The Cost of Offshore Software Development: How Much and Where?


Software Development is Not Cheap

From simple tweaks for a program to meet a minor goal (decrease bugs, increase responsiveness), to creating an app for both Android and iOS, some companies are considering offshore software development significantly.

Factors like what types of apps, features, user experience (UX) and user interface (UI), and budget, timeline, and manpower are all important to dictate the cost of developing software. Generally, the more time spent in developing the costlier it is.

Basic software development, which possesses around a basic feature set, a no-frills design, limited data processing capability, and has no third-party integration, usually takes 1-2 months, and costs around $3,000 to $20,000.

Intermediately complex software development, which includes features like integrations, real-time secure chatting, payment solutions, on top of a responsive UX/UI, as well as adapting to devices, often take more than 2-6 months, and costs around $25,000 to $60,000.

Finally, a highly complex program, requiring the development of a full set of features like data privacy, third-party integrations, media content, synchronization, and has support systems in place, takes more than 6 months and would be more than $70,000 to $100,000.

As such, it is necessary to consider other options when managing the budget for software development. Some project managers in a bid to cut costs would check how software outsourcing such development activities to different regions, usually outside their home countries. This is known as offshore software development.

One way to check how software development costs can be brought down is to check the hourly salaries of developers in the world’s regions, from compensation software company Payscale.

North American junior developers usually earn $95-$100 per hour, while its middle developers earn around $120-$127 per hour. Its senior developers make $140-148 per hour.

Western European junior developers typically earn around $35-$45 hourly, while its middle developers make around $45-$55 per hour. Senior developers can make $50-$65 hourly.

South American junior developers can make around $25-$35 hourly, while its middle developers can earn $35-$45. Senior developers can bring in $35-$50 per hour.

Eastern European junior developers can earn $25-$35 per hour, while its middle developers can take home around $30-$40. Its senior developers make around $40-$50 per hour. 

Finally, Asian junior developers consistently make less money than their regional peers: junior developers earn only $20-$30 per hour, while middle developers earn slightly more, around $25-$35. Incidentally, are also seen at average to earn the same as middle developers, also $25-$35 per hour.

Why The Huge Gap Between North American and Asian Developers? 

That’s because North America-especially through American and Canadian companies dominates the global market share for the software market, contributing 20% in 2020. Both countries have a steady stream of talented analysts, engineers, and scientists, and strong government and private sector support.

Europe, the second leading software market, is also buoyed by investments from conglomerates, as well as strong support from the European Union, which just launched the European Cloud Initiative, increasing collaboration between its millions of researchers.

What about Asia? Although one can reasonably assume that it’s because Asian countries have a relatively low cost of living (besides outliers like Japan and Singapore), it’s also because the industry is an emerging part of many of these countries’ economic outlook, especially in Southeast Asia, where the internet economy reached the $100-billion milestone in 2019, as well as increasing investments in technology, fintech, healthcare, and education.

When it comes to the offshore developer’s hourly rate in Asia, they usually start from $18 to as high as $60, examples of which are:

Malaysia – $25 to $30

Sri Lanka – $22 to $25

Philippines – $22 to $50

Nepal – $22 to $25

Indonesia – $21 to $24

China – $20 to $30, up to $60

Bangladesh – $20 to $25

India – $18 to $25, up to $50

Pakistan – $18 to $20

Thailand – $18 to $23

Vietnam – $18 to $22, up to $40

Hourly rates however are only one part of the total picture, when it comes to offshore software development. Various countries have different advantages on why they provide a competitive outsourcing experience. Some of the top outsourcing destinations recently include the following:

India – The second-largest English-speaking country in the world, India is also one of the leading outsourcing destinations in the world. Software development on things like artificial intelligence, blockchain, and machine learning, as well as more than two million STEM graduates per year help, drive the outsourcing growth in the country.

China – Although their English skills are not on par with regional competitor India, the government has consistently invested big in technology education, resulting in both growth of domestic and international companies in the country. Given its immense population and market opportunity, Chinese developers have grown their skills in Big Data, as well as develop global companies like Tencent and Alibaba.

Ukraine – The eastern European country has had its tech industry thrive lately and is seen as the location of the biggest number of C++ programmers in the world. With great English proficiency and nearness to Western Europe, Ukraine was able to bolster its standing as one of the leading places for offshore software development, ranking first place in the “Outsourcing Market in Eastern Europe” by Outsourcing Journal.

Philippines – One of the most English-proficient nations in the world, Filipinos are also known to be highly skilled in technical development. It is also implementing education reforms to improve its position as a leading outsourcing location.

Vietnam – Part of the list of the fastest-growing economies in the world, Vietnam is also home to a budding tech scene, with a growing IT talent pool and a young population. Some global tech multinationals, like Samsung and Intel, have already put operations in the country. We can find good outsourcing companies at a great price.

With the rise of remote work, communications technology, and the incessant pressure to keep up with market demand, the need for a reliable offshore software development company has grown more than ever. Asian countries, although lower in the pay scale, are growing their skills and experience by leaps and bounds and will continue to drive business growth for partners around the world.

About The Author:

Thanh (Bruce) Pham


Saigon Technology Solutions

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