Software Outsourcing: Risks of A “Least Cost Provider” Selection Method

October 30, 2017

By Andy Hilliard

CFOs care about value. Price is not “the only thing” in making a purchase decision, but price is never irrelevant.

Software development outsourcing is a proven way to reduce costs. But beware of treating outsourcing as a pure commodity (where all outsourcing options are equivalent). Low cost rates for outsourced software development must not force your company to forfeit an acceptable level of quality.

The old adage “if it seems too good to be true - then it probably is” definitely applies to shopping for the right partner for application development outsourcing.

Your company will encounter a continuum of possible hourly rates when selecting a software development partner. Rates can range from as low as $15 or $20/hr to as high as $300/hr depending on many factors.

Global Software Outsourcing Rates 

Based on our experience and global outsourcing relationships with top development firms in more than 30 countries, Accelerance recommends that you discard any services offered below $25/hr. Regardless of country or region, we believe less than $25/hr is a glaring red flag that the provider is (a) under-investing in his company or (b) will be cutting corners in your risk mitigation and delivery requirements.

Generally the “sweet spot” for global software rates is between $25-65/hr, depending on factors such as region, experience, and technology niche.

In this price range, you can (and should) expect the service provider to demonstrate best practices in infrastructure, tools, recruiting, hiring, training and retention. Moreover, service providers in this rate range offer highly-qualified teams of programmers with appropriate English fluency, technical certifications, process certifications, etc.

Simply put - you get what you pay for . Bargain basement rates, likely means that the service provider is compromising quality of work output in some manner.

Select a provider with reasonable and competitive rates for their region and you’ll be much more satisfied with process and deliverables - which will ultimately create cost savings in other areas.

Accelerance has produced an outsourcing cost guide to help you understand the differences and tiers you may encounter when examining rates for outsourced software development. 

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