What are the costs of software development services? | Part 1
In this video, you will learn the true costs of software development services mostly compared between Europe and the USA. We focus mostly on single-developer costs comparing staff augmentation and in-house hiring.
Key Highlights:
Hiring & Recruitment Costs: See real costs associated with in-house hiring and learn how staff augmentation offers a cost-effective alternative.
Salaries & Benefits: Understand the geographical impact on software development services.
Infrastructure & Tools Cost: What’s required for setting up your development infrastructure vs leveraging an external team's resources.
Overall Management Cost: In comparison to an in-house team and augmented staff.
Stay tuned for part 2, where we'll present a detailed case study and price analysis to guide your decision-making process further.
Subscribe to our channel: https://bit.ly/3vFhqL9
VIDEO TRANSCRIPT:
0:02 Have you ever thought about the true cost of in-house hiring or staff augmentation?
0:07 As a future founder, have you considered what is a better choice for you?
0:10 Will you go into building an in-house team, or into staff augmentation?
0:14 How about cultural problems?
0:16 Will they be an issue?
0:18 In this video, we focus on four selected criteria that compare both solutions: hiring and recruitment costs, salaries and benefits, infrastructure and tool costs, overall management costs.
0:31 But that’s not all, in part 2 of this video we will provide you with a case study and price analysis.
0:38 But first things first, are you ready?
0:44 In-house hiring typically involves recruiting software developers to work within your office as a part of your internal team. Business owners believe that it offers better communication, discretion, control over projects or processes, and organizational culture.
0:59 However, hiring and recruitment include lots of costs associated with finding, bringing in, and integrating new talent.
1:06 Not to mention advertising the job, and the whole process of interviewing and assessing candidates.
1:11 Internal recruiting can cost on average 3500$ per hire.
1:17 Salaries and benefits can still vary depending on the geographical location. The cost of living and the salary standards are different depending on a region
1:25 And these directly influence the salary expectations of potential employees.
1:30 For example, the average salary of a software developer in the United States ranges from $85,000 to $133,000.
1:39 But the salaries vary substantially in other regions.
1:43 In addition to the base salaries mentioned above, you would have to offer various benefits and perks to attract and retain employees.
1:50 These can include health insurance, retirement plans, stock options, flexible work arrangements, meal and sports vouchers, or paid time off.
2:00 These additional benefits and their costs can also depend on the region
2:04 Setting up and maintaining the necessary infrastructure for software development also contributes to the overall cost of in-house hiring.
2:11 If you want to keep security top-notch, you have to invest in licensing development tools, software, hardware, servers, and other equipment required for the development process.
2:22 Keep in mind that infrastructure provisioning comes with managing and maintaining the infrastructure as well.
2:33 Staff augmentation involves hiring external experts, or a team for a specific project or duration.
2:38 This allows you to pay only for the number of hours worked and eliminates factors like benefits, insurance, or other overhead costs associated with traditional in-house hiring.
2:49 However, the primary cost factor in staff augmentation is the hourly rate charged by the external developer.
2:56 In addition to skill level and expertise, this rate can depend on developers' geographical location. To give you an idea, we've calculated the average hourly rates of software development houses across different regions.
3:09 Based on the pricing listed on clutch.
3:12 You can see that in North America, it's around $150. Western Europe, Australia, Scandinavia, 50 to $99. Eastern Europe and South Asia, it's around 25 to $49.
3:25 This suggests that collaborating with an Eastern European software development house which offers notably lower hourly rates than North America, Western Europe, and Scandinavia is an option worth considering.
3:37 In case of individuals, customers usually must invest their time in management of the team.
3:43 In the case of an independent product team, it usually has a built-in leader among the team.
3:48 Keep in mind that the management time required for a team of five individuals is at least 10% of their time.
3:56 Picking an external partner might reduce these costs significantly.
3:59 When you get an independent product team, they don't come to your office, they deliver the solution from their own space.
4:05 So the infrastructure part is covered partially in their workflow.
4:11 Travel and accommodation expenses may be involved if your external team member is in a remote region or needs to work on-site for certain project phases.
4:18 However, this is very rare.
4:20 Such cost is not necessary if they work remotely.
4:28 Hiring decisions may depend on cultural differences and potential language barriers.
4:33 The time zone and language differences can sometimes affect collaboration.
4:37 This is a major concern for employers considering staff augmentation.
4:41 However, if you make this choice with a strategy in mind, augmenting your team can be beneficial.
4:47 The best way is to hire from less expensive but nearby countries and regions to minimize the cultural differences.
4:53 For example, you can augment your team with talent from Eastern European countries that offer cost-effective teams and have great English language skills.
5:02 Do you want to learn more?
5:04 In the next video, we'll analyze a case study and showcase real numbers.
