India has become a global hub for offshore software development centres. Companies from the US, UK and Europe are setting up their offshore development centre or directly starting with the process of subsidiary company formation in India.
The reason for major companies is choosing to offshore to India because they can be guaranteed of receiving high-quality outcomes, better talent, low costs, and quick turnaround times.
But the major concern comes in place when the company set up the offshore development centre in India, there is always a middleman in between the employees (software developers) and you.
Just because of this middleman partner, companies are not able to offer better benefits to the employees who are basically working for them.
Most of the partner companies or offshore companies pay very little amount to the developers but charge a huge amount to their clients. This is why the offshoring cost increases.
We understood this scenario after having a discussion with one of our clients, who was earlier using offshore services to develop their software in India.
They were outsourcing these development activities for the past 3 years, and the cost for the same was increasing exponentially every year.
The client knew that employees’ salaries do not get an increase at this pace, nor the employees were getting paid as per their satisfactory level.
Hence, they decided to subsidiary company set up in India and hire those employees on their own payroll.
The process of subsidiary company registration in India was quite easy, and we at BBNC helped them with the documentation, company formation, opening an India bank account, and taking care of monthly accounting and payroll.
Benefits Of Subsidiary Company Formation in India
Direct Connectivity With The Employees.
In our previous example, we understood that how having an offshore development team can cost you more when there is a partner company in between.
On top of that, you can’t really compensate the employees directly in the offshore model.
But when you have a subsidiary company in India you can hire employees on your own payroll and offer them benefits as per their performance and your own company policies.
In this case, employees tend to work harder and provide better results to the company.
Access To New Markets
If you have a product or service that can be offered in the Indian market, you will not be able to conduct the business operation in the case of offshore.
Incorporating a subsidiary opens up the opportunities and possibilities of conducting business activities in India without relying on a partner company.
If you do a simple google search for the salary structure of Indian software developers. You will understand that it is almost 60-70% lesser than what you will be paying to an offshore partner in India.
For those same employees, if you hire them on your own payroll even if you pay them 10-20% extra you will still be saving 40-50% more.
Access To Local Knowledge
By establishing a legal entity in a foreign country, a business can build new business relationships with local partners and set up joint ventures that take advantage of localized knowledge.
Access To Technical Skills
Many foreign countries – increasingly in Asia – provide great access to advanced technology and new ways of thinking about technical issues. For example, India offers a high level of technical knowledge that continues to attract foreign investment.
Now you understand the benefits of setting up a subsidiary company in India over an offshore development centre. But let’s understand, what the challenges are?
Basically, setting up a subsidiary company in India means you will be legally registering a company. Which requires you to meet the compliance requirements, labour law requirements, taxation, and accounting requirements.
These compliances seem to be a huge deal, but don’t worry! That’s where we come into the role and help you with the same.
Compliance, accounting, payroll and audit costs in India are cheap as well, compared to the other developed and developing nations. So, the legal cost will not be huge when you are starting and operating a subsidiary in India.
Now the main question comes that “How to open subsidiary company in India?”
Most of the blogs and articles on the internet tell that subsidiary company registration in India is quite a complex and time-consuming process.
If you had asked me the same questions 10 years back, I would have said YES, but now the situation is not the same.
10 years back when a foreign company wanted to set up a subsidiary in India, it was quite challenging due to the Indian laws and regulations.
But now it is a smooth process and does not even require you to travel to India to do that. The subsidiary can be registered within 15 to 20 days. All thanks to the Indian government working towards the initiative “Improving ease of doing business in India”.
Setting up a subsidiary company in India over an offshore development centre is a major investment. But this investment can deliver excellent results for your business, with some important benefits to consider.
We hope our blog post has given you some great advice on the benefits of setting up a subsidiary company over an offshore development centre in India. If you have any questions or would like to discuss this further, please contact us today by calling +91 86186 59640. We are always happy to help!