The research giant Statista quotes that in 2022, the total spending on IT services was projected to witness around $1.3 trillion all across the world. Outsourcing IT projects to offshore mobile, web, and software development companies in countries like India, the Philippines, Ukraine, and Kenya has been a tradition for quite a long time.
Most companies from first-world countries prefer outsourcing their software, web, and mobile app development projects to IT outsourcing companies due to several reasons, low cost being the primary one. When a project is outsourced for its development, companies need to ask for the quotation that IT service agencies provide with different pricing models.
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Outsourcing development projects can offer many benefits to businesses that want to save time, money, and resources.
Some of the benefits are:
IT outsourcing companies providing development services offer many pricing models to hire remote developers through which one can engage software developers, development teams, or programmers as per their requirements. Broadly, there are three pricing models observed in the outsourcing market.
While industry experts and veterans consider the dedicated model as the premium one, there are many enterprises that prefer a fixed-cost model or hourly model to outsource their product development projects where they have immense benefits.
Development companies identify the cost through various parameters as mentioned below:
In this short guide, we shall discuss which pricing model is best for outsourcing your project fixed cost or hourly rate.
The fixed cost, as the name suggests, is the total cost of the project with a fixed price. The outsourcing companies would provide buyers with a quote that mentions the total cost which is often a one-time cost to build the entire project or product. For instance, offshore mobile, software, or web development companies may present a quote of $30,000- and three months time/duration for a simple mobile application with basic features. The price may keep on increasing as per the six factors mentioned earlier.
There are many benefits a fixed-cost pricing model brings to buyers to hire developers.
The fixed-cost model to hire developers or agencies comes with a fixed number or amount of money to be paid. This sum could be paid in installments or one time as per mutual understandings or policies followed by both parties. Experts believe hiring developers with fixed-cost pricing models suits the following projects.
The hourly cost model, as the name suggests, is the model wherein buyers are billed for the total number of hours used to build their product such as software, website, or mobile app. The agencies would provide a quote that shows an estimation of the total hours to develop the entire project or product. For instance, outsourcing companies may come up with a quote of 1000 hours for a mobile application with some features. The price of product development varies depending on the six factors mentioned earlier.
There are many benefits of an hourly-rate pricing model to hire developers.
The hourly-rate model to hire developers comes with an estimated number of hours in the beginning. These hours may differ as the development process progresses; additionally, buyers may also mind that the duration of the project may also stretch if they keep on changing their scopes or advise programmers to add, edit, or remove features and facilities from their project.
The hourly pricing model gives the flexibility to stop and resume work as per the client’s choice and they can also buy more hours to start another project on the same line. Experts believe that hourly-cost pricing models are suitable for the following projects.
As you can see, there is no definitive answer to which pricing model is best for your project. You have to consider several factors as mentioned earlier such as the nature, scope, and complexity of the project, your expectations from the final product, and your preferences.
The best way to choose a pricing model is to communicate with an IT outsourcing company that you want to hire openly and honestly. You may ask their business and technology consultants to discuss the pros and cons of each option. They may help you with a fair and realistic pricing model that works best for your project.
Nevertheless, it is worth mentioning that each model to hire developers comes with its own benefits and restrictions. As stated earlier, specific project size and complexity plus the amount of time it takes to build decides a perfect model for a particular product. To check which pricing model is the best to hire developers or a development company for your project, you need to ask yourself some questions:
Such questions will help you decide on the hiring model for developers.
An enthusiastic Operations Manager at TopDevelopers.co, coordinating and managing the technical and functional areas. She is an adventure lover, passionate traveler, an admirer of nature, who believes that a cup of coffee is the prime source to feel rejuvenated. Researching and writing about technology keeps her boosted and enhances her professional journeying.