When a business faces the necessity to develop an app or a software solution, it actually has two alternatives: to establish or extend an in-house team or outsource the work to a 3rd party provider. Running an internal IT team isn’t cheap, so businesses with limited budgets often resort to outsourcing service providers.
A lot of companies in the pursuit of short-run gains forget that pricing isn’t the only criterion they should consider when choosing an outsourcing company. One should also prioritize decent quality, team proficiency, and effective communication among others.
If you don’t want to overpay for an outsourcing company this article may be useful to you. You’ll discover:
- What outsourcing is?
- Why outsourcing is cheaper than having an in-house IT department.
- Outsourcing IT services rates around the globe.
- Useful tips on what to consider when choosing an outsourcing team.
What is Outsourcing?
Outsourcing is a practice of assigning part of the company’s work to an external company. Among the most popular types of work outsourced are accounting, hiring, customer support, software application development, and many others.
This trend is widespread among many businesses around the world. According to Statista.com, in 2019, the global outsourcing market amounted to $92.5 billion. And the tendency is set to grow, especially in the IT-sphere.
Why Outsourcing Is Cheaper Than an In-House IT Department
To understand why an outsourcing team of developers is cheaper than an in-house team, you need to understand what payments outsourcing service providers exclude in comparison to in-house teams. For example:
- With outsourcing, you don’t need to spend your company’s money and time searching for employees, their onboarding, bonuses, and insurance payments. An outsourcing company provides you with a pre-formed team of professionals that is ready to start work at any time.
- You don’t have to enroll your employees in further training courses and upgrade their skills. Software development is a complex process that involves writing project specifications, project management, software design and development, testing, deployment, and support. Therefore, you’ll have to constantly upgrade your team skills and knowledge to keep them up to date with the fast-changing IT trends.
An outsourcing IT company can provide you with an experienced team in line with your project requirements and business ideas. IT companies have a large pool of specialists to choose from and if project requirements change, they can quickly change team players to ensure the high quality of your product.
- When you outsource you don’t have to buy or upgrade your software or equipment that is necessary for the continuous operation of your IT department. Meaning that you’ll invest in only those tools that you really need for your business rather than for the software development team.
- You have to pay your in-house IT team a fixed salary that doesn’t depend on the amount of work your specialists do. While outsourced companies offer you to pay only for the number of hours actually spent on the project. This means that with outsourcing you spread the full workload among the members of the hired team, thus getting better payback for the same level of investments.
- Finally, the salary rates for developing countries and countries with high standards of life differ significantly. For example, outsourcing software development rates in India can start from $18, however, the quality of the app might be questionable. In the meanwhile, in Eastern European countries, the price is higher but the quality is much more promising.
Given the above, small businesses and big companies choose outsourcing as a way to cut expenses and enhance available expertise. According to the Clutch survey, one-third of small businesses in 2019 was already outsourcing and 52% were planning to outsource, meaning that the service will only grow in its popularity. For example, such a big-name as Cisco has established its offices in India and Sri-Lanka to cut spendings.
Outsourcing IT Services Rates Around the Globe
Outsourcing rates in IT heavily depend on the location of a service provider. There are three outsourcing types that vary in the distance. Let’s compare their rates drawing on software development service:
- Home shoring means delegating some work to the companies in your country. This type can be rather expensive, especially when you live in a country with high living costs. As outsourcing companies set their pricing based on the competitive prices of their local market plus adding value for making income. The US software development outsourcing rates start at $100 up to $200 per hour.
- Nearshoring means transferring your work to nearby or bordering countries. If you live in Western Europe and you decide to outsource software development to the nearby countries, you can expect the outsourcing rates to start at $80 and rise up to $150 per hour.
- Moving offshore means outsourcing to remote companies with developing economies with lower rates such as Latin America, Africa, Asia, or Eastern Europe. For example, in Eastern Europe, software development rates start at $25 and increase up to $50 per hour.
Outsourcing isn’t limited to software development only. You can outsource software support and maintenance, technical customer support, data security, database operations, and a lot more.
Some businesses need a more basic package that includes customer service, monitoring, updating, server management, etc. Other companies may require a more complex approach with installing and maintaining a data center or a cloud, data recovery, cybersecurity, and others. The total service cost will depend on your business needs.
What to Consider When Choosing an Outsourcing Team
If it’s the first time you decide to outsource, then there are some points to consider before opting for any company. Here is what you need to do:
- Before looking for an outsourcing company analyze what IT services you really need and determine the amount of work you want to outsource.
- Base your choice not only on a company’s pricing but also on its experience, the number of skilled-employees, other customers’ feedback, the quantity and quality of developed software, and its diversity.
- If you need a call-center team, make sure that the employees have the same cultural background as you do as they represent your business to your customers.
- In case you need to outsource technical support, ask your IT service provider what billing type they use – fixed fee or pay-as-you-go service. The former has a set price per user or device while the latter is billed by the number of hours spent on providing the service. This will help you better plan and allocate your budget.
- Don’t miss the opportunity to meet your outsourcing managers and team. This way you’ll better understand inner working processes and working style in the company, especially if you’re expecting long-term cooperation.
There are many views about outsourcing services, some businesses benefit greatly from it and have positive views while others get disappointed. To join the first group and make your business fast-growing for lower investments, you need to understand how outsourcing prices are formed.
Nevertheless, when choosing an outsourcing company you need to be careful not to get into bad service. To avoid this, you should consider a company’s experience, successful projects, and other aspects and only then compare prices. If you make a deliberate decision it’s hardly likely that you’ll get disappointed in outsourcing services.