Global Software Outsourcing Rates Report

You get access to talent pools otherwise inaccessible. You also enjoy the benefits of flexibility of increasing and decreasing the team size as and when required. Easy access to ever-evolving technology and reduction in time-to-market are some other benefits. The most significant advantage, however, is the reduction in the cost of software development while maintaining the quality of software and adherence to the best practices.

Categorization Based On Location

Onshore

Onshore is when you outsource software development to a provider in your own country.

Nearshore

When you outsource software development to a provider in a neighboring country or a region a short distance away, it is called nearshore. 

Offshore

Partnering with an software development outsourcing company many time zones away is called offshore outsourcing. For instance, if you are based in the USA, and outsourcing to a software development company based in Asia or Eastern Europe, such as China or India, or Ukraine.

It is important to note that, onshore, nearshore, and offshore not only depend on the location of the software developer you outsource but your location as well. 

Cost Saving

Nearshore and Offshore will offer a cost advantage over onshore in most instances. If you are based in the USA, offshore to China or India or nearshore to Mexico will cost you a fraction of the cost to an onshore software development team. Even onshore is likely to cost you less as compared to an in-house team.

You eliminate the overhead costs associated with hiring an employee, training, retention, benefits, and taxes.

Total Cost Of Engagement(TCE)

It is important to factor in the other costs associated with the hourly rate you pay. Management costs, travel costs or other costs must be added to the TCE. The total cost of engagement is a cost factor different from the hourly rate. For an in-house team, it includes healthcare, retirement plans, benefits, vacation, and taxes besides the hourly rate.

Focus On Value

The primary motive might be saving costs, but you must focus on the value you get by outsourcing. It is important to research in-depth how outsourcing to a software development provider will contribute to value in terms of innovation, technology, time-saving, adherence to standards, etc.

Hiring the cheapest company can prove to be a costly mistake in the end. You may feel like saving money in the beginning, but if the team does not have the necessary experience, they produce bad quality costs, delay the projects, etc., your cost will go up both in terms of money and time.

3 Factors Determine 

Location

There are four major global regions:

Asia

IT and other services plays a major role in the economies of Asian countries such as India and China. These regions have a highly skilled workforce available that can work at a fraction of the cost of hiring a similar workforce in the western part of the world. Other smaller Asian countries such as the Philippines, Vietnam, or Indonesia also have a similarly talented workforce available as well. The talent pool from this region is well-reputed at a low cost. Vietnam is now recognized as an emerging software country.

Eastern Europe

Eastern European countries such as Ukraine, Belarus, Romania, Poland, etc. give importance to their educational programs in science and engineering. There are two different segments of the Eastern European market. Cost-wise, the segment with the countries Ukraine, Belarus, and Armenia are advantageous.

The other segment with the countries such as Romania, Balkans, Hungary, Poland, and Bulgaria is a little bit more expensive. Besides the high technical abilities, the talent pool of Eastern Europe has the advantage of better English language skills as compared to Asian workforce.

Latin America

Latin American countries such as Mexico, Peru, Columbia, and Argentina also offer a huge market. Latin American Universities yield highly skilled programmers with excellent English language skills. Travel proximities to the North American clients are a distinct advantage the Latin American programmers have over Asian and Eastern European developers. Costs in Latin America are higher than in Asia, but they still cost only a fraction of hiring an in-house team.

North America

North America is the most prominent IT hub in the world. North American Universities produce talented software developers every year. Though the cost of North American developers is higher than the rest of the world, they have certain distinct advantages. Travel proximity, familiarity with U.S. laws, English language skills, and cultural match create demand for developers from this region.

Engagement

Longer engagement with bigger teams increases the overall cost. However, this type of engagement tends to offer higher long-term value. Companies tend to provide better rates to clients who need large teams of developers for long periods of time. For instance, if you need 20-30 developers for a period of two to three years, you will be offered a lower rate in comparison to the requirement of 5-10 developers for a year.

Companies bear the risk of putting developers on the bench with short-term and smaller engagements. Long-term commitments will cost you less, but you must investigate the company thoroughly before you outsource the software development to it. You should include a termination period of one to two months in your agreement to avoid over-commitment.

Experience

Rates vary significantly with the technical expertise and experience levels. You should try to narrow down your search towards the specialists in your industry. It helps in improving productivity and communication. Companies with proven track records and years of experience tend to offer better rates and know how to work with their clients.

Quotation Rates

Full-Time Equivalent(FTE)

Full-Time Equivalent is an estimate of the hourly rate of the developers as an annual salary. If your engagement lasts for three quarters, you will pay 0.75 FTE.

Blended Hourly Rate(BHR)

Blended hourly rate comprises the average rate you pay for all team members. Make sure that you get a fair deal while you get a quote in terms of a blended hourly rate. You won’t like to pay the junior developers higher than the rate while saving on the charges you pay to the senior developers.

Risk Factor Surcharges

Companies may add a risk factor cost towards the risk of failure. If they are working with you for the first time or the software engagement proposed by you is not their specialty, they may quote rates with risk factor surcharges added to them.

To Sum Up

You can connect with software companies across the globe. You must perform the proper investigation and background checks. It is crucial to keep specialization, track record, hiring practices, communication skills, etc. besides the cost-benefit while considering the company for the engagement.