Section 1: How Large Is Your Vendor?
The popularity of the software outsourcing market is enormous. Its rate of expansion yearly now rests at $100 billion although that number continues to increase. The ever-growing size of the software outsourcing market makes it difficult to categorize. However, to help supply some guidelines we’ve broken down the market into a few categories below.
Large Overseas Companies
Some of the largest vendors exist outside of the United States. These huge businesses usually house themselves in places like Eastern Europe, India, South America, and China. Large overseas companies that fall into this category have software developers working for them that number in the hundreds or thousands. Often, large overseas companies also offer competitive rates and work well when attacking projects with bigger budgets, like $300,000 or higher. Also, large overseas companies do well when adjusting to new concepts in the market and know when to boost numbers using outsourcing strategies.
Many of the vendors that fall into this category focus on enterprise technologies, like .Net products. Since large, overseas companies tend to evolve at a slower pace, they don’t often take on newer technology options, like social media programs.
Mid-Sized Overseas Companies
Companies that fall into the mid-sized range usually employ around 50 to 500 software developers. A vast variety of companies fall into this category and are widely known for creating quality projects. Companies that hire more than 50 software developers usually require strong, well-versed leaders managing their employees, sometimes making them unreliable because of micromanagement tendencies. By comparison, a company that is mid-sized will be more likely to have a reliable output and organizational structure.
Some mid-sized companies from India and China resemble “body shops.” “Body shops” are businesses that hire inexperienced software developers who just earned their degrees. After hiring those employees, “body shops” then set them up with clients without supplying any type of training or guidance to their inexperienced employees. However, “body shop” businesses are usually inexpensive to hire, so they often achieve booming periods although they don’t often have the experience needed to successfully aid their clients. Clients that hire “body shops” can get results if they wind up finding a solid team or member to work with through the “body shop” business. However, connecting to a solid developer through a body shop is not the norm, since many “body shops” have attrition rates less than 50%. Some are quick to hire “body shops” because they offer to perform well for a much lower cost, but they also often grab at any potential profit before projects collapse.
So, are there any “body shops” out there that you can trust? Fortunately, they do exist. In fact, many well-performing companies that could be considered “body shops” work well for those trying to save money as long as those using this cost-effective method do not mind using their own time to find these decent “body shops” for outsourcing. Any client considering a “body shop,” however, should be prepared to invest time to find a solid company in this range, since the market is flooded with “body shops” of all types.
For instance, a client that uses the Offshore Development Center (ODC) model can capitalize with the right type of “body shop.” A client using the ODC model uses an offshore resource team for management, sometimes also called an extension. Since ODC clients pick what they want to use, they can find developers who will fully dedicate time to the ODC clients’ specific projects.
For those with a smaller operation, including startup, small business, or individual clients, a premium vendor is a way to obtain quality from a high-performing developer or team of developers. However, there is a downside to using premium vendors. Most premium vendors seem to have a higher cost tagged to their services when compared to other offshore options. In fact, the overall price for a premium vendor can be 40 to 70% more than the other options previously discussed.
Still, for smaller businesses, using a premium vendor can be well worth the price, since smaller business will typically wind up with somebody who delivers quality, communicates well, uses ethical practices, and offers plenty of reliability. Most smaller businesses need to hire vendors that offer these concepts since paying less for lower quality work can mean the business will have to pay for the same service more than once.
For those businesses that want to find a premium vendor, they should know that most premium companies do not work on Craigslist or take bids on websites like Upwork because they already receive plenty of work requests. Locating a premium vendor usually means finding a link to them through a well-known resource. If you don’t know a link to a premium vendor, then you can look online for companies that offer concepts associated with premium vendors. After you find those companies, you can then contact them through their websites.
What are the characteristics one would need to search for online to find a premium vendor? Most premium vendors hire around 5 to 40 software developers, offer solid management, have owners from the United States and Europe, demand higher rates, offer a few technical focuses, have been in business for two years or more, advertise on Google but not places like Upwork or Craigslist, and can be found online quickly.
New Companies and Freelancers
Anybody falling into this category can be unreliable as a vendor, but a business could wind up with a great deal if they find a solid vendor that is already growing out of this category. If you search around for a new company or a freelancer, you’ll be hiring a vendor that houses just one or two employees and is new to the industry.
