What is a Center of Excellence in Software Development

coe software

As someone who has conducted extensive research on startups and high-growth software company, I understand that innovation is a crucial component of a company’s success. I also know, however, that innovation calls for an extravagant time-tango and resource-rumba duet, meaning that making it happen can be difficult at any stage of a company’s growth.

To address this challenge, many companies establish an offshore innovation R&D Center. In this article, I’ll shed some light on what a Center of Excellence (COE) is and how it can help turbocharge your research and development division to boost creativity and productivity in your software development efforts.   Plus, as an added bonus, I’ll share my insider tips on how to setting up your own offshore CoE.

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What is a CoE in Software Development?

Generally speaking, the term “Center of Excellence” is used to describe a facility or division that has a particular area of focus or expertise.

In the software development industry, a Center of Excellence is a dedicated software development team – from product owners to software engineers to QA and more– that act as an autonomous unit to drive innovation. That’s why you will also hear them referred to as Software Development Centers of Excellence (SDCoE) as well.

The idea is that by having a central location for software development, companies can save money and time while simultaneously improving the quality of their software products. Most companies choose to locate their CoE offshore in regions –like Eastern Europe or Latin America – that offer a lower cost but the same level of technical expertise.

center of excellence

Software Development Centers of Excellence are responsible for a lot more than just writing code. They also play a vital role in the planning, designing, and testing of software applications. In addition, SDCoEs often provide training and support services to help other developers stay up-to-date on the latest best practices. 

As a result, SDCoEs play a crucial role in ensuring that software applications are well-designed, reliable, and user-friendly. While the specifics of what SDCoEs do can vary from organization to organization, their overall goal is always to promote excellence and innovation in software development.

A Center of Excellence also provides infrastructure and tools to help development teams work more efficiently. 

Here is a brief overview of the main components included in most Software Development Centers of Excellence.

Main Types of Software Development Centers of Excellence

There are four main types of Software Development Centers of Excellence: Corporate, Government, Academic, and Open Source.

  • Corporate software development centers are usually created by startups and high growth companies in order to centralize their software development efforts (particularly those focused on innovation).
  • Government software development centers are usually created by national governments in order to develop software for use by that government.
  • Academic software development centers are usually associated with universities and research institutes.
  • Open source software development centers are usually growed by volunteer communities of developers.

Each type of center has its own strengths and weaknesses. For example, corporate software development centers tend to be very well funded but may be less flexible than other types of centers.

Government software development centers may be more accountable to the public but may have less funding than other types of centers. 

Academic software development centers may be more innovative but may be less focused on practical applications, while open source software development centers may be more collaborative but may be less organized.

If You Like The Sound of a Center of Excellence But Need a Pro to Get You Started, TurnKey is Your Best Bet.

The Center of Excellence Model: Two Main Principles

The Center of Excellence (CoE) model is a framework that software companies can use to improve their performance. 

The model has two main principles: 1) Focus on a few key areas and become the best in those areas, and 2) continuously learn and improve. 

As it relates to the first principle (be the best in a few key areas), most CoE experts recommend that companies first identify the competencies they are most in need of and then invest heavily in those areas. For example, if a company really needs to infuse AI in its product, then the CoE should be focused on building world class AI capabilities.

In terms of continuously learning and improving, companies should establish a feedback loop so they can learn from their mistakes and constantly improve their performance. By following these two principles, organizations can use the CoE model to improve their overall performance.

The Five Main Reasons Companies Use a Center of Excellence Approach

Once primarily the domain of large corporations, more and more startups and high growth software companies are turning to offshore CoEs to help them compete in today’s global economy. 

Here are five key reasons why companies use offshore CoEs in software development.

benefits of coe

1). Centralize knowledge management

As the business cliche goes, knowledge is power. But what happens when that knowledge gets spread too thin? If too many people are responsible for managing it, the risk of losing track of important information increases. That’s where Centers of Excellence come in. 

By centralizing knowledge management within a specific team or department, companies can reduce the risk of critical information falling through the cracks.

In addition, Center of Excellence can help improve the efficiency and accuracy of knowledge management processes. By streamlining these processes, companies can save time and money while ensuring that critical information is always readily available.

