An ultimate guide to healthcare product development prices and costs around the world

For any start-up and product development company, choosing between internal development and outsourcing is an eternal dilemma. While both aspects have their pros and cons, and the best option depends on the company’s need, outsourcing is a faster, more agile, and cost-effective way to develop a product.

img1

Healthtech Market Overview

The year 2020 was a defining moment for the healthcare industry, as it was forced to modernize it’s infrastructure, undergoing a huge digital transformation. The pandemic and other factors — one of which is an increased desire of patients to take an active role in their own healthcare process and decision-making — have accelerated the transition of offline medical services to digital, resulting in the need for secure, interoperable, and compliant software solutions. This is the perfect time for the healthcare tech industry, as there has never been such high demand for quality products as there is today.

Combined market value of European healthtech startups

The industry is shifting from standardized protocols to digital and virtual care and cloud-based customized medical services, which creates more and more healthcare data and the need for innovative technology. Stakeholders and participants in the healthcare market have to capture these emerging trends and quickly adjust to the new environment. 

For healthcare startups, this time of change signifies an opportunity to introduce new products, solutions, and business models. Despite the fact that patients’ spending on medical services froze during the pandemic, investments in the health tech market continue to grow. In 2020, investors brought $21.6 billion into digital health organizations, which is two times more than last year’s spending, and almost four times the amount invested in 2016, according to the research firm Mercom Capital Group.

Global digital health market size 2019 and 2026 forecast

Between 2020 and 2024, some sectors that will see huge growth include telehealth and telemedicine, cloud and collaboration, interoperability, and compliance solutions. Global health spend CAGR will grow 3.9% until 2024. Digital health raised $14.7 billion in venture funding in the first half of 2021, according to Forbes.

Healthcare Software Development Trends in 2021 and Beyond

Between 2020 and 2024, some sectors that will see huge growth include telehealth and telemedicine, cloud and collaboration, interoperability, and compliance solutions. Global health spend CAGR will grow 3.9% until 2024. Digital health raised $14.7 billion in venture funding in the first half of 2021, according to Forbes.

AI

Growth in the AI health market is expected to reach $6.6 billion by 2021, and projected to grow to ten times the size over the next five years. Acquisitions of AI startups are also rapidly increasing. Artificial intelligence has many applications when it comes to medical services, and some of its capabilities are already in use. According to analysis by Accenture, important clinical health AI applications can potentially generate $150 billion in annual savings for the US healthcare economy by 2026.

Telehealth & telemedicine

Telemedicine has been in the spotlight for some time, but now there is an accelerated need for digital healthcare. With such fierce market demand, it’s no wonder that during the pandemic, investments in telehealth startups have tripled. Telemedicine is becoming an equal, if not better, counterpart to traditional medical services. According to the Global Market Insights report, the global telemedicine and telehealth market will grow from the current $38.3 billion, to $130.5 billion in value by 2025. For healthcare entrepreneurs, it is a great niche and provides the possibility to introduce a competitive product to meet rising demand.

VR and AR

Virtual and augmented reality technology is used for numerous purposes in the healthcare industry, from teaching medical students to creating simulations for a better experience when patients receive treatment. According to Allied Market Research, the market for virtual and augmented reality products in healthcare is anticipated to reach $2.4 billion by 2026.

Cloud computing

Now having a robust and integrated cloud infrastructure is no longer optional for healthcare organizations. With more patient data being accumulated, medical facilities need a network to easily collect, share and distribute these piles of information. In fact, cloud computing in the healthcare market is expected to grow by $55 billion over the next few years. Additionally, the cloud computing market is poised to reach USD 287.03 billion during 2021-2025.

Healthcare Software Development: Key Challenges

Despite the fact that investors are willing to pour resources into the development of new healthcare solutions for a hot market, few startups actually succeed.

“On average, large IT projects run 45% over budget and 7% over time, while delivering 56% less value than predicted. Software projects run the highest risk of cost and schedule overruns”, states McKinsey.

