Why is remote software development expensive?

While we are speaking to our prospective clients about their product development plans, one comparison that often gets discussed is why they should even outsource to us and not hire an in-house team?

While there are many other factors in comparing remote vs in-house software development, one of the important factors in this comparison is the overall cost.

Though seasoned entrepreneurs may understand this very well, as a first-time entrepreneur, it's easy to miss out that when you are hiring a company for your software development, you're paying for a finished product.

And a "finished product" is a lot more than the code that gets pushed on your servers. Here's what all goes into building successful software:

1. Team salaries: The salaries paid to the team working on your product is the most obvious expense and hence this is the first item on this list. Duh!
2. Office space: A clean, well maintained IT office at an accessible location with all amenities including Internet connectivity, meeting rooms, projectors, whiteboards, pantry, etc. is a constantly recurring cost borne by the company.
3. Hardware and software licenses: The employee's laptops and networking equipment, both of which require routine upgrades as per market standards is an important recurring cost an IT company has to bear. In addition, many software licenses and SaaS tools and services (ex. email services, testing servers, OS licenses, etc.) have to be paid for on a month to month basis.
4. Admin overheads: Admin and maintenance staff and office supplies needed for day to day office operations may seem like small expenses in isolation but quickly start to add up.
5. CA and Accounts: Any software company will need an accounting and CA services to handle their routine compliances, taxes, and payrolls.
6. Hiring and training costs: Hiring and training people is a stressful, expensive and time-consuming task. Not only is the hiring process difficult, but every organization also has to deal with the problem of employee churn. Every IT company also needs to spend considerable time in training and upgrading employee skills as per current trends and market expectations.
7. Team activities: A happy and satisfied team is much more than just offering market-rate salaries. Today's workforce looks for perks, team activities, etc. and as an employer, these are important team building and retention strategies.
8. Operating profit: Over and above these costs, the software company will keep a profitability margin which will make the business sustainable over the long run.

If you are starting up, it may be a better idea to simply outsource all of the above to a software company so that you have only one thing to focus all your attention on - Your product.