Software Development Outsourcing Pricing Guide

Are you one of the incredibly active business owners who never settle? Do you get a new idea for a new unique project every single hour or two? Does time or qualifications stand in the way of you getting your ideas to life? If you are one of those brilliant people who are full of ideas but lack the time or the staff to bring their digital ideas to reality, then the answer for your whole problem lies in software development outsourcing.

Outsourcing simply means hiring someone else to execute the ideas of your clients and finish your projects for you. Even if the case is that you do work on the same specific project but you don’t have enough time to cover all the work required from you within a specific timeline or you just find out that using your own resources on this project is costing your business too much, outsourcing comes to the rescue! Whether you are hiring an agency or a freelancer to get the job done, whether it is only for a part of the projector for the whole thing, outsourcing is always a lifesaver when it comes to the dread of the deadline. If you want to know more about each approach, check out our article “outsource vs in-house – what are the benefits“.

However, there are some pointers that you have to look out for in order for you to have a successful and pleasant software development outsourcing experience. You have to, for example, to make a thorough research on the market to make sure that you are picking not only an agency that is suitable to your quality and cost needs, but also you have to be as sure as possible that the agency you are outsourcing to is responsible and won’t just quit in the middle of the project leaving you exposed to the client with a deadline hanging over your head. Of course contracts keep everything in place and can guarantee no funny business appearing out of nowhere, but still, we are talking about best possible outsourcing experience here, which should not, of course, include any struggle.
In this guide, we’ll help you figure out the various pricing and development models available on the market, and how to choose the best company for your project.

There Are Many Types of Agencies

In this day and age, turn a rock and you’d find a software company. Of all sizes and specialties, software companies are the solution that most entrepreneurs seek when they are looking for a new business idea to invest in. The Facebook and Google models have made it way easier to start a software business than any other. This variation in the size, type, and the output quality of software companies has, just like anything else, has its good and bad sides. The benefit of having such a various market is that the fierce competition brings out the best of the competing business in terms of pricing and quality otherwise the business would not survive. However, this variation allows some companies that are failures by all measures to survive for a while before they are off the market.

To make things easier for you as you look for your best outsourcing option, we found that the software market categorizes the companies into three main categories based on the size of each category.

  • Enterprise-level software houses: These are your regular famous, usually international, companies. Companies in this category hire thousands of employees in multiple divisions that cover most, if not all, of the software-related products and services. If the project or task you are outsourcing requires every single step of the software development process to be performed with the highest quality and world-class specialists and you don’t mind the respective cost of such a level of service, then this category is what you are looking for. This level of outsourcing usually costs from $45/hour.
  • Mid-level agencies: These agencies have up to 500 employees on its working force. Mid-level software companies have a wide range of quality of their services and they usually face management problems because most of them tend to hire fresh graduates to save up on the cost of their developers which says a lot about the quality of their products. However, not every mid-level software company is the same. Many of them have a management team who know what they are doing and they are achieving remarkable success in the software market. If you are going for one of those agencies, make sure you do your research about it to ensure the quality and efficiency of their process and final product you’re going to deliver to your client. Depending on the quality and size of the company, the hourly rate can be in the range of $17-$23/hour or $26-$40/hour.
  • Start-ups: This category contains both small-sized companies and freelance developers. A start-up can have as few employees as 2-3 developers. They don’t have clear separated processes where analysis, development, testing, and support each have its own role, but rather one or two people doing the whole thing from start to finish. You can save big money outsourcing to a start-up since they charge about $18-$30/hour, but don’t regret it when they don’t meet the deadline or deliver an incomplete product, or refuse to support what they delivered. You’ve been warned!

Choosing The Right Vendor

Now that we told you the types of software companies out there, it is up to you to decide which option will work for your budget, timeline, and the model of business you prefer.

If you have a budget near $100,000 and have previous experience working with outsourcing companies, then you will be able to work really well with an enterprise- level and mid-level company. It also depends on whether you have your mind set or the project requires a specific framework and language, whether you want to keep track of the stages of your project’s development process and if the company you’re choosing would allow it.

If your budget is limited to $15,000-$50,000, then you’d have to go with a start-up or a freelancer. And in this case, you have to look carefully for a proven successful one who will commit to all required tasks, still, don’t get your hopes up when it comes to quality.

Pricing

Prices of software development have an insane range depending on which category of companies you’re outsourcing too and, even more, on which country or region in the world you’re hiring from. It also depends on your own experience with the market, for example, a client with some experience can get a price that is 30% less than what a client with no experience would get. So make sure to know your stuff so that you don’t get over-priced.

With that being said, there are a few general trends in outsourcing pricing system. In Eastern European countries like Russia, Belarus, and Ukraine, for example, developers tend to have a higher cost, but also usually have better product quality since they get better education and training. Vietnam, on the other hand, and due to the currency exchange rates, is able to offer better and lower prices, but companies lack the expertise that senior developers have to offer. South America will be more expensive than other regions because they are able to offer near-sourcing services to the US. In other words, they are able to provide software development services at a discounted rate, with the added benefit of being in the same time-zone as the client, which helps a lot with project management.

Conclusion

In order to find the best quality/price ratio, you will have to consider your project management, technical and scheduling needs, and then search the market for companies that best fit your needs. Your best ally here is time – do not be afraid to interview several developers and companies before you make your final decision.

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