Data privacy

Given the sensitive nature of medical data, any violation or discrepancy can result in costly and frustrating consequences, not only for patients but also for healthcare software providers and medical institutions. According to Gartner, privacy regulations emerge as the top risk for most organizations, and this is no different for healthcare. The accumulation of sensitive patient information along with medical institution records and smart data from healthcare wearables creates a target for devastating and expensive cyberattacks and data breaches.

Ensuring compliance

It’s no secret that the entire healthcare industry is heavily tied to regulatory compliance, especially when it comes to tech innovations. Firstly, a non-compliant software or application won’t even make it to market. Also, having a consistent and reliable mechanism for keeping healthcare solutions in line with updated policies and governmental standards is the primary determinant of success in a saturated market. In this realm, stakes are high when it comes to sensitive patient information, and mistakes can be extremely costly for everyone involved.

Quality software development

Ultimately, it’s the quality of the product that is the cornerstone of a company’s success; however, finding skilled and reputable talents that can deliver high-quality solutions without breaking the budget is a challenge. In healthcare, it is even more complicated due to the complex nature of the industry, where product development requires experience and deep niche knowledge. It is important to choose a vendor that can handle everything needed to build a successful software solution, from engineering and building architecture, to development and on-time delivery.

How to choose the development team?

Many companies end up choosing software vendors that either lack expertise, or are under or overqualified for the project’s budget. Another challenge is choosing the right employment model. Mainly, there are two options: an in-house team, with all the members hired full-time, and outsourcing, which is primarily priced by hourly rates. Let’s take a closer look at the pros and cons of both options. 

Hiring in-house teams is a common option for healthcare companies, which comes with some distinct advantages, but also some things to watch out for. For a long-term medical project, it may seem like hiring an in-house team is a more cost-efficient and reliable option. If you consistently need a team in close contact over a long period of time, this option can work. However, it is the tip of an iceberg. 

Let’s imagine that to develop a healthcare product, you need a team of 3 software developers, a product manager, a project manager, UI/UX designer, QA engineer, and DevOps specialist. While the programmers and product/project will likely be involved full time, other team members won’t have the full-time workload. That’s why when hiring in-house, you will drastically overpay for most of the team members.

With this set-up, a viable option is to hire essential team members in-house, and hire outsourced specialists for the rest of the positions. However, keep in mind that hiring employees in-house comes with many challenges and additional expenses. If you decide to hire a team outside of the US, it may seem cost-efficient, but requires even more effort, time, and expenses. Eventually, it turns out to be too expensive, time-consuming, and troublesome for a healthcare startup to form an in-house team, whether locally or in other areas. 

Let’s take a closer look at the pros and cons of in-house development teams.

Pros of an In-House Team

  • Communication

    One of the most prominent advantages of in-house teams is the close proximity and availability, making for easier communication. For businesses that want to be deeply involved in the development process, this is a distinct plus. As the in-house team will be locals, they will be available in the physical office, or if remotely, they will be in your time zone if a snap meeting is required.

  • Visibility into the process

    With an in-house development team, you have more control over the entire process. In addition to examining reports and analytics, you can communicate directly with participants or influence the modification of different stages of development. Additionally, the team is dedicated solely to your project, which increases overall involvement.

  • Cultural compatibility

    An in-house development team often comes with a shared mindset, language, and approach, which eliminates issues with cultural differences or misunderstandings that can occur in remote teams.

Cons of an In-House Team

  • Higher costs

    Hiring a team in-house is a longer and way more expensive process, so if your project is short on time and with a strict budget, consider outsourcing. An average software developer’s salary in the US sits between $90,000 and $120,000 annually, but apart from the developers, you will also need designers, project managers, business analysts, quality assurance engineers and other specialists.
    There are also large costs that can be found in the recruitment of these specialists. Additionally, there are a lot of other employee-related costs associated with in-house development, like taxes, software licenses, office equipment, rent, and training.

