Average Hourly Rates for Offshore Development Services: Software Development Costs Guide 2020

Average Hourly Rates for Offshore Development Services: Software Development Costs Guide 2020

Are you thinking about where to outsource software development? Below you’ll find a software development costs guide covering the rates most popular concerns about pricing, location, and their interrelation.

What’s the cost of software development in..?

The Most Cost-Effective Outsourcing Markets

PayScale and Clutch both take into account certain country-specific details such as their time zones, programming language demand and the average rates. The following list of countries that serve best as IT outsourcing providers is going to be mainly based on their research, compiled together in a concise form.

RegionCountriesRates
Western EuropeNetherlands, UK, Belgium, France, Norway$110 - $300
Eastern EuropeUkraine, Poland, Romania, Moldova, Estonia, Hungary$20 – $50
Central AsiaIndia, Philippines$15 - $25
East and South AsiaChina, Indonesia, Malaysia, Vietnam$30 - $100
North AmericaUSA, Canada$150
South AmericaMexico, Panama, Brazil, Argentina$20 - $ 55
AfricaMorocco, Kenya$25 - $ 50
AustraliaAustralia$100 - $ 180

 

Western Europe

Earlier we conducted a research on mobile app development cost and chose a few Western European countries to reveal average hourly rate for IT services. We got respondents from the Netherlands, UK, Belgium, France, and Norway. However, not all of them appeared to have an office in the above-mentioned countries. Despite their claims to be a local software development company, some of them still have ODC in India or Africa. That’s the reason why their rates seemed too low for Europe – only $15-30. With the rest of companies, we again got a surprising leap to much higher prices, varying from $110 and up to $300.

Eastern Europe

Although being close geographically, Western and Eastern Europe differ a lot in terms of software development rates. The region includes such countries as Ukraine, Poland, Romania, Moldova, Estonia, Hungary, etc. These developing economies have already got a high level of education and noticeable contributions to IT industry, but their salaries remain relatively low. If you outsource your project to a software development company it will cost you around $25-$45 per hour. If you hire a middle/senior dedicated developer, the average figure will be between $20 – $50 per hour, depending on the skill set of a particular offshore developer. Currently, Ukraine, Belarus, and Russia are the top outsourcing locations of this region, leaving Czech Republic, Poland, Hungary, Romania and Baltic countries far behind based on quality to price ratio.

Central Asia

Mostly when we talk about offshore outsourcing services in Central Asia, such countries as India, Philippines, and Indonesia come to our mind. This region used to be a heart of outsourcing for a long time. But in 2017 the situation changed drastically with Donald Trump threatening to the industry in the USA. Having lost their rich clients, local software developers decreased their price even more. The rates there are lower than $25 per hour; even more, some companies agree to work for $15. At first glance, cheap software development may look tempting, but in the long run such low rate for software development services result in low quality and the things standing behind it – underpaid programmers and lack of motivation. We also made a research of outsourcing rates in Southeast Asia.
Western vs. Eastern Europe Rates

East and South Asia

And here we have the similar situation to the one faced in Europe – a dramatic split of prices. China stands firmly on its feet and ramps up the potential, so software engineer’s hourly rate there makes $50-100. But for Shanghai, where an offshore developer earns up to $200 for an hour. The golden middle between Chinese ambitiousness and Indian cheapness can be found in Indonesia, Malaysia, and Vietnam. They offer their offshore software development services for $30-40 per hour.

Central vs. East Asia Rates

North America

You might think that California inflates prices because of its status, but the thing is that the average cost of software development in the rest of the states isn’t much lower – an experienced developer gets about $150 hourly, and in some cases the sum can rocket to $195, depending on the skills and languages. Canada stays on the US trail and sometimes even outruns it. However, the market here is flooded with the offshore development companies with actual addresses in Asia, so rates here can vary.

South America

It’s interesting to monitor offshore development situation in South America as this IT market is relatively new and rapidly growing. Large investments of the neighboring countries like USA and Canada created this pool of cheap software developers – demand creates the supply. Though the demand of a rich country creates the supply at the higher price. The average cost of software development in the region stays between $20-30, but one can notice that in 2020 the prices are gradually reaching $55. The proximity of Mexico, Panama, Brazil to the northern part of the continent makes this outsourcing destination attractive despite the rising prices. Hence, the cost of the offshore software development services is expected to go up in the future.

america rates

Africa

Newly discovered IT continent of Africa pleases businessmen with its affordable rates, but the local market still lacks experienced specialists due to its freshness. Offshore development would be cheaper to the north of the continent with the prices similar to Asian. Hourly rate for IT services in South Africa can be as high as $50 or even more – up to $100. Such fluctuation is caused by severe skill shortage the region is experiencing at the moment.

