What we have learned about pricing

Pricing is the mechanism by which your company will capture part of the value you’ve created for your customers. And the ability to capture a lot or very little of the value you create will depend on your competitive pricing pressures. So in the spectrum of how important this decision is for your company, pricing is pretty high up there.

How much value are we creating?

To start things off, we started thinking about this question first: how much value are we creating for our customers?

Not being able to quantify how much value a company creates can lead to a lot of trouble. If a service doesn’t lead to an easily quantifiable/measurable increase of revenue or decrease of costs for the customer, the ability to win new customers will be impaired. In our experience, the more you need to convince someone of the value you say you create, the longer it is going to take to win a customer and the harder it will be to find sales reps capable of selling it.

There are six sources of value we’re able to deliver to customers, some easy to quantify and others very difficult to quantity. We’ve broadly categorized these into reducing capital expenditure and executing better:

Less Capital Expenditure

1. Savings via more competitive salaries: very easy to quantify. Every year, clients pay less for an equally senior software engineer than they would within main tech hubs.
2. Savings via lower recruiter fees: very easy to quantify. Lower software engineer salaries mean lower recruiting fees (as it is a 10–30% success fee).
3. Savings via lower overhead costs: very easy to quantify. Office space, benefits, perks are cheaper outside the main tech hubs. So employing outside tech hubs lead to cheaper fixed and variable costs for the company.
4. Savings via less employee churn: hard to quantify, but easy to understand. US-based opportunities are hard to find outside the US. As a result, these markets are less competitive (local competition struggles to match offerings both in engineering challenge and economic terms). As a result, employees tend to stay longer. How much longer? Hard to demonstrate, but lower churn leads to fewer replacement hires, fewer recruiting fees, and higher productivity.

Better Execution:

1. Reduced time and effort to hire top talent: very hard to quantify. We provide pre-vetted, pre-screened candidates (always-on recruiting) that meet clients needs, so the time to hire is much shorter and the process less labor-intensive for our customers. This frees up their time to focus on building great product and culture.
2. Avoidance of mistakes: very hard to quantify. There are so many lessons we learned after building a tech hub in Argentina from Chicago. This know-how of having done it before is transferred to our customers, so they can avoid making these mistakes with their companies.
3. Ongoing support: very hard to quantify. Nurturing and managing a engineering culture from abroad is hard, specially if there are cultural and economical idiosyncrasies that are different from your own. It is very hard to put value on the cautionary tales that experience has equipped us other than it could serve as a life insurance for your team. As with many things in life, cheap solutions may turn out to be very expensive.