  • Time and cost to recruit

    Finding a great employee in-house is way more complicated than finding talent from a worldwide pool. What’s more, according to data from Statista, hiring a single team member is the second biggest challenge companies face, and takes on average 42-43 days in the US. The average recruitment cost of hiring an in-house employee can reach around 15-20% from the candidate’s annual salary. This means that for a $100,000 annual salary, the employer pays nearly $20,000 for recruitment. Also there are additional costs associated with taxes, office rent, software licensing and equipment.

  • Limited talent pool

    Choosing an in-house team means you will be searching throughout your country, but most likely your region and city. The global tech community is extremely versatile and vibrant, with many bright individuals located all over the world. Hiring employees in your area limits this talent pool, which also means you will have to navigate the market longer and more carefully.

Cost breakdown: How much does it cost to hire an in-house team?

In healthcare software development, the ultimate cost depends on the project specifications and type of product. To better understand the distribution of costs in an average healthcare development project, let’s take a closer look at an example of a project estimate. Here you can see and compare the lower and upper price estimate with a project’s timeline, team structure, salaries, and project duration. 

Project background: CRM software solution for a medical organization that includes a web and mobile application. 

Project duration: 6 months

Key features:

  • Dashboard for registration, adding users, and authorizations 
  • Questionnaire to add and manage information
  • Reports flow for analytics
  • Mobile application

After seeing the cost breakdown in the table above, we come to the conclusion that at least half of your in-house team will not have the full workload to pay for. Instead of paying for the actual work time of the employee, you will pay the full-time salary for a 30% workload. And don’t forget the taxes, recruitment costs, office rent, equipment, and software licensing. Doesn’t sound like a great deal, right? 

Here we come to the conclusion that for the healthcare product development case, outsourcing becomes the viable option one way or another. If you have in-house team members but want high-quality and cost-efficient development, you will need to combine your employment model with outsourcing. Another option, of course, is fully outsourcing product development. 

Outsourcing is a more flexible and faster way to kick off your project, with little involvement and onboarding needed. In projects like healthcare it might seem risky, but choosing a vendor with industry expertise is safer and more efficient than training an in-house team. Let’s take a closer look at the pros and cons of outsourcing healthcare software development.

Pros of Outsourcing Development

  • Cost-efficiency

    Since an outsourcing team works on an hourly-pay basis, it’s more cost-efficient. You only pay for the time that was directly spent on the project. Additionally, there’s no need to invest in recruiting, office supplies & equipment, and other onboarding processes. The wide talent pool also lets a company choose the expertise level and price range that fits its requirements best. According to a report by Accelerance, outsourcing development to an offshore software development provider can typically save a company between 40% and 75% of overall costs. Depending on the region, software development rates vary widely, with North America and Central Europe being the most expensive destinations for outsourcing. Asia and India are the cheapest regions.

  • Superior talent pool

    With outsourcing, you get access to an immense pool of worldwide specialists, with different experience and areas of expertise. This is a huge advantage in the healthcare industry, since businesses often need niche knowledge or narrow industry experience, which may be hard to find locally. For regions where developers’ wages are generally high, like in the USA and Western Europe, outsourcing is the perfect option, as it allows companies to find the required skills for a reasonable price. One of the most appealing destinations for outsourced software development is Eastern Europe, like Ukraine and Belarus. There, vendors offer unmatched proficiency and skills for a better price than other regions.

  • Flexibility & speed

    Healthcare startups usually want speed of development, with a requirement to get their products to the market quicker. Outsourcing teams can deliver software of superior quality faster than an in-house team as the onboarding process is very short. Outsourcing is a perfect way to launch development faster.

Pros of Outsourcing Development

  • Risk of miscommunication

    Working with remote teams comes with certain risks, one of which is miscommunication due to time zone discrepancies or language/ cultural differences. Additionally, there is no possibility of face-to-face communication. While some time ago this might have been a valid concern, now, in the era of remote jobs and Zoom, this doesn’t seem like such an obstacle. In the first stages of cooperation, clear communication channels can still be set up.

