The cost of outsourcing technical support services
written by Paul Belogour. Dec 28, 2020
Your technology product is developed and launched, you’re having traction, and meeting new customers who want to use your product, so what’s next? Next, you’ll be facing issues that appear when real users start interacting with your software, and you’ll need a team to deal with all these issues. One of the most common practices is to outsource your product support and maintenance to an external team. If you want to know how much it costs to outsource technical support and maintenance services, then keep on reading. In this post, we’ll shed some light on the cost of outsourcing IT support and maintenance and aspects that form the final price.
Aspects that influence the cost of IT outsourcing services
It may seem that all you need to do to find out the cost of outsourcing services is to contact a potential vendor and ask about its hourly rate. Apart from knowing the hourly rate, you need to take into account many more aspects that influence the total cost. Let’s take a look at the most significant ones.
1. Type of cooperation
When starting your cooperation with an external team, you need to decide what type of contract is the most convenient and advantageous for your company. The two most commonly used types of contract are fixed price and time and material.
This type of contract means that the team you’re hiring to handle the support and maintenance of your product tells you the total price of their services.
When this type of cooperation is applied during the development of a software product, the vendor has to name the price for the whole project or its particular part.
In case when support or/and maintenance are being outsourced, the team usually names the price for their monthly services. Here’s how the fixed price contract works:
- You list all the tasks you want the external team to complete. In case of continuous support and maintenance, you need to say how many hours a month, the team needs to work on your project.
- You provide the technology partner with all the necessary data and documentation.
- The vendor estimates the materials the team needs to complete all the listed tasks and adds 10 - 20% to the estimate to cover potential risks.
- The team indicates the cost of their services in a contract which you sign.
- In case you need additional services, you’ll need to sign an additional document with the team.
This type of contract has its pros and cons. Let’s consider them.
Advantages If you opt for this type of contract, you know the cost to outsource technical support service in advance and plan your expenditures having more data on hands.
Another great advantage is that you don’t have to pay more even if something went wrong and the team needs more time to complete the tasks.
Among the disadvantages you’ll get when choosing this type of cooperation is that you pay for the potential risks that hypothetically may or may not appear.
In case you need the team to handle something extra, you will have to prepare and sign an additional contract. The procedure looks similar to the process we’ve described above meaning that it will take some time before the team starts completing your task.
Time and Material
This type of cooperation means that you will pay for all resources (usually its hours) that were required to complete the tasks on your project. When the job is done, the team lists all tasks it completed and multiplies it to its hourly rate.
Here’s how the teams cooperate when choosing this approach:
- You and the team are meeting before the iteration starts to plan the most important activities for the next month (can be 2 or 3 weeks, depending on what duration of an iteration that is more suitable for you).
- At the end of an iteration, the team performs a demo where it shows all completed tasks.
- Based on this demo, the invoice is created
- You pay the invoice and plan the next iteration.
Before opting for this type of contract, take a look at the pros and cons that this type of cooperation has.
One of the most appreciated advantages of this type of contract is its agility. In case you have an emergent task or want to change the priority of tasks, you can easily do it. The team will form the invoice based on the tasks it completed.
Another advantage is that you don’t have to pay for the hypothetical risks like in a fixed price contract.
Among the biggest disadvantages of this type of cooperation is that it's difficult to calculate the cost of outsourcing technical support services and plan your budget.
Another drawback is that the team handles all unpredictable issues at your expense, meaning there are more risks for you to break the budget.
2. Outsourcing destination
The next aspect you need to consider when calculating the costs of IT support services is the country your vendor is located.
When choosing a technology partner, pay attention to the country it's located in. The hourly rates of teams from different countries can vary significantly. For instance, according to Indeed.com, teams from the US charge $150 - $250 per hour, teams from Ukraine get $40 - $75, and teams from India charge $25 - $50 for an hour of their work.
A lot of clients believe that the most expensive option means the best quality, nevertheless, teams that charge less can also provide high-quality services as well. More than that, the teams that charge more can be less qualified.
The thing is, the hourly rate mainly depends on the living standards in a particular country. Even young teams in the US can’t charge less than $150 in order to pay their bills and competitive salaries.
If you want to choose a team that is both cost-efficient and knowledgeable, choose it in a country that:
- Has a lot of universities. The abundance of educational establishments means that the country has a lot of knowledgeable specialists in it. If there are only a few good universities in the country you consider as an outsourcing destination, ask yourself a question where did these guys get their knowledge from.
- Is good at English as a second language. If you use English for communication, the adoption of this language in a country you choose to outsource your tasks to is crucial. In case your team has problems with it, you are most likely to face a lot of misunderstandings that lead to broken deadlines and reworks.
- Has laws supporting foreign investors. The legislating system of a country is also very important. It can either male or break your cooperation with an external team. For instance, in Ukraine, the law protects foreign investors and offers them its full support.
If the team you’re considering is situated in a country that has all three listed criteria, then you can expect a reasonable price for IT support services.
3. Maturity and experience of a company
Apart from the team’s location, you’ll also need to pay attention to the maturity and experience of a company you’re going to cooperate with.
On the one hand, when choosing a big dog that is famous worldwide, you can overpay only for its name. On the other hand, if you choose the cheapest option, you’ll get a team of students with little or no experience at all. Our advice is to check the hourly rate of different companies in a country you like and opt for the average value.
How to check the experience of a potential partner? Here’s some advice for you:
- Check the site and portfolio of a potential candidate. A portfolio should contain projects similar to yours.
- Check the technology stack of the team. The team should be proficient in the technologies used in your product.
- Interview the team. During the interview, you can find out the workflow of the team, the tools it uses, and its general approach to business.
The parting thought
It's impossible to tell the exact price you’ll be paying when outsourcing your IT support to an external vendor. When opting for fixed price, you need to give the team a complete list of all tasks and allow the team to estimate it. If you’re choosing to pay per hour, you’ll need to find out the hourly rate of a company and decide what amount of work you’re going to outsource.