Most new companies and freelancers use websites like Upwork or Odesk, and there is a flood of them available in the market today. However, that doesn’t mean one shouldn’t use a new company or freelancer if that individual wants to save a bit of money. That individual also needs to be willing to invest the time it takes to both discover and check good vendors. So, interviews and resume evaluations will become necessities, and reviewing all the applicants can demand plenty of time and effort. Plus, if the hiring company lacks experience in selecting new vendors, this can be difficult to carry out.
If you want to try to save a bit of money and don’t mind investing your time to find a high-quality new company or freelancer, then you may be able to land a great vendor before their demand and pricing increases. So, there is the potential to get fantastic work while paying less for it. While that strategy may seem easy, it isn’t as simple as it sounds, and it can require a substantial time investment to find a highly skilled vendor this way.
Remember, as you conduct your search for a vendor, about anybody with access to the Internet can act like an expert and offer to get the job done. The Internet gives those that are willing to defraud others or supply low-quality work the potential to grab at a fast dollar. For that matter, these low-level companies can also post themselves anywhere on the Internet, and even place bids on marketplaces like Elance.
Companies that have horror stories about hiring offshore vendors usually wound up selecting somebody out of this category. So, how can you avoid running into a low-level company? Low-level companies usually advertise using unsolicited email or social media messaging, and often sound too good to be true. You may also find these low-level companies online advertising on websites like Upwork or Craigslist.
One common characteristic shared by low-level companies is their constant chatter, which also makes them easy to discover. Companies that fall into these categories are usually starving for work and will complete assignments for astonishingly low rates. They also offer things like 24/7 contact and an immediate start on any work if hired. It’s a good idea for you to avoid these low-level companies if you want the best in quality for your business. It’s best to apply the old cliché to these low-level companies that says, “If it sounds too good to be true, it probably is.”
Section 2: Understanding Client Types
There are several diverse kinds of clients that are searching for offshore software development aid. To help you better understand the clients that are buying this type of work, we’ve broken them down into categories. Gaining a solid comprehension of the distinct categories of potential clients can aid you in two ways. First, it will help you to figure out what type of client you are and see the way offshore vendors might categorize you. Next, you’ll be able to gain an edge over your competitors because you’ll know how to attract and hire high-quality vendors.
Large-Scale Enterprise Clients
We previously discussed large overseas companies above, and large-scale enterprise clients act as their counterparts. Large-scale enterprise clients require extended periods of time, if months or years, for developing bigger teams. Also, these large-scale enterprise clients focus on technology like Oracle and other similar programs for project development. Most projects required by large-scale enterprise clients can cost as much as hundreds of thousands of dollars.
Mid-Sized Project Clients
Clients that are seeking out medium-sized projects are often what most offshore vendors hope to attract. These mid-sized project clients usually know how to outsource software already, have large budgets for projects of more than fifty thousand dollars and employ in-house software developers or managers that can help lead the outsourced project.
Also, this category of clients is typically desired because they know how to negotiate with businesses and have plenty of experience within the industry. Mid-sized project clients know the importance of scheduling, grasp the necessities of estimation, and understand the outsourcing needs required by most companies. That means these mid-sized project clients are usually both realistic and know how to create a successful relationship with businesses.
Reselling clients are typically companies in the United States that advertise their software services across the country but outsource their software development projects to overseas workers. These resellers attract both offshore workers and companies because they know how to find quality work offshore. Then, resellers connect those offshore workers to a steady workflow demanded by companies in the United States, cutting down on their needs. Plus, resellers are able to keep their vendors returning because of their quality output, while still offering competitive rates for their work.
Another benefit of reselling clients is that the work between the client and vendor happens privately, making it a “white label,” or secretive, relationship. If you decide to use a reseller, you might never discover the full story about your vendor. In fact, you could wind up using the same vendor that also works for one of your competitors.
Regardless of what goes on behind the scenes, most reseller relationships stay in popular demand as far as software development needs, SEO, virtual assistant, and testing companies are concerned. However, using reselling clients may not be budget-friendly for smaller businesses or new start-ups that don’t have much to spend. Both small and new businesses typically receive quotes that cost them more than what the reseller is shelling out, making them a potential competitor.
Resellers can be a successful, practical choice for many vendors, but they do have drawbacks. Resellers tend to work well when they are stable; however, not all of them are. Also, using a reseller should depend on the needs and size of your business. For example, if a reselling client knows that you are new and have yet to find a vendor for continuous work, the reseller may be less interested in handling your business projects.
