative leap, then this article is for you. We unravel the intricacies and specifics of initiating your journey toward establishing a successful R&D engineering center.

READ ALSO: Research and Development Centers in LATAM: Key Hubs, Pros, and Cons

Why do you need R&D engineering?

Investing in R&D engineering is indispensable for companies aspiring to stay competitive, foster innovation, and achieve sustainable growth. Also, it is about how companies innovate new technology and conduct research to generate new products and services. R&D enables organizations to stay ahead of the competition and plan for the future. 

The motivations for innovation differ across industries. Yet, the opportunity to use widespread technologies like AI to improve efficiency and deliver better products to customers has become a new driver for businesses. With the increasing complexity of products due to the merging of hardware and software, there is a growing need for businesses to invest in research and development expertise.

The term “R&D engineering” encapsulates the dynamic and strategic pursuit of technological advancements. Here are several key reasons why incorporating R&D engineering into your business strategy is essential:

1. Innovation and product development:

Companies like Apple continuously invest in R&D engineering to innovate their product lines, evident in the evolution from iPods to iPhones. This innovation not only attracts customers but also sets industry standards.

2. Competitive edge:

In the automotive sector, companies like Tesla dominate the market by leveraging R&D engineering to pioneer electric vehicles. This technological edge positions them as industry leaders, driving market share and profitability.

3. Adaptation to market trends:

With the rise of AI, companies like Google invest heavily in R&D engineering to develop AI-powered solutions, ensuring they remain at the forefront of emerging market trends.

4. Cost reduction:

Aerospace companies like Boeing continually invest in R&D engineering to enhance aircraft design and fuel efficiency. Not only does it align with sustainability goals but also contributes to long-term cost savings.

5. Risk mitigation and future-proofing:

Pharmaceutical companies like Johnson & Johnson allocate significant resources to R&D engineering to mitigate risks associated with patent expirations. Continuous innovation ensures a robust pipeline of new drugs, reducing reliance on existing products.

6. Technological leadership:

The semiconductor industry exemplifies the importance of R&D engineering, with companies like Intel consistently pushing the boundaries of technology. This leadership translates into market dominance and influence over industry standards.

7. Meeting regulatory and environmental standards:

In response to increasing environmental regulations, energy companies invest in R&D engineering to develop cleaner and more sustainable energy solutions. Not only does it ensure compliance but also aligns with corporate social responsibility initiatives.

8. Talent attraction and retention:

Tech giants such as Microsoft emphasize R&D engineering to attract top-tier talent. The promise of working on cutting-edge projects and contributing to technological advancements is a powerful incentive for skilled professionals.

In essence, incorporating R&D engineering into your business strategy is an investment in future success. It enables companies to lead in innovation, navigate industry changes, and build a resilient foundation for sustained growth. Whether it’s developing groundbreaking products, staying ahead of market trends, or mitigating risks, R&D engineering is the cornerstone of strategic business development in today’s rapidly evolving technological landscape.

READ ALSO: Benefits of Business Process Outsourcing for Your Company

How to operate an R&D engineering center?

Operating an entire R&D engineering center is no small feat. It demands a wealth of knowledge, a team of seasoned professionals, and substantial resources. While every case presents its unique challenges, adhering to a set of fundamental principles can transform this intricate undertaking into a lucrative venture. By doing so, not only do you propel the advancement of your company but also contribute to the greater good. 

Step 1: Clearly define goals and objectives

In the initial phase of establishing an R&D engineering center, the paramount step is to meticulously outline your goals and objectives. Let’s delve into a hypothetical scenario to better illustrate this critical process.

Example:

Consider a visionary tech company dedicated to revolutionizing renewable energy solutions. The goals of their R&D center might include developing ultra-efficient solar panels, enhancing energy storage systems for prolonged use, and devising sustainable manufacturing practices. By explicitly defining these objectives, the company sets a clear direction for its research efforts, ensuring that each innovation aligns with its overarching mission of advancing renewable energy technology.

Step 2: Choose a location for your R&D

The location of your R&D center plays a pivotal role in its success. Let’s explore a fictional example to underscore the significance of this decision.

Example:

Imagine that the company has chosen to focus on AI applications in renewable energy. Opting for a location like Eastern Europe provides access to a thriving tech ecosystem, where talent, ideas, and technological advancements converge. Factors such as proximity to top-tier AI experts, collaboration opportunities with neighboring tech giants, and exposure to the latest breakthroughs position the R&D engineering center for unparalleled success.

