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Global Offshore Software Development Pricing — An Overview

Achieving digital transformation and business development is impossible without fresh talent. However, a global talent crunch scenario in the field of software development has made it challenging for both startups and large enterprises to hire skilled programmers. This is coupled with stringent immigration policies in many countries, high cost of hiring local talent, and political instability — all of which makes it more difficult for tech companies to have the right people for software development.

To address these challenges and hire the best talent, outsourcing seems to be a more viable option for companies today. There are several reasons why outsourcing software development has become the latest trend among tech companies –

· Huge skill gap in the field of IT can be efficiently met by outsourcing programmers from countries with high availability

· Lack of knowledge and skills in Science, Technology, Engineering, and Mathematics makes outsourcing imperative

· Ability to leverage the expertise of highly qualified, experienced and fresh talent from countries with high levels of skill

· Save high costs by outsourcing software development to low-cost countries

However, before you outsource software development to a professional, it is crucial to ensure how cost-efficient the process is. Therefore, we have provided an overview of software development outsourcing pricing prevalent in some of the top countries.

Factors Affecting Software Development Outsourcing Cost

The pricing for software development outsourcing can significantly vary from one country to another. Therefore, it is crucial to understand what factors influence the cost of outsourcing software development.

1. Location: The outsourcing destination plays an integral role in influencing the cost of software development. For example, India is one of the low-cost countries to outsource IT services, whereas Western Europe and America are the most expensive.

2. Experience: A certified and seasoned outsourcing software developer will cost more than fresh talent.

3. Freelancer vs. an Outsourcing Company: This is pretty obvious. Hiring a freelancer for software development is more cost-effective than having a professional company work on the project. However, the latter is more trustworthy and safe to work with as compared to a freelancer.

4. Technical Stack: The cost may also depend on the software developer’s portfolio, skills, programming languages, or technical resources used. Rarer the tech stack used by the programmer, the more expensive the project cost will be.

5. Short-term vs. Long-term Outsourcing: Since most offshore software development companies would want a steady flow of work, they tend to have special pricing for long-term outsourcing projects. Additionally, long-term plans typically have a lower hourly rate.

6. Cooperation Model: Typically, the price agreement can be of two types. You can hire an outsourcing company with a dedicated team and a fixed project cost. You can also hire developers on an hourly basis.

Taking these factors into consideration, the focus is on the average low or the average high cost of software development in a country and not any specific price tag. To make a strategic investment decision regarding outsourcing software development, it is crucial to understand various hourly rates prevalent in different countries.

Average Cost of Software Development — Analyzing the Top Outsourcing Options

Before understanding the average cost of outsourcing software developers, it is important to compare based on different options available — onshore, nearshore, and offshore.

· Onshore Outsourcing: In this form of outsourcing practice, the developers are hired locally. This enables businesses to save resources and time as compared to hiring an in-house team or having experts with rare skills working on projects one-time. Typically, on-shore locations include the USA and Western European countries, including Germany, France, the UK, and the Nordics.

The hourly rate of a software developer is much higher onshore because of the high average wage and standard of living in these countries. Typically, the cost may vary between $50 and $200 per hour or even more. For good-quality software development services, the average IT cost would be $100 per hour. In addition to high cost, a lack of talent pool is one of the pitfalls of outsourcing on-shore.

However, the advantage is no cultural or language barrier, same time zones, better communication, and reliability.

· Nearshore Outsourcing: In this type of outsourcing, the software developer is located at a close time zone from the business, typically a neighboring country. For example, if a Germany-based tech company wants to outsource software development to Ukraine, it would be nearshore development. Despite that the developers belong to a different country, they are located within 2–3 time zones closer to the client and will be considered nearshore.

The hourly rate of a software developer in nearshore destinations may range between $20 and $50 per hour. However, the pricing may vary significantly depending on the country. For instance, Poland is a costlier location for software development than other Post-Soviet nations.

· Offshore Outsourcing: Offshore software development outsourcing to Asian countries such as India, Pakistan, China, and the Philippines is more popular among tech companies due to several advantages they offer. They ensure high-quality software development solutions and lower costs as compared to onshore and nearshore outsourcing locations. On the other hand, the lack of efficient communication or language & cultural barriers is the biggest disadvantages here.

Lesser-known offshore outsourcing destinations are Africa, Kenya, Nigeria, and South Africa. They are less competitive, and therefore, the cost of outsourcing IT services can be much lower. However, they are still considered inefficient as compared to popular outsourcing destinations such as India.

Unlike onshore and nearshore outsourcing rates, offshore pricing is much lower. The hourly rate may vary from $15 to $30, with average pricing of $25 per hour. But tech companies should be careful in hiring offshore software developers because lower prices may also come with poor quality. Top-notch destinations like India promise lower hourly prices but without compromising with the quality of software developed.

Top Software Development Outsourcing Destinations and Average Hourly Cost

#1: Ukraine

If you are considering high-quality software development services, outsourcing to Ukraine is one of the most viable options. Their level of skill is high, especially with regard to IT services. As such, the prices are typically higher. High availability of trained IT professionals is another reason why software development costs are higher in Ukraine. Custom software development in Ukraine may cost somewhere between $35 and $60 per hour.

#2: India

India is one of the top destinations to outsource software development, primarily because of two reasons — exceptionally low cost of labor and huge availability of experienced developers. According to reports, there are around 3 million software developers in India. Additionally, the quality of knowledge and experience of these developers is high, making India a preferred outsourcing destination for various premier IT companies.

Despite the high quality of IT services India promises, the hourly rates for developers are exceptionally lower — $15 to $48 only. This will vary depending on the programming language specialization, i.e., the hourly rate for PHP developers is lower than Java or C#.NET. Here, it is important to determine whether you want to work with a dedicated developer or choose hourly rate packages. Often, having a full-time software development company is considered cheaper than hiring on the basis of hourly rates.

#3: Poland

Tech companies in Germany, Switzerland, Austria, and the UK prefer outsourcing to Poland, not because of cost-efficiency but to meet the challenge of poor communication with software developers. Therefore, it is often referred to as the ideal labor market for western countries. The hourly rate for custom software development in Poland starts from $50 to $80.

#4: The United States of America (USA)

America is the hub of Information Technology and Computer Science, with some of the major IT companies located here. You can expect a remarkably high quality of software development services, but the rates are also comparatively higher — software developers in the USA charge a premium hourly rate of around $100 to $250.

Conclusion

The pricing for software development is different from one country to another. However, to be successful, it is important to focus more on the value of the project than mere cost. Therefore, outsource to experienced and expert custom software development companies that ensure high-quality software development at most competitive prices.

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Sarrah Pitaliya

Sarrah Pitaliya

Digital Marketing Head at radixweb.com. Creating valuable insights that would help brands and businesses to enhance their sales growth.