4 ways to cut application development and maintenance costs

Stephanie Overby

3. Technology expertise 

Each role has required specific skills, knowledge, and training requirements. When technology expertise is widely available across the market, standard rate levels apply while hard-to-find experts command premium market rates. "To ensure that a company pays the right price for a specific role within a band of experience, it needs to be sure that rates also incorporate the continuum of technology expertise required, [such as] Java, SAP, or mainframe [skills]," Kirz says.

4. Location

Man-hour rates for IT outsourcing are much like real estate prices. It's all about location. The most dramatic difference in how much you pay for a resource is based on geography, which many companies still define generically as either onshore or offshore. "However, service providers have delivery centers worldwide and resources associated with one account are often dispersed," says Kirz. "As a result, companies should examine rates for all locations delivering services for their project." Consider whether staff are located in India, Argentina, or the Philippines and whether they are tier-one, -two, or three cities. Rates per hour can vary by as much as 15 to 20 percent within a country, says Kirz. "Major service providers are also developing large delivery centers throughout the rural U.S. Like their tier-two counterparts in India, using these U.S. centers can mean paying a premium for those customers using generic onshore/offshore rates."

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