Category: BEST PRACTICES

The cost of the developers’ work can significantly affect the final budget of a product — an application, a website, or software. Of course, no one charges a fortune per hour, but developers’ hourly rates can seem high for clients.

As a customer, you may consider that it is more profitable to hire a software developer who has a bit less experience and a lower hourly price. However, in this case, pitfalls may await you. It may not be obvious, but a high rate, on the contrary, can reduce software development costs. In this article, we will find out how.

What affects the hourly rate of developers

To begin with, let’s find out what the cost of the developers’ work depends on. Several main factors influence this:

• Location. US developers are paid several times more than developers from Eastern Europe due to market conditions. However, it does not mean that engineers from Eastern European countries are less expert. It’s mostly because of the local economy and lower cost of living.
• Experience. It’s not a secret that juniors usually get paid less than middle or senior-level developers. For instance, in Ukraine the difference between their salaries may be 5-10x.
• Technology stack. Hourly pay may also differ depending on the skillset an engineer has. Rare expertise means a higher price. Also, big demand for a specific technology makes such specialists more expensive.
• Soft skills. Employees with great soft skills are highly valued in all domains, including IT. The knowledge of several languages, leadership experience, etc. also affect the hourly pay for engineers.

It is essential to take into account various factors beyond hourly rates when hiring developers, such as their experience, skills, and conformity with the project requirements. Considering all these factors, you already have an understanding of how much a software developer makes — those specialists can earn $15, $30, $60, $150, and even more per hour of work. 

The average software developer’s rates in Asia can vary from $15 to $35 per hour, in Eastern Europe — from $25 to $50, in Western Europe — from $50 to $100, and in the USA — from $70 to $150 and more. 

When high software developers’ rates can help to cut overall costs?

As we have already mentioned, you can find developers with different hourly rates on the market. Considering this, customers are tempted to save money and hire less expensive specialists. That completely makes sense. But very often less expensive means less experience. Will this compromise be okay for your product?

Yes, juniors are cheaper because they are in abundance on the market. Obviously, there is a risk that the work will take longer. In addition, a novice developer may not have enough knowledge to deliver a complex project. 

 And here the quality of software development services will depend on the management process. If you accurately estimate and assign tasks to each developer’s level, you can reduce costs and get high-quality work. 

Junior  specialists are suitable for handling straightforward, regular tasks, which might otherwise occupy the time of senior experts and hinder their effectiveness in carrying out crucial assignments.

Of course, a less experienced tech specialist can be trained, but it takes time. And time is money. Experienced software developers with a higher hourly rate are more qualified. High senior engineers’ salary for the most part means that they write good quality code much faster and know how to test it to make sure it’s correct. They are more productive and can do more work than juniors in the same amount of time. 

But, it’s essential to avoid assigning these specialists to perform basic tasks. Their expertise allows them to apply their knowledge in tackling more complex and global questions.

Working on difficult tasks and sophisticated products, an experienced pricey software developer can reduce overall costs in several ways:

1. Efficient problem-solving: Experienced engineers can solve issues and write code expertly, saving time and reducing the cost of a project. Their expertise allows them to see the whole picture of the product. When they solve a problem, they keep in mind the software integrity and overall functionality.

2. High code quality: Experienced developers do great job for their clients by writing clean, high-quality well-structured and documented code. They make fewer mistakes and correct them quickly, which also affects the final project’s price. This also means post-release maintenance and support costs will be reduced.

3. Faster time-to-market: As mentioned earlier, engineers with high hourly rates are more productive and can work faster. This speeds up the time-to-market for a product. Moreover, this can lead to increased revenue, which generally offsets the higher development cost.

Let’s look at a specific example of how a more experienced specialist with a high rate can save money. 

Imagine that you are faced with the choice of hiring two specialists to develop a new complicated feature. One of them, let’s call him Jim, is experienced in this field and costs $60 per hour. The second developer, John, has less experience and costs $25 per hour. 

