Top Hidden and Direct Costs of Software Outsourcing

Contact Us
Srbuhi Avetisyan
Holy Abgar King Street, 41/3
Yerevan 0033 

3 Major Hurdles of Calculating Software Outsourcing

1. Poor cost -consciousness in software outsourcing
2. Scarce data collection
3. Rare data analysis

Top Direct Costs of Software Outsourcing

Salary or paycheck
When speaking with a software outsourcing provider, the cost is the first thing you want to know after discussing your project. The budgeting varies depending on the size and difficulty of your project and its conditions.

Hiring a single or dedicated software developer
You could hire a dedicated software developer, designer, QA specialist, or PM who would work on your project on an hourly, weekly, or monthly basis or with a long-term contract, depending on your requirements.

Costs of hiring dedicated remote software developers
International tech hubs provide competitive software developers and IT specialists at affordable prices. The low prices have nothing to do with the work quality of these professionals. Armenia is a recognized international tech hub, which means this country concentrates a lot on the tech industry and has state support to make the country famous worldwide. Thus, it is safe to hire software developers from Armenia.
Hiring a single dedicated software developer from Armenia costs approximately $25-$50. The prices highly depend on the complexity of a software development project, the seniority of the software developer, and the tech stack.

Hiring a fully remote software development firm
If you have a business idea and need diverse tech professionals to make it a reality, hiring a software outsourcing company is the correct choice. Your business idea may include:
• Developing open-source software solutions and selling them to the appropriate professionals or companies
• Developing a custom software solution to solve a specific problem in your business or to level up your service or product quality
In all cases, the remote technical team acts like an in-house team and is fully devoted to your company.
When is it beneficial to hire a dedicated software development team?
• When you have full-cycle software development, implementation, and maintenance requirements but with minimal investment.
• When you want to hire an experienced tech team as an extension of your already existing IT department.

Cost of hiring a complete offshore software development team
If you require estimates for working with an entire tech team, you should know that software vendors calculate custom software development project costs by each professional’s hourly rates. For example, the client needs 2 full-time developers (for back-end and front-end development), a project manager, a tester, and a UI/UX designer. In this case, the software vendor will calculate each professional’s hourly rate based on how much time they should spend on the project, summarize, and propose the final cost.
This is, of course, an approximate estimate and one scenario. The rates may differ based on the specific working culture of your software vendor. For example:
• The software outsourcing firm may make discounts if you hire a whole tech team
• Already established team members have experience cooperating with each other, which will make their work more productive and efficient

Top Out-Of-Pocket Costs in Software Outsourcing
• Getting the SSL certificate for the security of your product. SSL certificate is critical for your product. An SSL-certified product keeps user data secure, verifies the ownership of your website, excludes the possibility of hackers or attackers creating the second version of your website, and, finally, owns users’ trust. Your offshore software development team is not obliged to cover the costs of getting this certificate.
• Travel costs of a software developer or any other IT specialist to meet you in person or the other way around.
• Hiring a technical consultant, a CTO (chief technology officer), or a technical partner to work with the team. Sometimes, when companies or organizations want to have minimum involvement in the SDLC, they feel safer hiring a tech lead who will keep control over the software development, implementation, and maintenance process. In some software outsourcing firms, this service costs additional money. We advise discussing the involvement of the tech lead with your vendor beforehand.
• Software outsourcing consulting services. Some software outsourcing firms charge additional money for tech consulting services before starting the SDLC. However, please keep in mind that this is not a paid service in every software development company. At CodeRiders, we do not charge money for consultations. Learning about your project and understanding your concerns is critical for us, thus the service is free of charge.
Top Hidden Costs of Software Outsourcing
Now, as we know the out-of-the-pocket and direct costs of software outsourcing, it is crucial to be aware of the hidden costs of IT outsourcing. As mentioned earlier, this is critical for correct budgeting and business planning.

Poor or slow communication
The typical fee structure for software outsourcing services is on an hourly basis. The more time IT specialists work on your software development project, the bigger your invoice is. Hence, arranging at least a rough time with your software vendor firm is crucial. When choosing a software outsourcing vendor, pay close attention to their communication skills. Here are the top 12 software outsourcing questions and answers to identify a good software vendor.
Costs of writing technical documentation (if you do not have one)
Before approaching a software vendor candidate, you certainly should have your requirements documented. The level of technical documentation depends on the type of software development engagement model you choose.

Cultural or legal risk factors
When outsourcing your software development requirements to an international software development firm, you should be prepared for diversities. Remember that various countries have different legal systems, political conditions, languages, and cultures.

Before signing a contract with a software outsourcing company, take your time to learn more about their country and clarify which country’s legal system your contract should follow.

Armenia is a safe country to outsource software development projects because the majority of IT field employees are fluent in English, and have no strong cultural and national characteristics. Nevertheless, if the risks are put to the minimum that does not mean they do not exist. You should be well aware of these risks.
Ask these questions to your software vendor candidate to avoid any factors affecting software outsourcing costs:
• Will currency fluctuations impact the overall cost of my software development outsourcing costs?
• What is the economic and political relationship between our countries?
• What will happen if something happens with the core member of the offshore software development team?
• How are the IP rights supported in the software vendor’s country?
• What is the condition of the internet connection and infrastructure?
You can overcome these risks by stating your conditions about these risks in your software outsourcing partnership contract.

Server management Cost
In the digital world, even a single error in your product (error in functioning or slow response time) costs money. We, as users, have so many options that we quickly bounce away from a website or app that does not serve our expectations. Good IT server management ensures optimal performance on the servers. It covers the administration of hardware, software, security, and backups and costs additional money (around $100-$400 monthly fee for a single server).