How much can you expect to save when outsourcing software development?

MadeinWeb

Introduction

Outsourcing can certainly save you money. A lot of money.

One industry that benefits the most from outsourcing is software development. When you look at developers’ salaries, the reason is clear. The US pays its developers some of the highest salaries, yet 40% of companies plan to increase their outsourcing spending. Of those companies, 64% cited application development as the main reason.

All in all, companies can save up to 90% on operational, developers and other costs by outsourcing their IT. But what exactly are those costs, and how do companies transform them into savings? This post breaks down the cost of developing software and how outsourcing is saving companies money.

The High Cost of Developing In-House

Hiring on-site IT staff is expensive. A junior developer in the US costs more than a senior developer in India. As developers gain education and experience, their costs also go up, making them prohibitively expensive for smaller companies.

For businesses in these countries, it only makes financial sense to outsource.

Consider the average annual salary for software developers in various countries:

Sources: Time Doctor, DOU.

To put this into perspective, imagine you run a small IT startup in the US. You want to hire two full-time developers, and you start by looking at the cost of hiring in-house. That’s a baseline annual salary of U$90.000, and that’s assuming these aren’t senior developers. It also doesn’t take into account the cost of onboarding and managing the two employees. In comparison, outsourcing to an equally skilled team in other country, let’s take Brazil for example, it would cost only U$ 16.000 without the need of considering additional hiring fees, that’s a range of over U$ 80,000/year/developer that companies can save!

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