Clients That Are Individuals, Start-Ups, or Small Businesses
This group of clients not only offers your business the most variety, they also make up the biggest sector of clients. These types of clients feature a bevy of entities with a variety of skill sets, including non profit organizations, newbie and smaller businesses, start-ups, bloggers, and other types of freelancing entities worth less than $50,000.
Some excellent upstart businesses, freelancers, and software service teams exist in this group of clients. However, you’ll also find some low-level vendors in this category that promise much while producing little.
You do need to be wary of this group of clients because they haven’t achieved the same success as some of their competition. Some of these clients have good reasons for not achieving their desired level of success, including asking for too high of a price range, being too inexperienced to attract clients, or problems with quality work. Since vendors that shop in this category of clients are also aware of the low-level clients that exist on the market and that can ward off businesses from shopping in this category. Plus, finding quality in this group can be difficult for businesses because this is an overcrowded category, and many of the clients they may find when shopping this group lack the necessary experience.
While we all love saving money, whether it’s for ourselves or our businesses, the desire to get more for your money can also lead you into this category of clients. Using low-level clients sounds like something we could easily understand, but so many offerings crowd this category, the options can become confusing. However, unless you have a good reason to seek out a low-level client, this category is best to avoid.
Why would you seek out a low-level client? Really, that all depends on your business and its needs. For example, some entities plan to use low-level clients because they are start-ups or non-profit organizations trying to create a new website on a tight budget. Also, on some occasions, the strategy of using a low-level client can succeed, and you may have heard about some low-level clients you can trust. However, keep in mind that most low-level clients will fail to rise out of this category and often produce work that lacks in quality.
With low level clients, their rates and prices may seem attractive, but you may wind up spending more money having the work done over again because the project you receive might fall short of your expectations. Remember, it’s a risky move to hire a low-level client, and it may wind up costing you more than what you originally planned.
Section 3: Understanding Your Client Profile
Now that you’ve received an overview of today’s market as well as a background in the various categories of clients and vendors, you’ll need to figure out what category best sums up your business needs and goals. Knowing what your company’s client profile is will help you grasp the best kind of vendor for your business’s goals. We’ll cover some of the most common types of client profiles below so that you can figure out which one looks like your company. Once you recognize the most similar profile, you’ll be able to gage how you can categorize your company.
Large Project Budget Clients: $100,000
Large project budget clients typically have a budget of at least $100,000 to invest in their new product. These types of clients also have outsourced at times in the past, but they still have in-house software development teams to aid with product development. Also, large project budget clients typically succeed when dealing with mid-level vendors; however, that is if these large project budget clients avoid “body shops” and other pitfalls that can happen when associating with that category.
These clients can often do well when using the ODC model on their projects since large project budget clients have in-house software development employees that help make the process both management friendly and less expensive, overall.
Companies Searching to Resell
These types of businesses usually offer Internet development work and want to collaborate with a steady overseas provider so that they can resell their projects. Companies that are searching to resell services are usually attractive to offshore entities seeking work because these reselling companies can supply a long, steady stream of work alongside excellent project management techniques. Many vendors seek out reselling companies because the vendors get prompt communication and help.
If your company matches this type of client profile, then you may want to seek out mid-level vendors. As your workload ebbs and flows, these mid-level vendors can adjust to your needs and give you price breaks. Most mid-level vendors also have the right skills set and the resources your company will need to successfully complete your projects. Also, the ODC model may work well for those of you who fall into this category. However, smaller companies may not be able to continuously employ a group of workers dedicated to ODC. If that is the case, look for a vendor that can provide “white label” services.
Mid-Level Project Budget Clients
Mid-level project budget clients usually have project budgets that run from $15,000 to $50,000. These types of clients may specialize in products and services that don’t relate to the Internet. That means some mid-level project budget clients may have little to no experience with software development. So, several mid-level project budget clients have no in-house software developers to help lead a project. That means most mid-level project budget clients require help with project management.
If your business falls into this category and you don’t have much software development experience, you’ll have to find a vendor that can both communicate quickly and effectively with you and offer excellent project management aid. While you might be able to find mid-level vendors that claim to help with project management, they may fabricate statements about their capability in that realm. It’s more difficult to find successful project managers than it is to find software developers. Some freelancers and small, upstart vendors will also advertise help in the project management spectrum, but most of them lack the resources to be able to carry out high-quality project management.
