How much money can you save with Offshore Outsourcing?

What is the one thing that every company needs to keep themselves afloat? Money, right? It is almost as important as the reputation of the company, because without money, nothing works according to plan. Every company, irrespective of whether it is a startup or a multinational, planning the finances correctly, makes a lot of difference. One way to manage finances would be to invest in the right places, and save wherever possible. This is why most companies prefer to outsource, because it gives them access to better talent, at a much lesser cost. Not to speak of the advantages and benefits of focusing your energies on company goals. 

Choosing an offshore outsourcing agency would give you a team with stellar quality, economic rates and saves time. There are several countries like India, Ukraine, Indonesia, Poland etc. offering offshore services to clients from across the world. One of the biggest areas of offshoring is in the software development industry. Other popular areas include BPO or Business Process Outsourcing and Infrastructure and Technology Outsourcing.

The need for outsourcing

As mentioned earlier, the main benefit of offshoring is that the company can focus on the core aspects and functions and control costs. If you are a startup, or have been running your company for a couple of years, then you need to ask yourself these questions:

  • What are the best possible working scenarios in cost cutting?
  • Are the present resources utilised to the fullest capacity
  • Are the present available resources suitable to support new technologies? Can they give you a competitive edge?
  • Are the business processes efficient, quick and professional?
  • Are there any ways to cut down on recruitment and training, as they consume lots of money and time?

So it is obvious that you can save large amounts of money with outsourcing, but choosing the right partners is so important, or it could backfire. Read about how you can save money by outsourcing, and the hidden costs of outsourcing, so you can make the right decision.

Hidden costs of outsourcing that you must know about:

Many companies like IBM, Deloitte, Microsoft, Mindtree and all other big names in the industry outsource, and they outsource carefully so as not to burn themselves.  But often startups and small to mid-size companies are unable to estimate their costs because they do not know where the hidden costs lie. Here are some areas. 

The cost of hiring and retaining a vendor

Getting the right vendor can be time consuming and of course, costly if you don’t know where to look. With the right team, you can save money but with the wrong team, you will have to endure repeat work until you are satisfied or move on to someone else.  There are some processes in selecting a service provider and the team they provide. The amount will, of course, depend on a certain percentage of the annual cost of the deal. So if you are sending work to India, for say, 100 thousand dollars, then you might have to get them a fee, (example 1% or 2%). And then there are some legal fees too, since you have to hire a legal adviser too. 

The problem with social loafing

Hidden costs will happen when you hire more people for your team. Suppose, you need only five people for your team, and you hire seven people without realising you need only five, then the expenses for the two are extra, and a strain on your resources.  

Having more people on the team will not improve the speed of the work, instead it will only slow the whole thing down, because with more people, there is a tendency for people to think that the other person will pick up the slack. If you have the exact number of  people  in your team, then everyone will know what the other is doing, and nobody would think the other person would be doing it; and each will be aware of his/her tasks. 

Costs incurred during the transitioning stage

Before going into outsourcing, have a look at the direct costs involved:

The actual transferring of work to the outsourced team incurs a certain amount of money. It is called the transitioning costs because you have to explain the project to them. It doesn’t cost much, but nevertheless, an expense you should be aware of. Rather than financially, it would be the time involved in the transition that you should know about. 

Server management costs

When the work is remote, there will be a lot of server management costs that you should be aware about. It is important that your product never experiences downtime when it is up and running. 

The payment to the team, of course

The most transparent expenses would be payment to the team. You have three options: Hire a single developer, a team of dedicated developers and the full product development team. While hiring a single developer, you can choose to go for the per hour basis, month to month basis or a long term contract depending on your project. If you are looking for expertise on a particular requirement, then hiring a single developer would be enough. There are talented developers that you can get for $20 per hour, and even as high as $50. This is much lower than hiring in-house developers. 

When you are hiring a remote team as a whole, then you will get the whole package – developer, design, tester, QA analysts and product managers. You don’t need to hire a specific expert because as it is a team, all you need would be professionals. You don’t have to hire front end developers, backend developers or QA analysts separately. You can hire a service producer who would give you the team, and fees will vary because it would depend on the level of the professionals. 

If you are hiring for full product development, then they would be involved in the whole works, right from brainstorming to creating the MVP and the final release of the product. Once again, you have to send a quote to the outsourcing agency, and depending on the features you need integrated into your project, and an estimate would be provided. 

Calculating the costs

Now that you have decided to outsource the work, you will have an idea of the core functions that are to be outsourced, the quality of work needed and the hidden costs involved. Tally this against in-house team expenses, infrastructure costs, insurance and other expenses involved. Do the math, and the rest is easy.

Why India is the best choice for outsourcing:

India has the largest collection of highly skilled and talented people. With the Covid 19 situation, the demand for remote work has increased, and with it the demand for workers from India. There is an excellent and competent staff who are quick to respond with queries. It is easy to hire really good people with specialised skills at optimised rates. 

Conclusion

Outsourcing is definitely not the cheapest option around, but when you do it correctly, and with the right service provider, you can save. Collect the quotes from the different service providers,tally that against the skills and expertise they provide and make your choice based on it. 

Interesting Links:

What is Offshore outsourcing?

What are the benefits of Offshore outsourcing?

Pictures: Canva

The author: Sascha Thattil works at Software-Developer-India.com which is a part of the YUHIRO Group. YUHIRO is a German-Indian enterprise which provides programmers to IT companies, agencies and IT departments.

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