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How to optimize costs with outsourced software development teams

Outsourced software development teams: optimize your development costs

Outsourced software development has become a widely used way to optimize the cost of any project. Besides cutting costs, hiring a remote team helps in-house teams concentrate on the businesses’ core functions. Learn how to avoid the common pitfalls of software development outsourcing and optimize your budget.

Software development outsourcing has become a widely used way to optimize the cost of any project. Besides cutting costs, hiring a remote team helps in-house teams concentrate on the businesses’ core functions. If the following questions come to your mind while working, consider searching for a remote software developer:

  • Are we working at the cost?

  • Are our available resources being utilized to their fullest efficiency?

  • Can we cut down our recruitment and training costs?


First, you must decide whether you want to hire an outsourced team or pull in freelancers. If you rely on assembling project teams from individual freelancers, you’ve probably hit road bumps in the workflow. The typical project requires not only developers but also designers to handle the UI, QA to test each aspect of your product, and a project manager to organize the workflow and to oversee progress. Pulling together this many freelancers is not only time consuming, but it can also leave you with gaps in skills and experience that become apparent after the workflow has already started.

Outsourcing to an existing team is a great fix, unlike freelancers, who are usually hired on a short-term basis. Besides, in many cases, business “grows fond” of the amount of skill in their dispose of, and a short-term deal turns into a “life-long love affair.” More so, with an outsourced software development team, you know that you’re getting the full skill set you need. To deliver a high-quality product, outsource and offshore app development companies also provide you with several specialists including (but not limited to) QA engineers, Business Analysts, Project Managers, Designers, Software Architects who collaborate closely with the outsourced development team.


Why are companies that outsource research and software development and design jobs becoming more successful these days? There are a few reasons for this:

  • Cost-effective: The most crucial advantage is that hiring a remote developer allows a business to get the work done at a little cost and in a much more efficient way.

  • Higher-level effectiveness: Outsource web development work not only increases the efficiency and quality of the work. Offshore and outsourced development teams possess greater knowledge of the work and have vast experience in that field.

  • Saves investment: You don’t need to spend your budget on developing infrastructure. When you hire a remote developer, the developer makes necessary infrastructural changes, as per the requirements of the project.

  • Cost-cutting on training and recruitment: When you hire a remote web developer, there is no need for training programs for the development team. The work will be handed over to people who are already experts.


There are, of course, some challenges that come with managing a remote team. However, with the right planning, you can easily avoid the pitfalls of working with the development team to scale up their operations.


Outsourced and offshore software development has gained momentum, especially with the pandemic. But even before the world-wide quarantine software development outsources was a secure way to save costs and access talent. So how much does it cost to hire a team of developers? That depends on the location. The rates for remote development teams vary between $15-$50 per hour. 

  • Central and Eastern Europe: CEE boasts over 1 million software engineers, which makes it a significant powerhouse of IT talent and provide competitive rates, an average of $35 per hour, according to PayScale. 


  • India offers a software developer under $20 per hour. But the cost savings often comes at a price of low quality.

  • China: China offers moderate rates of $25–$40 per hour. 

  • Vietnam, Indonesia, and Malaysia: can become a happy medium in terms of quality/cost ratio. 

  • Japanese programmers ask only $20 per hour, senior engineers in the countries mentioned above usually charge $30–$40 per hour.  

  • Latin America: In Brazil, Argentina, and Mexico, the hourly rates vary between $30–$50. 

  • Chile, Panama, Costa Rica, and Peru: offer the cost of $15–$25 for a full-time developer. 

  • Africa: Morocco, Egypt, and Kenya offer the average offshore programming rate of $20.


With an in-house development team, there are several expected costs, like rent or mortgage, utilities, building repairs, furniture, technology, etc. It amounts to 3-4% of the company’s annual revenue. At the same time there are some “unexpected” costs, like:

  1. Costs of choosing a vendor can be substantial, and should not be under-budgeted. Research shows that you may need up to an additional 10% cost of the whole outsourcing venture on vendor selection. 

  2. Cost of transition and relationship building. It is estimated at an extra 2-3% on transition costs; you can avoid this by selecting a vendor with a responsive outsourcing model and experienced staff that needs little software development training and can begin work immediately. 

  3. Cultural difference costs. No matter where you outsource, you will go through a period of cultural and organizational differences. On average, this can add between 3 to 27% extra to your outsourcing costs. 

Productivity lags. About 20% of organizations that went offshore also experience a lag in productivity. This extra can be avoided by having the ability to select remote staff with the right qualifications for your project. Turnover can cost you an additional 2%.

April 15, 2020