SOFTWARE DEVELOPMENT COST

Added value in offshore development

The past couple of years saw outplaced software development services clock over 200 billion USD per year worldwide. It is a living breathing industry, which blows down the development costs like a windstorm and bites off time expenses like a wild animal. All of these changes allow more flexibility and growth opportunities for both up and coming and well-established companies across the board.

But everything comes at the price. Being the breath of fresh air it is, it also plants a certain degree of confusion on the market. Expensive doesn’t always mean high quality, and on the other hand, cheapness can cause a significant quality drop. As of now, the hourly rates vary between 10-120 USD, which begs the question  – with so much opportunity, how can I get what I pay for, and what I actually pay for? Let’s find where lies that fine line which marries low prices and high-quality outcomes. 

How do you think, which one is more expensive – to have an in-house team, or to find some skillful strangers who can carry the job? And the answer is obvious -  yes, it is more expensive to maintain an in-house team. And yes, it is cheaper to hire an offshore team. But then again, cheaper doesn’t mean cheap, doesn’t it? If you strive for a certain level of quality, you must be willing to pay extra, regardless of whom you hire, while being fully obedient to market rates. Cruel, but fair.

Obviously, you can find a lot of cheaper options. The market is flooded with highly qualified, honest and dedicated developers and development teams from different countries, who offer high-quality work with a reasonable price tag. And while hiring an offshore team usually costs around 60% of your domestic prices, don’t be fooled when the cost is lower than 12 USD per hour. It is a warning sign.

Even considering the high professional expertise of a given team, the cultural and language barriers can come out as a spanner in the works of your cherished project. So, it is vital to get your team to fully understand how exactly the project will run from start to finish. Including the time and financial constraints. 

Getting access to a global talent pool, if approached correctly, gives a lot more opportunities than just sticking to your local market. For a product team, it’s often a challenge to have several Back-end developers, front-end and markup, DevOps specialist, a part-time DB engineer, Product owner, Marketer, Security specialist, and Sales team in one place. That’s why sometimes it’s much easier to put together your own team of remote workers and mix them up with some of your trusted local partners. 

Now let's imagine that you have an idea, and want to implement it from scratch with the up-to-date technologies, and choose offshore development as an option. You choose a nice agency that fits your criteria and after an interview, you receive a quote...That surprises you...

In fact, the logic of composing project quotes from the point of view of a software development agency is based on the experience and is quite clear and transparent. Let's go through all the possible layers of this pie.

Work with docs (SRS, User cases and User Stories, etc.) (V hours)

Environment setup, Infrastructure, CI/CD (Y hours)

Pure total development hours (X hours)

Quality Assurance (5-20%)

Project Management (5-15%)

Communicational risks (1-5%)

Deployment (Z hours)

Client Training (W hours)

Total: V+Y+X+0.15X+1.1X *(X+0.15X)+Z+W.

In short = 2X

This is where all magic happens.

What's interesting, when PMs and Sales reps hear "why does it cost so much!?" they offer their prospect to cut down any line that he considers as unnecessary. But usually, there is nothing to remove.

Basically, this is a widely spread approach to estimation among digital agencies all around the world. Some of them put their fee on top, some include it into each hour of development. 

Of course, there should be solid research before you settle on a certain list of people for your team. There’s more than enough fish in the sea, so choosing the right one for you takes time and effort. Don’t hold to the first set of candidates and don’t look for only the cheapest ones. Don’t be afraid to ask questions and pay close attention to questions, asked by them – it’s always a great indicator of competence and understanding of the future project.