TCO in IT Outsourcing & Why In-house Development is Exorbitantly Expensive

With industries shifting back to office spaces and work environments they were well-acquainted with before the cataclysmic spread of the pandemic, IT leaders have now begun to notice one certain development and it is the increase in the total cost of ownership.

During the pandemic, operational and overhead costs had dropped to a record low, helping businesses enjoy a financial boom.

But now that it’s all (almost) back to normal, businesses are no longer reaping the same fiscal privileges they did before.

Why is this so?

Organisations have now come to realise that in-house development comes at a cost more than what we perceive it to be at its face value. There are multiple fiscal intricacies in in-house development that are hidden under the guise of administrative and operational costs.

A lot of times, these overhead costs even exceed developer costs. This is when businesses need to stray away from the usual and turn to IT outsourcing if they aspire to be more cost-effective.

Total Cost of Ownership in IT Outsourcing

With new processes, technological advancements and IT developments rolling out in the market faster than ever before, everyone wants to be on top of what’s hot and happening.

And one such hot and happening phenomenon is none other than outsourcing.

Outsourcing IT development projects has seen a triumphant boom in recent years. According to statistics, the global IT outsourcing market will be worth a whopping $397.6 billion by 2025, making it a prominent part of the way we function.

There are several reasons why outsourcing has skyrocketed so rapidly and one of the top reasons is cost reduction.

70% of the businesses that have outsourced IT development so far in 2022 have done it for its cost-effective nature.

Brandished in the media as a saviour of startups short on funds, outsourcing has a lot more to offer and less to take away from your business than in-house development.

For instance, here are some of the overhead costs that you wouldn’t have to bear the brunt of with outsourcing as opposed to working with an in-house team:

• No Hiring & Onboarding Costs: Hiring and onboarding new talent can be a cumbersome process and more than cumbersome it can be expensive. With the onboarding tools and several employees needed to hire new talent, your costs shoot up rapidly. Outsourcing prevents you from incurring these costs. The developers are already pre-vetted and interviewed so you wouldn’t have to put your recruiters to the task when selecting them.
• No Upskilling Costs: As an employer, it is your job to provide the funds and resources to train and upskill your employees and keep them from stagnating. This can cost a lot of money since training materials and employee LMSs don’t come cheap. With outsourcing, you wouldn’t have to worry about this. Upskilling your outsourced team is the job of the external agency you are tied up with as they technically are their employees.
• Less Infrastructure & Reduced Maintenance: When you have a dedicated outsourced team working remotely for you, you don’t have to fret about maintaining your office space or commissioning more infrastructure. This is one of the biggest perks of outsourcing. You not only save up on electricity bills, water bills and office rent but also other menial bills that normally pile up at the end of every month.
• Less Developer Costs: It is indeed true that developers in the US can cost a fortune and that’s why a lot of people turn to outsourcing. Developers in South Asia, Eastern Europe and Central Europe cost less than half the price and get the work done hassle-free. According to statistics, a remote developer can cost up to 3 times less than an onshore developer and save businesses up to 40% more than an in-house team.

Conclusion:

Some of the cost-saving that outsourcing does is tangible while the rest is intangible. Some of it can be seen and felt immediately but most of it shows its benefits in the long haul. All in all, no matter what the scenario is, the total cost of ownership with IT outsourcing will always amount less to any scale of in-house development you undertake.