The Costs of Software Development Outsourcing

‍Introduction

If you are a company or an individual looking to outsource your software development, you may want to budget your project properly so that your software can produce value when it's put to use. But whenever you ask "how much does it cost" to software development firms, the answer is almost always: it depends. That is because the price is personalized to fit your project precisely, so a definitive answer does not exist. This article will break down the average cost of software development outsourcing, which factors influence the cost, and which contract types are available for outsourcing your project.

‍

How does outsourcing save costs?

Lower labor costs: Outsourcing allows you to access skilled workers from countries with lower wages and living standards, such as India, China, or the Philippines. You can pay them a fraction of what you would pay a local employee, while still getting high-quality work done. For example: hourly rates for Vietnam developers range from $20 to $40, while those from developed countries work for a $100 hourly rate.

Reduced overheads: Outsourcing eliminates the need to invest in office space, equipment, utilities, and other fixed costs associated with hiring in-house staff. You only pay for the services you use, when you use them.

Increased efficiency: Outsourcing enables you to focus on your core competencies and strategic goals while leaving the routine and non-essential tasks to the experts. You can also benefit from the best practices and innovations of the outsourcing industry, which can improve your processes and performance.

Enhanced flexibility: Outsourcing gives you the ability to scale up or down your operations according to your changing needs and market conditions. You can easily adjust the size and scope of your outsourced team, without having to worry about hiring, training, or firing employees.

Improved quality: Outsourcing can improve the quality of your products or services, by allowing you to leverage the skills and experience of specialized professionals who have access to the latest technologies and tools. You can also ensure that your outsourced work meets your standards and expectations, by setting clear guidelines and monitoring the results.

Outsourcing is not only a cost-saving strategy, but also a way to enhance your competitive advantage and customer satisfaction. By outsourcing, you can free up your time and resources, and focus on what you do best: growing your business and delivering value to your customers.

‍

‍

Average cost of software development

There is also no one average cost, and it again depends on the type and size of the project. What is it that you want to build? Is it a content management system (CMS), eCommerce, or something else? Let's look at the average prices used to create these platforms.

‍

Content management system (CMS): Some companies build CMS to meet the specific needs of their users. This tool allows users to create and update content like blogs, videos, press releases, and so on. While many can use the popular available CMS like WordPress or Magento, having a custom one is much more expandable and profitable. The average cost to build CMS software is $20,000 to $50,000 for a basic platform.

Customer relationship management system (CRM): This platform is important for businesses to keep track of their existing customers, win over potential customers, and manage vendor and partner relationships. There are already many popular CRM platforms like Salesforce, Freshsales, etc. The average cost falls around $100,000 for a basic platform and can go up to $600,000+ if you're looking to build a large-scale one like Hubspot.

Enterprise resource planning system (ERP): The ERP system helps businesses manage their daily operations, such as accounting, supply chain tasks, project management, and more. This is a scalable solution tailored specifically for your business to handle all the in-betweens so that you can focus on the product itself. The average cost for this type of software is usually over $ 100,000 depending on the size of the company. A larger project will fall between $150,000 to $500,000+ if more advanced features are required.

Mobile app: You know them enough! They're the life & party of our cherished smartphones. But how much does it actually cost to develop a mobile app? Well, simple apps developed in the West should start around $20,000 - $30,000, while the most complex ones easily multiply these number by a factor of 10. However, when outsourcing your app development in a country like Vietnam, you could divide your budget by 2!

‍

‍

Factors influencing the cost of software development

Now that you get a feel for the bigger picture let's break it down further and look at which factors influence the cost of software development. 

‍

Platform

If you're looking to build a cross-platform application that can run on different platforms using the same code base, the prices will go up accordingly. Native apps, on the other hand, can only run on one platform. Building a cross-platform application requires a more experienced team, thus, a higher cost.

‍

Type of project

Software development is a broad term that covers every type of software project, so which one is your type? The most common outsourced project is website development, followed by software integration, modification, or custom brand-new software development. If you want to add a custom code that expands your software's existing capabilities, that is called software integration. If you need a large-scale enhancement to an existing software, you're looking for software modification. And building custom software from scratch, from applications to management systems, will definitely cost differently. The best way to figure out the exact price for your project is by contacting a trusty software development firm. Our expert consultants at Dirox are waiting for your call!

