Compare the price you’re quoted to the average range in the region based on like-for-like software engagements. Be ready to recognize when a price is abnormally above or below the average and when something is off. Carefully review what your quote includes and put a high priority in getting world-class software for your investment. Saving money isn’t helpful if the result is an inferior product.
Separate from the quoted rate is the total cost of engagement (TCE) and is a cost you’ll have to factor in above the quoted rate. As an example, TCE for in-house teams can be astronomical, with taxes, benefits, and overhead all added onto the hourly rate you’re paying your developers. Outsourcing cuts the TCE down significantly, but it doesn’t vanish. It’s still important to consider the extra management costs and the potential travel costs for offshore and nearshore software outsourcing.
How your rate is quoted will vary by provider. Commonly, rates will be quoted based either as Full-Time Equivalent (FTE), where you pay a percentage of the annual salary of each team member based on the length of your engagement, or as Blended Hourly, where you’re quoted an hourly rate based on an average wage of multiple team members.
Often when outsourcing without a trusted representative, outsourcing companies will include a Risk Factor Charge which may increase your quote by up to 50%. Risk factor charges are eliminated when hiring a vendor through Accelerance.