Of course, at first sight, it seems more profitable to hire John, because it saves you a lot of money. But there is a huge snag here. Jim will spend only 3 hours doing that task, and this will cost you $180. In his turn, John, because of the lack of experience and the need to investigate the specifics of the task, can spend 15 hours, and this will cost you $375. 

Thus, in such cases experienced specialists with a high hourly rate can reduce costs and solve the problem in a short time, avoiding the need to redo the work. Тheir skills and abilities fully pay off.

But, what you also need to remember — it’s essential to strike a balance when forming a development team, not relying solely on super-specialists. A well-balanced team allows for skillful and efficient tasks allocation based on different complexity levels. 

As we mentioned earlier, less experienced engineers can effectively do regular tasks, freeing up the time for planning and implementation of more complex objectives for higher-level specialists.

For example, by mixing Jim’s and Jonh’s skills in the long-run perspective, you can benefit even more. Thanks to this balance, you can not just effectively distribute tasks, but also manage your budget efficiently.

That’s why at ImproveIT Solutions we carefully evaluate each task, opting for cost-effective solutions without unnecessary expenses. We make sure you pay for what you truly need.

Advantages of working with Ukrainian software development companies 

As we found out, a high hourly rate can indeed save you money. However, sometimes the project budget is very limited, and there are no extra funds to pay for expensive developers from the USA or EU countries. Often clients decide to find a nearshore software development company or offshore software development company.

In this case, you can choose an outsourcing team from another country, for instance in Eastern Europe, where developers have wide expertise and are more affordable.

One of the best destinations for outsourcing is Ukraine. Here you can find high-class specialists with a reasonable hourly rate, but at the same time, you save your budget and don’t overpay for the developers’ location. 

Ukrainian software development outsourcing companies are really in demand these days, because of the country’s thriving IT industry. You will get many benefits if you choose a Ukrainian IT company to develop an application, website, or software. You will get:

• Team of professionals;
• Developers with up-to-date knowledge and skills to work with the latest technologies;
• Cost savings;
• Product quality;
• Ongoing support; 
• Flexibility in collaboration models, etc.

So you’ll be provided with high-quality services for a reasonable price. Doesn’t it sound like the best software development company ever?

ImproveIT Solutions: reasonable price for high quality software development services

ImproveIT Solutions is one of the software development companies in Ukraine, which you can count on. Our team consists of competent and skilled developers who will help to bring your projects to life.

The main advantage of our team is that we take recruitment seriously. Most of our developers are middle and senior guys — experienced professionals with a wide range of skills. 

In addition, we carefully consider the prices for our services. With our team, you do not have to spend money on redoing work or hiring additional development forces.

We choose the best specialists to get the best results. And you will get a quality product at a reasonable price. To get started with us, just contact our software development team.

What Is Outsourcing? A Short Definition
Types Of IT Outsourcing
Comparison Chart Of Each Model
Advantages And Disadvantages Of Each Model:
- Nearshoring
- Offshoring
- Onshoring
Conclusion

What Is Outsourcing? A Short Definition

What Is Outsourcing? In simple words, outsourcing means transferring some business process outside of the company to a specialized service provider.

This model became a popular response to the IT market situation when the number of specialists isn’t enough to cover a growing need for their skills. As a result, we see an annual increase of IT engineers’ salaries and software product development costs as well. By outsourcing IT processes, companies benefit from access to the global talent pool and expertise unavailable in-house and can hire skilled specialists at reasonable rates.

Based on the location of a service provider, IT outsourcing is usually divided into three different models: nearshoring, offshoring, and onshoring. Let’s take a look at each of them.

Types Of IT Outsourcing

Nearshoring is the most convenient model of location-based outsourcing. According to it, you hire a company located in a neighboring country (usually in the same time zone or within a couple of hours difference). It allows finding the best cost-quality ratio. You will also benefit from cultural similarities and the same business hours.

