Software Development Outsourcing Hub

Pricing Strategies for Software Development Outsourcing: How to Get a Good Price

October 1, 2023

Price is no longer the #1 reason why companies outsource. But the cost of IT outsourcing is still a driving factor when choosing a software partner. 

As you calculate a comprehensive budget for your project, it’s essential to gauge the full costs. Our experts at Netcorp have broken down the main software development outsourcing prices. In this way, you can build a realistic budget and get a good price on high-quality software.

In-House vs. Outsourcing Software Development

According to some estimates, outsourcing your project can save you up to 53% in costs. How is that possible? Here’s a quick cost overview of these two options. 

In-House Software Development Costs

In-house software has its advantages, mainly that you keep 100% control of the project. Yet in terms of cost, it involves a much larger upfront investment. That’s because creating your own internal team requires you to pay for:

  • Competitive salary and benefits packages
  • Recruitment, hiring and onboarding costs
  • Training and career development
  • Software licenses and expenses
  • Workstations and equipment
  • Project management
  • Turnover and replacement costs
  • Overhead (office space, collaboration tools, etc.)

Many of these cost categories are completely eliminated when you choose to outsource. In fact, estimates show that hiring in-house developers results in costs of 2.7x the base salary

Outsource Software Development Costs

In contrast, outsourcing has a much lower initial expenditure. It also grants your business greater flexibility in the long term. 

When you choose to outsource, you’re simply responsible for paying for the resources you use. Here are the main software development outsourcing prices to be aware of.

“Time” (Team Salary Costs)

The two main cost categories for outsourcing are “time and materials.” In other words, you must pay for the time your developers spend on your project. (This is typically charged per hour for each specialist.)

Some businesses choose to hire a few remote developers to meet their needs. Others form dedicated teams, i.e. outsourcing a group of pros for more manpower.

“Materials” (IT Licenses & Expenses)

What's more, you’ll be charged for “materials." Often this includes software licenses, server management and IT-related tools. Depending on your infrastructure gaps and needs, the cost of “materials” may run the gamut.

Contract Negotiation

At the end of the day, “time and materials” make up the bulk of your outsourcing budget. However, there are a few other minor expenses to be aware of. 

First, you’ll be accountable for contract negotiation fees. In particular, you'll be billed if you made multiple rounds of contract revisions.

Knowledge Transfer & Transition

Knowledge transfer may also lead to expenses. You’ll have to pay for any hours spent offloading business or IT knowledge. For larger outsourced teams, this transition cost may be slightly higher.

Recruiting Your IT Partner

You don't have to worry about the substantial cost of recruiting developers. However, you will have some minimal expenses finding your ideal IT partner. 

Research, screening and negotiation for your outsourcing partner can take up resources. Keep in mind this is a much lower cost compared to trying to capture tech talent on your own.

Key Factors Impacting Software Development Costs

How much does it cost to outsource software development?

Unfortunately, there’s no simple answer. Software development outsourcing prices vary widely depending on the project. To better assess your outsource software development costs, consider these key factors. 

Type of Software Development

Outsource software development costs are first determined by the type of project. If you’re building new or custom software, you can expect the price tag to be higher.

However, a modernization or integration project will be more affordable. In this case, developers don’t have to work from scratch.

The technologies involved will also play a role in the cost. For example, building an Android app incurs a different cost than an Apple app. For some projects, the ability to create cross-platform apps may also cut the end price. 

Size & Scope of Development

Besides the type of project, the size and scope of your software will influence costs. Naturally, projects with a large scope will incur higher costs. (For example, an app with a feature-intensive design or a members-only login section.)

Typically, the size of the project varies from small, medium or large. Some examples include:

  • Small: A run-the-mill website with limited custom code. Or, a minor modernization or integration project.
  • Medium: MVP software built from scratch. (Extra features and functionality may put it in the “large” category.) 
  • Large: Software with multi-layered IT components. (For example, a database, cross-platform features and so on.) These projects may take a year or more to fully scale up and complete.

Team Size & Expertise Required

The next step of defining the project size is determining the team size. Depending on your ideal scope and timeline, your team may have 5-10+ professionals. 

The most common team size for a small-to-medium software project is five professionals. This includes two developers, a UX designer, a QA engineer and a project manager.

However, larger projects will require a much heftier team of 10+ professionals. This will be contingent on the technology specializations you need as well. For example, your project may call for a business analyst, database expert, etc.

Time Required & Complexity Of Software

Not all software is created equal. The complexity and specialization of the project will also impact the final price.

As you can imagine, the greater the technical expertise, the higher per-hour cost. And as your software becomes more complex, you’ll require more developer hours. That's because you'll have to handle scaling, debugging and monitoring to keep up top QA.

Your Partner’s Location & Reputation

Last but not least, software development outsourcing prices vary depending on the region. As a rule of thumb, you’ll find the most expensive developer rates in North America and Western Europe.

Yet, there are numerous other options that combine elite skills with affordable rates. Eastern Europe, Asia and Latin America are all top-ranked regions for IT outsourcing. These regions have some of the best developer talent in the world. Plus, their hourly rates are up to 50% lower compared to the U.S.

Along with location, the partner’s reputation can also affect costs. Partners with world-wide renown will command a higher going rate. However, top boutique partners in these regions will offer reasonable rates. 

Take a closer look at the best regions to outsource software development in our guide!

Cost Savings When Outsourcing Software Development

Let’s go through an example of the cost difference between in-house vs. outsourcing. For this case, let’s hire a team of five IT professionals for an MVP of medium complexity. MVPs typically take between 2-4 months weeks, so let’s assume 12 weeks for development (equal to 480 hours). 

