The hidden costs of outsourcing software development
Last updated: February 25, 2024 Read in fullscreen view
Recommended for you
- 07 Jul 2024
Top Fintech Companies in Vietnam Driving Innovation Across Digital Banking & Investment 91/184 - 17 Mar 2026 How Much Does it Cost to Build an AI Agent in 2026 72/119
- 18 Oct 2020 How to use the "Knowns" and "Unknowns" technique to manage assumptions 66/1144
- 05 Mar 2026 Top 7 Full-Cycle Web App Development Companies for Your Business in 2026 60/71
- 08 Oct 2024 Vietnam: The Rising Star in Global Outsourcing – Trends and Costs for 2025 58/411
- 21 Aug 2025 Top 30 Oldest IT Outsourcing Companies in Vietnam 58/161
- 17 Mar 2026 Top 10 Product Development Companies in Chennai 2026 (Updated) 57/64
- 06 Feb 2026 How Much Does a CPA Cost for a Small Business? 55/64
- 02 Feb 2026 What Is the Total Cost of Web Development for Small & Medium Businesses? 54/74
- 11 Mar 2026 OEM, ODM, and OBM in Software Development: Choosing the Right Growth Path 51/58
- 01 Sep 2022 Facts Chart: Why Do Software Projects Fail? 51/631
- 12 May 2021 The Real Cost Between Outsourcing IT vs In-House: A Quick Comparison 51/486
- 11 Mar 2024 Why You Should Hire Odoo Developers from Vietnam to Customize Your ERP System 49/152
- 24 Nov 2025 Top Blockchain Companies in Vietnam 49/92
- 01 Oct 2020 Fail fast, learn faster with Agile methodology 46/1087
- 13 Dec 2020 Move fast, fail fast, fail-safe 46/356
- 06 Feb 2021 Why fail fast and learn fast? 46/500
- 09 Sep 2022 Close Collaboration and Communication Can Overcome the Challenges of Distributed Teams 46/244
- 05 Jan 2022 What Outsourcing Engagement Model is Right For You? 43/353
- 30 Oct 2022 How Much Does MVP Development Cost in 2023? 41/282
- 03 Oct 2020 Outsourcing Your MVP Development - Streamlined Solutions for future 41/462
- 14 Oct 2021 Advantages and Disadvantages of Time and Material Contract (T&M) 41/907
- 07 Jul 2021 The 5 Levels of IT Help Desk Support 40/498
- 10 Apr 2021 RFP vs POC: Why the proof of concept is replacing the request for proposal 40/359
- 15 Oct 2022 Project-based team model for one-off and pilot software development projects 39/846
- 21 Oct 2021 Advantages and Disadvantages of IT Outsourcing 39/387
- 24 Nov 2021 What is the Actual Cost of Hiring Cheap Developers? 39/423
- 04 Apr 2024 Unlock Vietnamese-Japanese outsourcing potential 38/267
- 05 Aug 2025 Why Doesn’t South Korea Outsource Its IT Projects Like Other Developed Countries? 37/130
- 18 Aug 2022 What are the consequences of poor requirements with software development projects? 36/293
- 01 Jan 2023 4 New IT Outsourcing Pricing Models to consider in 2023 35/397
- 01 Mar 2022 Top 5 reasons why outsourcing to Vietnam is a smart move 33/312
- 08 Nov 2022 4 tips for meeting tough deadlines when outsourcing projects to software vendor 33/316
- 08 Oct 2022 KPI - The New Leadership 33/627
- 19 Mar 2021 Selective Outsourcing of IT Functions - a new trend in business outsourcing 32/574
- 28 Oct 2022 Expect the unexpected in 2023 - How Outsourcing Can Help? 32/232
- 31 Oct 2025 The True ROI of Software Development Outsourcing for Tech Startups 32/107
- 03 Dec 2025 IT Outsourcing Solutions Explained: What, How, Why, When 31/56
- 03 Dec 2025 IT Outsourcing Solutions Explained: What, How, Why, When 31/56
- 16 Oct 2024 Building a Software Outsourcing Startup: Strategy Through Two Canvases 31/63
- 01 Mar 2023 Bug Prioritization - What are the 5 levels of priority? 31/251
- 03 Nov 2022 Top questions and answers you must know before ask for software outsourcing 31/313
- 03 Nov 2022 Top questions and answers you must know before ask for software outsourcing 31/313
- 03 Jan 2023 IT Outsourcing Costs: Is outsourcing really cost-effective? 31/236
- 16 Dec 2021 Why outsource Python development of your project? 31/515
- 28 Dec 2021 8 types of pricing models in software development outsourcing 30/463
- 05 Jan 2024 Easy ASANA tips & tricks for you and your team 30/225
- 10 Jul 2025 Building AI-Driven Knowledge Graphs from Unstructured Data 30/186
- 01 Jun 2025 10 Sustainable & Unique IT Outsourcing Companies in Vietnam 29/105
- 07 Nov 2024 Outsourcing Crisis Looming: Will Trump's Policies Transform the Global IT Landscape? 29/199
- 22 Mar 2022 8 Mistakes Marketing Agencies or Consulting Firms Make When Outsourcing Web Development 29/368
- 09 Jan 2022 How to Bridge the Gap Between Business and IT? 29/215
- 01 Sep 2019 Outsourcing Software To Vietnam: Facts, benefits and limitations 29/476
- 16 Feb 2021 Choose Outsourcing for Your Non Disclosure Agreement (NDA) 29/197