Australia

The same happens in Australia. That’s the common problem of all islands – on the one hand, isolation and remoteness protect the state from wars, but on the other hand, it prevents the country from cultural exchanges and cooperation with neighbor labor markets. The digital era made the latter criterion more vague as it allows more possibilities for remote work. If we take a look at the Australian Skilled Occupation List 2017-2018, we’ll see that the country lacks software engineers, web developers, QA engineers (software testers), and different types of programmers. So, it goes without saying that the local specialists are expensive, the minimal hourly rate is $100 with the highest cost rising beyond $180.

How Software Development Rates Are Affected By Certain Factors

Although IT outsourcing has become a regular practice across the globe, the connection between rate fluctuations and the respective location are still somewhat of a mystery to business owners. However, our experience in the industry along with statistical analysis has helped us determine certain factors which have an influence in the offshore development rates, such as:

  • the high living standards make America and Western Europe most expensive software outsourcing regions;
  • the cost rises as the tech stack’s complexity, depth and required skill level increase;
  • the bigger the company’s history and reputation are, the more they will charge;
  • a lower number of employees means fewer salaries to pay out;
  • teams of developers who work remotely either charge on a pay-per-hour model or set a fixed price depending on the project.

Ultimately, the developer’s hourly rate is going to depend on all the aforementioned factors as well as their experience, current market trends and the level of demand.

Read on to find out how the average rates measure up as per PayScale and the statistics of other local marketers.

Outsourcing Categories Based on Regions

It’s also important to outline different types of software outsourcing. Depending on the providers’ vicinity, we differentiate between:

Onshore Outsourcing

This variation involves outsourcing tasks to developers from the same country. Since it doesn’t require workers to be physically present in the company, this method is often favoured when time is of the essence or when there’s a request for rare skillsets.

Pros

  •  Efficient and easy communication
  •  Ability to make the personal acquaintance

Cons

  • Identical software development hourly rates

Nearshore Outsourcing

Involves employing developers from countries which are three time zones away at the most. As an example, a Ukrainian provider outsourcing work for a German company would fit these restrictions, since these two countries aren’t that far apart to belong to the third variety.

Pros

  •  Easy communication
  •  Time zones aren’t drastic enough to present a problem

Cons

  •  Chances for significantly cheaper rates are poor due to the countries’ close proximity

Offshore Outsourcing

Those that don’t fit the previous two fall into this category, which usually implies overseas or countries up to five time zones away. Besides requiring a far lower budget due to salary diversity, offshore outsourcing helps business owners get a useful insight into the preferences of consumers who belong to different cultures.

Pros

  • Noticeably smaller spending for clients

Cons

  • Varying timezones can hinder communication
  • Possible work culture and standart differences

The outsourcing provider of choice is going to vary depending on the long-term goals of the business owner. Each variety has its own perks – the first two are ideal for projects which often require physical interaction, while the third one is specialized for reduced costs.

How Software Development Rates Depend on Company Size and Location

Custom software development companies can be categorized according to their size and the prices that they charge. We researched such catalogs as Clutch, Goodfirms, SoftwareWorld, Thinkmobile and noticed a categorization that refers to consultant and development companies which are based in the USA and Europe, and they’re as follows:

Global Software Development Companies

These top-of-the-line consultancies are compromised of both developers and consultants in staff, with their numbers often belonging to the thousands and having development centers around the world.

According to Clutch, companies that position themselves having developers located in USA/Europe have high costs of the projects, which range between $500,000 and $100,000,000+, as well as the $250-$800 hourly rates, mean that their services are most commonly used by big corporate companies and enterprises like Lenovo, Skype, Mercedes-Benz, Thomas Cook, FlixBus, SAS.

If you will hire such a company with local development centers in Ukraine the rate can be lower overall and hit $35-50 per hour for a developer’s work.

They usually position themselves as companies that work with Fortune 500 companies and fast-growing organisations/startups.

global software development companies

However, large prices don’t necessarily reflect their results. This is mainly due to the “all-in” methods with which these companies approach their projects, wherein they develop the whole app at once instead of creating a solid foundation and building up from there, and we noticed that with Boeing.

Besides being highly volatile, this development method requires a lot of time and money while carrying a whole lot of risk due to the inability to take user feedback into account.

Large Software Development Consulting

A slight downgrade from the former, these companies provide a development with the average hourly rates between $150-$300. Their services are usually offered to fairly large businesses with sizable budgets. They usually have a wide range of technologies and developer on bench to start your project immediately. Developers can work on few projects simultaneously, but if you are billed hourly it won’t be a problem. Such companies will mostly have a focus priority in their services like ML, IoT, Cloud, e-Commerce. If you are located in United States or Western Europe and want to hire a local software development consultants, then you will likely pay these rates, but if you are take a look at offshore or nearshore software development firms, there rates will be lower and depending on country migh be from $20-70 per hour.