Offshoring’s main goal is getting work done in faraway countries where the costs are as low as possible. So it means handing over your product development to a service provider located in a country with an emerging economy, where the cost of living and the salaries of IT specialists are lower. And if you choose your service provider correctly, you will get almost the same quality of services as if it were done in your country. Compared to others, offshoring has more disadvantages, such as time zone differences (from 5 to 12 hours), possible cultural and language barriers, etc. 

Onshoring means transferring software development to a lower-cost location inside the national borders. The main goal of this model is to have maximum proximity, communication without any barriers, and control over the process. Although onshoring is the most expensive model, it still allows some cost optimization. Usually, a service provider is located in a small town and charges less than companies in the metropolitan area. 

Comparison chart of each model

Advantages and disadvantages of Nearshoring, Offshoring, and Onshoring

Besides differences, some key advantages and disadvantages are common for offshoring, nearshoring, and onshoring. There is a popular opinion that the language barrier can potentially cause a few cooperation problems. But due to globalization, the post-covid digital transformation, and the spread of English, the risks of miscommunication and cultural issues seem to perish. Apart from the language itself, there is a potential risk relevant for all models regarding the style of work of a particular vendor, their ability to follow deadlines and communicate effectively.

The common advantage of all models is the strong expertise that clients don’t have in-house. Specialization makes it possible for all outsourcing service providers to gain strong expertise in the service field they provide. To stay competitive, they hire top-notch experts who face multiple challenges working on projects of varying complexity. 

On the other hand, you should note that according to some cooperation models you will hire specialists that work for multiple projects simultaneously. Some vendors don’t fully immerse into your project. That’s a huge challenge, especially if your startup is currently in the discovery stage. But that’s a disadvantage of a particular IT outsourcing company, not of IT outsourcing itself. 

All the above paragraphs refer to common features. Now here is more detailed information on their particular advantages and disadvantages.

Nearshoring 

Advantages:

• the teams can collaborate and communicate throughout the workday (for example, additional feature development or bug fixing sometimes requires the exchange of information between a service provider and an in-house developer); 
• geographical closeness makes it possible to organize offline events to increase the effectiveness of teamwork and personal communication;
• cultural similarity reduces potential issues;
• tax and financial laws can be similar.

Disadvantages:

• there is only one main disadvantage compared to other models: it is more expensive than offshoring.

Offshoring

Advantages:

• due to intense competition, many offshore outsourcing companies create beneficial conditions for their clients and provide complementary services like short-term support, consulting, free QA services, etc; 
• access to a larger talent pool; 
• quicker time to market with the ability to work on projects round the clock (e.g. when an Indian team ends a working day, their US colleagues only start working, as if the second shift); 
• possible tax holidays, financial incentives, and fewer business regulations.

​​Disadvantages:

• there are chances that your offshore provider follows business and management processes that are very different from yours;
• sharing information between systems and locations increases the risk of a security breach, data leaks, or loss of data; 
• some developing countries have not adapted their educational system to modern technological requirements, so you need to double-check the developers’ competence;
• deadlines and tasks may also be harder to sync due to local national holidays etc. (of course, this can be avoided with proper planning).

Onshoring

Advantages:

• possibility to meet with your provider and outsourced team offline as often as needed;
• no need for late-night meetings as you are in the same time zone; 
• possibility to check a company’s reputation and references on your local market;
• onshoring guarantees more effective cooperation, because all participants have common cultural and linguistic background;
• same business approach.

Disadvantages:

• onshoring is more expensive than nearshoring and much more expensive than offshoring;
• hiring locally limits the talent pool you access – there may not be enough candidates with needed skills;
• very fierce battle for talents on the markets of developed countries.

Conclusion

To sum up, we provided you with comprehensive and objective information to help you make the right choice and maximize benefits. Compared to all models, nearshoring works more effectively in our opinion, so we prefer this model of cooperation with customers.

Feel free to contact us and get answers to all your questions about IT outsourcing from our specialists.