  • Limited visibility

    Outsourcing means limited project transparency, however this can be both a benefit and a disadvantage, depending on business objectives. As a company, you will be able to focus more on your business rather than being constantly distracted by IT issues. However, if control and high level of involvement is a priority for you, outsourcing might not be the best option for you.

Cost breakdown: How much does it cost to outsource healthcare software development to US vs Eastern Europe?

In healthcare software development, the ultimate price depends on the project specifications and type of product. To better understand the distribution of costs in an average healthcare development project, let’s take a closer look at an example of a project estimate. Here you can see and compare the lower and upper price estimate with a project’s timeline, team structure, rates, and development hours. 

Project background: CRM software solution for a medical organization that includes a web and mobile application. 

Project duration: 6 months

Key features:

  • Dashboard for registration, adding users, and authorizations 
  • Questionnaire to add and manage information
  • Reports flow for analytics
  • Mobile application

In-house vs Outsourcing: the Final Choice

In the case above, it is evident how outsourcing is way more cost-efficient and flexible than hiring an in-house team. But there’s still a dilemma: which option to choose? To make it easier for you, let’s take a look at the total cost of hiring one developer in-house in the US vs outsourced in Ukraine. 

We compare salaries of developers with full workload for one month. It is important to note that hiring in-house means additional expenses like recruiting, office rent, equipment, taxes, insurance, etc. In the US, all of these expenses result in roughly 30% of an employee’s monthly salary. While outsourcing also has some extra costs, all of them are included in developer’s rate, so you won’t have to pay additional hidden costs. With that in mind, let’s compare the ultimate cost in the following table.

Finally, hiring an in-house developer in the US will cost you around $14,300, while hiring an offshore developer in Ukraine for the same workload will cost you $7840. With your Ukrainian team, there would be no recruitment costs, taxes, or office spending. Outsourcing healthcare software projects of the same scope to Ukrainian teams is almost twice as cheap as hiring a team in the US.

In-house vs Outsourcing: the Final Choice

Outsourcing can be a complex process with some risks. Here are some of the most common mistakes made when outsourcing software development. Some of those mistakes are only noticeable in the long run, impacting the result down the road, so prevention is the most important thing.

Choosing a vendor that’s either too big or too small for your company

The mistake: Companies with big and small teams might work in different tempos and use different approaches, so if your vendor is a huge corporation and you are a niche startup, some friction is possible during the execution process. 

How to prevent: Pick the vendor that is slightly larger than your business, this is accounting for a difference in the structure of the product and outsourcing companies. A software outsourcing company with about 100 people is still considered quite small and thus will match by a culture to 20-50 people product company.

Not specifying your needs and requirements

The mistake: You risk choosing a vendor that is not a great match for your strategic needs. The absence of early discussions around goals can result in a misunderstanding surrounding what is actually required on delivery. 

How to prevent: You must know why exactly you decided to outsource, and need to ensure that this specific vendor can provide you with all the outsourcing benefits you need. Have a list of what you need and on every sales call, make sure your chosen team can deliver. Discuss your needs in-detail, which is not just important in terms of the project, but also in terms of producing an approximate cost estimate.

Selecting an unsuitable pricing model

The mistake: A wrong billing arrangement results in having surprise charges later on, or very unpleasant conversations about the in-scope functionality, potentially ruining your relationship with your outsourced team.

How to prevent: Choose a fixed cost approach only if you can provide a fixed scope definition to your vendor. As a rule of thumb, if the project takes more than 4 developer months to complete, it’s almost a definitive candidate for T&M billing, unless of course, you have scrupulously prepared all the documentation, requirements, and technical specifications.

Failing to analyze what skills are required for the project

The mistake: You’ll leave gaps in the knowledge and skills of your global team, or have an excess of a certain specialist and knowledge.

