You have a great idea for a new product or a growing business and need a team of software developers. The number of companies and freelancers on IT market might be overwhelming. There are numerous decisions you have to make. For example:

• Whether to choose an agency or an individual freelancer?

• The local provider or an outsource company abroad?

• Place a bid on a freelance market or contact a company directly?

• Ask for a fixed price or hourly rate?

And then comes one of the most ambiguous issues — the price. Should you go with the cheapest, cheap, in-between or an expensive team?

I believe that you have already done a lot of research on how to choose the best provider for your needs. There are many articles that have gone viral about the challenges and pitfalls of working with developers with alluring rates and the high cost of “low-cost” software development.

Avoid the Hidden Costs Trap

So what are the hidden costs of a software development? Where do they come from?

1. Teams often reply to bids with unrealistically low prices to match your quote and to get this project. In such a case, when the project is being developed it turns out that additional iterations are needed to cover all the features.

2. Often you can get a low price for the product development but later you will have to pay for technical debts. You can familiarise yourself with the concept better here.

3. With low price, you are likely to get a questionable quality. If the price you are offered is lower than the medium on the market, think twice about hiring this provider. Positions with low salaries for the developers attract people with little experience. If you are outsourcing, even having taken the difference between the cost of living in your country and abroad, it is very unlikely that decent developers will agree to work for the rate that is lower than the middle of the market in their country.

When should you agree to work with the low rates? It might work for a short trial project or an MVP (Minimum viable product).

Considering all the facts mentioned above, do you think it is a high time to turn toward high-end providers? Let’s have a look.

What Are You Paying for When You Are Working with a Big-Name IT Company?

1. High margin. The bigger the company is, the higher the expenses are, the higher are the maintenance costs.

2. Marketing and Sales. If the company is looking for new leads, it pays sales representatives and marketing representatives, helping them to promote their services.

3. Staff overage. Large companies have a lot of staff members, meaning long procedures that take time. And this is you who pay for these salaries and time

On the other hand, there is still a chance to steer a middle course without breaking a bank.

Don’t choose cheap, don’t choose top-of-the-range. Choose inexpensive.

There is a number of companies who have a constant flow of the clients coming by references and do not need to spend time and money on advertising and sales representatives. These companies choose the developers carefully so they do not grow up quickly by hiring a lot of undergrads. Their steady grow is based on the number of new projects from the returning respectable clients.

Clients themselves are not interested in the publicity of their providers, preferring them to stay inexpensive.

All in all, look for companies with good references, who charge reasonably, do not downplay, provide you the value for the money you pay. These teams might not have a fancy office with leather sofas in the reception zone, they are focused on work and great products.