The Economics of Outsourcing: 4 Ways Outsourcing Benefits Your Bottomline

How Outsourcing Benefits Your Bottomline

Want to know the real ROI of offshoring software development? Well, put away that excel spreadsheet and let us give you our two cents. 

Bad money puns aside, check out the 4 outsourcing benefits and key ways offshoring saves money and drives revenue. 

Looking for an outsourcing partner that specializes in working with portfolio companies and PE-backed software companies




1. Cost

Compare the average offshore costs to US-based employee rates. Looking at dollars spent, offshore wins every time.

To understand outsourcing benefits, this image compares average hourly rates for onshore developers and testers ($50-100 for North America, Western Europe, and Australia) to average offshore prices ($20-50 in Africa, $15-40 in Asia, $30-50 in South America).

Before jumping at the lowest rate, pause and think about this. 

A cheap umbrella that turns inside out with one gust of wind has you worse off than if you had just stuck out the rain. You are still soaked and out $5. 

Similarly, an outsourcing partner whose code is…well, crap, may end up costing you more money in the long run. 

So, think about value when choosing an outsourcing partner. Dollar for dollar, the cost of rework or poor application performance is not a smart buy. Instead, find a partner that offers both: a price that beats onshore AND high-quality work. 

For example, by implementing new workflows and improved testing standards we are able to

help one of our partners save: 2

  • $150,000 per year in rework and fines
  • $900,000 per year in labor costs

A value-driven partner is how you will really rack up the savings.

2. Scale

A company that is growing is a great thing. But scaling your team to keep up with rapid growth can prove difficult AND expensive.

A key outsourcing benefit is quickly adding new team members. This image shows that the average cost to hire a new employee is $4,129, the average time to fill a role is 42 days, productivity loss during recruitment is $32,251, and once hired it takes a now programmer about 29 weeks to reach full productivity.

Sure, with unlimited time it’s doable. But when faced with deadlines from investors, companies do not have that luxury.

Outsourcing gives organizations the ability to scale and meet market demand without investing the time or money in hiring and training new people. Using outsourcing to achieve scale also offers flexibility. See, a true outsourcing partner will not only scale up with your needs but will also scale down when you need fewer people, saving you money.  

Outsourcing to a company like KMS ensures you not only get those needed extra hands but a dedicated team of experts who know your products inside and out. 

3. Fill in Gaps in Expertise

Offshoring is a perfect option for an incremental project, resolving inherited technical debt, or even to just avoid hiring and training new team members. Let’s not relive the hiring training costs we mentioned earlier…

The right outsourcing partner will have an employee base with an extensive and diverse skillset. You can tap into this pool of talent to immediately fill in gaps in expertise. 

Take a look at the KMS team, our staff has over 375 unique areas of expertise, ranging from coding languages to test automation to cloud proficiency. To give you an idea, below is just a sampling of some of the coding languages our team knows.

This chart lists 36 of the 375 programming languages that people on the KMS team know. Languages include: .NET, ActionScirpt3, Angular, ASP.NET, ASP,NET MVC, C/C++, C#, C# (Winform), Caml, Clojure, CoffeeScript, ColdFusion, Crystal Reports, CSS, CSS3, Groovy, HTML, HTML5, iOS Swift, Java, JavaFX, JavaScript, LINQ, Objective-C, Perl, PowerBI, Python, React, React Native, Ruby, Sails.js, Scala, Spark, SQL, Swift, TypeScript. Filling in gaps in expertise is a fundamental outsourcing benefit.

Needless to say, outsourcing is a quick and cost-effective way to expand your team’s skillset. 

Bonus benefit! Want more? In addition to varied talent, to meet the demands of their many customers, offshoring teams are often ahead of new trends and have access to more tools. This means as a customer, you reap the benefits of these tools without investing in licensing and training.  As the offshore company continues to upgrade and invest in new resources, your company will benefit. Let the outsourcer take on the cost and risk of maintaining a wide variety of technical skillsets so that you don’t have to.

4. Optimize Your Best People

Pass off daily or mundane tasks to the experts offshore and free up your team’s bandwidth to focus on expansion, new revenue streams, and more. By leaving the maintenance work to your offshore partner, you take advantage of the lower hourly wage to reduce maintenance costs. 

This shift in work also enables you to deploy your high-value (and higher-cost) resources to high-value tasks. After all, who better to drive innovation at your business than the people who know it best? 

More work will get done and your employees will feel valued and motivated. It’s a win-win. 

Maximize Outsourcing Benefits with KMS

Why KMS? The right offshoring partner brings you all these benefits and more. At KMS we focus on being a value-driven partner for each company we work with. Our teams are assigned to an individual account, learn the ins and outs of your platform, and work as an extension of your existing team. We would love to add value to your team, let us know how we can help your business grow!





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