Software Outsourcing Rates in 2023
Software development is expensive. But did you know that you can save thousands of dollars when you outsource to a team of foreign programmers? We have modern technology to thank for outsourcing.
Outsourcing provides software development companies access to international talent pools. But, software development services‘ average software outsourcing rates vary across different countries. Also, product development costs vary based on different factors. These factors include the tech stack, the developer seniority, and the recruiting process.
Reasons Companies Outsource
There are many reasons why a company outsources its software development needs. Other than low offshore software development rates, here are a few of the most common ones:
- Cost-controlling and cost-cutting
- Gaining access to more advanced skills and knowledge
- Letting internal resources flow
- Getting more done in less time on tasks that take a lot of time
Outsourcing software development has many benefits. One significant benefit is the use of cutting-edge technologies and practices. Outsourcing expedites time-to-market. It also gives software development companies the expertise of high-quality development teams.
One of the most appealing benefits is the money saved by paying less for much better software. ISG says that there are almost 3,000 IT outsourcing contracts in the world. These contracts are worth more than $5 million per year.
Factors Affecting Software Development Cost
Before we get into the software development rates, let’s take a pause.
You need to know the things that affect the costs of software development first. The expenses vary not only for the development company you choose but also for each project.
We listed the factors below:
Type of Software Development
This should be the first thing you need to consider. Figure out what kind of software project you want to do.
It could be any of the following:
- Application Modernization
Do you want to upgrade or modernize your existing application? Software updates allow you to join the digital transformation race.
- Software Integration
Need help integrating your existing software with other software? To do this, you need help in making new code to help with integration.
Looking to start a new product from scratch but wary of the expenses? An outsourced team can help you lessen the costs.
Size of Development
The next thing that will give you a better idea of the cost to make software is the size of the project. To figure out how big something is, you must first create a list of all the requirements in the software scope.
Based on the type of software and the timeline, you can divide the project into the following groups.
- Small Size
You consider a development “small” when you have a specific need but do not need custom coding. It can be building software integration or upgrading software features.
An MVP development project in which you start from scratch is a mid-sized development. Building an essential software version without any extra functions is also mid-sized.
The size of the development is “large” when it needs a much bigger team, more dedication, and more time. You may need a database, many pages, an easy-to-use UI/UX design, or even a multi-party app for a large development.
- Enterprise Size
Enterprise-sized projects are larger projects that have been in the works for years. Building enterprise software takes a much bigger team. This is because the team needs to do more to ensure security, smooth operation, and other features. Enterprise applications handle various processes and systems and would be much more expensive.
The size of the team also affects the offshore software development rate. In the first stages, software development may only need a small team. You will only need two developers, a quality assurance engineer, and a UX/UI designer. But as the requirements and size of the project grow, so does the team size. This means that you will need more money to pay more team members.
Time Required & Complexity Of Software
The complexity of the software and the time it takes to build also affect how much it costs to make software.
If the software development takes longer, the more expensive it gets. The costs also go up as the project gets more complicated.
How To Choose an IT Outsourcing Country?
Deciding which is the best offshore software development country? You need to consider several important factors.
Compare Average IT Service Prices
The main reason for outsourcing software development in IT is to save money. 59% of businesses say the prices help them decide where to outsource their product.
Another thing that worries business owners is finding qualified employees in their area. The first step in choosing where to outsource IT is to compare average IT service prices. You should also take note of the software development hourly rates.
Check the IT Outsourcing Company Performance
The most important thing to look at is the experience of the development team. Look at their previous projects to see if they can deliver your needs. Check the reviews of their former clients.
Take the Time Difference Into Account
People think that having developers in the same time zone speeds up development. But this is not always true. For example, using a “follow-the-sun” model could cut the time it takes to get a product to market.
Follow-the-sun model is a form of global cooperation used by outsourcing companies. In this model, the development team works on projects around the clock. They pass on the project between offices in different time zones. This model helps the company to be more responsive and to reduce delays. IT outsourcing teams from all over the world use Follow-the-Sun.
Determine If You Fit the Culture
There are many ways to find out if the IT outsourcing team you want to hire will fit in with your company’s culture. Look for companies that have used IT outsourcing services in a particular country. Reach out to them and see what they have to say. You can also talk to other companies in the country where you want to do business. Cultural compatibility is vital because it makes for a good work environment. In the end, if your cultures are compatible, the results of the project will be exceptional.
Software Outsourcing Rates by Country
Software development is a growing industry. And it’s growing fast! In fact, there were 23 million software developers in 2018. By 2024, that number is likely to rise to 28.7 million. From these numbers, we can say that the software development industry has nowhere to go but up.
