The offshore software industry is continuously growing, and filled with companies of different sizes, and technical expertise, from start-ups to large enterprises all charging different price points. The industry commonly categorizes outsourcing software firms based on size and price, which essentially becomes the two primary factors of consideration when it comes to finding the right offshore team.
Types of companies and how much you pay
Freelancers (individuals who work by themselves and not with a company) vary significantly in skill and experience. Freelancers are often more cost-effective than companies, but there is an element of risk as they can stop working on a project at any time and may not have the resources to deliver what is required. The typical freelancer can cost anywhere between $10 and $70 per hour with the price being determined by their skill, experience, and location.
A ‘sub-par company’ offers to complete projects at incredibly low prices with exceptional turnaround times. A package that might sound tempting, but the old adage “If it’s too good to be true then it probably is” often applies as the work delivered is of incredibly low quality. Many businesses working with ‘sub-par companies’ are left dissatisfied by the quality of work produced, leading to any gains made from cost-cutting being negated. If businesses need to work with a ‘sub-par company’ it costs $11 to $17 USD per hour.
A ‘body-shop’ company is a growing firm but lacks the management that can transform the company into a larger, more robust operation. Companies in the ‘body-shop’ category have a capable team working on several projects. However, the team mainly consists of inexperienced employees leading to a high attrition rate and low employee morale due to lack of management. The inability of the management to retain talent over the long-run hampers the quality and frequency of their work. Companies in the ‘body-shop’ category charge anywhere between $19 to $25 per hour.
Mid-level companies are in the same category as ‘body-shop’ companies, in the sense that they have similar size and growth rate. However, mid-level companies are different from ‘body-shop’ companies due to management strategy. A strategy that results in a lower turnover rate, higher employee morale and more senior-level employees. Mid-level companies are the best pick for most projects and firms. The price can vary from $22 to $45 per hour, depending upon the company and location.
These are the largest companies in the outsourcing industry, an example of which is a firm like TATA Consulting in India, which towers over other companies in workforce, and technology. These are the type of companies that work best with other large enterprises. Large enterprise vendors charge about $22 to $33 per hour, depending on their location. These prices are generally for projects with a long development cycle, lasting more than 2 to 3 years.
Boutique shops are small firms (less than 100 employees), run by expats or locals with International Exposure. Usually comprises of a skilled workforce with high levels of job satisfaction, as the company has not yet felt the stresses of intense growth and expansion. Boutique shops are a good fit for most companies and most projects because of the management’s understanding of cultural differences, that normally hamper a company’s working relationship with its offshore software team. If you are interested in working with a boutique shop costs will be approximately $32 to $62 per hour.
We hope that this article can help you to make an informed decision as you begin your fruitful relationship with an off-shore software company!