Software Development Rates By Country - Offshore Services Cost & Guideline 2020 / 2021

If you’re thinking about where to outsource software development, you’ve come to the right place. In the below section, you’ll find information about software development costs guidelines covering the most common concerns regarding third-party involvement - price, location, and correlation.

How much does software development cost in ...?

The most profitable outsourcing market

PayScale and Clutch worked together and came up with the following list of countries that hold great potential for being top IT outsourcing providers. Let’s have a look!

Western Europe Outsourcing Costs

A study of mobile application development costs in several Western European countries has revealed the average hourly rates for IT services. Some of the respondents who are IT service providers from the Netherlands, UK, Belgium, France, and Norway said that their average rates are somewhere around $15 to $37 per hour per developer. The reason is that despite them being software outsourcing companies themselves, they still have ODC teams in India/Asia to help them accelerate their technological projects.

And those who are not outsourcing to another country offer a much higher price, for example in Switzerland, software engineers command an average of CHF 50.77 (or approx. $55) per hour, as a result, the outsourcing price that software firms charge may reach up to $200 - $300 hourly as per Clutch.co.

Eastern Europe

Although these two regions are geographically close, Western and, Eastern Europe differ greatly in the software development costs. This region includes countries like Ukraine, Poland, Romania, Estonia, Hungary, etc.  

Although these developing economies have already had high education levels and contributed significantly to the IT industry, their IT wages are still relatively low compared to other developed nations. If you outsource your project to a software development company, per Youteam.io's statistics, you will pay roughly $30 - $40 per hour. Hiring a dedicated mid/senior software developer, you will have to pay an average between $20 to $50 per hour, depending on a particular developer's skill set. 

Recently, Ukraine, Belarus, and Russia are considered the top software outsourcing locations in the Eastern Europe region, outperforming the Czech Republic, Poland, Hungary, Romania, and the Baltic countries in terms of value for money.

Asia and Southeast Asia IT services costs

When we talk about outsourcing services to Asia, countries such as India, China, Vietnam, and the Philippines pop up in our minds, this region has been the center of outsourcing activity for a long time. Moreover, the local offshore software developers usually offer more discounts and decrease their prices to gain competitive advantages now that they need to attract their prosperous customers. 

Rates could be less than $24 an hour; some companies even agree to work for $15. At first glance, cheap software development looks attractive. Still, in the long run, such low rates of software development services lead to poor quality, and the main reason behind it is underpaid programmers who lack motivation. 

Part of the Asian region is facing the same substantial price split situation as in Europe. The average annual wage for software developers, in India for example, is on average ₹589,581 (roughly USD 8004, or $4/hour). But in a big city like Shanghai, China, a foreign developer can make up to $210 per hour. 

The gap between China and India can be filled by other Southeast Asian countries like Vietnam, Indonesia, Malaysia, etc. (The Philippines is exceptional since it has long been an outsourcing destination like and China and India).

New land like Vietnam holds great potential due to its affordability and high-quality services. You can search for top software companies in Vietnam and find out more about their IT services. The price offered in this region often ranges from $25 to $45 depending on the project's size, the skill set required, and the company’s reputation.

North America

In the USA, you might think that states like California often offer exorbitant prices for software development. Still, the truth is, the average software development costs in other states aren’t lower. An experienced software developer can make around $123,040 annually, or $60 per hour and even higher. And in some cases, if it’s a large scale project which demands strong expertise in a software team with extensive experience, the total cost can reach a peak of $200 per hour. The price is also worth the skill and programming languages of individual developers. 

In Canada, the price range is comparatively the same and sometimes even beyond. However, because Canada's market is filled with foreign development companies that are located in Asia, the price can change.

South America

The IT industry in South America is fairly new, but the growth is surprisingly fast due to the large investments from their affluent neighbor countries like the US and Canada. To catch the investors' eyes, IT services providers in this area lower their development costs. The average price is $19 - $40. The average cost is slowly reaching $55 this year.  Mexico, Panama, and Brazil, and the northern part of the continent have become an attractive outsourcing destination despite rising prices. Therefore, the cost of overseas software development services is expected to increase in the future.

Australia

Compared to its neighboring countries in Asia, Australia has a slight disadvantage in geography, preventing it from cooperating with their neighboring labor markets. Fortunately, modern digital technology allows the country to be available working remotely.

