IT Outsourcing services: what budget should you have?

In everyday life we sometimes fall for deals, trying to save wherever possible to cut costs. But in the tech industry, this can be pretty expensive at the end of the project. In this technology market, you will find many incredible IT Outsourcing services offers that will make you want to sign the contract instantly, precisely to take advantage of that offer "that will expire soon".

A more efficient but expensive IT Outsourcing services provider ends up being cheaper than an inefficient one with a more affordable rate. Do not choose your technology partner simply because it is the cheapest and "seems" efficient. 

Table of Contents

• IT Outsourcing Services: Economic Partner vs Experienced Partner
• IT Outsourcing service's price range 
• How the IT Outsourcing services partner quotes their projects

IT Outsourcing Services: Economic Partner vs Experienced Partner

Before deciding, evaluate the characteristics of each profile and their experience. Most likely, the provider of IT Outsourcing services with the lowest rate has little experience, is junior level, and does not have defined methodologies or documentation of their work. Although the rate is more accessible, in the end, the development will be more expensive because the partner does not have their work standardized, so it will take much longer to complete the project.

On the other hand, if you look at the partner of IT Outsourcing with the highest rate, you will notice the reason for that price: it is probably a provider with extensive experience, with a multidisciplinary team with a defined work methodology, standardized processes that allow developing quickly and with quality, optimizing time and saving budget.

IT Outsourcing services price range 

You as a company, ask the IT Outsourcing services partner if they have different pricing tiers depending on these two situations:

●    If I contract more services, do you improve the price?

If the project in development is long-term, the client can ask the IT Outsourcing partner if the price per hour can be negotiated, for example. It would be to give a preferential price to the client "rewarding" their loyalty by continuing to work with this partner for a long period of time, being a strategy to retain this client.

●    Costs per seniority

Another possibility that an IT Outsourcing services provider can offer you is a scale of services and prices by seniority. Many software companies have Junior, Mid, and Senior developers, so depending on the need of your company and the project, you can ask for the rate of a junior if your requirement is simple, investing only the right amount. In case your company's needs are more complex, you can ask for the hourly costs of a Mid or Senior. It's all about negotiating.

But be careful with this: Don’t focus on hiring only junior developers for their affordable price, since this can generate more errors and delays than benefits if your project is complex and advanced.

How the IT Outsourcing services partner quotes their projects

Every negotiation is based on two equally essential aspects: on the one hand, on the evaluation of the IT Outsourcing partner's tools and experience and, on the other, on how much it charges for the service it is offering. Pricing is one of the most important and delicate stages since it defines what service the partner will offer and at what cost.

When talking with this IT Outsourcing partner or possible partner, you as a client should ask how they quote their projects, and how they get to the rate that they are presenting to you. Make sure that he follows some procedure to make this calculation based on the tasks to be executed and that it is not simply a random figure that he decided to charge you, without evaluating if it corresponds to the complexity level of the development.

●    Example of what can go wrong without a project quote:

An IT Outsourcing services partner quotes the development of a web application, without justifying the costs of each of the tasks and stages of development. Midway through the project, he discovers that he miscalculated the scope, the rate paid by the client in advance being insufficient. As a result, the partner begins to reduce priority to your project, delaying its development, because he knows there will be no gains but losses. The client then begins to 'chase' the partner to finish the project, delivering a poor and buggy platform.

Another red alert is when the IT Outsourcing provider desperately begins to lower the rate of the quote they just presented to you. If he showed you a high fee first and then cut it in half, what is the real cost of the project? The first amount was chosen at random; did he want to scam you?

Costs and fees can always be negotiated, but a serious and professional partner should always be able to justify the quote they are presenting to you, breaking down each of the tasks and describing their complexity, down to the actual cost of the project.

If you have a small budget, how do you negotiate with an IT Outsourcing provider?

During the negotiation with a technology partner, they may also present you with a quote that exceeds your budget. This situation can trigger two scenarios, the first, is that the partner immediately discards working with you because you cannot cover this rate. The second is that you find an IT Outsourcing provider who really wants to help you move forward with your project and strengthen your company, adapting to what you can invest at that time.

In the latter case, the IT Outsourcing services company can review the needs of your project and evaluate with you which functionalities are essential to developing, and which ones can be eliminated for the moment because they are not so urgent, until putting together a version of the project that fits the budget.

Defining the needs of the project and the quotation can be very complex and demanding tasks, which can lead to total stress as you debate between what you can afford versus what your project costs. On this path, the important aspect is that you have an experienced technological partner who knows how to guide you in your digital transformation.

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