As the software industry grows, software outsourcing is gaining traction, too. This increasing popularity has a direct effect on the average software development rates.
We looked into various studies to compare offshore software development rates per country.
Continue reading to find out!
Average Rates of Offshore Developers In Eastern Europe
Eastern Europe offshore software development rates: $30-$65
Countries with offshore developers:
Austria, Ukraine, Hungary, Bulgaria, Poland, Romania, Belarus, Czech Republic, Slovakia
Pros and Cons of Outsourcing in Eastern Europe
Pros And Cons Of Outsourcing in Eastern Europe
Professionals With the Right Skills at a Price You Can Afford
Developers in India or the Philippines charge less per hour than those in Eastern Europe. But, low prices have nothing to do with how good the service is.
Time Zones That Work for You
When a company’s main office is in the U.S. and an offshore team is in Ukraine, time may overlap. You can talk to your outsourced team without the need to adjust due to the time difference.
A Large Pool of Possible Employees
Eastern Europeans are very interested in information technology. Getting a degree in information technology is becoming popular every year.
There Are a Lot of Low-Context Cultures
Eastern European countries are easier to understand. Their cultures are pretty much the same as those of North America and Western Europe. They take part in conversations and don’t agree with everything. Eastern Europeans don’t repeat other people’s bad ideas. They also give their opinion on a wide range of subjects.
Taxation That Is Hard To Understand
The way taxes are set up in a few Eastern European sourcing countries can be hard to understand for U.S. clients. Double-check the legal name of the person or company you send money. If you look at Ukraine, you will see that it has one of the lowest tax rates in Europe.
There Is a Lack of Communication
Most of the time, you can only talk to a project manager at a local software development company. You don’t have direct access to the development team.
You must talk about how you want to communicate with team members. This way, everyone knows how, when, and how often they will meet.
There Is a Lack of Being Able To Change
Changes in project goals can happen at any point in the SDLC. These changes are not always possible to predict in time. It can be difficult to make the necessary changes to the stack or add more people to the team.
Average Rates of Offshore Developers in Asia
Asia offshore software development rates: $20-$45
Countries with offshore developers: China, India, Philippines, Bangladesh, Vietnam, Pakistan, Nepal, Malaysia, Indonesia
Asia is one of the best places in the world to outsource work. Asian developers can build your software at a low price. If you’re looking for a software development partner, Asia is a good choice. The hourly rate for an Asian junior software engineer is around $20. For senior developers hourly rate is approximately $45.
India and China are important places in Asia for software development. Each country has close to 5 million software engineers. You can outsource your software development in Indonesia, the Philippines, Vietnam, and Pakistan. These countries are all growing markets for outsourcing services.
Pros and Cons of Outsourcing in Asia
China’s size and lower labor costs than India make it a good place for IT outsourcing. Still, the language barriers pose a major problem. There are also concerns about intellectual property. These concerns keep US companies from using it as a top-tier offshoring location.
Access to China’s Huge Market
China is between Asia and Europe. It is a very active participant in world trade. Outsourcing your software development in China opens up profitable doors for you.
Compared to other low-cost offshoring destinations, IT salaries in China are very competitive. Expect to pay more for those developers who have English-language skills.
Increased Spending on Infrastructure
China invests in the improvements of its road, rail, and air travel. It has also increased spending on its telecommunications infrastructure. You can be sure that your outsourced team in China can meet your software development needs.
Intellectual Property Is a Source of Worry
Experts say copyright protections in China are not as strong as in the US. Illegal copies of IT software are being made in China. This costs US companies billions of dollars in sales.
US companies don’t feel safe outsourcing their app development and maintenance in China.
China’s government spends money on English-language programs. But it’s still hard for US IT firms to work with Chinese IT firms. This is because they don’t speak English well enough.
Competition Within the Country
In China, people don’t think that IT outsourcing is good for the country as a whole as much as they do in India, for example. Don’t expect to get unbiased advice about software development in other countries.
Filipinos know the American language, and culture is a big plus. The Philippines have been outsourcing IT for a long time. They also have the infrastructure to support it. The Philippines is a good place for business process outsourcing (BPO). You can outsource application development and maintenance, and lower-level help desk operations there. The country has political instability and social unrest. This makes some US companies think twice about sending their IT work there.
Excellent Language Skills
Many people in the Philippines speak English. Their accents are more like American English than in other Asian offshoring locations.
The salaries of people who work in IT outsourcing and BPO are among the lowest in the world.
Compatible Between Different Cultures
Everyone in the Philippines grows up watching Nickelodeon and ESPN. So, they are very familiar with American culture.
