How to Reduce IT Development Costs 

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MARYNA DEMCHENKO

Published: 31 May 2022

Software development costs

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The pandemic has been a triggering point in transforming approaches to businesses, but the question of how to reduce IT development costs will always be on the agenda. As businesses continue to look for ways to save, many are compelled to partner with vendors of IT development services in the hopes of cutting IT development costs.

As a vendor of development teams, we want to share some bits of advice that may help you keep your software development prices at bay. We will review what influences IT development costs and ways to reduce them. Let’s begin!

Factors affecting software development prices 

In-house vs. remote teams

It's common knowledge that hiring a remote team can be a great cost-cutting tool, as it allows companies to forget about added IT development costs. Many businesses prefer sourcing remote developers through a vendor (like nCube), which lets them have extensive coverage when it comes to team recruitment, administration, and management. For example, we take care of recruitment, IT infrastructure, HR support, employee motivation, team building, and more. So, if you’re thinking about how to reduce IT development costs and build a productive and motivated team, our approach may come in handy. 

READ ALSO: How Should You Hire Remote Developers in 2022?

Location 

When it comes to cutting IT development costs, the location of your developers plays a great role as a key factor that defines specialists’ rates. Developers in Eastern Europe and Latin America charge much less than their North American counterparts. Thus, if you source developers from one of these regions you can significantly optimize your software development price. 

Team size

The number of developers you need is another important factor that defines a software development price. Many of our clients at nCube chose to start with one or several software developers and add team members gradually, as their project grows. 

On the other hand, some projects start on a large scale, so companies tend to hire a full-fledged team from the get-go, including a software architect, software developers, Quality Assurance engineers, a Project Manager, and other experts. It’s clear that this approach requires a more extensive starting budget. 

Cooperation model

When you partner with a vendor, you may come across different cooperation models, Outsourcing and Staff Augmentation being the most popular ones. 

With the outsourcing approach, you can order a custom-made software product developed by a vendor’s team. In this case, the payment model will be fixed and defined by the complexity of your project. With this approach, the client typically pays a lump sum in advance or divides all the work into chunks and pays in installments. 

Staff augmentation uses a different approach and relies on a payment model that is based on the hourly/daily rate of a full-time team member. That way, the client pays for hours worked on their project – while the provider bills for hours spent, plus a service fee. 

READ ALSO: Offshore Product Development: Eastern Europe, Latin America or Asia? 

So, how to cut IT development costs? 

  • Hire remote developers 

How to reduce IT development costs? The easiest way to do so is by hiring talent in regions with a lower cost of living. One of the most affordable zones are Central and Eastern Europe. According to Clutch.com, a software firm aggregator, the average rate per hour for software development here is $25–$49, not including taxes and provider’s fees.

As a company that builds teams mainly in this region, we can say that it offers the best quality-price ratio, which allows our clients to cut IT development costs while working with a skilled team. 

Another pool of skilled tech talent is Latin America. If you’re located in the US and looking to prune IT development costs, you should consider building your nearshore team in this region. The two hotspots of IT development in this region are Brazil and Argentina where you can hire a developer at an hourly rate of $25-$99, excluding vendor’s fees. 

  • Choose a suitable pricing model

As we’ve mentioned earlier, there can be several cooperation models, such as Outsourcing and Staff augmentation. Outsourcing works best for projects with clearly defined requirements. You and the provider agree on the works to be done and define the budget, which is set in stone until the end of cooperation. Apart from being the least flexible option, it’s also one of the most expensive models of cooperation in terms of IT development costs. The price here typically includes all potential risks that may appear down the line. Any deviations from the pre-defined set of tasks will also incur an additional payment. 

Staff augmentation lets companies develop a product on a model where the price is defined by hours invested by the development team. It allows sourcing specialists that fit your budget as well as regulate hours invested in your project. This model is highly flexible and fully adaptable to any changes, as you can scale up and down, depending on your project needs and budget. For example, at nCube, the IT development costs are comprised of the salaries of the team members, plus a fee that we invest in team retention services, IT infrastructure, and more. So, if you still wonder how to reduce IT development costs, consider choosing a flexible option like Staff Augmentation. 

READ ALSO: Staff Augmentation or Project Outsourcing, Which is Better for you?

  • Adjust the composition of your team 

The answer to how to reduce IT development costs is to put the right people into the right positions. Therefore, it’s important to consider the complexity of your project and the tasks you need to complete. Sometimes, you only need one junior– or middle-level developer rather than hiring costly senior developers. 

However, if your project involves running a large team, creating a proof of concept, or developing a sophisticated system, you will be better off with a team of seniors. They usually demand higher compensations but guarantee better results, potentially over a shorter period of time. 

On the other hand, composing a team of senior-level developers can be a great way to complete your project faster. However, if you want to optimize your IT development costs, it’s probably better to water down the team with junior and middle-level developers who will work efficiently under the lead developers. This approach can potentially dial down the cost. 

Cutting IT development costs with nCube 

Among the means of cutting IT development costs that we have gone over, we want to single out several factors that can help you keep software development prices at bay. So, in this section, we will go over the methods we practice that can help you reduce the price tag. 

  • Fast team launch

The faster you launch your product, the higher your chances of outpacing the competitors, entering the market and starting cashing in. We at nCube prioritize a fast team launch, which lets you expedite the dev process and lower the software development price by skipping the recruitment step

  • No infrastructure investments

We invest in building out a secure and reliable IT infrastructure for every remote team we assemble, so you can cross this step off your expenses list. Thanks to this, your developers will work efficiently, we also help build solid communications with you and your company. 

  • Access to pools of talent

Our answer to the question of how to reduce IT development costs is to source developers from skilled and affordable hubs of technology talent, such as Central and Eastern Europe as well as Latin America. 

  • We cover team retention expenses 

Employee attrition costs businesses a lot of money. We provide extensive retention services to keep their motivation high and fuel team members’ professional growth. The average retention rate of a developer with us is 3.5 years. With us, your team will work for as long as you need them. 

Contact us to discuss IT development costs in Eastern Europe and Latin America as well as your team staffing needs. Let’s see how our solution can help you reduce your software development price. 

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