So, if you feel your business most resembles a mid-level project budget client style, then you should consider sticking with premium vendors. You’ll have to pay at a premium rate for somebody that will communicate quickly with you in proper English while also giving your business just the right amount of project management. However, although premium vendors might be more expensive, you’ll find that premium vendors are the safest bet and will also provide you with the best quality.
Small Project Budget Clients
Small project budget clients typically have project budgets of around $15,000. Often, small project budget clients are start-ups, but they can still be quite experienced. In fact, clients in this category often know exactly what they need and understand how to manage those leads. Small project budget clients often search out a few added resources, including outsourcing some of their work.
Since many start-up companies fit into this category, they typically have plenty of technical knowledge and can take the lead themselves where project management is concerned. Occasionally, start-up businesses want to seek out the best software development teams and try to avoid lower-priced offshore options. If you are part of a startup business that feels it is best to avoid inexpensive offshore help, then it’s best for you to use a premium vendor.
However, many start-up companies simply don’t have the money to invest in premium vendors and are willing to take more risks to stretch their budget. If you are part of a start-up company on a tight budget, then you’ll need to consider looking at freelance software developers. If that’s the case, it would be best for you to spend plenty of time screening those freelancers to make sure they can give your company what it will need before you offer them any work.
Low-Level Project Budget Clients
Low-level project budget clients usually have project budgets of around $2500 and don’t have much knowledge about either software development or project management. Because low-level project budget clients often lack the experience and resources needed to succeed, many of them have higher risks of failing when compared to other types of clients. The failure rate for low-level project budget clients is typically higher because most low-level project budget clients cannot afford to pay for premium vendors that bring them the project management and resources they would need to succeed. Thus, many low-level project budget clients must search around on the lower-end scale of vendors and hope to find an affordable, experienced choice that will help them succeed. Also, these low-level project budget clients try to manage projects themselves, hoping they can pave their own path to success.
If your business falls into this category, you’ll need to look around for bottom-level vendors as well as freelancers to complete your projects. While it can take time to assess and screen all the options out there in that overcrowded market of vendors, it’s still possible for you to find an excellent freelancer who is trying to gain experience and offers affordable prices.
Your Company’s Profile
While the above descriptions of the diverse types of client profiles that exist on today’s market may not perfectly describe your company, you can use them to help you categorize your company. That way, you’ll have a better idea of how to approach a vendor, as we’ll talk about the various kinds of vendors you might want to consider following this section.
Remember, as you consider how to categorize your company’s profile, you’ll need to think about how difficult and expensive it can be to find decent project management. If you own a company that is well-versed in conducting high-quality project management, then you can cut costs by using cheaper vendors and guiding the project management yourself. However, if your company lacks the experience to handle project management on its own, then you’ll need to think about spending the money on a vendor that can guarantee a high-level of project management for your company.
If you are only seeking out smaller projects, you might be able to get away with little or not project management. However, at some point, you will run into a company need that will require some level of project management. Software development projects that lack good project management often fail because there is little to no leadership present to guide that project into success. The good news about project management is that you can find it anywhere, as project managers can be developers, clients, or even employees in your business. However, the key to succeeding with software development projects is to ensure that your company has the solid project management it needs. If you aren’t sure where to find a higher level of project management for your project, then consider making the budget to hire premium vendors. While premium vendors are often more expensive, they already have the resources, skills, and experience to offer solid project management, and they can guide your company if you are lacking in project management experience.
Section 4: Understanding Your Vendor
Now that you have a background in how you can categorize your business and its needs in the software development field, you can start focusing in on the right type of vendor for your project. Once you know what kind of vendor will work well with your company, you’ll then need to find them, hire your vendors, and kick-start that software development project you have in mind for your company. To keep this assessment as simple as possible, we’ll avoid discussing the large clients and vendors since, we assume, they already understand how to connect. However, for everybody else that doesn’t fit into those categories, we do have a few pointers to share with you.
