The In-House Illusion: Why Your Development Team Costs More Than You Think

IT outsourcing and in-house development are two key approaches that companies consider when implementing IT projects. Each of them has its own advantages and disadvantages, and choosing between them is often difficult.

In this article, we will tell you what costs you can expect when developing projects in-house and why IT companies can offer a project cost lower than in-house.

In-house development costs

If you want to organize a development department in a company, you will have several main cost items:

• Employee salaries
• Taxes/social contributions
• Office rent
• Administrative and business expenses

Calculations of the cost of software development

Let’s try to calculate the average cost of an annual project for 6 employees in Germany.

Salaries

According to Industry Research 2024, the average income of a programmer in Germany is a net $50,000 per year. In addition to employee salaries, in Germany, employers pay an additional ~21–23% of the employee’s gross salary in social contributions.

In Germany, the minimum paid vacation is set by law and is 20 days for a 5-day work week. In addition to vacation, there are 9-13 public holidays in Germany (depending on the federal state). It is worth noting that when paying for a year of work for an employee, you pay for a year of work, of which the employee works only 11 months. And when choosing custom development, you pay for the actual hours of work of the team.

In addition, you need to pay employees for sick leave and maternity leave for women.

Other expenses

Please note that the costs of purchasing equipment and licensed software for employees are not included. In addition, you need to buy tables, nightstands, and chairs if they are not in the rented office.

In our calculations, we also did not take into account changes in the number of personnel during the project and the complexity of hiring specialists. If you hired 6 employees in January, and in March you can only provide employment for 4, then 2 will be idle. You will pay them a salary, but they will not bring real benefit to the business.

And if in August you need 7 people for the project, you will have to urgently look for a person. The average time to hire a qualified specialist in the field of technology, according to Recruitment Trend, is 28 days.

IT Outsourcing costs

Most often, custom development is chosen to focus on the key functions of the company and reduce costs.

Our pricing model is transparent and flexible, designed to align with client needs while ensuring sustainable business operations:

1. For well-defined projects with clear requirements, we provide fixed-price quotes based on detailed scope analysis and development estimates.
2. For projects with evolving requirements or long-term development needs, we offer hourly or monthly rates that allow for greater flexibility.
3. For complex projects, we sometimes implement phased pricing models, with initial phases at fixed prices and later phases using time and materials as requirements become more refined.

You can check our hourly rate on Clutch.

We are skilled at “calculating budgets for iterations, working with accounting, and finding ways to reduce costs” while maintaining quality deliverables. Our goal is always to provide maximum value within the client’s budget constraints.

We already have highly qualified specialists on staff who are ready to start working on your project. This saves us from having to spend time and money on recruiting and training employees. You can read more about how to get the most out of IT-outsourcing and how to write o technical task for on outsourcing company in our articles.

AKDev works with many clients, which allows us to distribute our fixed costs, such as office rent, IT infrastructure, and administrative costs, between different projects. This allows IT outsourcing to be more profitable than in-house projects.

Leave an application on our website, and we will calculate the incentive for implementing your project for you.