Over the years, offshore software development, or outsourcing, has gained momentum. More and more companies have mushroomed worldwide, with most of them promising to offer the best rate and service.
Whether you want to go with a company or an independent freelance offshore software developer, you should know what you are getting into.
If you are in the US, the average hourly rate stands at $60 per hour, whereas developers in Ukraine would charge $35 per hour. In India, you can opt for software development outsourcing at $18-40 per hour depending upon the experience.
Confusing, isn’t it?
Building an offshore team at a low-price sounds like a miracle. Having an offshore software development team would always be much cheaper than your own country. It’s the biggest reason that makes offshoring a considerable success.
Most Profitable Markets For Outsourcing – Costs In Details
Clutch and PayScale worked in tandem to build a list of countries holding great potential to be the top outsourcing service providers. Let’s watch!
1. Western Europe
2. Eastern Europe
3. Central Asia
4. East and South Asia
5. North America
6. South America
Western Europe and Outsourcing Costs
A mobile app development study cost in different parts of Western European nations highlighted the average hourly costs for services. Some respondent IT service professionals from Belgium, UK, Netherlands, Norway, and France disclosed that they charge around $15 to $37 per hour.
Reason – despite being service providers or companies, they have an offshore development team based in Asia, specifically in India, to accelerate the projects.
Those who do not outsource to other countries charge much higher – such as Switzerland. Software developers in Switzerland charge CHF 50.77, which is approximately $55 per hour. According to Clutch. Co, outsourcing costs may reach as high as $200 to $300 per hour.
Eastern Europe and Outsourcing Costs
Though geographically close, there is a significant difference in software development costs in Eastern and Western Europe. This particular region includes Ukraine, Romania, Poland, Hungary, Estonia, and other countries.
Although these are developing countries with growing economies having contributed mainly to software development, their wages remain relatively low compared to other nations. According to Youteam.io’s statistics, outsourcing projects to offshore software developers in any of these countries will roughly charge $30-$40 per hour.
Hiring dedicated software developers would cost you $20 to $50 hourly, depending on the team/individual’s skill set.
Recently, Russia, Ukraine, and Belarus are rated as the top locations for software outsourcing, outperforming Poland, the Czech Republic, Romania, Hungary, and even some of the Baltic countries, if you consider the value for dollars.
Asia, Including Southeast Asia Outsourcing Costs
Software development outsourcing to Asian countries like India, Vietnam, the Philippines, and China is not unheard of. Moreover, these countries offer additional discounts, reducing their prices to gain a competitive edge and attract more customers.
Asian countries offer $24 per hour rates; some may even go as low as $15 per hour. Initially, cheaper offshore software developers may seem alluring. However, eventually, much lower rates often result in poor quality. We underpay the main reason software developers lacking motivation.
A sizeable part of Asia is facing a substantial split in price, as seen in Europe. On average, software developers in Asian countries, such as India, earn roughly $8004, which is $4 per hour (INR589, 581).
However, in big cities, such as Shanghai, foreign developers could earn $210 hourly in China.
North America and Outsourcing Costs
An experienced American software developer can make up to $123,040 annually, which is $60 hourly, or even higher. If truth were told, the average cost of software development in different states isn’t much different. If it is a big project demanding strong skills and expertise in a development team, the total cost could reach as high as $200 an hour.
In Canada, the cost of software development is usually the same, or sometimes even more. However, as the Canadian market is flooded with foreign software development companies based in Asia, the price may vary.
South America is relatively new in software businesses. However, it has been growing exponentially due to significant investments from affluent neighboring countries such as Canada and the USA.
To attract investor’s attention, offshore software developers here may even lower development costs. The average price could go as low as $19 to $40. This average cost has gradually reached $55 in 2020. Brazil, Panama, and Mexico, and some parts of the northern continent are the most attractive destinations for outsourcing despite the price rise. Hence, the cost of offshore software development services is likely to be on the higher side.
