What’s the Real Cost of Offshore Software Development?
Offshoring has been around for a while now. Western countries' rising labour costs are a big reason more businesses are turning to outsourced help. With COVID's unpredictable challenges, companies are seeing more of offshoring's upsides and its potential. So, with business environments changing, organisations need to evolve quickly. Offshore software development helps make that happen.
By tapping skilled programmers in emerging tech hotspots at a fraction of the cost, businesses in developed markets reap the benefits through offshore partnerships. But hidden fees can quickly sink those savings.
How can you get an accurate read on the real cost of offshore software development? This post breaks down the key factors that impact offshore software costs so you can make smart decisions.
Calculating Offshore Development Costs
According to Deloitte, 70% of companies see cost reduction as the main reason to go offshore. Estimating costs can be tricky without an expert partner, but is usually a fraction of local hiring. Keep these points in mind when budgeting for offshore developers:
- Having a clear project scope helps providers estimate delivery.
- Defining the full scope aids accurate cost estimates.
- Estimates aren't final costs.
- The right developers influence costs.
- Additional costs vary.
- Technical support, bug fixing, documentation, and ownership transition add costs.
As you can see, calculating the cost of offshore software development is complex.
What Affects Offshore Software Development Prices?
- Project size: Larger projects with more features need bigger teams, increasing costs. Costs always scale with project scope.
- Technical considerations: Choices like architecture, design, tools, integrations, etc. affect costs.
- Time to market: Faster timelines increase costs. Deadlines impact planning, R&D, and development. Short timeframes need more engineers working quickly at higher costs.
- Team skills: More experienced, skilled teams cost more, especially for complex projects. Senior developers add to the price tag.
- Additional costs: Providers may charge for maintenance, support, licenses, infrastructure, modifications, etc. Remember to clarify any extra costs upfront.
The Cost of Local Software Development
Many of our partners are from Western Europe, the US, Australia, and New Zealand. The reason? High talent shortages and costs - not just salaries but office space too.
Let's look at typical salaries in those areas:
Western Europe
Europe often offshores to Eastern Europe and Asia for talent and lower costs. 60% of Western Europe jobs are already outsourced to some degree, and more offshoring is planned as talent is scarce locally. Rates range from €133 to over €267 per hour.
Australia
Australia's offshore market is growing but faces hurdles like high rates (€89-133/hour), remote location, and time zones.
United States
The US leads digital competitiveness but has an expensive market. Rates range from €57.5-115/hour.
The Cost of Offshore Software Development in Different Locations?
Eastern Europe
Eastern Europe has emerged as a top destination for software development outsourcing. Rates in this region typically range from €22-40 per hour, depending on the skills and experience level of the developers. This includes countries like Ukraine, Poland, Romania, Moldova, Estonia, and Hungary.
Asia
Asian countries offer some of the lowest rates globally, ranging from €17.8-40 per hour. Major outsourcing hubs are India, China, Vietnam, Malaysia, the Philippines, and Bangladesh.
India
India provides highly cost-effective development talent. Tech hubs like Bangalore have world-class infrastructure and skilled developers available at favourable rates. The talent pool is deep thanks to strong engineering and IT education.
Latin America
Latin America provides competitive talent at €26.7-49 per hour. Key countries are Mexico, Brazil, Argentina, and Colombia. Nearshore advantages include geographic proximity, cultural affinity, and overlap with North American time zones.
Africa
Africa is an emerging outsourcing destination with rates from €18-43.5 per hour. Well-known hubs are Kenya, Morocco, Egypt, and Nigeria. The region is known for young, motivated developers and entrepreneurs seeking new opportunities.
Offshoring software development can deliver significant cost savings compared to hiring locally, while still maintaining high-quality output. However, careful planning and thorough vetting of potential providers is key to maximising the value and benefits.
Organisations should evaluate factors like technical competencies, English proficiency, cultural fit, infrastructure, and processes when selecting an offshore development partner. With the right provider in place, outsourcing can stretch budgets further and access specialised skills unavailable locally.
Highlights and Conclusions
Remember that the hourly rates above estimate experienced offshore developers' pay. Actual costs vary based on:
- Niche skills needed
- Developer seniority and experience
- Past project complexity
- Full-time vs contract hiring
- World-class talent demands more
Consider those rates a starting point for your search. The specifics of your project will shift the numbers. If you want an offshore team that will propel your business forward, get in touch. Our experts at The Scalers can help find that sweet spot between top-notch skills and budget realities.
Here's the bottom line - offshore almost always beats local hiring on price. But choose your partner carefully for the best outcome!
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