Average Hourly Rates for Offshore Developers: Software Development Pricing Guide 2017

Feb 27, 2017

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In today’s global economy, talent is the driving force. The team hired to expand or launch a business is the key to success, but it can be difficult to find the right people for the job. You need software engineers that are both engaged and qualified, which can lead to several issues; there could be a shortage of locally available software developers, or a necessity to follow specific budget plans. So many companies look to offshore outsourcing.

When considering outsourcing, the primary concern is whether or not your investments in the team will pay off, as well as what exactly those investments will be. We’ve put together this guide to help alleviate some of those concerns, and answer your questions regarding outsourced software development. It’ll help you learn about rates and trends in key regions, advise you on other factors to consider, and also offer some tips on how to choose an outsourcing vendor.

Keep in mind that the ranges provided are a rough guideline — as always, exceptions exist, and the offshore development marketplace is constantly changing!

An Overview of Key Outsourcing Countries and Rates

Eastern Europe

Eastern Europe is a region with a wide array of sought-after IT services. In countries such as Ukraine, Russia and Belarus, software developers boast high education, English skills, and advanced programming ability. Because of these factors, demand for engineers in the region continues to increase, with the average rate for software development being $25–35; this can extend to around $30–40 depending on the developer’s city, level of experience, and if there are complicated product requirements. Although these hourly rates will seem higher than other regions, it's important to remember that they are still much lower than in North America and Western Europe, where a software developer of similar calibre could cost you above $100 per hour to hire.

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Asia

Asia is a varied region, with many factors and countries to consider when thinking about offshore outsourcing. Due to a vast labour pool, India tends to be inexpensive, with rates averaging at $18–25 for IT services. This monetary saving comes at the cost of a lower project quality, however, outsourced software development can be impacted by adverse work conditions, correspondence can be difficult due to time zone disparity, and cultural differences could impede factors such as level of urgency regarding project issues. China similarly has a wide pool of talent available, but their hourly rates are on the increase for high quality projects — now similar to those in Italy, Spain, Portugal, Poland and the Czech Republic in Southern/Eastern Europe. Other countries in Asia such as Vietnam, Malaysia and Indonesia offer similar services, with pricing at around $30 per hour, increasing to a cost of around $40 per hour for top quality engineers.

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Latin America

Latin America has a growing industry of software development with numerous outsourcing countries available. The top locations are Argentina, Mexico and Brazil, but these countries can cost you hourly rates of $30–40, with some projects nearing $50 per hour for an experienced software developer. Latin American countries can be desirable due to their close proximity to North American clients, and this is especially the case for outsourcing to Puerto Rico; the country follows U.S. laws, making it a key location for work that needs to be fulfilled by American companies (such as projects relating to government departments). 

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Africa

Africa, at first glance, seems to be a rather cheap and growing destination for software development outsourcing. This is certainly the case for countries such as Egypt, Morocco and Kenya, where hourly rates can cost you around $20 or less. Countries like Nigeria and South Africa, however, are not very cheap — they can cost around $40–50, due to an unfilled labour market across the continent, and it can be hard to find software developers who provide high-quality services at an efficient cost.

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Here’s a useful report by Accelerance regarding 2017 outsourcing rates, for further reading.

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Things to Consider When Choosing an Outsourcing Country

Naturally, cost will always be a factor in your mind when outsourcing software development. Saving money on projects is a priority for any business, but other aspects must be remembered — a good vendor for your project criteria will consider a myriad of other important factors, such as the financial attractiveness of the project, the people skills/availability of the offshore software engineers, and the business environment in which they work. You should also take taxes, benefit policy and employment guidelines of the outsourcing country into account.

It's important to be aware of public holidays. For example, according to research by Mercer, India and Columbia enjoy 18 days of public holiday per year, with Mexico being on the lower end with only 7. Poland, Ukraine and Vietnam have 10, and Russia, Malaysia and Indonesia have 14 — it varies a lot, and it’s worth looking into when regarding outsourcing. Alongside public holidays, it’s also helpful to investigate the minimum annual leave of the country you are considering; China and the Phillipines have 5 paid vacation days, whereas India and Indonesia have 12.

Work conditions and rules are also highly relevant when choosing an offshore software development solution — some countries prohibit a 40-hour night-shift week, such as Malaysia and Slovakia. In other countries, including Egypt and the Philippines, it's prohibited for women to work full-time during the night. Sometimes specific work ruling can increase employee costs by amounts as high as 70–80% — in Brazil, taxes and employee benefits (e.g. a 30-day vacation and food vouchers) can make certain forays into externalizing more expensive than they first seem. 

How to Choose an Outsourcing Country and Vendor

Focus on Value Instead of Cost

It’s all well and good choosing the cheapest possible solution to your software development needs, but you might end up with an end-product that was not even worth the low price you paid for it. For most projects, it’s worth more in the long run to outsource to a more valuable team, in order to have a more financially appealing final product — saving you even more money in the long run.