- 12 Jan 2023 Top 10 Trustworthy IT Outsourcing Companies in Vietnam 29/307
- 11 Mar 2023 Common Pain Points in Software Development Outsourcing 29/281
- 10 Nov 2022 Poor Code Indicators and How to Improve Your Code? 28/244
- 16 Apr 2021 Insightful Business Technology Consulting at TIGO 28/456
- 15 Aug 2021 TIGO Rate Formula - Things the partners should know 28/518
- 10 Dec 2023 Pain points of User Acceptance Testing (UAT) 28/478
- 03 Nov 2021 7 phases of Odoo Implementation and Development: Can they be outsourced? 27/434
- 09 Jan 2021 How can outsourcing enable business agility? 27/216
- 23 Sep 2021 INFOGRAPHIC: Top 9 Software Outsourcing Mistakes 27/449
- 10 May 2021 What are things you should look for in a good IT outsourcing company? 27/457
- 02 Mar 2021 Estimate the Cost of Software Development 27/362
- 14 Dec 2021 The Top 10 Problems with Outsourcing Implementation and How to Solve Them 26/419
- 07 Aug 2022 Things to Consider When Choosing a Technology Partner 26/297
- 13 Oct 2021 Why Outsourcing Software Development Services Is Gaining Traction With Non-Technical Leaders? 26/336
- 01 Oct 2022 Vietnam is a favorite supply of IT outsourcing services to Japan 25/259
- 01 Jan 2023 Why is Vietnam the Top IT Outsourcing Destination of 2023? 25/260
- 11 Jan 2024 What are the Benefits and Limitations of Augmented Intelligence? 25/498
- 01 Jan 2024 Software Outsourcing Questions for 2024 24/173
- 16 Feb 2026 Education App Development Cost in 2026: Benchmarks and Key Cost Drivers 24/55
- 01 Jan 2023 Software Development Outsourcing Trends to Watch Out for in 2023 24/340
- 04 Jan 2021 VIETNAM AS A BIG ATTRACTIVE DESTINATION IN THE FIELD OF OUTSOURCING 24/333
- 10 May 2021 Project Audit and Second Opinion Services 23/267
- 09 Mar 2022 Consultant Implementation Pricing 22/231
- 02 May 2021 Outsourcing Software Development: Avoid 8 Mistakes 22/128
- 01 Jan 2023 Top 5 IT outsourcing countries in 2023 22/290
- 13 Jan 2023 What are the Hourly Rates in Offshore Software Development? 22/257
- 09 Feb 2023 The Challenge of Fixed-Bid Software Projects 22/233
- 19 Apr 2021 7 Most Common Time-Wasters For Software Development 22/564
- 19 Oct 2021 Is gold plating good or bad in project management? 22/843
- 17 Feb 2022 Prioritizing Software Requirements with Kano Analysis 22/325
- 12 Mar 2024 How do you create FOMO in software prospects? 22/187
- 01 Jan 2024 12 reasons for software development outsourcing 22/194
- 06 Oct 2021 Intellectual property issues with outsourcing software development 22/403
- 01 May 2023 Streamline Your Business with Outsourcing 21/216
- 01 Jan 2024 Tech Partnerships: Choosing the Right Software Outsourcing Firm in Vietnam 21/192
- 25 Sep 2025 A Practical Guide to Secure Online Work for Outsourced Teams 21/109
- 01 Feb 2023 [InfoWorld] Is your outsourcer agile enough? 21/213
- 01 May 2023 CTO Interview Questions 21/350
- 06 Mar 2021 4 things you need to do before getting an accurate quote for your software development 21/699
- 01 Apr 2021 IT Outsourcing to vietnam: Why It Is A Good Choice? 21/314
- 25 Nov 2021 Low-Cost Software Development: Buy Nice or Buy Twice? 21/360
- 21 Aug 2022 Forbes: IT Outsourcing Hotspot: Vietnam, A Small But Mighty Powerhouse 21/273
- 15 Nov 2023 IT Staff Augmentation Types and the Best Choice for Your Business 20/211
- 17 Oct 2020 How Outsourcing can Improve Time Management for Better Business 20/290
- 08 Aug 2021 Why Nearshore Software Development is better than In-House Development? 20/211
- 07 Oct 2022 Digital Transformation: Become a Technology Powerhouse 20/261
- 16 Mar 2021 Outsource Data Engineering Services - TIGO Streamlined Solutions 20/267
- 26 Dec 2023 Improving Meeting Effectiveness Through the Six Thinking Hats 20/277
- 01 Jan 2023 Top Software Development Challenges in 2023 19/324
- 31 Oct 2021 Tips to Fail Fast With Outsourcing 19/404
- 10 Jan 2024 Facts Chart: Reasons for outsourcing 18/168
- 08 Feb 2022 Software Development: Fixed Cost or Opportunity Cost? 17/477
- 10 Mar 2021 The 7 Biggest Mistakes to Avoid Before Outsourcing a Web Development Project 17/249
- 02 Nov 2023 What are the pros and cons of iIT outsourcing? 16/203
- 17 Jan 2024 What are the benefits and challenges of using multi-sourcing or single-sourcing strategies? 16/205
- 01 Jan 2024 Hiring Tech Talents in Asia: An Overview of Skills, Costs, and Potential 16/174
- 14 Mar 2024 Why should you opt for software localization from a professional agency? 16/152
- 08 Jan 2024 Outsourcing on an As-Needed Basis 15/173
- 12 Oct 2021 Vietnam outsourcing path - the silk road connecting ASEAN with the developed countries (EU, US, Japan...) 15/314
