The Hidden Costs of Low Quote Dev Shops: Overbooking
Sometimes, selecting an app development shop is like buying a plane ticket. At first, a lower price can be appealing, until you realize the airline has to make its money somewhere, and it’ll probably be a nasty surprise. Much of the time that comes from opaque baggage fees, convenience fees, upgrades, overbooking, and simply cutting corners on quality.
Many of those issues also appear in working with low quote dev shops. Let’s consider ‘overbooking.’
Many low-bid dev shops will hire developers (often overseas) and pay them a flat salary. Unfortunately, this incentivizes taking on more projects than is reasonable to pressure employees into working long hours so they can pay salaries and make a profit at the same time. Let’s look at an example.
The nasty surprises
Suppose a dev shop pays a developer $50,000 a year—less than half what you would normally pay for a domestic US developer. If they charge clients $25/hour for that developer, then 40 hours a week will allow them to break even for that developer. It follows that the way to profit off that developer is to get them to work more than 40 hours a week. The incentive, then, is to put that developer on as many projects as possible, so they’re working as many hours as possible. In this example, for every 10 hours a week over 40, the dev shop will make an additional ~$12,000 a year.
We at Thryv see this a lot when we’re rescuing projects that have gone off the rails. It’s not that overseas developers are worse than domestic ones, it’s that anyone who’s working 100 hours a week is going to make mistakes. The code will be ugly, poorly organized, and fragile just because whoever was working on it had ten other projects to get to. It’s unreasonable to expect that sort of code to be usable long term, and for startups lured in by the low price, this kind of mistake can have devastating consequences when it’s used as a foundation for the company.