How Much Can You Save with Outsourcing and Outstaffing?

If you are thinking of ways to reduce your operational costs for a healthier capex, oftentimes the ultimate decision comes down to cost savings. With different saving models, you can easily cut expenses without compromising the company’s efficiency.

Outsourcing Model Price Calculation

Onshore software development prices in the US reach $46–68 per hour, according to the US Bureau of Labor Statistics. A lot of US companies outsource their development needs to other countries and effectively leverage their budgets. IT Outsourcing costs are calculated on a per-hourly basis and range from $15 to 50 per engineer, depending on the type of professional and technologies involved, and this is also different from country to country. Eastern European prices, for example, are between $20 to $40 per hour.

Median annual payment for an employee in IT Outsourcing would be: $30x8hx21dx12m= $60,480* compared to an average annual salary of $102,550 onshore. You can save around 40% on your IT needs with Outsourcing.

*Here we used median figures to be able to compare them more accurately.

Although you end up saving quite a substantial amount, beware that when you outsource the whole development process along with its management, you might lose control over the process at some point. IT Outsourcing works best for short projects with clearly set requirements, but never for those with a rolling-wave approach.

Outstaffing Model Price Calculation

The Outstaffing model is a bit different from Outsourcing. Likewise, businesses use it to significantly decrease administrative expenses, such as rent, utilities, equipment, documentation, insurance, etc. In this case, you get a dedicated team of remote professionals working exclusively on your project and paid a monthly-based salary, pretty much like an extension of your inside team. This often helps to save much more than you would with hourly rates.

In this model, you directly manage your team and thus totally control your OWN dedicated developers. Outstaffing provides an ideal pricing mechanism for long-term projects. The price calculation is slightly more complex, but its results are much more cost-efficient in the end. There are one-time initial fixed charges for the team formation; namely, recruiting and workplace arrangement. This fee pays itself back right after the first month of collaboration. Then, monthly costs are estimated, on average, at $2000, which results in a much more cost-effective method in the long run.

Here is the average annual payment for an employee in the Outstaffing model: One-time payments: $2,000 (single team formation fee: licenses, work place equipment, HR services) + median base IT professional salary $1,300×12 + team maintenance fee $500×12= $23,600. With Outstaffing, you save around 60% on your IT costs. This is four times lower than adding in-house developers and more than two times cheaper compared to the outsourcing model.

What Works Best for Me?

The figures speak for themselves. The Dedicated Dev team proves to be the most cost-effective solution for clients, resulting in up to 60% savings due to much lower monthly-based payments and fewer administrative costs. You can trust your dedicated developers and save much more. With the savings you get, your company can maximally concentrate on its business tasks and growth perspectives.

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