Table of Contents
We’ve already praised the Ukrainian development market. But in this article, we’d like to examine outsourcing from two different perspectives: costs and talents. At first glance, outsourcing seems like a trivial question: It is cheaper for software development. However, many clients who have decided to outsource the project don’t quite understand the benefits and how to maximize them.
Now, let’s hit the road!
In-house vs Outsourcing software development costs
Recruitment process
You may know that the recruitment process is quite challenging in any industry as these days, the range of highly skilled specialists is huge, and the selection becomes harder than it used to be several years ago. The average cost of hiring a new developer in the U.S. ranges between $4000-$7000. The hiring is not a one-day process as it can take at least 40-50 days. Commonly, the most time-consuming activities are:
- Job advertising – all professional networking websites, job boards, LinkedIn, and Facebook charge you for their services;
- Screening – this involves the time you spend on reviewing CVs and screening;
- Interviewing – do you have the necessary knowledge to determine whether the candidate has the skills you’re looking for;
- Background assessment;
- Onboarding & training.
In addition, ask yourself a simple question: What happens if your new hire doesn’t work out?
41% of US companies said the average cost of a wrong hire was $25,000, and 25% lost over $50,000.
An outsourcing development team is usually a close-knit squad with experience working on the same projects together. So, there is no need to spend time looking for the required specialists, as the chosen technical partner has to upvote you with all the necessary information about the developers, their experience, level of skills, etc.
Outsourcing development requires payment only for the hours spent working on your particular project, no more or no less. Once your software solution is completed, your cooperation is considered over, which means you don’t need to pay salaries all year round, as in the in-house team model.
Salary review
In-house salaries can vary based on the number of employees and the project’s budget. This kind of expense will stay even if you choose to outsource software development. But the main disadvantage of the in-house development is that you will get less proficient employees for the budget comparable to the outsourcing development.
It must be acknowledged that in-house teams don’t always hire employees with a high level of expertise. Companies usually require candidates to know a little bit about everything, which sometimes prevents them from taking a holistic approach.
The salaries of outsourcing developers mostly depend on the location of the software development company of your choice. Eastern European software companies offer almost the lowest rates in the world with the quality of the top-notch services. For instance, the Ukrainian outsourcing rates start from $35 per hour, when in other European countries they start from $50.
Hiring an in-house team would be equal to outsourcing it to a development partner and could cost over $ 1,000,000 annually.
OPEX
Depending on your location, a mid to senior-level developer has an average salary of about $ 90,000 per year. Here’s a breakdown of additional operational costs you’ll have to face.
- Office space or rent;
- Medical insurance;
- Day-offs & training days;
- Electronics and furniture;
- Snacks and beverages for a kitchen space.
Short-Term Projects Specifics
If we’re talking about software development, there are a number of specialists who can be involved in the project even for a short period of time. For example, DevOps developers, admins, software architects, and web designers are critical players, but you’ll require their help only for a short period of time, like two weeks or two months max.
By outsourcing software development, you basically hire a team of top-notch professionals but pay each of them only for a period of time they are actually involved in the project. Eventually, you receive all the needed resources to build your solution but you do not overpay.
In-house vs outsourcing tech talents
Many in-house development teams are required to wear many hats without a possibility to stay agile to changing trends and execute several projects simultaneously. Offshore partners contribute highly skilled resources at a much-reduced rate. The outsourcing development team involves only those developers who are acquainted with the required technologies for your project. In-house developers usually specialize in only a few areas like writing code for the back end. But what about GUI, or app development (iOS, Android)?
An outsourcing development company has access to top talent in every field and is able to provide you with all the needed specialists who are aware of what to do. Moreover, your project manager will be able to optimize expenses by choosing the most suitable specialists for the project, based on the budget and technological requirements. For instance, your PM can bring in additional manpower if some unforeseeable difficulties arise. Or he can just ask a senior programmer to spend extra hours in order to refine important parts of the code, instead of hiring him full-time.
Ability to scale up the team
Next, access to human resources gives you the ability to minimize time to market. For example, you might want to beat your competitors and enter the market faster, thus showing that you’re the leading innovator.
Outsourcing lets you scale your team quickly and add programmers on the go without raising the hiring costs. Outsourcing will allow you to put as many developers as you need to meet whatever time frameworks are best for you. By outsourcing your software development needs, you can concentrate your time and manpower on other business requirements. It just allows you to look at the big picture, and build your strategy. In addition, you can use the knowledge of a business developer that works on your project during the discovery stage.
