Managing Cost of Outsourced Software Development

Source: Accelerance, Inc.

CFOs care about VALUE. Price is not “the only thing” in making a purchase decision, but price is never irrelevant.

Software development outsourcing is a proven way to reduce costs. But beware of treating outsourcing as a pure commodity (where all outsourcing options are equivalent). Low cost rates for outsourced software development must not force your company to forfeit an acceptable level of quality. The old adage “if it seems too good to be true – then it probably is” definitely applies to shopping for the right partner for application development outsourcing.

Your company will encounter a continuum of possible hourly rates when selecting a software development partner. Rates can range from as low as $15 or $20/hr to as high as $300/hr depending on many factors.

Based on our experience and global outsourcing relationships with top development firms in more than 30 countries, Accelerance recommends that you discard any services offered below $25/hr. Regardless of country or region, we believe less than $25/hr is a glaring red flag that the provider is (a) under-investing in his company or (b) will be cutting corners in your risk mitigation and delivery requirements.

Generally the “sweet spot” for global software rates is between $25-65/hr, depending on factors such as region, experience, and technology niche. In this price range, you can (and should) expect the service provider to demonstrate best practices in infrastructure, tools, recruiting, hiring, training and retention. Moreover, service providers in this rate range offer highly-qualified teams of programmers with appropriate English fluency, technical certifications, process certifications, etc.

Simply put – you get what you pay for. Bargain basement rates, likely means that the service provider is compromising quality of work output in some manner. Select a provider with reasonable and competitive rates for their region and you’ll be much more satisfied with process and deliverables – which will ultimately create cost savings in other areas.

Accelerance has produced an outsourcing cost guide to help you understand the differences and tiers you may encounter when examining rates for outsourced software development.
Download the Full eBook Here: https://www.accelerance.com/download-what-your-cfo-needs-to-know-about-outsourcing-software-development

About Scale Finance
Scale Finance LLC (www.scalefinance.com) provides contract CFO services, Controller solutions, and support in raising capital, or executing M&A transactions, to entrepreneurial companies. The firm specializes in cost-effective financial reporting, budgeting & forecasting, implementing controls, complex modeling, business valuations, and other financial management, and provides strategic help for companies raising growth capital or considering M&A/recapitalization opportunities. Most of the firm’s clients are growing technology, healthcare, business services, consumer, and industrial companies at various stages of development from start-up to tens of millions in annual revenue. Scale Finance has multiple offices in the Carolinas including Charlotte, Raleigh/Durham, Greensboro, and Wilmington with a team of more than 45 professionals serving more than 130 companies throughout the region.