The issue of software development costs varies depending on the resource that provides IT services. Along with the remaining positions of expenses, the IT sector takes the smallest part, in comparison with marketing and payment for startup employees, if there are any. How can you save money from your wallet in software development? We have selected for you 3 modern ways of hiring employees for startup and software development, which will help reduce several times spending on software development.

Costs that Business Owners Usually Invest in IT Services

Any startup owner wants his product to be the best on the market, with the highest rates of demand and quality. To survive in a competitive environment, you need to invest in quality software, develop SEO, and monitor trends in your niche. What does software development include? Wireframe and architecture, design UI, backend development and testing, of course. Role of cost estimation in software development project takes an important place as it helps to predict expenditures and prioritize tasks. You can read other pieces of advice about startup creation here.

It is quite troublesome to say specific numbers for absolutely all the projects, but some points that affect cost analysis of outsourcing software development. Project duration should be measured in calendar time, also define the way you estimate the work of programmers, whether its function points or lines of code. In the USA the average cost of software development is $6,824, in Germany $5,170, so there is a question: how to purchase software development services with lower price? We’d happy to offer several ways to save your budget, you can read about them below.

Software Development Services With Available Price

Freelance, outsourcing, and outstaffing – all these concepts are closely related, therefore it is not surprising that many sometimes substitute them. What is the difference between these concepts? Our guide will help you choose the most effective solution and organize the work of your startup in the best way.

Freelance

Freelance is becoming a usual form of cooperation in the world of startups. And the more startups start using the services of freelancers, the more people join the generation of those. Startups often change their business model as they work. Freelancer is more mobile and open to change. Moreover, the changes do not bother him much: the person just does the work on the terms of the employer. Fundera notes that software development expenses usually occupy about 10% of the total budget. Working with a freelancer developer is always cheaper. You can pay per hour or for a result. There are no holidays, taxes, payment for office space and other bonuses.

 

Outsourcing

Giving non-core processes to a third-party supplier, the company becomes more specialized and focuses only on those processes in which it has the expertise, that is, focuses on the core business.  For ex:ample, if you are looking to hire software developers, you can check upwork, toptal or hiremotely, these platforms will help you with the best options.

 

Starting a startup right away with recruiting a team is a big risk. At the start, it is important to demonstrate the prototype of the product, to justify its value to investors. If besides there is a continuous search for personnel, the launch will simply be constantly postponed. One of the alternative scenarios is the outsourcing of a fully-equipped rent team.

 

Many startup entrepreneurs underestimate the time-consuming costs of solving organizational problems and the seriousness of the consequences if they are not correctly addressed. Even if the company employs only 5 people, the company is forced to carry out functions for which entire departments are responsible in a large company. 

 

In particular, any company should have bookkeeping, monitor its security, conduct legal support of the business and manage its staff. Hiring individual employees to carry out each type of work is not profitable for the company. And here this way of hiring employees as outsourcing comes to the rescue. There was a task – find an employee for it. The project is completed – the employee is no longer needed.

Outstaffing

Outstaffing services are one of the effective mechanisms for optimizing the tax costs of an enterprise. Business is interested in reducing costs in all respects, including staff. The fewer a staff, the lower the administrative costs. In the modern labor market, there is a tool that can solve the dilemma – outstaffing. According to this scheme, employees are registered in a specialized employment agency and work directly with the employer.

As a rule, a startup is associated with great risks – at the very beginning, the prospects for the project are foggy. At this time, it is important to attract foreign staff and concentrate on the main activity. If the project develops successfully, employees can be hired to a staff, eventually.

Outstaffing vs Outsourcing

Outstaffing is often confused with outsourcing or is mistakenly considered to be its kind of outsourcing. However, these are completely different services. The concept of outstaffing means “outside a staff”. The peculiarity of this type of employment is that part of the company’s personnel is removed from the staff and legally registered in the outstaffer service, however, it fulfills its duties within the framework of the tasks of the customer company. From a legal point of view, an employee has an employment relationship with an outstaffer company, and not with a customer company. At the same time, the outstaffing service provides services to the customer under a contract for the provision of services, and the customer pays for them. Thus, we can say that the main difference between the two types of services is that outsourcing is the transfer of certain functions of the company to the contractor, and outstaffing is the transfer of employees to the customer.

 

To answer the question of how outsourcing differs from outstaffing, you must first understand what functions they perform. Outsourcing, like outstaffing, can take on many functions of the enterprise. The most common are the following tasks: Payroll, taxes, preparation of accounting reports, software development, even cleaning, legal support of transactions and company activities.

Outsourcing and outstaffing are different directions that set themselves the same task of reducing costs and improving production efficiency. Both methods have their characteristics, which should be considered before concluding a contract of a certain type.

Conclusion

Management development dictates ever new criteria for optimizing business processes. One of these technologies is staff outstaffing, which helps reduce production costs. Hiring outstaffing employees for an unlimited time, but at the same time, the lack of direct employing him or her to the staff will help reduce startup costs and at the same time use guaranteed quality services. Thus, you can find a software developer at affordable prices, avoid taxes for an employee, and get a quality product that you need.