If we look at Australia's 2017-2018 Skilled Occupation List, we will see the lack of software engineers, web developers, QA engineers, and similar programmers. So, apparently, the local experts' costs are expensive; the minimum hourly price is $100, with the highest cost over $180.

What impacts the software development rate?

Although IT outsourcing is no longer an unfamiliar norm, the connection between rate and location remains a mystery to business leaders. With our extensive experience in the IT industry, here are some factors which have a significant impact on the outsourcing rates:

• High living standards making the US and European market the most expensive outsourcing regions
• Costs increase as the technological stack has become more complex, depth, and required certain skills.
• Reputation: sometimes, the price reflects one company history, achievements, and reputation in the industry
• The number of employees, the more employees one company has, the more they need to pay
• Remote developer teams charge on an hourly rate model or set a fixed price depending on the project’s essence.

In simpler words, developers’ hourly rate depends on all of the aforementioned factors, their experience, current market trends, and the level of demand.

Let’s explore each category to gain a deep understanding of how wages change from one place to another.

Region

It is crucial to define each type of outsourcing based on its location and name. This plays an important role in finding suitable software development firms. We have previously talked about this topic. Offshore Development Centers (ODC) is an umbrella term for hiring professionals who locate in another country to work on IT projects. ODC does not mean onshore outsourcing. Let’s explore the term:

Onshore Outsourcing

This variation includes all outsourcing of tasks to developers from the same country as you. Since it does not require employees to be present in the company, this approach is often preferred when critical or unusual skills are required.

Advantages

• Easy communication
• Expand the network in your country

Disadvantages

• Same software development rate per hour

Nearshore Outsourcing

Nearshore outsourcing is when you employ developers from the three farthest time zone countries. For example, a Japanese supplier outsourcing to a Vietnamese company would fit into this category. The two countries are not so far apart as to fall into the third category.

Advantages

•  Easy communication since there will be a chance that the two countries share similar languages
•  The time zone is not drastic enough to cause any problem.

Disadvantages

•  The chances of significantly cheaper wages are meager according to the proximity of the countries.

Offshore Outsourcing

Anything that does not fit the previous two falls into this category, which generally involves overseas or countries up to five time zones away. In addition to the much lower budget requirements due to varying salaries, outsourcing helps business owners gain useful insight into consumers' preferences from different cultures.

Advantage

• Significantly lower spending for customers
• Expanding knowledge since you have a chance to learn from a team with a different background than you

Disadvantages

• Time zone changes can interfere with the communication flow.
• Working culture differences can cause a false impression. 

The choice of hiring a service provider will vary based on the long-term goals of the business owner. Each category has its own advantages: the first two are ideal for projects that often require physical interaction, while the third type is advantages for reducing costs.

The business’s size and location

Software and application development companies can be classified based on their size and the prices they charge. 

From the research that we have done (most of our resources are from Clutch, SoftwareWorld, and Thinkmobile) and found out a categorization refers to software development and consultancy services in the USA and European countries as below:

Global software development companies

These global software organizations offer both developers and consultants staff; they often have thousands of employees with many development centers worldwide. According to Clutch, companies who are willing to hire the US/ European developers whose average salary are $250 - $850 per hour are usually big companies, and enterprises like Google, Skype, Lenovo, Thomas Cook, SAS, Mercedes-Benz since these companies' projects' costs often vary from $500,000 to $100,000,000+. This information is explicit enough for us to evaluate the market landscape in these countries and the living standard. 

If you’re thinking about hiring such companies, but your budget is fairly tight, you might want to consider development centers in Ukraine since their rate can be lower. And if you don’t mind the geographical factor, you might want to give a thought to outsourcing your IT team in Asia, especially in the new IT market in Southeast Asia.

But we want you to keep in mind that high prices do not necessarily equal high-quality results. 

This is mainly due to the "all-in" approaches these companies take in their project where they develop a complete application at once rather than building a solid foundation and building off of it.

In addition to volatility, this development approach takes a lot of time and money while bringing many risks because of its inability to take user feedback into account.

Large software development companies.

Large software development companies are slightly downgraded than before; these companies offer development with average hourly rates ranging from $150 to $300. Typically, their services are offered to large companies on a budget. 

These companies usually have various technologies and developers ready to get your project started right away. Developers can work on multiple projects simultaneously, but if you pay them by the hour, it shouldn't be a problem. 

These companies will primarily have a priority to focus on, like ML, IoT, Cloud, and e-Commerce. If you are in the US or Western Europe and want to hire a local software engineer, you will likely have to pay these prices, but if you consider offshore or nearshore engineers, the costs will be much cheaper.

