Complete Guide to
Outsourcing
Software
Development

Agenda
 Why outsource software development?
 Top outsourcing destinations
 Freelancer or company?
 Developer & freelancer hourly rates
 Tips on how to choose the right company
 And more!
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Did You Know that…
This year,
the global
tech market
will grow by
5.9%?
In 2016,
businesses and
government will
spend $ 450
billion on
outsourcing?
80% of all
IT projects
are global?
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When to Outsource?
You want to reduce software development costs
• You cannot afford hiring in-house developers
Your project is of temporary nature
• Your employees lack certain skills required for the project
You need an on-and-off development team
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Why Outsource?
Cost reduction (lower hourly rates,
no office space and recruiting
expenses)
Financial flexibility (“fixed price”,
“time and material” or “dedicated
team”; easy staffing)
Focus on your core activities (let the
pros do their job)
Full control (you monitor KPI, track
employees’ performance and receive
reports on a regular basis)
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Top Outsourcing Destinations
46%
21%
17%
10%
6%
Asia
Eastern Europe
South America
North America
Other
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Medium Hourly Rates (companies)
0
50
100
150
200
250
300
From ($) Up to ($)
USA
Western Europe
Eastern Europe
Asia
South America
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Why Outsource to Eastern Europe?
Expertise
Developers from Belarus,
Ukraine, Czech Republic are
highly valued by Venture Beat
and StackOverflow
Reasonable hourly rates
$20-50 per hour (rate in
Eastern Europe) compared to
$50-99 in Western Europe and
$100-250 in the USA
Western mindset
According to Geert Hofstede’s
cultural dimensions theory, US
businessmen are more likely to
establish beneficial business
relations with Europeans
Effective cooperation
Better English speakers
compared to Asians, universally
approved project management
methodologies
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Freelancers or Companies?
Freelance is the fastest-growing labor market in Europe.
Why US enterprises employ freelance developers?
 Lower hourly rates
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Freelancer Hourly Rates (Eastern Europe)
0
5
10
15
20
25
30
Bulgaria Russia Belarus Romania Macedonia
($)
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Freelancers VS Companies: Benefits
Working with a freelancer Outsourcing to a company
Cost reduction
Cost reduction
Increased value
(full-cycle product development)
High-quality product
Financial flexibility
(variety of pricing models - fixed
price, time and material or
dedicated team; free consultation
on which to choose)
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Freelancers VS Companies: Challenges
Working with a freelancer Outsourcing to a company
Complicated management
Higher costs
(include testing and support;
outsourcing software development
to a company is more beneficial in
the long run)
Cultural misfit
(and no manager to handle the
problem)
Projects exceed budget & run over
time
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How to Choose the Right Company?
1. Study independent developer
ratings on platforms like Clutch.co.
4. Evaluate the reply time, accuracy of
English & quality of information they
provide you with. Make your choice!
3. Study their websites. Pay attention
to design and content quality. Contact
the vendors
2. Choose several companies with
reasonable hourly rates, desired
expertise and favorable reviews
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Why Outsourcing Projects Fail?
16
9
9
15
13
0 5 10 15 20
Unclear scope
Poor Management
Poor Communication
Cultural misfit
Provider's poor performance
(%)
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Outsourcing Challenges & Ways to Overcome them
Poor performance & prolonged
deadlines
Trust your project to an experienced
manage
Unclear scope & exceeded budget
Choose the right pricing model (fixed
price, time & material, dedicated team);
define the scope & possible changes to
the project
Cultural misfit
Partner with developers from Eastern
Europe
Poor communication
Contact the vendor to evaluate the
reply time, command of English,
willingness to help and quality of
information
Legal issues
Find a company with headquarters in
USA or Europe + sign an NDA
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Outsourcing Trends 2016
Quality-centered approach Contract renewal; dedicated team is king
Development for IoT Focus on interoperability & security
Data analysis
By 2018, IoT devices will generate 403 ZB of
data per year
Cloud computing
Growing demand for enterprise software; lack of
developers
Eastern Europe on the rise Between 2014 and 2018, Belarusian IT
outsourcing market will grow by 17.78%
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Sources:
http://r-stylelab.com/company/blog/it-outsoursing/outsourcing-software-development-trends-for-2016
http://r-stylelab.com/company/blog/it-outsoursing/offshore-web-development-extra-services-and-
benefits-for-startups
http://www.gartner.com/newsroom/id/2550615
http://r-stylelab.com/company/blog/it-outsoursing/top-reasons-why-startups-should-outsource-web-
development
http://www.lessonsoffailure.com/developers/real-reason-outsourcing-fails
http://r-stylelab.com/company/blog/it-outsoursing/global-delivery-is-the-future-of-outsourcing
http://r-stylelab.com/company/blog/it-outsoursing/freelancers-or-companies-how-to-outsource-software-
development-right
http://techcrunch.com/2010/04/17/should-tech-startups-outsource-product-development/
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