How Much Does It Cost to Outsource Software Development?

Fact: 74% of companies already outsource IT professionals, аnd 87% are planning to opt for it in 2022. Are you in 87%, wondering how much it will cost?

Let’s figure out two things:

• what defines the price;
• how outsourced specialists get paid.

How much is it to outsource developers?

As you can see from the picture above, developers’ location is important in terms of price.

Eastern Europe and Russia are known for cost-effective and professional outsourcing solutions.

Other factors include:

• the team’s size (the faster you need to get the results, the more specialists you have to outsource, and the higher your expenses are)
• the product’s type and complexity (the feature set, third-party APIs, native or hybrid app, Android or iOS — all of these and many more choices will affect the cost estimates)

You can use one of these popular ways

TIME AND MATERIALS

It is used when it’s difficult to determine the cost of a project in advance. With this approach, the price consists of the payment of the time spent and the resources of the team.

Suitable for: small teams (up to 3 people).

Pros:

• Flexible approach to work;
• Efficiency. You can change the plan or requirements for the finished product right on the way;
• Result: the result is visible at all stages. You can continuously monitor the process.

Cons: the uncertainty of budgeting (it’s not clear how much money will be spent in the end) and the need to spend a lot of time communicating with the team.

AGILE VALUE

A modern way of pricing when working on an IT project. The calculation takes into account the volume of work performed, team costs, and even competitors’ prices. The work is divided into short periods — sprints.

Suitable for: any project.

Pros:

• Efficiency. Flexible management allows the customer to get exactly what they need;
• Clarity. The customer sees the result at the end of each sprint.

Cons: The main disadvantage of this approach is that any change, even the tiniest one, will require more time for approval.

Photo by Patrick Perkins on Unsplash

DEDICATED TEAM

Specialists are assigned to a specific project. They receive monthly/weekly (negotiable) payments + administration costs.

Suitable for: large projects without in-house specialists.

Pros:

• Skills. You can select the best specialists for your project, depending on its complexity;
• Control. You fully control the work and distributes the workload between each performer;
• Cost reduction. Developers have deadlines that they adhere to, and more specialists can be hired if necessary.

Cons: Before starting the project, you must provide the team with detailed guides and instructions so that there are no discrepancies with the final goal.

FIXED-PRICE

Most often used when working exactly with outsourcing companies. The customer doesn’t need to know how much it costs to outsource, let’s say, a website development, since a manager of the partner company will be responsible for calculating the cost of all works. At Exceed Team, we use a flexible pricing approach and will always help you determine the work you need.

Suitable for: small (up to 2 months) projects but can also be used for larger projects.

Pros:

• Terms. The deadline and all the details are discussed in advance and documented;
• Accuracy. All stages of work are discussed before the start.

Cons: The fixed price approach will suit you if the project requirements will definitely not change during the course of the work. Otherwise, you will have to recalculate everything from scratch.

HOURLY RATE

As the name suggests, this is an hourly wage payment model. It is good for small projects, for example, when you outsource app development. Here at Exceed Team, we often use this approach. The technical specialist determines how much time a developer will spend on a specific task.

Pros: Saving funds. The services of one specialist are cheaper.

Cons: The performer may add extra hours to the actual work time. It is recommended to work with reliable vendor companies to avoid such unpleasant situations.

Do you have any more questions about IT outsourcing and software development cost? Ask us at hello@exceed-team.com or visit exceed-team.com