Despite the potential impacts of the global Coronavirus pandemic and Omicron variant, 2022 is the year of digital prosperity. Businesses worldwide are getting more inclined towards technology investments, embracing new emerging technologies, and closing staff skills gaps via offshore software development. According to the Gartner latest forecast on Information Technology (IT) services spending, a significant growth of 5.1% from 2021 has been witnessed, with a forecast of a whopping $4.5 trillion in 2022 on the global IT investments.
With IT leading the charge for global digital transformation across all industries, an impressive surge can be witnessed in IT outsourcing contract investments across Asia, Europe, America, the Middle East and Africa with a significant growth. In a report, the Bureau of Labor Statistics estimated that by 2026, the entire IT workforce requirement will exceed 1.2 million. Investing in outsourced product development helps businesses to address an ever-increasing gap between technical talent supply and demand faster.
Hard-pressed to stay competitive in today’s marketplace, different companies across scales are making a stupendous shift towards offshore software development, which enables them in bolstering efficiency, productivity, and innovation while trimming their overall development costs. However, the decision of choosing offshore software development partner as your critical resource, is a daunting task for businesses due to various complexities and challenges like meeting release deadlines, communicating across time zones, language and cultural inadequacies, etc.
Nevertheless, we have compiled a comprehensive offshore software development pricing guide which shall provide you valuable insights into topics such as region-wise offshore software development cost, choosing between offshoring and nearshoring along with divulging intricate details on what change offshore teams would usher in 2022 and beyond!
There’s a sea of options available if you wish to opt for an offshore software development model, with a lot of variability in pricing. The world’s biggest tech hubs to hire experienced software developers are Asia, Eastern Europe, Africa; Central and Southern America. Offshore software development prices range from $30 to $50 in Central and Southern America; in Eastern Europe from $25-$50, and in Asia and Africa, offshore developers charge $18-$40.
Role of Cooperation Model in Influencing Offshore Software Development Rates
Before we dig deeper into region-specific or offshore development country-wise rates, let’s understand how the cooperation model chosen by your outsourcing software vendor directly influences the IT outsourcing prices. There are two basic cooperation models, the project outsourcing model, and the extended team model.
Project Outsourcing Model
In the project outsourcing model, the vendor charges a fixed fee for the project plus additional cost in case you decide to change some functionality midway into the software development project. The fixed price includes fees for the services rendered by project managers, business analysts, and solution architects.
Extended Team Model
Under the extended team model, you pay the developers’ fixed monthly salaries, rent for vendor’s office space, and infrastructural costs such as acquiring workstations for the developers, expenditure on HR management, etc.
Which model is better, Project Outsourcing Model or Extended Team Model?
In the project outsourcing model, the hourly offshore software development rates you’ll end up paying will be higher than the hourly development rates for the same services under the extended team model. Another pitfall in the project outsourcing model is that you seldom get to know how skilled the developers working on your project really are, as you mostly communicate with the vendors. Some vendors exploit this situation to increase their profit margins by hiring inexperienced junior developers whose salaries are at the lower end of the spectrum but ask the client to pay the rates of experienced software developers.
Bear in mind that the region-wise price ranges provided in this software development pricing guide are indicative only and don’t take into account the variations arising out of choosing different cooperation models. To find out the real outsourcing rates, you must contact the vendors directly.
Offshore Software Development Rates by Region
South Asia is the world’s most populous and densely populated geographical region, where one-fourth of all humanity lives. The region has had a long history of being under the British colonial rule, right from the 18th century till the late 1940s. Due to the prolonged British presence in the region, the English language developed as a medium of administrative control, creating an English-based subculture in South Asia. This is the main reason that South Asia, and in particular India, is one of the most preferred outsourcing destinations in the world.
“The Indian IT industry contributed around 16.29 billion to the country’s GDP in the very first quarter of FY2022. The industry is experiencing the fastest recoveries with a drastic change in its talent management strategy, projecting increased double-digit growth in hiring in 2022 and beyond.
India is the largest democracy in the world. According to the UN, India will surpass China as the most populous country of the world by 2028. Producing over 200,000 IT graduates each year, India boasts of the largest workforce of technology professionals hired by companies across the globe because of the very affordable software developer hourly rate India.
India has had a long affinity with outsourcing which started over two decades ago in the mid-1990s after the Indian government made information technology an educational priority. American universities too deserve their share of credit for contributing towards India’s success as an outsourcing destination by accepting Indian students under various exchange programs. Many such students returned to India after developing a deep understanding of the Western culture and business practices, which helped in gradually diminishing the cultural and communication barriers.
With the average software developer hourly rate India ranging from $19-$40, hiring offshore developers from India is indeed a cost-effective option. Apart from being an affordable offshore development country, India is also a politically stable and mature market in terms of business delivery.
Hourly Rates in Other South Asian Countries
- Bangladesh: $25 - $35
- Nepal: $25 - $30
- Pakistan: $25 - $35
- Sri Lanka: $25 - $35
East & Southeast Asia
In the past few years, the technology sector has experienced high economic growth in Southeast Asia. Although China continues to be the dominant economic force in the region, countries like Indonesia, Singapore, Malaysia, Vietnam, and Thailand have seen a prodigious rise in startups and young entrepreneurs. Each country of Southeast Asia offers its own unique advantages and disadvantages when it comes to software outsourcing.