How to prevent: Have a clear understanding of your needs and what your outsourcing partner has to provide. Just like if you were looking for an in-house developer, you would have a clear idea of the skills needed to complete the project. The difficulty lies in the fact that you have to have a map for the entire team. Don’t just focus on having developers — a successful project means that all roles are well covered. Identify those that are needed, take a look at what you already have and where the gaps are, working to properly fill those gaps.

Being unprepared for deviations from the plan

The mistake: Software development is a risky enterprise, so setting your expectation for immediate success is not the best approach. If you embark on this path, get yourself ready to face unexpected events. According to McKinsey, 17% of the IT projects go so badly that they threaten the existence of the entire company, with large software projects running on average 66% over budget and 33% over time while delivering 17% less value than predicted. 

How to prevent: Try to accept the fact that things can go wrong at some point and prepare accordingly: analyze the problem, change your plan with new information in mind, regroup to ensure this won’t happen again, and get back to normal execution. It will save you tons of time, money, and stem unnecessary stress if you follow this simple flow.

Not providing objective and candid feedback

The mistake: Honest feedback is one of the strongest pillars of your relationship with a vendor, so being unclear complicates the entire project. Everyone understands that it’s a necessity, but very few do it properly. 

How to prevent: The feedback must be constructive and objective, backed with facts and examples. Avoid generic comments like “You’re doing a bad job” or “Your code is horrible”. Instead try something like “From the data we have, the quality of the product is below our standards, in the last release there were 20 critical defects, which is 25% more than the previous one”. Critically, don’t forget to seek feedback about yourself!

How to structure your outsourcing development team?

Whether your idea can be brought to market through an application or a web platform, here are some basic tips that will help you navigate through the process of team building. This way, it will be easier to screen and hire developers as well as other members of an outsourced team. Here you can set up a realistic budget, as you can see approximately how many specialists you will need. Another important factor is development duration, which solely depends on the specifics of your project and your business needs.

For example, here are approximate team numbers needed to create a small MVP of a healthcare application.

Healthcare app development

How many developers do I need?

There are different types of mobile application development, but on average you will need around 1-3 developers. Other essential team members include a DevOps, QA, and UI\UX designer, a business analyst, and a project manager.

Here are approximate team numbers needed to create a small MVP of a healthcare platform.

Healthcare web platform

How many developers do I need?

There are different types of web application development, but on average you will need around 2-4 software developers. Other essential team members may include DevOps, QA, 1-2 UI\UX designers, a business analyst, and a project manager.

Key points to consider when choosing an outsourcing partner

Knowledge of the industry vertical

When it comes to software development in healthcare, a deep understanding of the vertical is crucial. This point is often dismissed by healthcare companies, but it can be a defining factor in the ultimate quality of the result, as well as the time and costs spent on your product. In fact, an organization can save up to 30% of development time due to the software vendor’s industry knowledge. Software companies who have expertise in the field have more insights into how to make the product better and are acquainted with common pitfalls of healthcare software development.

Compliance certifications

To make sure the product is going to successfully enter the market, it is imperative to pay attention to whether your software vendor is certified and compliant. Common industry certifications include the ISO 9001 quality management certification and ISO 13485 certification for medical device development. It is also critical to ensure compliance with major industry standards and protocols, like FHIR, HIPAA/HITRUST in the US, or GDPR in Europe.

Healthcare software development with Glorium

Founded in 2010 and based in New Jersey, Glorium Technologies is an ISO-9001 and ISO-13485 certified software development company with expertise in healthcare digital solutions.

The professionals at Glorium develop robust software for clients’ businesses or even augment their in-house team, delivering innovative solutions to their users. We have leveraged this expertise to serve more than 50 companies in the healthcare sector.

With 10+ years of experience and 150+ skilled developers, designers, QAs, PMs, and business analysts ready to dive into clients’ projects, we are ready to take on your healthcare project from scratch and deliver quality results and satisfaction across the board.

Reach out and get a free consultation!