Offshore Development Cost Control: Best Bets for Controlling Financial Risk in Off-Shore Outsourcing

Controlling the costs of offshore application development can seem daunting if you don’t know how to structure your pricing. While there are several different pricing structures to choose from, a new trend is emerging for price predictability and cost control that you may want to consider.

Fixed price for fixed scope

With fixed-price models, you pay for deliverables that are predefined at the start of the project. For this pricing model, you must be able to define the full scope of your project up front. This fixed-price model tends to work well with waterfall development methodologies that are more predictive than adaptive, because the project scope is fixed and cannot be changed. There is some financial risk to this model in that if you overestimate the scope you may end up paying for more resources than you actually need. Worse yet, you can underestimate the scope and put your project at risk.

Time and materials for adaptable scope

The time and materials pricing model eliminates the need for up-front requirements and documentation. You simply pay for the time and resources used on your project. This model works well for spiral development because it can be adapted as you go. Time is tracked and billed at stages until the project is completed. While you pay less up front, there is a need for close oversight and controls to manage and track time. Projects that don’t follow agile, efficient development methodologies can run longer in duration and result in higher cost that eats away at your bottom line.

Shinetech for a hybrid approach

Shinetech utilizes a hybrid model that gives clients the best of both worlds to control development cost and financial risk. We give our clients a fixed-price ODC (offshore development center) model that provides flexible access to a stable pool of resources at a fixed, low monthly fee. Resources are aligned with predefined project goals and time lines that are managed with agile process methodology. With this model, risks associated with process inefficiency and project estimation errors are mitigated. The entire ODC team is dedicated to the client’s task and the time line for getting work done. When development is slow, team members can shift their time to client business requirements, bug fixing and task completion so idle time is minimized.

This hybrid model works hand in hand with the agile methodology for application cost control because it’s customized, it’s flexible and it supports the best financial and development outcomes. Contact us to learn more about our client-friendly pricing for agile offshore application development.