Pros and cons of in-house software development process
Nevertheless, in-house development has a range of benefits which we would like to discuss further.
Culture and language fit
The in-house development team is aware of and supports the internal company policies, speaks the same language as the company’s owner, and has the same cultural background. This fastens the merger process and helps achieve the expected outcomes from cooperation as soon as possible.
Awareness of the project
The in-house team is constantly working on your internal project, which allows them to be familiar with its specifics from start to finish. If your product needs improvements, your team will always be ready to fix all bugs and errors to make the solution work smoothly.
Face-to-face communication
The in-house development team model implies constant communication within the same office and time zone. You may have heard that face-to-face meetings are considered more effective than online meetings.
Besides, the in-house development team also has several disadvantages. Software product development doesn’t last eternity. However, by hiring in-house developers, you have to provide them with the work all year round in order to pay them salaries, enhance skill growth, and so on. In addition, in-house developers have quite a narrow specialization and poor knowledge of all potentially needed technologies for improving your product.
Advantages and disadvantages of outsourcing software development
Despite the fact that outsourcing development may seem risky and complicated to you, we would like to prove to you that an outsourcing development team is a much more convenient and profitable team model compared to the in-house development team.
Easy to scale
Does your project scope expand? Do you need to hire more developers to work on it? You don’t need to spend time looking for and hiring the required specialists; your technical partner can provide all the engineers needed to finish your project successfully.
Reasonable rates
The market of outsourcing development is large and you can easily find a team that fits your budget. In the case of an in-house development team model, you cannot propose wages that are less than what is common on the market. Moreover, our cooperation is supposed to be over as the product is successfully delivered. Of course, some outsourcing teams offer maintenance services when the same developers will maintain your solution and fix errors and bugs.
Wide technical expertise
The outsourcing company can suggest any specialists needed for your project. The in-house development team is stable, meaning if you hire a PHP developer, he or she will code only in PHP, not using any other programming language or framework. After all, learning a new coding language will take enormous amounts of time. When you outsource your development operations, you can get the required specialist within several days without losing money or time.
Check out what companies outsourced their development in our recent blog post.
Tips on choosing an outsourcing development team
We cannot guarantee that all outsourcing development teams are great and reliable. However, we decided to provide you with tips on how to select the outsourcing development company and not to fail in the end on your cooperation. Before signing the contracts, we advise you to pay attention to the following things:
Check the previous experience of the company you are willing to select – learn the portfolio, domain industries, read reviews from their clients on Clutch and Goodfirms, contact these clients if you have such an opportunity;
Ask about the document package and ensure its transparency, especially of those parts that include NDA;
Don`t fall for the low rates: your project will fail if the skills of the development team are just as low as their rates.
At Altamira, we vouch for the quality of outsourcing services we provide for our customers. We do not just build software but deal with the issues of our clients, help them set their priorities, and create a top-notch application that will be a solution to all the initially revealed problems.
Bottom Line
Hiring an outsourcing partner gives you a significant cut in expenses, but what’s more important is how you’ll use this extra money. We advise you to use this monetary advantage to get a team of experienced software professionals, rather than blindly chasing the money and looking for the cheapest outsourcing partner possible. Always keep in mind, you already saved a lot by going offshore. Now is the right time to choose the best variant possible in terms of quality and proficiency.
FAQ
Numerous worldwide companies have entrusted the development of their apps to outsourcing development companies. We would like to mention Slack, Samsung, Google, and others.
Outsourcing will always be more advantageous, as this development model provides you with all the required technologies and specialists to successfully deploy your software solution and achieve the expected result.
It depends on your priorities. Outsourcing is usually more cost-effective and gives you access to specialized talent without the need for hiring and training. It’s a good choice if you need flexibility or don’t have the resources for a full-time team. In-house development, on the other hand, provides more direct control and better alignment with your company’s culture but comes with higher costs and longer hiring processes.
If speed and expertise are more important, outsourcing is often the better option. However, if long-term control and deep integration are priorities, in-house might be the best option.
In-House Development – Your company hires, trains, and manages its own development team. This gives you more control but also increases costs and requires ongoing management.
Outsourced Development – You hire an external team or company to handle development. This reduces overhead costs and provides flexibility, but you’ll have less direct oversight.
The choice depends on your business needs—outsourcing is often faster and more scalable, while in-house teams provide greater consistency and deeper involvement in company goals.