The workforce is typically made up of 100 to 1,000 talented developers in a country but will sometimes have development centers in different cities.

Small-medium software development company

These companies scale are ideal for businesses that want to save money while also getting well-founded products from companies with extensive knowledge and experience.

The development team size ranges from 10 to 100 people, with an average hourly wage of around $120 to $200 for each team. The investment costs that these companies work for usually from $50,000 to $5,000,000.

A lower price has a certain associated risk, especially if the consultant does not have much experience. This type of business can offer lower prices due to lower back-office spending, including public relations budget, development schools, social projects, and more. Business owners are encouraged to do some research before partnering with a small-scale company. 

Don’t let the size mislead you; small companies often can provide a pretty good balance of price and quality due to its small team, which leads them to develop solid skills for one specific field.

Boutique Agencies

These boutique agencies are even smaller than the one we’ve just mentioned above. No more than 10 developers run them. Depending on their experience, they can complete projects for local startups, SME, which is often limited to a single domain. 

But they are sometimes hired to complete projects for companies or large companies because they have first-rate experience in the industry or technology. 

Hourly developer fees can range from $70- $290 depending on the agency’s location and position in the market. The project in which they involve base price typically starts at $10,000.

We have many companies that offer decent development types in Vietnam, be it software development or web design, or any digital transformation projects.

Due to the limited number of developers, these boutique agencies focus all their efforts on a single project portfolio like design, web application, mobile game, or others, not to mention the specific language. Therefore, they can be redoutable competitors for mid-sized technological companies. 

Also, they typically only do one project at a time or several small projects.

Before choosing a boutique agency for your project, like always: do your research to see if they have worked on enough similar projects to yours in the past, and feel free to ask for specific evidence about their completed work or referrals from others to clients. If they have signs of financial instability, stay away - it's not uncommon for these companies to disappear mid-project. However, if you are careful enough, they can be one of your efficient approaches to save money.

Tips for choosing an offshore development center

Each project is in a class by itself, and the right technical skill it requires will determine the best course of action for you. From languages to the target market, there are many small variables at play here. Since they are not always clearly visible, you will usually have to mine.

Average rates

Don't just go with the first foreign development center that seems right for your needs. While it is essential to be realistic about your project’s requirements and expectations, there is always another company that will offer the same or even better quality at a lower price. Keep researching and comparing every company with the potential and remember: there is a valid reason why nearly 60% of business owners choose to outsource (especially those big names like Apple, Slack, Whatsapp, etc.)

Privacy and cybersecurity

The biggest threat to any company’s security is the leakage of critical information. Often these are caused by misunderstandings between all parties and certain rules. Before looking for a provider, make sure you understand the risk of cybersecurity fully.

Each outsourcing firm implements different security protocols, which will be affected by that particular country's regulations. This should be one of the main priorities in your search - try to choose the strictest country or company you can.

Market saturation

The more developers for a particular language, the more competitive the price. Plus, you won't have to spend heaps of time trying to figure out a perfect fit for your company, as there are so many of them. With recommendation, you should choose the location where you see a significant increase in the language you need.

While this isn't such a difficult task for today's booming tech, the rarer your tech arsenal, the more you'll have to pay. In cases like these, do some more research to find the best solution.

The similarity in work culture

To achieve an effortless smooth workflow, the developer's mindset, and yours should be similar. Because of cultural differences, you may have difficulties in the first place. We rarely mention this on our website, but trust your guts because they are often the most correct. 

Other businesses that have experience working with a particular country can be a good source of information. Take their thoughts into consideration - what they liked, what the opportunities, what the obstacles might be, and how your project will fit into the bigger picture. 

You can also contact companies in that country and request some details that interest you, but after all, there is no substitute for hands-on experience. 

Don’t let the language barrier be the cause!

Look for reference

It is better to learn from other people's mistakes, so you know how to avoid them yourself. If there is a company that’s in a similar field as yours has already taken advantage of outsourcing, high chances are they implemented their digital transformation project in the same country that you are considering. You can ask for their advice and modify it to better suit your overall budget, expectations, requirements, and deadlines.

TP&P Technology is proud to be the top software outsourcing company in Vietnam. Besides providing software development, we’re also a registered salesforce implementation and consulting partner in Vietnam.

Contact us now to know more about your software outsourcing solutions!