Beyond the Hourly Rate
When US businesses outsource IT, they often focus on the lower hourly rate of offshore or nearshore developers. However, ‘hidden’ costs can quickly erode those savings if not managed.
Factors to Consider
- Vendor Management Overhead: Time spent managing the contract, communication, and quality control.
- Transition Costs: Knowledge transfer and ramp-up time for the outsourced team.
- Communication Inefficiencies: Time lost due to language barriers or time zone delays.
- Quality/Rework Costs: If the code quality is poor, your in-house team spends time fixing it.
- Travel Expenses: For initial setup or critical meetings.
- Legal/Contractual Fees: Setting up and managing international agreements.
Mitigation
Clear Service Level Agreements (SLAs), robust communication protocols, and pilot projects can help uncover and control these hidden costs before they escalate.