Hourly Rates in East & South Asian Countries
- Cambodia: $4-$7
- Indonesia: $4-$8
- Thailand: $12 per hour
The main reason that draws companies towards outsourcing software development to China is the lower cost and an enormous workforce of IT professionals. Good experiences in India are driving cost-conscious CIOs to go far offshore, as prices of offshore software development rise in India and other Asian countries. The Communist regime of China supports the tech sector by offering economic incentives. The Chinese government has also been instrumental in establishing over 50 science and technology industry parks that are incubators for software developers.
Although China offers affordable average hourly offshore software development rates at $25-$40, there’s one big catch – China’s weak intellectual property (IP) protection. Despite tall claims by the Chinese government, a cloud of suspicion has always loomed large over cyber hacks and IP infringement.
There is also a wide cultural gap between China and Western nations like the United States and the United Kingdom and out of China’s 1.3 billion population, only around 10 million people speak the English language, posing a large communication barrier for most international employers.
Hourly Rates in Other Southeast Asian Countries
- Malaysia: $30 - $40
- Philippines: $4 - $5
- Vietnam: $4 - $3
There were over a million software developers in Eastern Europe, which makes the region one of the most sought after outsourcing destinations. Eastern Europe also has a high density of software developers – 1.3 developers for every 100 people. While Poland stands first in terms of number of developers, with many tech universities mushrooming in Eastern Europe, developers from countries like Russia, Ukraine, Belarus, and Romania are highly skilled in advanced programming.
Hourly Rates in Eastern Europe Countries
- Bulgaria: $25-$80
- Czech Republic: $25-$150
- Hungary: $30-$99
- Poland: $25-$100
- Romania: $20-$50
- Slovakia: $50 to $99
Although the average IT outsourcing prices in Eastern Europe range between $25 and $50 per hour, by opting for an out staffing model and hiring junior developers, you could drive down the offshore software development cost to $18 per hour. Apart from the cost, what drives businesses towards Eastern Europe for outsourcing software development is the proximity to Western Europe and close cultural affinity with the West.
Hourly Rates in Western Europe Countries
- Germany: $25-$99
- Belgium: $25-$99
- Ireland: $50-$149
Hourly Rates in Other Eastern European Countries
- Belarus: $25 - $80
- Czech Republic: $25 - $150
- Poland: $25 - $100
- Romania: $20 - $50
- Hungary: $30 - $99
- Slovakia: $50-$99
Latin America is the most preferred destination of US-based companies for outsourcing software development as real-time collaboration can be achieved due to full workday overlap. Moreover, there are a lot of cultural similarities between the two American continents including good English language skills and top universities with robust IT programs.
Another major advantage for US-based companies in outsourcing their software development projects to Latin America is the close travel proximity which enables them to have face-to-face meetings with their software development teams.
Although the hourly outsourcing rates are higher than regions such as Asia or Eastern Europe, outsourcing to Latin America still remains a bargain if compared to the high cost of hiring onshore software developers in the US mainland.
Hourly Rates in Latin American Countries
- Argentina: $55 - $60
- Brazil: $40 - $45
- Chile: $50 - $55
- Bolivia: $30 - $35
- Peru: $35 - $40
- Uruguay: $55 - $60
Africa seems to be emerging as a highly affordable destination to outsource software development. There are six countries in the African continent where you can outsource software development – Morocco, Egypt, Nigeria, Kenya, Tunisia, and South Africa.
In Morocco, Egypt, and Kenya, hourly outsourcing rates average around $20. However, offshore software development can cost a bit high at around $3-$7 per hour in Nigeria and South Africa. The reason for higher outsourcing software development costs in these two countries is that it is hard to find high-quality software developers at affordable prices, which can be attributed to an unfilled labor market scenario across the African continent.
The hourly offshore software development costs typically vary from $2-to $6 in Ethiopia companies whereas the software development price in Egypt is $4. For sure, outsourced product development would be cheaper to the North of the continent with prices similar to Asia-based companies. Hourly rate for IT services and offshore software development in South Africa can be as high as $50 – $100 per hour.
The young population of Africa, which is set to double by 2050, is driving demand for high-quality service sector jobs. Two major entrepreneurial hubs of Africa, namely Nairobi and Lagos, are poised to propagate firms offering high-quality offshore software development services.
While French companies mostly prefer to outsource their software development projects to Tunisia and Morocco, Egypt provides a vast talent pool of affordable Arabic-speaking software developers to the Mediterranean and North America. Although various African languages are spoken across the continent, French and English are the official languages in most African countries.
How to Choose the Right Offshore Software Development Company and Country?
Since saving money is top priority for any business when outsourcing software development, value for money is what you should primarily look to focus on. There’s no point in hiring a cheap offshore software development company who’s unable to deliver your desired end-product. You must do proper research and find yourself a reliable offshore team which can deliver a fabulous final product.
As previously discussed in the initial part of the blog, for developing a successful software product, you must choose the appropriate offshore cooperation model which works best in your case. It is worth visiting the vendor/country you’re considering before outsourcing your software development project. This way you would be able to make a true assessment of the work ethics, adeptness in technology, and the local culture of your prospective outsourcing destination.
The Benefits of Outsourced Product Development in India
Although this offshore software development pricing guide mentions a number of good offshore software development destinations located across the globe, there are myriad of reasons that make India the most preferred software outsourcing country.
India is the second-largest English-speaking country in the world with the English language being the country’s only lingua franca. This is a major reason most companies based out of the US and the UK prefer to outsource their software development projects to India.
Outsourcing software development to India means higher quality at lower costs, virtually no communication barriers and access to a humongous talent pool of software developers. Indeed, India’s share in the global IT services outsourcing is impressive and the Indian IT industry aims to touch $350 billion in revenue by 2025 from the present $170-180 billion.