The old 'offshore development' model — a body-shop in India billed by the hour, managed at arm's length by a delivery manager, treated as fungible capacity — is in steep decline. It produced poor outcomes for both sides. Modern foreign companies hire Indian engineers the way they hire anyone else: direct employment (via EOR or own subsidiary), integrated into the product team, with the same career trajectory as any other hire.
Three models, ranked by what works
| Model | How it works | Strengths | Weaknesses |
|---|---|---|---|
| Vendor / staff augmentation (legacy) | Outsourcing firm provides developers on time-and-material basis | Fast to start | Low quality, high churn, no ownership |
| Captive offshore center | Foreign parent sets up Indian subsidiary; manages directly | Full control, IP clean, retention | Setup cost, ongoing operational load |
| Direct remote hiring (modern) | Hire individual engineers directly via EOR / subsidiary | Best talent, best retention, scales | Requires the foreign parent to actually manage people |
Why the vendor model lost
- Vendor margins (typically 30-50%) leave less for the actual engineer, who knows it.
- Vendors rotate engineers to optimise their own utilisation — destroying project context every 6-9 months.
- Indian engineers prefer direct employment with a foreign brand — better comp, better career, better optionality.
- Vendor IP arrangements are often weak; original code created by the vendor's engineers may not transfer cleanly to your IP.
- Modern remote tooling (Slack, Linear, GitHub, video) makes direct management of remote teams genuinely workable.
Captive offshore center vs direct remote hiring
A captive center is your own Indian subsidiary with a physical office and a managing team. Direct remote hiring is hiring individuals one at a time without a physical center. Both put the engineer on your subsidiary's payroll.
- Choose captive when: headcount > 30, you want a physical office for in-person culture, you're scaling rapidly and want one geographic hub.
- Choose direct remote when: you're under 30, you want geographic spread (engineers from multiple Indian cities), the engineering culture is comfortable async-first.
Captive center setup or direct hires — one consultant
FastLegal supports both models. Captive — full subsidiary setup, office lease facilitation, HR / payroll / compliance. Direct remote — EOR for under 15, subsidiary for above. Your consultant handles the legal layer regardless of model.
What modern foreign companies actually do
- Start with 2-5 senior Indian engineers via EOR. Treat them as full team members from day 1 — same Slack, same standups (within reason), same product roadmap inputs.
- Grow to 15-20 by hiring individual ICs through the same EOR. Begin treating India as a 'team', not 'remote individuals'.
- At 15-20, start subsidiary setup. Continue hiring in parallel under EOR. Migrate to own entity over 60 days.
- Once on own entity, start optional in-person initiatives — quarterly offsites, optional office in Bengaluru, founder visits.
- At 40+, consider physical hub office in Bengaluru if engagement metrics support it. Some teams stay fully remote even at 100+; either works.
Frequently asked questions
Is the vendor model ever the right answer?+
Rarely. For very short engagements (single 3-month project, no IP), vendor model can be expedient. For anything ongoing, direct employment wins.
What about Global Capability Centers (GCCs)?+
GCC is corporate-speak for captive offshore center. Same model. Foreign-headquartered companies running 50-500 engineers in India typically call their setup a GCC.
Can we use a vendor for some roles and direct employment for others?+
Yes — common pattern. Core product roles direct, ancillary (DevOps, QA support, content moderation) sometimes via vendor. Most companies eventually direct-hire even the ancillary roles.
How does direct hiring affect IP?+
Better than vendor. The engineer's employment contract assigns IP to your subsidiary; clean assignment. Vendor relationships need separate IP assignment in the master service agreement, which is often weaker.
Stop reading circulars. Start running clean payroll.
Every FastLegal plan ships with a dedicated payroll consultant — a real human who runs your PF, ESI, PT, TDS and Form 16 issuance, configured to your salary structure, your state, and your hiring plan. You sign off. We do the rest.