People from other countries describe the Philippines as “liberal.” This means that the Filipino people are aware of their civil and political rights.
Fears of Crime and Terrorism
Corruption continues to hurt the country’s growth. Social unrest and insurgency continue to cause political instability. Some high-level officials worry about a kidnapping. No one wants to go there as something terrible might happen.
Analysts say that this new place for outsourcing has low software development costs. But they warn about the lack of language skills. Vietnam also lacks government support for outsourcing.
The labor cost is about one-third of what it is in other Asian Countries.
A Pool of Young and Educated Talent
About two-thirds of the population is under 30 years old. The education from kindergarten through high school is top-notch.
Inadequate Vendor Selection
There are fewer vendors to choose from, and big ones are the only captives that have done well. Experts also found that many people didn’t know about essential business practices. They also lack knowledge of operating standards.
A Lack of Direction From the Government
Vietnam doesn’t have a concierge service to help you. Their government agencies won’t be able to help you find and file for real estate. You won’t have help to put you in touch with HR groups and telecom vendors.
Average Rates of Offshore Developers in Latin America
Latin America offshore software development rates: $50-$70
Countries: Colombia, Mexico, Peru, Brazil, Chile, Argentina
Latin American nations are suitable options for software companies needing nearshore software development. This is due to their geographic closeness and overlap in work hours. A junior offshore software developer from Latin America charges about $50 per hour.
Senior offshore software developers can make up to $70 per hour. The rates would be lower if the software developer came from a staff augmentation vendor. For technology companies in the US, Latin America is a popular place to develop software.
US companies outsource software development because rates are much lower in other countries. This lowers the cost of making new products. The slight time difference is another reason they outsource in Latin America. Also, Latin American countries are closer to American clients’ geography. This makes Puerto Rico, Brazil, Argentina, and Mexico great places to outsource.
Pros and Cons of Outsourcing in Latin America
Knowledge and Experience
Mexico and Colombia are garnering increasing recognition for improving education. Colombia has the second-most college graduates aged 25-34 in Latin America. Mexico’s 120 technical universities graduate many engineers each year. These countries focus on engineering, IT, and programming training. This focus has made software outsourcing workers knowledgeable and skilled.
Since 2005, governments and private companies have invested money in Latin America. It has led to a significant improvement in the infrastructure of the area. Some of these changes are:
- Better ways to talk to each other
- Building blocks for the internet
- Easy access to the internet
Most developers in Latin America can speak both English and Spanish. This lets them serve a broader range of clients. Most people in Argentina, Costa Rica, and Chile know how to speak English well. The English Proficiency Index (EPI) shows that they are getting better at English. This trend will help English-speaking businesses that want to outsource their work.
More Expensive Services
Compared to Asia, the outsourcing rates in Latin America are pretty high. Compare the rates of software development outsourcing in different parts of the world:
- Latin America costs $21 to $93
- South Asia costs $19 to $75
- Southeast Asia costs $14 to $61
You need to think about how this solution will affect your budget in the long run and decide if it meets your needs.
Problems With Data Security
There is always some risk when sending sensitive information outside your organization. When you use a third-party company, the risk goes up even more. When you outsource, the company you hire could work for your competitors.
It is more likely that some hackers will steal or leak your data. Latin American countries generally don’t follow international policies that protect personal information. But now, Argentina, Brazil, and Mexico have made privacy policies that align with the GDPR.
Uncertainty About the Quality of Work
There may be problems with the quality of the work. This would need a back-and-forth with the outsourcing company. Latin American service providers might not be as strict about ensuring their processes. This is because they are always the same, which can affect the quality of their work.
Also, some developers may need constant updates and reminders. You can tell the developers from the start what your goal is and when you need it.
Average Rates of Offshore Developers in Africa
Africa offshore software development rates: $25-$45
Countries: Kenya, Morocco, Egypt, South Africa, Nigeria
Africa is new to the market for outsourcing software work. Africa’s IT job market is a long way from being a hotspot for outsourcing development. Experts say that African countries are the most promising in the IT industry. The average offshore development rate in Morocco, Egypt, and Kenya are around $25 to $45.
Nigeria and South Africa have higher rates for offshore software development. This is because their job markets aren’t as full. This makes it hard to find qualified offshore developers at fair prices. Tunisia and Morocco are popular places for French-speaking countries. The rest of the continent has a large pool of people who speak Arabic and English.
Pros and Cons of Outsourcing in Africa
Young And Skilled Talent
Africa’s long-term economic growth depends on how many young people live there. Africa is full of youthful energy because more than 70% of its people are under 30 years old.