A Creative Process, Not a Financial Transaction

One factor that is incredibly important to remember is that software development transcends the world of money. Obviously, money has to be a factor at all parts of the process — but that process is a creative one, and you should prioritize countries and vendors with a proven track record of effective, innovative work. 

Visit

For any project, it's worth visiting the country/vendor you are considering outsourcing to. This is especially the case if long-term cooperation is a possibility. By doing this, you can examine the work conditions of your potential future software developers, get a feel of the work ethic, and experience the culture your project will emerge from. Make the most of your trip — examine the local tech community, and meet with recruiters to see if the local developers meet your criteria.

You should visit the people there who are working in the software development industry. Are they hard-working? Are they enthusiastic? And most importantly, do they share your passion for building great products? They’ll be part of your team — not just a resource to utilize — so interact as you would when hiring locally. 

The Benefits of Outsourcing to Ukraine

At Daxx, we work with Ukrainian software developers, bringing their talent to other countries. Here are some reasons why you should consider Ukraine as your outsourcing destination.

The Largest Pool of Tech Specialists

Ukraine has a vast talent pool, with over 90,000 IT professionals, in which there are beyond 50,000 software professionals ready to undertake work on your company plans. This pool is as broad as it is deep — Ukraine holds the worldwide record of having the most C++ and Unity 3D developers, with the second highest number of Magento, JavaScript and Scala experts. Other common skills include PHP, front-end and .NET development, with experts also available in other aspects of software — including iOS and Android.

Education

What further sets Ukraine aside as a pinnacle of outsourced software development is the education of the professionals on offer. With over 36,000 tech graduates annually, the majority of Ukrainian software engineers are university educated, and possess English language skills. Ukraine is among leaders on the list of countries with the most engineering graduates, and places 11th as the country with the best software developers. Our database is ever-growing, and new experts in established and frontier fields are added daily.

Time Zones

An often overlooked benefit of outsourcing to Ukraine is the time zone it resides in — with only a 1–2 hour difference from Western Europe, efficient correspondence is very achievable. It’s even perfect for regions such as the East Coast of the U.S., as the morning there is Ukraine’s evening; a client can set a task, go to sleep, and wake up to it completed by a team of Ukrainian software professionals.

Low Corporate Tax/Expenses

Among the world’s technology capitals, Kyiv has great corporate tax rates, at only 2,500/50,000 ($/year), as opposed to cities such as Berlin (11,133/50,000 $/year) and New York (12,352/50,000 $/year). It’s interesting to look at the cost of living in Ukraine, too: a 1-bedroom apartment in the centre of Kyiv is around a $392.18 monthly rental, and outside the city center you can get one for around $216.66, with lunch in the city costing around $5–6. This is great for the software development staff you will be outsourcing to, allowing them to live well on their wage, positively impacting their work output. 

Ease of Doing Business

Jumping from rank 24 in 2016, to rank 20 in 2017, Ukraine is highly regarded as a great place to do business, with evidence that this is only growing each day. It’s a justified worry that enacting even simple business procedures can be difficult when corresponding overseas, but Ukraine has a proven record of being a great environment for visiting companies; the work ethic and culture suits those in Western countries, encouraging great projects to grow.

Fast Internet

Internet in Ukraine is rapid, yet cheap — an unlimited data connection via Cable/ADSL is around $3.23 per month, enabling your development team to provide quick updates, contact you efficiently, and also have additional benefits such as quick uploading to the project YouTube channel.

A Strong IT Community

Ukraine has an incredibly developed and vivid IT Community which boasts regular hackathons, international (and local) tech conferences, as well as networking events. Participating in these sessions are a wide variety of enthusiastic young people who are passionate about software development — eager to work in the world sphere, they are one huge benefit to Ukrainian outsourcing. This community has impacted outsourcing to Ukraine very positively — Ukrainian engineers will argue their case, providing a healthy work environment for everyone involved and eliminating a culture of saying “yes” unilaterally.

Growing Startup Environment

Ukraine has 2,000+ IT startups, and this number is growing every day. These include many famous companies, such as Petcube, iBlazr, Grammarly, Jooble, CleanMyMac, Mobalytics, and even Looksery — an acquisition by the app-giant Snapchat in 2015.

Moderate Rates for IT Services

Many people have a warped perception of the salary in Ukraine, often thinking of it as rather low. The demand for Ukrainian developers is high for the aforementioned reasons, and this grows the standard of living. In turn, the paycheck must rise — developer salaries don’t follow standard logic, as their skills are liquid on the global scale, regardless of their own location. Productivity is at an all-time high, but the good news for companies looking to outsource is that the salary level is still far below the Nordics, London, or Silicon Valley. This allows you to get world-leading software development for a lower cost than locally, while still tapping into a ground-breaking sphere of eager, creative engineers.

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