  • For in-house estimates, we’ll hire U.S. developers. (Using the average salaries listed by Stack Overflow). 
  • For outsourcing estimates, we’ll hire a partner based in Southeast Asia. (Using the average rates listed by Accelerance). 

Here’s what you can expect in terms of developer rates for in-house vs. outsourcing:



Senior or specialized developer: $163,000/year= $78/hour

Junior developer: $140,000/year= $67/hour

UX designer: $151,000/year= $73/hour

QA engineer: $124,000/year= $60/hour

Project manager: $125,000/year= $60/hour

Total combined team hourly rate: $338/hour

Total team salary cost: $338/hour x 12 weeks (480 hours) = $162,240


Senior or specialized developer: $41/hour

Junior developer: $29/hour

UX designer: $29/hour

QA engineer: $31/hour

Project manager: $44/hour

Total combined team hourly rate: $174/hour

Total team salary cost: $174/hour x 12 weeks (480 hours) = $83,520
Just from the salary comparison, we can already see a big difference in price – about 50%.  

However, there are still other cost factors to include in our estimate. Let’s add these in to get a more robust sense of the final prices:

Cost Factor


Full Team Salary (“Time”): $162,240

IT Licenses & Expenses (“Materials”): ∼$2,500

Contract Negotiation: ∼$1,000

Knowledge Transfer & Transition: ∼$2,000

Recruitment & Onboarding: ∼$5,000

Benefit Packages: ∼$5,000

IT Workstations/Equipment: ∼$7,500

Tech Training: ∼$1,000

Overhead: ∼$15,000

Turnover Costs: ∼$30,000 per employee

Total: $231,240


Full Team Salary (“Time”): $83,520

IT Licenses & Expenses (“Materials”): ∼$2,500

Contract Negotiation: ∼$1,000

Knowledge Transfer & Transition: ∼$1,000

Recruitment & Onboarding: ∼$1,000

Benefit Packages: $0

IT Workstations/Equipment: $0

Tech Training: $0

Overhead: $0

Turnover Costs: $0

Total: $89,020


Ultimately, this gave a $142,220 difference in price between in-house and outsourcing. Our example suggests your business can save about 60% by outsourcing. 

Keep in mind that this is just an example and tweaking the factors may result in a different final price. Even so, choosing to outsource software development costs will usually result in savings.

How Else Does Software Outsourcing Save Costs?

Our cost comparison above shows how outsourcing can reduce expenses for your business. Yet, there are even more indirect benefits to outsourcing

Beyond the lines in your budget, here are a few ways outsourcing boosts your business value. 

Rapid Time-to-Market

Outsourcing partners tend to be highly efficient, with top experts and established processes. Dedicated entirely to your project, they can maximize productivity. In this way, they can achieve a quicker launch compared to in-house teams.

A rapid time-to-market can give you a competitive edge, earning you more clients and sales.

Greater Scalability

Scaling up a large software project can be expensive in-house. That's because your talent and resources are usually permanent. 

In contrast, outsourcing lets you ramp up new features without long-term hiring costs. You can access your IT partner’s resources on-demand with minimal initial expenses. In turn, this helps reduce the final software development outsourcing price.

Minimize Expensive Risks

Often it’s best to leave complex IT needs to the experts. Hiring a specialized partner will ensure you don’t expose your company to costly risks, such as:

  • Data breaches
  • Cybersecurity attacks
  • IP theft
  • Scope creep

Just consider that the average cost of a data breach is $4.35 million. You can protect your data, security and IP by entrusting these issues to specialists. Be sure to clearly define these areas in your contract, too. 

Higher Quality Code & UX

Outsourced partners also tend to achieve higher quality code and UX. With industry-best experts and 100% dedication to your project, they’re able to get top results. Often these teams have their own QA testing, so user experience is even more seamless. 

In the end, top software can elevate your reputation, customer satisfaction and sales.

Maximize Your Budget With the Right Outsourcing Model

As you prepare to outsource your software, it’s vital that you choose the right model for your business. The right services mean you can efficiently utilize resources and maximize your budget. 

Extend Your Team

Expand your team with elite developers integrated into your in-house team’s efforts. This service is ideal for businesses with established workflows and talent. In this case, they simply need more manpower or expertise.

Build a Dedicated Team

If you don’t have an in-house team, you may need a more robust outsourced solution to meet your goals. Hiring a dedicated team means getting a full group of experts to develop your software. Often this team works independently and handles end-to-end development of your product.

Consult With Experts

Not sure how to get started? First schedule a consultation for expert advice on how to achieve your vision. A consultation can stop you from making expensive mistakes. Experts will also guide on the right model to carry out your project.

Get an insider’s look into top software development outsourcing strategies here!

Cut Your Software Development Budget With Netcorp

Outsourcing your software development can significantly reduce your budget and add business value. As our example cost comparison shows, you can save up to 60% with outsourcing!

To reap the benefits of outsourcing, you’ll need the right partner by your side. At Netcorp, we’re ready to provide high-caliber software that aligns with your vision. Reach out to our team to learn about our software development outsourcing prices. We also offer consultations, so you can identify the ideal IT service for your business.

Paavo Pauklin
Executive Board Member

Paavo Pauklin is a renowned consultant and thought leader in software development outsourcing with a decade of experience. Authoring dozens of insightful blog posts and the guidebook "How to Succeed with Software Development Outsourcing," he is a frequent speaker at industry conferences. Paavo hosts two influential video podcasts: “Everybody needs developers” and “Tech explained to managers in 3 minutes.” Through his extensive training sessions with organizations such as the Finnish Association of Software Companies and Estonian IT Companies Association, he's helped numerous businesses strategize, train internal teams, and find dependable outsourcing partners. His expertise offers a reliable compass for anyone navigating the world of software outsourcing.

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