The #1 inhibitor to business growth is all about Labor costs and the shortage of software developer talent in the U.S. That’s why software development outsourcing is more popular than ever. Before you jump into any decisions, let’s keep up to date on the latest global software development outsourcing rates in the world’s hottest regions.
Outsourcing your company’s software development has various advantages. You gain access to talent pools that would otherwise be unreachable. You also can increase and decrease the size of the team as needed. Other benefits include easy access to ever-changing technology and a shorter time to market. However, the significant advantage is the decrease in software development costs while preserving software quality and adhering to best practices.
How are software development outsourcing rates quoted?
Comparing one market or provider to another, buyers tend to compare a blended hourly rate of 6 – 8 person scrum team and assume full-time employment (FTE) of that team for 12 months or more. Naturally, actual rates will vary by skill level, technical specialty, and the engagement’s term and commitment.
Actual engagements can be structured one of three ways, ordered from most desirable to least.
Option 1: Dedicated Team
This is where the partner commits individuals to you full time, and you pay for them per month. Developers are part of your team, will sit together, and will integrate with your development activities. You will build maximum rapport with your team, and, importantly, they will feel like they are part of something bigger.
Option 2: Staff Augmentation
Staff augmentation is a relationship in that you hire engineers to augment activities domestically and pay them hourly. This model can be valuable when you need resources temporarily. Still, you’ll need to carefully track and approve hours and work harder to keep the engineers engaged and on task, as they will not feel the connection to your team.
Option 3: Fixed Bid
It occurs when you deliver the partner a detailed project spec, and they commit to completing it for a fixed price. This setup can work with smaller and highly specified projects (e.g., developing a mobile app or MVP). However, it is not well suited to agile development processes since larger projects tend to be defined as they progress.
Global software development outsourcing rates in 2022
Rates for software development outsourcing vary greatly depending on geography, talent level, expertise, the same technology stack used, and the necessary commitment length.
Our research looks at software outsourcing rates in a variety of partner regions. It will assist you in weighing the benefits and drawbacks of location – nearshore versus offshore – which is a significant driver of outsourcing rates:
- Nearshore partners share the same time zone (for a US company, including Canada and South America). This enables fluid engagement outside regular business hours and reduces travel time and jetlag for on-site meetings.
- Offshore teams in Asia, Europe, or Latin America often offer the most considerable cost reductions. Still, they may also present obstacles, such as cultural differences and the need to handle a more significant time zone difference.
Global software outsourcing rates by developer’s level and position
Based on more than 7,000 software companies around the world, the rates as reported below. Here is how the rates differ depending on the level and position of developers.
Global software outsourcing rates: FAQ
1. What is blended rate in software industry?
According to the concept, your service provider must bid on the project based on your specifications, project scope, workload, and degree of coverage (scope vs time). Your in-house project management team is in charge of determining the scope of activities and managing the project. The better your project requirements are defined, the less time will be wasted on rework and the sooner the project will be delivered to you. This will result in substantial cost savings.
On the other hand, if you, as a client, fail to offer a clear explanation of needs, be prepared to pay an additional fee at the time of delivery. As a result, it is critical that you constantly evaluate and validate the project scope and regulate it in terms of consistency, clear communication with your provider’s team, escalation methods, etc.
You can establish an upper limit or cap on costs to prevent uncontrolled cost escalation. Such constraints always aid in keeping your project within budget.
2. How much does it cost to outsource software development?
The cost of custom software development can vary dramatically and is determined by a variety of factors, including where you outsource to, whether you have your in-house team and only need to outsource a portion of the project or want to delegate the entire development process. Last but not least, the seniority level of the developers involved in your project.
The bottom line
The software business is a highly competitive industry that affects every area – it will only expand and diversify with each passing year.
As you can see, the average cost of software development in offshore nations is much cheaper than in the United States or Western Europe. A senior software engineer in another country may be paid less per hour than a junior or middle-level developer in the United States. Outsourcing is the most cost-effective option since living expenditures in offshore nations are cheaper than in the United States or Western Europe.
You can communicate with software outsourcing companies all over the world. Before you outsource, you must conduct the necessary research and background checks. When selecting a software outsourcing business for the engagement, it is critical to evaluate specialty, track record, recruiting procedures, communication skills, and other factors and cost-benefit.
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