‍

Size of project

The size of your project is classified into four categories: small, medium, large, and enterprise. Small software projects usually involve making changes or fixing bugs in software. Medium projects are often mobile applications, web interfaces, or anything that is built on a single source of data. These types of projects include changes and fixes, but also solutions and integration. Large software projects include almost everything: system integration, databases, security, logging features, and frameworks. They ease maintainability and scalability while creating multi-party applications across all platforms. Enterprise software projects are ten times large ones. The security, error handling, and logging are much stricter. A great example of this is the Uber mobile app. 

‍

Size of the development team

The more requirements you have, the bigger the team will be. Each developer will be in charge of a part of the project, and the project manager is there to oversee the progress and ensure your project gets done creatively and promptly. If you already have a team and want to add developers with specific skills, please contact Dirox to get a rate for developers proficient in the talent you need! 

‍

Location

Because of the rise of technology, developing software can be done anywhere. Hiring software developers from America or Western Europe prove to be costly and may overwhelm your budget. Eastern Europeans can build software at a much lower rate without compromising the quality. But if you're looking to outsource in Asia, you will benefit from an extremely low cost and excellent quality. However, the time zone, language barrier, and cultural differences may pose a problem. Dirox mixes Western values with the polished talents of Vietnamese developers who will deliver you the perfect project for your business. Contact us for a free expert consultation to learn more!

‍

‍

‍

Hiring options

Finally, looking at what options you have will, again, determine how much your software project will cost. There are three ways to hire software developers: freelance, in-house, and outsourced. If you're reading this article, you might be highly considering outsourcing your project. Still, let's look through what other hiring options are available. Freelance developers can fill in the gap for your existing team. Dirox offers individual developers to coordinate with your team and add value to the development as well. In-house developers are your employees, but the downside is that it can turn costly and ineffective, especially if your project is a one-time thing.

‍

‍

Contract types

Many contract types would best suit your business and budget depending on what your team currently has and what is still needed to complete your project. The most popular contract types are Fixed Price Time & Material, which can be read about in this article. Glimpse into what the BOT (Build - Operate - Transfer) model is in this article! 

‍

How To Choose An IT Outsourcing Country?

There are many factors to consider, such as the cost of labor and living in the country, the availability and skill level of IT professionals, the time zone difference and cultural compatibility, the legal and regulatory environment and data protection laws, and the infrastructure and internet connectivity.

To help you make an informed decision, here are some tips on how to choose an IT outsourcing country:

‍

1. Compare the cost and quality of different countries: You can use online platforms like Clutch or GoodFirms to find and compare IT service providers from different countries. Look at their ratings, reviews, portfolios, and prices. You can also use online calculators like PayScale or Numbeo to compare the cost of living and labor in different countries.

2. Consider the time zone and language: Depending on your project needs, you may want to choose a country that is in a similar or compatible time zone as yours, so that you can communicate easily and avoid delays. You may also want to choose a country that has a high level of English proficiency or speaks your native language, so that you can avoid misunderstandings and ensure quality.

3. Check the legal and regulatory aspects: Before you outsource your IT project, make sure that you understand the legal and regulatory environment of the country you are choosing. For example, you may want to check if the country has strong intellectual property protection, a stable political situation, a low corruption rate, and a favorable tax regime. You may also want to check if the country complies with international data protection laws, such as the GDPR or the CCPA, if you are handling sensitive or personal data.

4. Assess the infrastructure and internet connectivity: Another important factor to consider is the infrastructure and internet connectivity of the country you are choosing. You want to make sure that the country has a reliable and fast internet connection, a stable electricity supply, and a modern transportation system. You also want to make sure that the country has a good IT ecosystem, with access to innovation hubs, universities, and industry associations.

‍

Choosing an IT outsourcing country is not an easy task, but it can be rewarding if you do your research and find the best fit for your project. By following these tips, you can narrow down your options and select the country that offers the best value, quality, and compatibility for your IT needs.

‍

Summary

So there you go! Hopefully, this article has given you a rough picture of how much software development outsourcing costs. If you're looking to outsource to an offshore firm in Vietnam to save costs, Dirox is the perfect partner to help make your dreams come true! Please don't hesitate to contact our expert consultants to get a quote for your project!

‍

‍