From Office Tables to Local Taxes: How Offshore Software Development Cost is Formed?

How to get maximum quality and efficiency at the minimum cost? That’s the question that bothers many business owners. You want to bring your idea to life before someone else comes up with something similxar, but you need to do it right. 

One way is to assemble an in-house team. This would include recruitment, onboarding, planning, management, accounting, and all that jazz. You may need a bigger office with a few more workstations. In other words, it’s going to require more money and more time, which you don’t necessarily have.

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The other way is to outsource the dedicated software development teams. Here’s how it works. You partner up with a foreign contractor and they do all the work for you. Many companies go for this option because it’s thought to be faster and more cost-effective compared to having more employees locally. But is it as cheap as it seems? You might always wonder: how offshore software development cost is formed?

In this article, we’re going to explain what factors make up the offshore software development cost . You’ll see why your invoice might not be as small as you expect and why it’s still worth it. 

The Factors that Makeup Software Development Cost

Imagine that you’ve partnered up with a Ukrainian software development team. What exactly are you going to pay for? 

Office 

The first and most obvious factor that makes up the cost of offshore software development is the cost of office space and related expenses. This includes rent, furniture, technical equipment, office supplies, food, and drinks (water, coffee, tea, cookies/fruits). 

Even if the company assembles remote teams, they still need the office to do it. For example, here at Relevant, we have specialists working with us in-house, but we also have access to a large talent pool of freelancers in case our clients need extra brains.

Hiring 

Every client has unique needs, and when it comes to gathering development teams, it’s always a process with multiple stages. From figuring out how many specialists the client needs to conducting multiple levels of interviews, there has to be someone to take care of it all. 

That’s why software development outsourcers usually have several recruiters working with the team full time and getting paid for their expertise. Without them, it would be impossible to assemble a qualified team so fast and integrate into the clients’ projects smoothly. 

Vacations 

Let’s not forget that we’re working with real people. And even though some of them are super motivated to work tirelessly 365 days per year, it’s not a healthy story. The developers are working with the clients overseas, but they are treated like regular full-time employees with all the perks and days off.

The company is legally required to provide time off to employees, which includes state holidays and annual vacations. Also, whenever someone is not feeling well, it covers a certain amount of seak leaves. 

Education 

Software development is a skill. The new technologies and solutions emerge all the time, so it’s super important to keep it sharp. Also, since Ukraine is not an English speaking-country, ensuring that the team speaks the language at a decent level is a must. That’s why many IT companies pay for their employees’ language courses. 

Every respectful offshore software development firm invests in the education of their employees. Otherwise, they won’t be able to compete on the market. Here at Relevant, for example, we make sure our specialists get access to the latest knowledge. We arrange mentorship programs for new hires, hold internal lectures, and have a full-time English teacher in-house. 

Taxes 

If we are talking about Ukraine, the cost of living here is much lower than in other best countries for outsourcing software development, like European countries, not to mention the United States. That said, the taxation system here is generally favorable for the IT-sphere. You’ll find our local corporate taxes pretty comfortable than yours, so it won’t be as much of a financial burden for you as it would if you had an in-house team of the same size. That also adds up to the final offshore software development cost.

Non-tech employees 

We’ve already mentioned HR managers and recruiters, but they are not the only not-tech employees working in the organization. There are also project managers, accounting staff, cleaning, and other office maintenance services. All these people ensure the smooth work of the entire office.  

Accounting work

One of the best things about working with an offshore software development company is simplicity. When you have an in-house team, you are the one dealing with employee salaries and accounting. But if you are working with an outside contractor, you don’t have to worry about anything. As a client, you will simply receive an invoice. All the behind the scenes work will be done for you. 

Offshore tech talent hourly rates

Why hire Ukrainian developers? Ukraine’s outsourcing rates.

Why cost shouldn’t be your primary driver  

What do you mean, you may ask? Why else would I need to outsource if it won’t save me any money? 

First of all, outsourcing software development is going to cost you less anyway. It’s just that the price shouldn’t be the most important factor in choosing a contractor among several alternatives. 

The vendor that offers the lowest cost on the market cannot provide the best quality by definition. From what you can tell after learning about all those pricing factors, software development outsourcing is a complex service. Therefore, every aspect plays an important role in the outcome.

Lowering the overall rate would require significant trade-offs in certain aspects, and it’s a sure way to end up with poorly qualified developers who can’t seem to get on a call with you in real-time, have difficulties communicating in English, and have nothing in common with your company culture. 

We don’t need to mention that as the result of such collaboration, you’ll lose more than you gain, so be wise about it. 

Summary 

Outsourcing a software development team can become one of the best business decisions you’ve ever made. However, for this move to work out as good as expected, you need to be willing to invest. Now that you understand how offshore development cost is formed, it’s going to be much easier for you to find a reliable partner overseas. Feel free to contact us to learn more about how to choose a dedicated software development team for hire.