Outsourcing IT isn’t a new concept. Companies have been doing it for years but to this day it remains a divisive topic. On the one hand, outsourcing makes sense because it can keep costs down for organisations. On the other hand, it’s never good to see jobs go overseas. In an age when IT talent comes at a high cost, we want to know whether outsourcing software development is a good or bad idea.
Dmitry Davydov, CMO of collaboration platform company Bitrix24, wrote a lengthy piece on Medium about what US software companies are doing wrong from a global perspective. While most of the blog post is aimed at bringing US organisations down a few notches with criticism about their business practices, one point he brought up did pique our interest:
“A good developer in Eastern Europe now costs $US1000-$US1500 a month. I kid you not. In many newly joined EU countries (Lithuania, Poland, Romania) $3000/mo salary for IT engineer is considered to be great. When you pay $US100K a year to your developers – and let’s face it, you don’t have much choice – this means what you can do with a million dollars is a lot less then they can. It really helps to have R&D office in Europe, India or Philippines, you definitely should consider this if you want to keep your dev costs down.”
This is particularly pertinent to Australia give the high wages we pay to software developers at this end of the world.
Outsourcing certainly has its merits in keeping costs down but as we’ve addressed in previous articles, it may not always be the best solution. In a start-up context, Steve Baxter, an investor and judge on the entrepreneur reality show Shark Tank had this to say about outsourcing:
“Can you keep up to date with bugs, feature requests and the constant A/B style improving that modern digital products need if you do not have core skills in-house, preferably on the equity roster? Can you assess the work quality and value for money of outsourced resources if you are clueless as to what they are providing?
“Tech businesses need tech skills. Yes, you can hire them in but for early-stage companies that should be demonstrating traction in the market to investors, do you really think this is the best use of our funds?”
Yes, you can acquire developers cheaply, especially if you do choose to outsource your work. But it may not be worth doing that. According to AJ Agrawal, CEO and co-founder of alumni-engagement platform Alumnify:
“Specifically, developers who are underpaid often under-achieve. And those who do not know what they are really worth are likely to be under-educated or lack necessary experience. Either way, I you choose one of these options, you’ll be hiring someone you shouldn’t because you’ll be settling in order to save money…
“Developers who come cheap are known for lacking motivation and not having much desire to advance. This shows that their career goals are nearly non-existent, that they are there just for the paycheck in most cases.”