Components of IT outsourcing cost


Components of IT outsourcing cost

When a company wants to ensure long-term success while minimizing R&D expenses and risks, one of the best approaches is to go for IT outsourcing services from a reliable provider. However, there is a line denoting the price-quality ratio, and crossing this line is not a wise business decision. We list the components of IT outsourcing cost to give you an overview of how a good IT outsourcing company forms its price list.

Naturally, the business wants to use IT outsourcing to minimize expenses on a variety of business processes. When working with IT outsourcing providers, you don’t have to pay for:

  • office space and equipment for employees
  • personnel salaries, sick leaves, paternity leaves, vacations, etc
  • recruiting and HR processes, teambuilding
  • licenses for various software, etc.

However, one of the most important aspects of IT outsourcing cost is the size of wages and this is directly influenced by the cost of living. Thus said, the lower the cost of living, the more affordable the services, which naturally meant close attention to South-Eastern Asia. However, over the course of years, many companies from that region have proven their low professionalism and delivered sub-par code quality. This has lead to shifting the focus of interest to other developing countries, in Eastern Europe in particular.

Why so? Because this region is geographically close to the US and EU, shares the same culture, boasts good English proficiency and follows the same business culture. Most importantly, the economics of the countries there is not as well developed as in Western, Central Europe or the US, meaning the value of a dollar is quite high there — but not as high as for nearshoring the projects to your country.

This situation resulted in a variety of projects available — and successfully completed — by IT outsourcing companies in the region, the rapid growth in popularity of the IT services industry, accumulating significant technical expertise over the years by the community. Therefore, when outsourcing to Easter Europe nowadays, you gain instant access to a pool of skilled and motivated professionals able to deliver your project with good quality.

This is where the challenge is — these services are not as cheap as when outsourcing to South-Eastern Asia. Many customers — especially from the Persian Gulf and the Middle East are used to working with much lower contractual expenses. However, the questions of quality come to the forefront there. You can buy a Lamborghini, a Volvo or a Prius. All three will get the job done, but Volvo is obviously the most cost-efficient investment, as it will not require astronomic expenses and will not break as often as the latter variant.

What are the components of IT outsourcing cost then? We list them below, in no particular order:

  • The wage of the professional you hire. A Middle Python developer in Eastern Europe earns around $36-40 k a year, which is 3 times less than the salary of the same specialist in the US, according to Glassdoor and Monster
  • The cost of office space and appliances. While Macbooks needed for developers cost nearly the same worldwide and all IT specialists store their code on the same GitHub in the cloud, the cost of office space, furniture and various appliances (air conditioners, coffee-making machines, bottled water, cookies, teas and coffee) is much lower there, so it forms a much lesser part of business expenses.
  • The cost of expertise. The majority of developers and DevOps engineers in Eastern European companies regularly undergo certifications by AWS, Google, Microsoft, Kubernetes, Docker, Hashicorp and other platforms. This allows them to confirm their skills and learn the latest technology best practices, so they are able to leverage this knowledge in your projects. This helps avoid costly errors and reduces time and money expenses on all projects.

These are the main components of IT outsourcing cost. If you think that IT outsourcing companies from Eastern Europe ask too much — you are free to work with contractors from Eastern Asia and run the risk of breaking the deadlines or receiving sub-par code quality.

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