The workforce usually consists of anywhere from one hundred up to one thousand highly talented developers located in one country, but sometimes they will have development centers in different cities.

Small Software Development Company

These mid-tier companies are ideal for business owners looking to save money while getting a solid product from companies that have a very dedicated experience and expertise.

The development team’s size ranges between 10-100 whose average hourly compensations are around $125-$200 for USA and Western Europe located teams. Project’s size starts as low as $50,000 and goes up to $5,000,000.

Lower price does have a certain risk associated with it, especially if the consultancy doesn’t have a whole lot of experience behind it. This type of companies can provide lower prices because of the lower back-office spending, which may include PR, schools for developers, social projects and other. Business owners are highly encouraged to do a research before engaging with a mid-tier company, but they are usually able to provide a fairly good balance between price and quality.

Boutique Agencies

These tiny agencies are run by no more than 10 developers. Depending on their experience, they’re able to complete projects meant for local startups, small and medium-sized businesses, which are usually restricted to a single region, sometimes they complete projects for big companies or enterprises because they have a top experience in their industry or technology.

The hourly development rates can be anywhere between $75-$300 depending on a location of the agency and how they position themselves, while their projects’ base price usually starts at $10,000.

In Ukraine we have such companies that provide a very defined type of development – web development or design or Ruby-focused company.

Due to the limited amount of workers, these small companies focus all their efforts into a single project category – design, web apps, mobile games or others – as well as the specific language associated with it. In addition, they usually take on only one project at a time or a few small projects.

Before choosing a Boutique agency for your task do enough research in order to see whether they’ve worked on enough projects similar to yours in the past, and don’t be afraid to ask for concrete proof of the finished job or for references from other clients. If they show any signs of financial instability, steer clear – it’s not a rare case that these companies can disappear in the middle of the project. However, if you’re careful enough, they can be a very effective way to save money.

Choosing an Offshore Development Center Location

Every project is unique in its own way, and the aspects which it requires are going to determine the best course of action for you. From your language to the target market, there are a lot of tiny variables that come into play here. Since they aren’t always in plain view, you’ll usually have to do some digging.

Average Rates

Don’t settle for the first offshore development center that seems to fit your needs. While it’s important to be realistic as far as your demands and expectations are concerned, there’s almost always another company that will offer the same (or better) quality at a lower price. Compare each and every company and remember – there’s a good reason why almost 60% of business owners choose to outsource.

Security & Privacy

The biggest security threat of each business is an important information leak. These are commonly caused by misunderstandings between the businesses and certain rules set in place. Before settling for a provider, make sure that you completely understand every little detail.

Each center implements different security protocols, which are further impacted by the regulations of that specific country. This should be one of the major breaking points during your search – try to pick the most strict country/company that you possibly can.

Market Saturation

The higher the number of developers for a specific language, the more competitive the prices will be. Besides that, you won’t have to spend countless hours trying to find a perfect fit since there’s so many of them. Ideally, you should pick the location where the popularity of the language which you require is on the rise.

While this is not that difficult for some of the current booming technologies, the rarer your tech stack is the more you’ll have to pay. In cases like these, it’s quite beneficial to do a little bit of additional digging in order to find the most optimal solution.

Work Culture Similarities

In order to achieve a smooth workflow, the mentality of the developers has to be similar to yours. Due to the cultural differences, you might struggle in this area at the start. It’s good to trust your initial instincts since they’re most commonly going to be correct.

Other business owners who have experience in working with a certain country can be a good source of information. Take note of their thoughts – what they liked, what wasn’t as good and how your project would fit into the bigger picture. Furthermore, you can contact the businesses in that country and ask for some details that interest you – but after all, there’s no replacement for the first-hand experience.

Look Around For References

It’s always best to learn from the mistakes of others in order to know how to avoid them. If there is a company similar to yours that takes advantage of outsourcing, maybe they’re doing business with the same country that you’re considering. You can then modify their advice to best fit your overall budget, needs and deadlines.

If you want to set up an offshore/nearshore remote team contact us to check developers rates at Qubit Labs!

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Svitlana Rumyantseva
Project Manager
Svitlana is a PM with legal education and PhD degree in political science. She has experience in managing in-house and offshore/nearshore software development teams including freelancers. She is sure that smooth communication and motivation is the basis of efficient teamwork and successful projects. Svitlana is passionate about networking, achieving great results and acquiring new knowledge.