In our time, outsourcing has become the most standard way for most businesses to operate, and we’re witnessing a boom of offshore software development companies. A company or entrepreneur can profit from outsourcing due to several reasons.
Startups typically save the most money with outsourcing. They are assigned with software development projects and they are willing to do it at a fraction of the price of the in-house development team. This practice also enables small companies to get an upper hand over their bigger rivals.
Read on to learn how software development outsourcing can substantially save your business money.
How Does Outsourcing Save Money?
The first area where companies try to cut cost is labor. The cost of a full-time employee is calculated 1.5 times to twice the amount of his/her basic pay. The costs will be lower when you outsource, as you can hire programmers from countries where the standard of living is lower than in your country.
For instance, the average wage rate in the United States is $18.50 per hour, while the average wage in India and the Philippines are $o.48 and $1 per hour respectively. If you are outsourcing to India or the Philippines, the cost per hour of doing business range from $8 to $25 per hour, including Internet service, rent, telephone expenses, salaries, benefits, and utilities. The same cost in the United States is $74 to $92.50 per hour.
The same principle holds true for Australia, Western Europe, and other developed regions. For instance, here’s a cost comparison of employing an in-house team in Sydney vs. sending software development work to an offshore development company. The figures speak for themselves:
Other Benefits of Software Development Outsourcing
A partnership with the right software development company can save your money by:
- Eliminating hiring hassles and fees
When an in-house team member walks out on you, that can put you under a lot of stress. You would have to replace him/her with a competent talent in a short time. You would be pressed to endure the hassle of scanning tons of resumés, interviewing potential candidates, and making difficult decisions.
However, if the same situation takes place in the context of an outsourced development team, then no worries! Your outsourcing partner is responsible for finding you a capable replacement in no time without sabotaging the successful completion of your project. Therefore, you can save your time and efforts by shifting a big portion of the responsibilities on your tech partner.
- Fixed-price contracts
Software development providers engaged in small projects usually follow the policy of fixed-price contracts. These companies orient themselves towards short-term projects which usually last for a few weeks up to a few months. This model works as a package deal when the price is agreed early on. The benefit for you as a client is you get a particular product for a fixed price, avoiding the dreaded cost creep.
Should you outsource software development to third parties? If you want to save money, the answer is “yes.”
Software development outsourcing works due to the big difference in wages between developed and developing countries. You don’t have to pay astronomic salaries or benefits when you outsource to developing countries. The article showed the evident difference between the wages of developers in such developed countries as Australia and the US vs. smaller hourly rates of programmers in the Philippines and India.
Quality matters as well. In Ukraine, another top outsourcing destination, the hourly pay for developers’ work is $6.79 – $34.52 on average. It’s higher than in India, but you get much better quality. The bottom line is that with outsourcing done right, you can get the same quality of software products as in your country and still pay less.