Inhoused, or Outsourced: that is the question

Let’s count financial benefits!

The age of global economy erases boundaries between countries. People living in different corners of the earth may work on the same project at absolute ease. It’s as if they were in adjacent cubicles, just not going to each other’s workplace. That’s why business people turn more and more to outsourcing, also for their own software product development. This option is slightly discredited, but it remains quite popular in countries of the West.

Inhoused, or Outsourced: that is the question

Why are companies more and more likely to fall back on services provided by third parties? The reason is the economic feasibility.

Imagine a company that needs a mobile app to be developed. It is urgent and has to be done for a reasonable cost. The company has two options:

  • Hiring local full­time iOS developers
  • Assigning a remote employee from another company

Let’s make some calculations.

"Welcome aboard!"

Hi! We are a respectable company and we are looking for two iOS developers for three­months’ project. For the purpose of finding a good employee, we will spend plenty of time and money on HR. Except for salary, we have some expenses for organization of his workplace: table, chair, PC, telephone. In the absence of communication for wall outlets, we will call a telephone fitter to settle this problem. There will be a part of expenses for an internet­channel, building services and rent for each employee. In case of feeling bad employees are guaranteed the sick leave money for paid hospitals and maternity leave for those, who are expecting a baby.

Inhoused, or Outsourced: that is the question

Being a respectable company, we pay all taxes (social and income tax) for an employee in obligatory order. We guarantee employment benefits as medical insurance etc. (and some companies do not promise, by the way). Welcome to our office!

Let’s look what we have so far.

The annual salary of an iOS developer in San Francisco amounts (up) to 120,000 $. It is 9000 $ and more per month or 27,000 $ for three months. We add the following to it:

  • 450 $ on the employee tax or 1350 $ for three months
  • 70 $ on the additional medicare tax or 210 $ for three months
  • 550 $ on the workplace set­up or 1650 $ for three months
  • 300 $ on the on additional expenses (office parties, accounting etc) or 900 $ for three months

Total expenses on 1 iOS developer for three months: 27,000 + 1,350 + 210 + 1,650 + 900 = 31,110 $.

The total amount for two employees makes 62,220 $.

Adding compulsory educational and qualification­based trainings for employees, as well as the voluntary insurance makes the check grow even larger.

"We are far away, but still close"

Hm… now let’s consider Senior iOS Developer from an outsourcing company in Eastern Europe. This developer’s salary comes to about 5,000 $. Hiring two such developers for three months will cost you 30,000 $. That’s all, no need to pay any extra money: no social and income taxes, no medicare, no paid and maternity leaves etc.

Inhoused, or Outsourced: that is the question

Going for outsourcing will save you:

  • money: no need to set up a workplace, pay taxes etc.;
  • time: you don’t spend months to pick a right employee from the locals;
  • nerves: no urgent need to seek replacement for an employee on a sick or maternity leave or quitting.

The total amount for two developers hits 30,000 $.

Money saved: over 32,000 $, almost twice as cheap. This is anything but a limit, especially for large scale projects!

There is an extra benefit, namely selecting a professional from anywhere in the world. The choice is not limited to your location.

A definitive conclusion: using outsourced professional services can save the customer a significant amount of money. What’s your opinion? Please write to us and let’s discuss it!

P.S. We have deliberately highlighted our theme only from the point of a direct financial gain, leaving other value aspects of outsourced development aside. For instance: communication within the inhouse development is definitely more efficient, benefiting the speed of project delivery. That’s a separate topic, though.


Gary Weaver
E-mail: gary.weaver@instinctools.ru
Skype ID: gary.weaver360
Senior Business Development Manager
*instinctools EE Labs

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