This article was originally published on Aceinfoway.com: Hidden Costs Of IT Outsourcing
Software Development outsourcing has become the foremost priority for businesses. To accomplish their digital transformation roadmap and fill the talent gap in an organization, the demand for IT Development outsourcing has surged. Yet not all businesses have had positive experiences; some have ended their projects with exceeding costs, a bitter reality. This post will highlight all scenarios where your outsourced software project development cost can increase.
While many entrepreneurs lean on their ability to multitask to get things done for their business, studies have proven the human brain is actually incapable of juggling multiple tasks at once. What’s worse, doing so can actually lower your IQ and damage your brain. So, to combat problematic multitasking and your ever-growing to-do list, one tactic is to outsource some of your tasks to credible pros. More companies than ever are leaning on outsourcing to fill gaps in their business.
Based on recent research, companies outsource some of their tasks for a variety of reasons. According to the companies surveyed for the report, some of the top justifications for outsourcing include that it’s used as a way to cut costs; outsourcing enables companies to focus on their core business; and it helps free up bandwidth or solves capacity issues.
For companies experiencing a shortfall in tech capabilities, having a limited budget, and wanting to get their work done by experts, outsourcing IT services is the best option for them. But outsourcing IT services could come up with challenges like project management, security, quality assurance, integration, and other factors.
Especially for start-ups, being with limited resources and having a major focus on marketing and sale these outsourcing development services are vital.
So, if you are planning to outsource software development services and are confused about how much it will cost, then here are the factors you must consider.
1) Cost of Getting a Reliable IT Service Provider
While getting the software development outsourcing team on-board, you might need to conduct online tests and interviews with the developers, which again will be time-consuming.
The extra cost you may have to bear for getting tech partner on-board are:
- Consultancy charges
- Intermediaries Fees
- Project Coordinators (If required)
- Travel expenses- If you visit the service providers
Consultancy charges, fees of intermediates such as project managers or project coordinators (If required), and travel expenses- if you visit the service providers are the hidden costs of IT outsourcing that you will have to spend while procuring an IT service provider.
2) Scope Creep and Technology Swift
If you are working with an in-house team you would oversight the changes and improvements you demand in on-going project. But with outsourcing IT company, it may cost you extra dollars if changes are major.
“One of our clients contacted us with a proposal and a list of features he wanted to integrate into the product. After a few months, the CTO of the company was replaced by his successor. Now, the newly chaired CTO of the service buyer wanted to change a few features as well as the technology stack in the project, but without paying extra bills for that. Practically, it was not possible as the project was outsourced on a fixed-price model. So, whom to blame here? Neither the service provider nor the service buyer, but such unanticipated situations could increase the costs of IT outsourcing.”
These are unavoidable hidden costs of IT outsourcing because technologies, product features, software development platforms, and frameworks service providers keep on updating and keep on introducing advanced versions.
To help you Choose the Right Outsourcing Development Partner, 8 Tips by Leading Experts ⏬
3) Transition Cost and Disengagement Fees
If either the customer or the service provider abandons the project, outsourced IT projects may remain unfinished. It can be difficult and expensive to transfer the project to another IT firm or hire an internal team to finish it; this calls for descriptions of the project, technology, and resources used. According to the agreement, the procedure may involve extra hourly fees or disengagement costs.
4) Cost of Negligence
Offshore tech partners may not inform clients about talent gaps or lack of skilled resources in their onsite staff. Clients need to be vigilant to avoid the negative impact on projects caused by overlooking important factors like QA analysts, business analysts, and project managers. Negligence of these factors can eventually affect product quality and hinder project development. It is advisable to keep these requirements in mind while building the team and creating the RFP.
Adverse effects of these Hidden Costs
As per the data, the global IT outsourcing industry is valued at USD 526.6 billion in 2021, and it is expected to reach USD 682.3 billion by 2027. Amid this steady rise, what we are neglecting is the loss of billions of dollars that companies bear due to the hidden costs of IT outsourcing.
Often, companies don’t pay the required attention to these hidden costs that soar the budget despite having well-documented SOW, RFP, execution plan, and whatnot.
Moving Forward With Outsourcing
Now that you understand the ins and outs of outsourcing, you can focus your efforts on running your business and delegate some of your busy-work to qualified assistants.
For over 2 decades, Ace Infoway is helping businesses with their digital transformation journey as a preferred ‘Go-To’ Technology Partner. A team of experienced professionals is ready to help you with cost and delivery estimation for your project. Team up and get started with your software development project.
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