- 06 Nov 2019 How to Access Software Project Size? 15/261
- 21 Oct 2022 Outsourcing Billable Rate 14/278
- 01 Jan 2024 What The World Is Flat Means to IT Outsourcing 13/179
- 20 Nov 2022 Software Requirements Are A Communication Problem 13/253
- 01 Mar 2023 How do you deal with disputes and conflicts that may arise during a software consulting project? 12/172
- 17 Mar 2025 IT Consultants in Digital Transformation 10/94
- 31 Dec 2021 Outsourcing Software Development to mitigate the impact of COVID-19 6/325
Previous article: The Hidden Cost Behind Hiring In-House Software Developers
With outsourcing, the bulk of the in-house expenditures go and the cost structure becomes more straightforward and apparent. However, be mindful of the charges that are not so visible for the first calculation. Depending on the collaboration type, e.g. project outsourcing or outstaffing, you may have certain additional charges to take into consideration. These are recruitment fees, communication, travel, administration, legal documents and others.
Hidden costs of outsourced software
Recruitment
Everything you need to know about the screening and hiring remote engineers is right here. Not all IT outsourcing vendors charge for employment. Recruiting costs are already included in the partnership fees in staff augmentation models.
Team Forming
A customer must negotiate contract terms and maintenance to form a remote IT outsourcing unit. Because there will be many extra expenses you have to pay for when forming a remote IT team. For instance: Infrastructure, tools, technologies, hiring process, employees’ benefits and compensation, etc.
Legal Documentation
Outsourcing contracts with all of their associated SLAs, OLAs, UCs, timeframes, and non-disclosure agreements are a need. You’ll need the assistance of a legal professional to make sure that all issues of cooperation and punishment are taken into account. The cost for such service, as well as a charge to notary institutions, is generally ignored when determining the entire cost of outsourcing.
Cost Variability Factors
In addition to the variation in cooperation models and their accompanying prices, be ready for large variances in pricing, and therefore the hidden amounts you can spend or save.
These are the prices you’ll eventually spend that vary depending on such things as location, the uniqueness of the given technical talent in the IT outsourcing market, level of expertise, English proficiency and the length of the engagement.
Consulting creep
Most clients tell us it’s the cost of consulting during engagements that send costs spiraling unpredictably. Almost all digital and IT engagements are now consulting-led, which is pushing up costs.
Even as other areas of IT service have embraced outcome-based pricing, consulting is still largely charged on a time and materials basis. This can be jarring for clients expecting engagements to be priced in a certain way. While some enterprises will appreciate the increased value they get from getting their engagements right the first time, others will find the additional cost hard to justify.
Duplication of work
When problems arise, the first instinct of new IT outsourcing customers is to fix it themselves rather than allow the supplier to take accountability to fix it. This leads to the client retaining more staff than needed and to the duplication of effort. Be sure the roles of the retained staff have a clear remit that does not duplicate the responsibilities of the supplier. There can also be value loss if some business units opt out of the outsourced services altogether.
Misaligned visions
One of the biggest challenges your project can face is making sure your outsourced partner has a vision for your product that is in line with yours.
It's important that your vision is communicated clearly and concisely to all your outsourced partners, whatever their role in the project may be. This way you will have peace of mind knowing that they are always working on their parts of the project with your views front of mind.
TIGO focuses on your vision from day one, ensuring that everyone is always working towards a common goal with your interests at heart.
Final Word
TIGO is here to help you leverage all that internal knowledge you have, not pinch it! The key is to ensure that your outsourcing partner has the same goal as you -developing a truly awesome product that will generate a good ROI.
Explore more on these topics
Guest Blogging: The Definitive Guide
Top Trending Topics
Share This
Link copied!
Recently Updated News