Step 3: Hire a provider in the location of your choice

Selecting the right service provider is a strategic move that can significantly impact the efficiency of operating your R&D center. Let’s consider a hypothetical provider to illustrate this point.

Example:

The company partners with a renowned provider of R&D engineering center with a proven track record across multiple industries. With expertise in renewable energy and a deep understanding of the local market dynamics, the service provider becomes an invaluable ally, streamlining the setup process and providing insights tailored to the unique challenges and opportunities of the chosen location.

Step 4: Together with the provider you define the structure of your R&D

Collaboration with your chosen provider is key to shaping the organizational structure of your R&D center. Let’s explore a hypothetical team structure to illustrate this collaborative process.

Example:

Working closely with the service provider, the company defines a multidisciplinary team structure for its AI-focused R&D engineering center. This includes roles such as robotics engineers, machine learning specialists, and automotive design experts, each contributing their expertise to the overarching goal of advancing AI applications in renewable energy. This tailored structure ensures that the team’s skill sets align seamlessly with the innovative objectives of the company.

Step 5: The provider supplies an office space 

The physical environment in which your R&D team operates is crucial for fostering creativity and collaboration. Let’s paint a vivid picture of the ideal workspace.

Example:

The service provider provides the company with a state-of-the-art office space, featuring cutting-edge laboratories for hands-on experimentation, collaborative workspaces designed to encourage idea exchange, and recreational areas to nurture a culture of innovation. This thoughtfully designed workspace becomes the incubator for groundbreaking ideas, offering the ideal setting for the R&D team to push the boundaries of renewable energy technology.

Step 6: Operations transfer to make R&D your own company (including IP, employees, knowledge base, and other assets)

As your R&D engineering center matures, transitioning operations from the service provider to your company is a pivotal step. Let’s explore a hypothetical scenario to illustrate this transformation.

Example:

As the company’s solar technology innovations take shape, the organization ensures a seamless transfer of intellectual property rights from the service provider. This includes the integration of skilled researchers, who have been instrumental in these breakthroughs, into the company’s team. The knowledge base accumulated during the R&D process becomes a vital asset, positioning the company to drive further innovation in the renewable energy sector as a part of your organization.

Step 7: Potential scaling to include other roles like local HR

Scaling your R&D center involves considering additional roles to support its growth. Let’s envision a scenario where the company expands its team to include local HR specialists.

Example:

As the Advanced Engineering R&D Center gains momentum, the company strategically expands its team to include local HR specialists. These professionals play a crucial role in fostering a positive work culture, supporting talent acquisition for specialized roles, and facilitating the integration of diverse skills within the R&D team. The term “Advanced Engineering R&D Center” underscores the cutting-edge nature of the company’s research efforts, attracting top-tier talent and solidifying its position at the forefront of innovation in renewable energy technology.

How can we help you set up an R&D development hub in CEE and LATAM?

As we already mentioned, embarking on the journey to establish an R&D engineering center in the CEE or LATAM regions can be a formidable task, but with nCube as your trusted provider of R&D engineering, the process becomes streamlined and efficient. Here’s how we can assist you:

1. Extensive experience:

With a track record of launching five R&D centers since 2019 and boasting 15 years of expertise in software development, nCube brings a wealth of experience to guide you through the complexities of establishing a successful R&D engineering center.

2. Tailored specialists:

At nCube, we understand the critical role that specialists play in the success of your R&D hub. Our team is adept at identifying and providing suitable experts from LATAM or CEE who align precisely with your project requirements, ensuring a skilled and dedicated workforce.

3. Efficient launch:

Time is of the essence in the fast-paced tech industry. With nCube, expect a swift and efficient launch for your R&D engineering center. We leverage our experience to streamline processes, reducing the time it takes to go from conceptualization to active operations.

4. Scalability:

Recognizing the evolving nature of R&D initiatives, nCube ensures that your center is built with scalability in mind. Whether you plan to start modestly and expand gradually or envision rapid growth, our solutions are designed to accommodate your scalability requirements seamlessly.

5. Global HR presence:

nCube extends its support beyond the technical aspects by providing a robust HR presence in both CEE and LATAM. This ensures that your R&D team not only consists of top-tier technical talent but also operates within a supportive and efficient human resources framework.

Whether you are venturing into the CEE region or exploring the vast potential of LATAM, nCube is your reliable partner in establishing and running a successful R&D engineering center. Let’s connect.

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