2). Improve product quality

When it comes to improving the quality of software development, Software Development Centers of Excellence (SDCoEs) are a key piece of the puzzle. By creating an environment that is focused on excellence and continuous improvement, SDCoEs help to ensure that software development is delivered on time and meet or exceed customer expectations. 

In addition, by sharing best practices and lessons learned across the organization, SDCoEs can help to raise the overall level of quality for all software development initiatives. As a result, companies that invest in establishing an SDCoE can expect to see a significant return on their investment.

3). Foster professional growth among employees

SDCoEs not only help a company optimize its agile software development process, but they also help foster professional growth and development among employees.  This provides staff with an ongoing opportunity to improve their skills and knowledge. 

As a result, SDCoE developers are better equipped to handle the challenges of the software development process. In addition, a SDCoE can also help to improve communication and collaboration among employees. By promoting a culture of sharing best practices and knowledge, employees are able to work together more effectively to deliver high-quality software products.

4). Accelerate product development velocity

As anyone who’s ever been involved in software development knows, timelines are often one of the biggest headaches. There are always unforeseen delays and unexpected problems that crop up, no matter how well you plan. That’s where a R&D Center can help. 

By centralizing all of the resources and expertise needed to develop and deploy software, an SDCoE can help quicken software delivery timelines. By having everything in one place, you can avoid the need to coordinate between multiple teams and locations.

In addition, an SDCoE can also help to reduce duplication of effort and optimize processes. As a result, an SDCoE can be a powerful tool for improving the efficiency of software development.

5). Gain a competitive advantage

Companies are always looking for ways to gain a competitive edge. One way they can do this is by establishing Centers of Excellence. By bringing together experts in one area, companies can tap into a wealth of knowledge and experience that can be used to improve their products and services.

In addition, Centers of Excellence can also help promote creativity and innovation within a company. By encouraging employees to think outside the box and work together, Centers of Excellence can help companies develop new and better ways of doing things. 

As a result, it’s not surprising that more and more companies are establishing Centers of Excellence as a way to stay ahead of the competition.

TurnKey Uses a Unique Hiring and Onboarding Methodology That Helps Us Build Rockstar CoE Teams With Minimal Turnover.

Why create a Center of Excellence?

Creating a center of excellence is an important strategic decision that can have several advantages for Startup.  

By centralizing expertise, knowledge, and resources, CoEs aim to improve the quality and efficiency of operations. They often serve as a knowledge bank for the area they specialize in, focused on continuous improvement and honing expertise.

To further appreciate their significance, let’s explore this example from the real world. Headspace, a pre-IPO company that provides a comprehensive mental healthcare platform. Despite having a large US-based development team, Headspace faced challenges in attracting more top development talent locally at a fair price.

Recognizing the need for a solution, Headspace partnered with TurnKey to establish an R&D innovation center of excellence in Mexico. This center of excellence allowed the company to not only attract quality talent in the form of Python and Mobile Engineers but also to do so quickly and efficiently. In fact, the first round of hires for the center was made within 30 days of the contract being signed, and they were onboarded shortly thereafter.

The success of this venture was such that the initial plans for the center were expanded based on early accomplishments. In less than two months, TurnKey was able to build out the first team for Headspace. The quality of the engineers found and the speed with which they were sourced surpassed expectations, proving the immense value of creating a center of excellence.

Reasons Why Companies Choose TurnKey as Their CoE Partner

Clients choose TurnKey to create their software development innovation centers due to the company’s extensive experience and expertise in creating offshore dedicated development teams. TurnKey has a proven track record of establishing successful innovation centers for various companies in different industries, including healthcare, finance, and insurance.

TurnKey’s boots-on-the-ground presence along with decades of experience building and scaling teams, mitigates against most of the cons people typically associate with offshore development (lack of transparency and high churn), while offering most of the pros (similar if not better quality of talent than in the US at a lower cost). That’s the Yourshore difference.
RyanFounder & CEO of ResNet

TurnKey serves as the strategic operational partner, providing the necessary infrastructure and expertise to establish and optimize your offshore research and development hub. While you maintain complete control, TurnKey offers its support to streamline the process and ensure that your offshore team operates efficiently.

TurnKey’s custom recruitment process and access to a large pool of pre-vetted talent enable clients to easily establish their offshore teams. The streamlined recruiting process saves clients time and money while ensuring that they have access to top-tier talent that aligns with their specific business needs.

