Why cheap software outsourcing can turn out to be costly for your business
Illia Shaptala
800+ Talented Remote Developers For Your Startup | CEO at OGDSolutions
When a person makes repairs in an apartment, he does not invite the cheapest workers but looks for an experienced team. He agrees to pay more to get a quality result. So why do many Clients choose the cheapest offers without considering the consequences in IT??
How does a Customer choose a freelancer or a company? As a rule, the Customer conducts small research and makes a choice already based on the first rough project assessment. At this very stage, I now see two radically different approaches to the IT market.
An honest assessment of value.
In this case, the Client is given an adequate cost for the project, considering all risks. If the tasks are correctly defined, and the risks are laid down, the preliminary estimate given by the technical team will correlate with the final cost on completion of the project. It is how the market to which Western Mindset is committed, in particular Eastern Europe, works.
Even before the work begins, the Client clearly understands how much time and money he will spend on the project. He sees the whole picture and can make a considered decision on whether it is worth starting the project at all.
Deliberate underpricing.
It is not uncommon for an IT company to initially quote a much lower cost when fighting for a Client. And some Clients agree to such an offer to save money and time. But what happens in the end? During the work process, the project grows with tasks that were not taken into account during the evaluation, the deadlines are delayed, and budgets grow. This approach is most often the sin of companies from South Asia or inexperienced freelancers.
As a result, most projects either die because they run out of money or, if there are still resources available, the Customer returns to the companies where they originally quoted a realistic price.
How not to make a mistake when choosing a development partner.
1. Make a project evaluation of several companies from different regions (Western, Eastern Europe, Southern Asia).?
First, a rough estimate is given, and the company will give you a range: minimum — average — maximum cost. You will be able to give a rough estimate of the budget. It is better to focus on the average and maximum estimates.
2. Compare the valuation of 2-3 companies from Eastern Europe and 2-3 companies from Asia
Is it significantly different? There is a reason to talk to each company to find out why the estimate is the way it is and why there is a big difference from other offers. A company that has made a conscious evaluation will be able to explain everything thoroughly.?
Please note that a project in another region may not cost 90% less than in the Western market. Those who set a low price will most likely not be able to complete your project clearly and on time. Either the task was underestimated on purpose, or you have fallen for an inexperienced team. After all, good programmers are also expensive in Asia.
Take a look at the diagram below to see how much a Developer hour costs. Compare the rates of Eastern Europe and Asia. They are almost identical. Why, then, is there such a difference in budgets?
领英推荐
Software Developer Hourly Rate
* According to ?2023 Custom Software Development Pricing by Location? by Clutch.co
3. Check out cases and reviews of cooperation with the company
Make sure that the feedback relates to projects that have already been completed. Because often companies ask for feedback from the Client already at the initial stage of the project, after the start of cooperation, while the work is in full swing and everything is going well, and the deadlines and budget bloat have not yet started. Contact the person who left the feedback and ask how the project worked out in the end and what the result was.
4. Get a more detailed evaluation of the project during the Discovery Phase
A discovery phase is a process of breaking down the project into its smallest parts and making a detailed estimate of the cost and duration of the task. For this task, we assemble a separate technical team consisting of a Project Manager and Technical Specialists. They create a plan to accomplish the work, each estimating the duration, cost of their work, and possible risks.
The project duration is estimated in business and calendar days, after which the client can plan the best time to start and understand the deadline.
Example of Discovery Phase execution when creating an MVP
As a result, the Client receives not just a detailed assessment but a ready-made roadmap, where everything is worked out to the last detail: all the tasks, team composition, project management plan, and possible risks are laid out. It is a complete detailed technical specification that any Developer will understand.
At this stage, you already understand the final cost of the project, and you can give it to any company for development or refuse to perform if you see that you do not pull the budget.?
Unfortunately, freelancers often lack skills in making discourses for complex projects, so they can't properly estimate the scope of work. And companies that operate in low-cost markets rarely do discourses. It is one of the reasons why projects that are initially estimated too cheaply go well over budget or remain incomplete.
Software development is no less complex and responsible process than apartment renovation. It requires high knowledge, skills, experience, and expertise. Therefore, you should not skimp on the quality and honesty of your development partner. You may end up paying more than you planned and getting less than you expected.