Software Development Outsourcing: Is the Lowest Price the Best Price?

August 13, 2019

Sasha Lapshina

When it comes to software development outsourcing – a business practice in which a company hires another company or an individual to perform tasks, handle operations or provide services – a lot of companies end up going after the cheapest contractor and the lowest price tag on the market. But is the lowest price always the best price? What a lot of companies don’t realize is that there are plenty of hidden cost traps behind cheap solutions.

We had yet another experience recently that fueled the inspiration or rather the frustration felt to create this blog.  We had worked with a prospect on a proposal.  In the end it was down to two companies and the organization chose the company with the lowest quote. Now we may have been bitter about this for a few minutes (or days), but we moved on and accepted that it was not to be. Turns out we were wrong. The engagement with the company went horribly wrong.  Not only did they end up paying hundreds of thousands over the original quoted price, they also were left with a solution that was sub-standard. The actual money spent turned out to be higher than our original proposal price.  Luckily for us, we stayed on good terms with the organization after the proposal period and they called us a few months ago to come in and fix the work done so far. The good news is the app is performing significantly better and we are helping with other development projects.

This example further proves that when dealing with “cheap” software development vendors, the initially inexpensive quote might turn into double or triple of the quoted amount by the end of the project. Furthermore, the quality of the final product might not meet your expectations either. So let’s explore some of the risks of going with the lower priced software development outsourcing.

How Software Development Companies Lowball Quotes

Many companies base their decision to go with one software development provider over another solely on the quoted price. What they fail to realize is that many software vendors use the lower price as  bait to secure the initial contract. Then, as soon as you close the deal with them, you are likely to discover a number of sacrifices that allowed the vendor to cut costs:

  • The Initial Work Scope Was Purposely Underestimated: once the contract is secured and the work begins, you will be informed of many extra hours needed to actually deliver the project.
  • The Low Rate Didn’t Cover Extra Fees: you will learn that the initial special pricing didn’t cover a variety of hidden fees and extra services.
  • Offshore Software Development Facilities: you will find out that the developers are located offshore, somewhere far afield, and whilst they will deliver, it may not be to your specification.
  • Low Commitment: you are likely to discover that your developer team is working on a dozen of other projects at the same time, and is unable to focus on providing your company with timely quality results.
  • Cloned Apps: you might encounter a “one size fits all” type of solution, with your final product being a cloned application.

How Cheap Can Turn Into Additional Costs

You went after the cheapest price tag, and now your project is being developed. Maybe it’s almost done. Yet, you’ve already had to cover many additional fees and there are likely to be even more ahead of you. Here are just a few examples of how your “cheap” software development outsourcing turns into additional costs:

  • Missed Deadlines: you were planning to launch in September, yet it’s December and your product is still far from being ready. The developers keep promising to deliver, yet there are ongoing delays with the project. As a result, you missed the opportunity to launch and the costs are devastating.
  • Quality Issues: your product is technically “delivered”, yet there are so many bugs and issues with it, that it is no condition to be officially launched. Moreover, it turns out that the bug fixing will take months of work and add up to 80% of development time. At this point the price of your project doubled or tripled.
  • Failure to Deliver: in some cases, the developers might even notify you of their inability to deliver the software right in the midst of the project. As a result, you lose a huge chunk of time and blow your budget. To make things worse, now you have to find a new software development company to continue the project or even start over.

Final Thoughts: Buy Nice or Buy Twice

When it comes to software development outsourcing, it’s important to remember that in the long term “cheap” solutions often turn out to be even more costly than the “expensive” ones. Sometimes companies underestimate the scope of work on purpose, and other times they just have difficulty providing an accurate estimate due to lack of information. That’s why here at RedBit we offer “Discovery” services to our clients. With “Discovery”, we become a part of your team for a short time, help examine the viability, feasibility and desirability of your idea and then give you a complete evaluation and a focused perspective. We want to clarify your vision before you end up spending way too much money on a new project.

We believe in buying nice over buying twice.

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