Types of software development outsourcing — which one is the best for your needs
There are many types of software development outsourcing and the price range of the options available on the global market is enormous. Use our advice to find a software house that will deliver on their promise and still ensure competitive prices.
In the last article, Sebastian pondered the outsourcing vs inhouse issue, having decided that web development outsourcing is worth it only when you can find a quality software house. Only then are you able to benefit from traditional web development outsourcing benefits such as low cost, the ability to pay only for the time spent on working as well as the flexibility it provides.
To help you find the right software development outsourcing provider, we’re going to compare some of the most common types of outsourcing services available on the global market. From the perspective of a company located in a high-wage country such as the UK, US, Western Europe or Scandinavia, we can simply divide the available options by using the minimum price per developer as a factor. The result would be as follows:
- Local software development outsourcing options — companies located in the same country as the company interested in outsourcing (UK, US, Western Europe). Let’s call them just ‘local outsourcing companies’ from now on.
- Central European software development outsourcing companies — located in countries such as Poland, Ukraine or Slovakia. Let’s can call them “Central European outsourcing companies”.
- Offshore software development outsourcing companies — located in India, Bangladesh or in South Eastern Asia. We can call them ‘offshore outsourcing companies’.
Let’s take a closer look at all of them.
Imagine this situation — you have a software project and you want it to be delivered in a few months, but you don’t want to spend too much money. You found an offshore outsourcing company that charges a $10 hourly rate per developer. The total development time is 3000 hours and the ready product is to be delivered within 3 months. You’re quite pleased with that. However, three months pass and your software is still far from being anywhere near ready to be released. Bugs pile up and you end up paying for 50 hours more. You’re okay with that, after all, it’s 10 bucks per hour. But you still don’t have what you wanted. The product crushes and you soon find out that a local software house could have done it all in 1000 hours. For a far higher rate (let’s say $85 per hour), sure, but the final cost, that is that multiplication of the hourly rate and the number of hours, is just about identical. What’s more, the local software developer can deliver faster and the product is of far better quality.
You have just fallen into the trap of low prices. You agreed to an unreasonable extended schedule, because the hourly rate was low. You were okay with delays and bugs, because the hourly rate was low. You also agreed to purchase further 50 hours, because you already invested a lot and… the hourly rate was low. I hope that by now you know how delusional you would be if the imagined situation was actually your reality.
Developers in offshore countries can be very cheap, with $10–20 per hour of a developer’s work being a common rate. But it doesn’t mean that you will actually get to pay less for your product or that you will receive what you really want at all. It isn’t to say that you will not get a good developer in India or Bangladesh. There are some great ones. But they don’t cost $10 per hour and those who are really worth it are not that competitive price-wise. Since there are many many cheap software houses, the risk of picking a wrong option is extremely high.
Developers you can find locally that cost $80–150 per hour almost guarantee fine quality, but they are very costly. If you want to find similar quality at a competitive price, you should take a look at Central European software companies that are known for great developers. In countries such as Poland you will find hourly rates of $25–50, which can be explained to some extent much like in India by lower costs of living when compared to countries such as the UK or US. In fact, the cost of basic food products in Poland (28.12£) according to Numbeo doesn’t differ that much from India (23,48£), but is substantially lower than in the UK (54,26£).
For slightly higher, yet still very affordable rates, Polish software houses offer a much more pleasant outsourcing experience. The quality of Polish developers doesn’t vary that much, making the likelihood of coming across a completely subpar company much lower. It’s partly thanks to the Polish education system, which provides free college level courses for everyone. Just in Krakow, there are at least two large and prestigious technology universities — the AGH University of Technology (which Sensinum happens to cooperate with) and the Cracow University of Technology. In this aspect, Poland surpasses India as well as the UK and other high-wage countries, where quality college education is not as accessible. For example, in the US completing a 5 year college course can cost one as much as $200 000.
To sum it up, It doesn’t really matter how inexpensive your outsourcing provider is. If they prove insufficiently capable, they will consume many hours and still won’t be able to deliver a quality product on time, wasting your time and effort in the process. In the long run, the cheap developer will prove the most expensive option out there. All the more so, because there is more to costs that just the price of a developer.
Which brings us to another very important topic, strongly related to cost in many ways…
It border on obvious than the further your outsourcing provider is, the more difficult it is to manage the project. Some outsourcing customers never actually see their outsourcing provider with their own eyes! It’s common with offshore software companies as such trips just don’t calculate considering the number of clients they have and the money they receive. This makes an in-person kickoff meeting impossible and seriously affects the ability to come up with a solid project specification.
Your communication online will also suffer as the time difference between countries such as the UK and India is as much as 4,5 hour, which means having to wait for an extended period of time to get an answer and countless project management issues that are difficult to predict. The long distance will also badly influence the sense of partnership and accountability of your offshore outsourcing provider.
In this particular aspect, a local software house is the best. However, as long as they are not in your office, you will still have to resort to communication online or sending your own project manager. A European software house provides a really good trade off as they are situated far closer to countries such as the UK, Sweden or Germany. With just an hour or two of difference, with just a little but if adjusting the workday may be completely synced. What’s more, quality European software houses do provide in-person meetings with their customers regularly. And how to assert that your software house of choice is quality? This brings us to the last part…
The issue of quality has been covered quite extensively in the ‘cost’ section above, but so far I’m yet to really say just how to assert that you have found a quality software house. Well, the short answer would be… you can’t. Unless you actually start working with your partner, you can never say for sure that they are able to deliver on their promise. There is, however, a way to make sure that you have to do with a software house that has the potential to deliver serious software development project. It’s the specialization. Software companies that limit themselves to doing basic web development and maintenance kind of work hire accordingly. Such software houses may be good choice when it comes to coding simple websites. But serious outsourcing providers are able to specialize in areas that require substantial knowledge and grasp of technology just to be able to try to handle it. So do search their portfolio and find them. It can be data engineering, eCommerce, internet of things or fintech. You name it. The point is that if you find them, your chance of finding the right company greatly increases.
There are many flavors of software development outsourcing. If there is anything we can definitely tell you is that you should never consider price as the only factor. There may be a world of difference between two developers no hourly rate ever justifies. At the same time, don’t pay more than you have to to get a quality product on time. Use our advice to limit your risk of overpaying and still get a magnificent product.