Compared to Asia, Australia has a geographical advantage. As a result, Australia does not compete with other neighboring labor markets. Luckily, with digital technology in place, countries can work remotely, regardless of time zones.
Local experts believe that there is a steady demand for software professionals in Australia, and the outsourcing market is thriving. However, it could be expensive, as much as $100 per hour and reaching up to $180 hourly.
Factors Affecting the Rate of Offshore Software Development
Though IT outsourcing is a ubiquitous concept in this modern world, the why’s and how’s are still a mystery.
For example, what is the connection between location and rate – do you know?
1. Location: A Manpower Group survey conducted back in 2018 shows that more than 45% of employers face difficulties finding skilled applicants in IT and engineering, especially in Western Europe and the USA.
Due to this shortage, companies struggle to source experienced developers. When they finally find skilled and talented developers, the latter demands a higher price.
In the Tholons Top Outsourcing Destinations of 2017, 6 cities out of the top 10 are India and the Philippines.
Hiring engineers and software developers in Asia and Eastern Europe, contrarily, offers economical options. The substantial talent pool and low living costs ensure these companies hire the best engineers without paying from their own pockets.
2. Experience: Experience counts in every sphere of life. Developers with several years of relevant experience usually demand higher wages, while developers lacking that experience but having delivered a series of brilliant protects with a proper demonstration of technical ability also expect better pay.
3. Technology Stacks: Technology stacks are more complicated than ever. As most frameworks are not a part of the academic curriculum or formal education, it becomes difficult to understand. So, whenever you want an offshore development team with a specific niche or in-demand skills, it would cost a lot. Developers with multidisciplinary skills command higher wages relative to location.
For instance, hiring front-end developers to create a mobile application may cost less than hiring a developer with specific Artificial Intelligence or Machine Learning expertise.
4. Project Length: The project’s length or duration is usually more relevant to the outsourcing team than offshoring. An offshore development team remains permanent, with full-time employees and long-term goals. There is no scope of bargaining in the middle of the project for speedy delivery or price rise.
Why Is India The Star Destination of Software Development Outsourcing?
India is now the hub of offshore software developers. Globally, the Indian IT industry is known for its competitive pricing and high-quality services.
In 2018, as per OurStockPick, India’s highest market share in the global services sourcing industry stood at 56%. This has been the highest in the world.
By 2025, the IT industry of India aims to achieve USD 350 Billion in total revenue. Moreover, if you need to hire dedicated developers, India is still the leading name as the base of software developers with the fastest growing network of experienced and talented engineers worldwide.
These statistics are explicit enough to show you why India has become the most preferred choice for outsourcing. To elaborate further, here’s an explanation:
1. Talent Pool: India has an enormous pool of talent, which is instrumental. It has allowed the country to rule the outsourcing front. India adds approximately 3.1 million students each year. India is home to the youngest cohort in software development in the world. Over 95% of software developers are in the age group of 18-35 years. India employs around 200,000 software graduates in the IT industry each year.
2. No Communication Gap: The world is fast becoming an interconnected marketplace globally where beliefs and business ideas are shared. To ensure effective communication, English is preferred. India has over 125 million English-speaking populaces, making it the second-largest country that speaks English worldwide, second to the USA. Moreover, India is the third-ranking Asian country on English proficiency according to the EF English Proficiency Index. Communication is the key in offshore software development, and India dissolves that language barrier efficiently.
3. Low Cost: The fact is the cost of software development in India is lower than in other countries in the world. This has been the sole reason for outsourcing to India until a couple of years back. However, today the ratio of price-quality is essential. Standard rates for software development in India start from $18 per hour for junior developers.
If you are looking for dedicated software developers, look for a top-rated software outsourcing company. You may also want to consider some references and testimonials from past clients to help you make an informed decision. Even if you choose to work with a company based out of India, you may still need to do a lot of research to find the right fit for your team and your business vision.