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A critical phase of appointing a new offshore provider or renewing an existing contract is to get the best price possible.
However, I often noticed that potential customers are trying to go far off limits when it comes to prices. I think this is plain wrong, as too much bargain is very likely to backfire on them.
The worst part of the story is that there are always some vendors willing to accept any conditions to get a contract.
But hold on, there is no free lunch! You can be absolutely certain that the client will get what they are paying for, which might be very different from what’s written in the agreement.
Let’s face it: if you are a serious outsourcing vendor, positioned on a market that gladly pays 25 to 30 dollars an hour for a seasoned engineer, why would you assign him or her to a contract that only pays $ 15 or even less? There is no way. Your vendor might assign some senior engineers for 2-3 months but they will replace them as soon as possible with less experienced ones. When blended rates are used, customers get less without paying less. And in the software industry less means very often failure!
It is relatively easy to find out what the average prices for a profile and a region are. Bear in mind that developers in places like Bangalore, Shanghai or Beijing are more expensive than in tier-2 cities. On the other hand, large cities harbor larger pools of talents, usually more affluent in English; the engineers are generally more career oriented, hence more motivated.
There is a very good article on this topic on the “Pragmatic Outsourcing” blog [click here to read it].
If you are on the market looking for an outsourcing vendor, do your homework; it is worth spending time evaluating what the supplier’s realistic bottom line really is. Do not go below it, it is not worth it!
Remi
www.vsisoft.com
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yes i definitely agreed with this post bargaining to much would come into worse i think, what matter is the service and the quality is the most important thing.
Left by Virtual expert on January 19th, 2009