Outsourcing can save you money. A lot of money.
One industry that benefits the most from outsourcing is software development. When you look at developers’ salaries, the reason is clear. The US pays its developers some of the highest salaries, yet 40% of companies plan to increase their outsourcing spending. Of those companies, 64% cited application development as the main reason.
All in all, companies can save 30% on operating costs by outsourcing their IT.
But what exactly are those costs, and how do companies transform them into savings? This post breaks down the cost of developing software and how outsourcing is saving companies money.
The High Cost of Developing In-House
Hiring on-site IT staff is expensive. A junior developer in the US costs more than a senior developer in India. As developers gain education and experience, their costs also go up, making them prohibitively expensive for smaller companies.
For businesses in these countries, it only makes financial sense to outsource.
Consider the average annual salary for software developers in various countries:
| Country | Average Annual Salary |
|---|---|
| Australia | $106,000 |
| USA | $94,000 |
| Switzerland | $69,741 |
| Denmark | $58,237 |
| Germany | $57,581 |
| Ireland | $46,959 |
| UK | $43,682 |
| Japan | $31,245 |
| Ukraine | $24,000 |
| Malaysia | $15,392 |
| India | $14,000 |
| Philippines | $7,521 |
Sources: Time Doctor, DOU.
That’s a range of over £60,000!
To put this into perspective, imagine you run a small IT startup in the UK. You want to hire two full-time developers, and you start by looking at the cost of hiring in-house. That’s a baseline annual salary of £54,508, and that’s assuming these aren’t senior developers. It also doesn’t take into account the cost of onboarding and managing the two employees. In comparison, outsourcing to an equally skilled team of Ukrainian developers only costs £23,614. Plus, you gain the benefits of a managed team without having to hire anyone yourself.
The Top 10 Countries for Outsourcing
The 2017 A.T. Kearny Global Services Location Index lists the top outsourcing destinations as:
| Country | Average Annual Salary |
|---|---|
| India | $14,000 |
| China | $25,853 |
| Malaysia | $15,392 |
| Indonesia | $6,295 |
| Brazil | $16,194 |
| Vietnam | $13,429 |
| Philippines | $7,521 |
| Thailand | $17,580 |
| Chile | $24,795 |
| Colombia | $15,912 |
In terms of cost effectiveness, India is still the world leader. India has a blend of skilled, English-speaking workers at a lower overall cost than most other countries. Cities like Hyderabad are becoming second homes for companies like Apple, Amazon, and Google through their low costs, corporation-friendly policies, and large populations of skilled workers.
But saving costs isn’t just about paying lower wages. There are other factors in outsourcing that contribute towards saving money.
Factors Besides Cost
The cost benefits of outsourcing go beyond direct dollar amounts. They include the amount of time spent working on projects, the quality of the work, and the ease of working with developers.
Time
The longer it takes to complete a project, the more it costs.
Besides workers’ salaries, you also need to consider lost opportunity. The longer a project spends in development, the less time it spends on the market, and the less revenue you earn.
Quality developers can successfully complete their tasks on time. If they miss a deadline, they should be able to justify why. Otherwise, you’re paying them more for the same amount of work.
The same goes for outsourcing vendors. By hiring a reputable vendor, you can rest assured knowing that your project won’t go over budget due to time. Fixed price projects are designed for scenarios like this, as they ensure the cost doesn’t change even if the project is delayed.
Quality
Your product is a reflection of your company.
If your product is slow, buggy, or hard to use, your customers will look for something better. Hiring the cheapest vendor may save you money today, but will cost you customers later.
Even if a quality vendor costs twice as much as the cheapest vendor, it’s worth the extra expense to know you’re getting a quality product. Not only does this keep your customers satisfied, but it makes the product easier to maintain in the future. Also, it’s still less expensive than hiring your own developers.
Communication
Working with your team should be a straightforward process.
Remember how more time means more money? The same goes for your relationship with your developers, whether they’re in-house or outsourced. The more time you spend planning, communicating, and explaining ideas, the longer it takes to get your product to market and the more revenue you miss out on.
This process is more difficult for outsourced teams than it is for in-house teams. This is because your outsourced team could be located anywhere in the world. When outsourcing, companies need to consider:
- The geographic distance between clients and providers
- Language barriers
- Cultural differences
- Differences in intellectual property laws
For these reasons, many companies prefer outsourcing to Eastern European vendors rather than Indian or Chinese vendors. Hiring a vendor that understands and is aligned with your goals makes working with them much easier. And without significant time zone differences, it’s easier for companies to collaborate with vendors throughout the work day.
The top IT outsourcing countries in Eastern Europe include:
- Ukraine
- Czech Republic
- Poland
- Hungary
- Romania
- Belarus
Ultimately, choosing an outsourcing vendor requires a thorough cost-benefit analysis. Which companies will help you achieve your business objectives for the lowest overall cost? Bargain-basement rates may look appealing, but looks can be deceiving. Don’t fall into the trap of hiring cheap today, then paying for it later.
Ukraine as Your Next Outsourcing Destination
More and more companies are outsourcing to Ukraine due to its balance of quality and cost. Ukrainian IT outsourcing companies are equipped with skilled developers and years of experience delivering quality work.
You won’t find bottom dollar prices, but you also won’t find the lowest quality results. And since software development is Ukraine’s most popular outsourcing service, you can trust that your vendor is experienced.
Companies all over the world have had success outsourcing to Ukraine. Chartsnow, a UK-based mobile app developer, chose Ukraine due to its close proximity and similar culture. According to CTO Christopher Lemoine, “including transport costs, we spend nearly half of what we would [in the UK] for these services.”
When considering your next project, consider outsourcing to Ukraine. You’ll find a technically proficient, talented developer pool that can easily give traditional IT outsourcing destinations such as India and China a run for their money.