Additionally, TurnKey provides its clients with a seamless integration process, ensuring that the offshore team is seamlessly integrated into the client’s existing operations. This level of integration enables clients to achieve faster results and increased productivity.

And finally, TurnKey’s dedicated support team offers 24/7 assistance to clients, addressing any concerns or issues that may arise during the process of establishing an offshore innovation center. By partnering with TurnKey, clients can benefit from TurnKey’s extensive expertise, save on labor and infrastructure costs, and create a high-performing offshore team that aligns with their unique business needs.

turnkey coe

How to Establish an Effective CoE for Your Startup or High Growth Company

Building a successful offshore CoE requires careful planning and execution. Here are some key tips we’ve learned from our many years of experience at TurnKey.

coe establishment

Step #1: Define the scope of the CoE

What are the CoE’s goals and objectives? What areas will it cover? Who will be responsible for it? This can be a difficult task, as there are many possible ways to organize a CoE. 

One common approach is to base the CoE around a specific industry vertical. This can be helpful if the company wants to focus on developing expertise in a particular area. 

Another option is to structure the CoE around a specific function, such as a technical expertise (like machine learning) or a product in your portfolio. This approach can be beneficial if the company wants to create a centralized repository of knowledge for that function. 

Ultimately, there is no right or wrong way to define the scope of a CoE. The most important thing is to choose an approach that will best meet the needs of the company.

Step #2: Create a governance structure

Now that you’ve defined your goals and objectives, it’s time to start thinking about how you’re going to govern your offshore Center of Excellence. There are a few different models you can follow, but a common thread is the importance of making sure that everyone has a voice in the decision-making process. 

One popular governance structure is the steering committee. This group is typically responsible for setting the direction for the Center of Excellence and making decisions about resource allocation.  The steering committee should be composed of staff within the CoE as well as folks from the broader product development organization back in headquarters.

Step #3: Find a team of development experts

Building a team of development experts is critical to the success of any Center of Excellence. The team should be composed of individuals with complementary skills and experience who can collaborate effectively. 

Additionally, the dev team should be able to provide expertise in all aspects of the center’s operations, from its strategic direction to its day-to-day operations. Furthermore, the team should be able to provide a mix of perspectives, including both customer and developer points of view. 

Not surprisingly, it can be a daunting task for startups to figure out how to find the right staff for their offshore CoE. But we have great news: we here at TurnKey are experts in building high performing Innovation Centers of Excellence.   We have deep experience in recruiting top developers to stand up and optimize your CoE. And every developer goes through a robust screening protocol to ensure they’re a perfect fit for your organization.

quote about coe

Step #4: Implement processes and procedures

When you’re setting up a Center of Excellence, it’s important to have well-defined processes and procedures in place. This will help to keep everyone on the same page and know what’s expected of them. It can also help to streamline operations and make your center more efficient. 

There are a few key things to keep in mind when you’re aligning processes and procedures. 

First, try to involve all stakeholders in the process. Second, keep it simple. It’s important to have a process that is easy to follow and understand. Third, be flexible. Things change, and your process should be able to adapt as needed.

Finally, establish metrics by which you can measure success. Without these, it will be difficult to know whether or not your efforts are actually making a difference.

Step #5: Monitor and evaluate performance regularly

It’s important to monitor and evaluate the performance of your CoE on a regular basis. This will help you identify areas that need improvement and make necessary adjustments. There are a few key metrics you should track:

Output: How much work is your CoE able to accomplish each month? This can be measured in terms of deliverables produced or tasks completed.

Quality: Are the deliverables produced by your CoE of high quality? This can be assessed through customer feedback, external evaluations, code peer reviews, or other means.

Efficiency: How efficiently is your CoE operating? This can be evaluated by looking at the ratio of input (e.g., hours worked) to output.


Flexibility: How flexible is your CoE in terms of being able to adapt to changes in scope, timelines, etc.? This can be gauged by how often changes are made to plan and processes, and how well the team handles unplanned work.

How TurnKey Can Help You Build an Effective Offshore CoE for Your Startup or High Growth Company

Given how important a Center of Excellence can be to a company’s software development efforts, we’ve invested heavily in all the resources needed to create high performing offshore CoEs for our clients.