On the diverse African continent, people speak many different languages. A lot of Africans speak English, French, and Portuguese well.
Infrastructure on the African continent is getting better all the time. This makes it a good place for offshore outsourcing.
Close to European Countries
Africa and Europe are at similar latitudes. The time zones in their countries are identical. For example, South Africa and the United Kingdom (U.K.) have different times by two hours. Senegal and France are also two hours apart in time.
The Opportunity for Impact Sourcing
Impact sourcing is an ethical way for businesses to outsource work. It involves hiring people from countries with poor economies. Impact sourcing gives them the training they need to get out of poverty. Offshore software development companies that want to outsource can do so.
The cost of living in Africa is so low. You can find cheap human capital in all its countries for any outsourcing service.
- Not enough IT professionals
- Technology Stack
- Not enough laws about privacy and security
Different Software Outsourcing Models and How They Help Save Costs
Software outsourcing will become widespread in the post-normal era. Software development outsourcing can sustain company growth in times of crisis.
Let’s dig deeper into the various types of outsourcing. Knowing the various types will help you choose. We advise that you choose the most suited to address your company’s needs.
Onshore Outsourcing Model
The onshore outsourcing model involves engaging with a third-party service provider. The service provider will supply in-house operations.
Usually, the onshore model is best for time-sensitive and non-stop jobs or projects. Additionally, it is ideal for projects requiring tight coordination with internal stakeholders. This model entails external or outsourced service providers situated in the same region.
When you choose the onshore outsourcing model, you will have access to an expert team in your time zone. You can reach them when it’s convenient for you. Also, they speak the same language as you, so there will be no language barrier. They are familiar with your culture too.
With these advantages, using this model is sure to reduce operation costs.
Nearshore Outsourcing Model
This model is the practice of outsourcing to a firm in a neighboring country that shares borders. Nearshore outsourcing is more cost-effective than offshore outsourcing. This is because service providers are from neighboring countries. It reduces communication barriers, travel expenses, and other expenditures.
Offshore Outsourcing Model
Hiring offshore developers entail exporting IT-related jobs to a foreign company. This model saves time and money. Cost reduction is among the most prevalent reasons businesses outsource. Enjoy reduced labor and production expenses when you outsource to a foreign country.
Multi-Shore Outsourcing Model
Large-scale businesses and corporations use a multi-shore outsourcing model. They contract many firms to provide offshore services based on their existing locations. Also, they can use both offshore and nearshore organizations to do software projects. The administration and teamwork must be well managed. This is because each team member may use various project management systems.
Additionally, productive cooperation requires the establishment of efficient communication networks. With this outsourcing model, you can enjoy both offshore and nearshore models advantages.
SOFTWARE OUTSOURCING RATES FAQs
What Are the Common Challenges of Outsourcing Software Development? How Should I Address Them?
Below are some of the most common challenges companies encounter when outsourcing software:
- Loopholes in contract
- Imprecise stakeholders
- Understanding concerns
- Code quality challenges
To address these challenges, managing your projects before outsourcing is essential. Other than that, it would be best not to take the outsourcing procedure lightly. Pay per your requirements, and clear your communications. Document all the processes throughout your project.
What Should I Look for in a Software Outsourcing Partner?
Below are the most important evaluation factors to look for in your software outsourcing partner:
- Investigate the provider’s history
- Test capacities
- Consider their company’s culture
- Check procedures and tools
- Determine quality criteria
- Observe their method of communicating
- Examine legal and security considerations
- Assess the business carefully
What Should I Look for in Offshore Software Developers?
You should consider looking for offshore development developers with competent and impressive portfolios of past works. Consider firms that have completed projects in several sectors. Thus, you can be sure they offer the essential expertise. They can create, complete, and deliver successful projects with low risks.
Their rate is also a good factor to look for. The average hourly rate for junior specialists is between $15 and $45. It can go as high as $50 to $100 for senior engineers. Costs vary a lot depending on which country you choose to do the software outsourcing.
BIT Studios Is Your Long-Term Software Outsourcing Partner
We offer the UX-first rapid prototyping approach in software development. This approach lets you experience the prototype first before we begin the development.
Our developers are experts at using a diverse technical stack for our global clients.
At BIT Studios, you can hire either a solo developer or an entire team with our team augmentation assistance for your business. Our team members can work only on your project. This results in a greater awareness of your project’s core. This ensures a more cost-effective operation. We can use any tech stack and programming language depending on your needs. Do you have questions about the software outsourcing rates at BIT Studios? Feel free to contact us anytime!
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