Finding Mid-Level Vendors
Seeking out mid-level vendors is typically not too difficult. Most mid-level vendors that are successful won’t be using websites like Elance and Upwork too often, but there are exceptions to that rule. However, usually the easiest way to discover good mid-level vendors is to search online for them. Several mid-level vendors that offer high-quality work advertise often on search engines, including Google. Companies that can afford to advertise on search engines are typically more able to produce better work, since they have the money to spend on this more expensive advertising choice. Keep in mind, however, that a company that has over 100 people on its staff will face hardships when it comes to growth and management. So, focus on finding a company that has been in the market for around five years instead, because that means the vendor is much more stable.
Finding Vendors Associated with the United States
Another good sign of a vendor’s stability is an association with the United States. If a vendor has a representative or an office found in the United States, they are more than likely stable. You can also do research on a company be searching around for case studies and reading up on management biographies. Plus, most mid-level vendors should offer you resources that can help you with your project, make sure any mid-level vendors you are considering can supply specific names for resources you would need.
Finding Premium Vendors
If your company needs some project management help and can afford a premium vendor, then you’ll wind up paying more but also receive high-quality work. If you want to hire a premium vendor, you can usually find companies like these by using search engines. Premium vendors won’t often spend time in online marketplaces, and they usually focus on a single skill.
If you’re looking to find freelancers because your company needs some budget-friendly aid, then you are more likely to find these vendors easily by searching Craigslist, Elance, Upwork, and other similar websites. While utilizing freelancers means you will be searching through an overcrowded market, you can still potentially find a good freelancer if you have the time to search through the bevy of less desirable assistance you are likely to encounter. One way to find a freelancer who is qualified to complete your project is to test them with small parts of a project as a trial. Most new freelancers will be willing to complete a trial project for a short span and may even offer discounted rates. You can also conduct trials with more than one freelancer so that you can pick the best-performing one. While it does take time to find a good freelancer, if you are willing to invest that time, you should be able to find one.
Finding Low-Level Vendors
If you want to find low-level vendors, just remember that you’ll be seeking them out at your own risk. Vendors that fall into this category can seem to offer much at low prices but remember that these less expensive vendors may not wind up saving you money, overall. In fact, a cheaper resource might wind up costing you more because cheaper resources often turn in poor work, so the project gets redone. On occasion, low-level vendors simply disappear, so they can also be difficult to rely on.
Section 5: What Vendors Cost
Prices for offshore software development can depend on several things, including the location of the vendor and the resources that the vendor is available to offer your company. Some vendors are willing to adjust prices and offer discounts as well if they feel the client will be a valuable long-term partner.
To offer simplicity, we’ll supply some information as a baseline so that you have an overview of the average cost ranges. However, keep in mind that the data here is meant to be more of a guideline, and there are many exceptions to these rules.
Companies that fall into this category have several resources and can demand a lot of money per hour. Many large vendors cost about $23 to $34 per hour if you need to engage them for several resources.
Most mid-level vendors charge between $26 to $40 per hour. Typically, they supply quality and can sometimes also offer discounts to help adapt to a company’s budget.
Premium vendors are some of the most expensive entities to hire, but they have ample resources and produce high-quality work. A premium vendor will usually cost between $30 to $60 per hour.
Freelancers and Low-Level Vendors
Freelancers offer the widest range of prices in any of these categories. Some that are new to freelancing may offer cheaper prices to attract clients and reviews. Cheaper freelancers can charge around $15 an hour, but you may also find some low-level vendors in that range. More experienced freelancers can cost between $18 and $30 per hour.
Section 6: Finding Your Fit
We’ve covered much in this report, including the types of clients and vendors available in today’s market, how you can categorize your business as a client, and how to find the right vendor for your business. We also discussed how companies can find the vendors that are right for them, and why certain vendors work best for certain types of companies. Once you know how to categorize your business and what type of vendor you want to seek out, there are a few other items you need to consider.
First, think about your company’s category as a client as well as the things that make your company unique. Then, reflect on how different vendors might view your company, and any potential issues that might create for your company.
Also, think about the amount of project management your company will need to successfully complete projects. If you already have the means to manage your projects well, you could save a lot of money by hiring vendors that won’t charge you for project management. On the other hand, if you don’t have any project management guidance, you may need to consider paying for a vendor that can provide it. While vendors that supply high-quality project management can be expensive, paying for them is better than having your project fail.
Once you’ve taken the time to assess your company’s client category, you should be able to figure out the best type of vendor for your project. When you know what type of vendor your company needs, then you know it’s time to go out and find them.