To this end, TurnKey is your operational partner that:

  • Custom recruits your CoE development staff from scratch to ensure that you get the absolute best folks for the job.
  • Limits potential churn of your developers to ensure continuity and stability of your dev team.
  • Establishes a flexible team structure that can be scaled up or down easily as needed.
  • Handles all administrative and legal hassles.
  • Provides best practices for integrating the offshore CoE into the culture of the broader product development organization.
coe service

But as they say, the proof is in the pudding, so grab you spoon and dig into this real life example of the R1 company. This client requested us to scale the engineering team due to high product demand. They also needed to optimize the control over the development process and security infrastructure. In total, we hire 40 full time staff for:

  • UI/UX design,
  • DevOps & Infrastructure,
  • Implementation & Integration,
  • Customer-facing professional services,
  • Customer support.
TurnKey’s YourShore model allows us to easily integrate developers directly into our organization so that they are truly my team. I honestly forget most of the time that they aren’t working in the same building as me.
Anna AlisovaGeneral Manager, R1

Ready to Partner Up and Put All The Awesome Benefits of a CoE to Work for You?

What are the areas of expertise of a Software Development Center of Excellence?

A Center of Excellence in software development is responsible for developing and maintaining specific software applications, as well as for providing training and support to software developers. A Center of Excellence typically has a team of developers who are knowledgeable in a variety of software development topics, including programming languages, application development tools, and software development methodologies.

What is the benefit of a Software Development Center of Excellence?

When it comes to software development, there are usually a lot of moving parts. Developers have to take into account the operating system, the hardware, the code, and the user interface, just to name a few. This can make it difficult to keep track of everything and ensure that the product works seamlessly. That's where a Software Development Center of Excellence comes in. The SDCoE acts as a dedicated team within a company that is responsible for developing and maintaining a specific function or product.  By having a SDCoE, the development team is more focused on a set of problems and more efficient in delivering high quality software.

What are the risks of implementing a Center of Excellence?

There are a few risks to implementing a Center of Excellence for software development. One risk is that it can silo knowledge and best practices within the CoE, rather than sharing it across the organization. This can lead to other teams feeling like they are not part of the "inner circle" and create resentment. Another risk is that the CoE can become overloaded with work, leading to unrealistic expectations and burnout among team members. Finally, there is the risk that the CoE will become bureaucratic and inflexible, stifling creativity and innovation. However, these risks can be mitigated by having clear goals and objectives for the CoE, involving all stakeholders in its development, and making sure that it remains responsive to changing customer needs.

What is offshore global Centre of Excellence

An offshore Global Centre of Excellence (CoE) is a specialized and centralized hub, typically located in a lower-cost region or offshore location, that focuses on delivering high-value services, expertise, and support to a global organization. The primary objective of an offshore CoE is to drive excellence and innovation in specific domains or functions while optimizing costs.

Key characteristics and functions of an offshore Global Centre of Excellence include:

  1. Expertise and Specialization: Offshore CoEs gather a team of highly skilled professionals with specialized knowledge in areas such as technology, research and software development, data analytics, or any other domain critical to the organization's operations.

  2. Innovation and Best Practices: They serve as centers for innovation, staying updated with the latest industry trends, technologies, and best practices. Thanks to access to more affordable professionals, the company can hire the best experienced specialists.

  3. Cost Efficiency: By leveraging the cost advantages of offshore locations, organizations can reduce expenses while still benefiting from high-quality services and expertise.

  4. Global Collaboration: CoEs often collaborate with various business units and teams across different regions to drive efficiency, share knowledge, and provide support.

  5. Problem Solving and Continuous Improvement: They are tasked with identifying and addressing complex challenges within their domain, driving continuous improvement initiatives, and finding innovative solutions.

  6. Metrics and Performance Measurement: CoEs typically have key performance indicators (KPIs) and metrics in place to measure their impact on the organization's objectives. This data helps assess their effectiveness and areas for improvement.

  7. Scalability: Offshore CoEs can easily scale their operations up or down based on the organization's needs. This flexibility allows them to adapt to changing business requirements.

In summary, an offshore Global Centre of Excellence is a strategic unit that combines specialized knowledge, cost-effective operations, and a commitment to excellence to support a Head company in achieving its business goals.

March 2, 2024

TurnKey Staffing provides information for general guidance only and does not offer legal, tax, or accounting advice. We encourage you to consult with professional advisors before making any decision or taking any action that may affect your business or legal rights.

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