Offshore software development is an excellent solution for businesses looking to optimize software engineering contract rates while still getting quality software development services of top-notch quality. But, with so many countries and their respective vendors offering offshore software development services, it can take time to find the right one. Hourly rates, among other factors, are backbones when considering offshore software development services. This article provides a comprehensive guide to offshore software development hourly rates by country in 2024. In this report, you’ll find a discussion on the contractors’ rates, factors that influence them, and the best destinations for offshore software development.
Factors that Shape Software Development Hourly Rates
The hourly rates for offshore software development services vary significantly depending on the country. For instance, in 2024, the hourly rates in some countries can reach $25-$45, while the rates in North America could be as high as $150-$250. The hourly rates in countries such as Ukraine, Poland, and Colombia also vary. That’s why it’s necessary to review the fundamental factors that shape the calculation of an hourly rate for a software developer. Let’s start with the essential ones which are proven to be the most detrimental to shaping hourly rates:
- In-demand skill set. As the global IT talent shortage is booming, the existing expertise can shape the final contractors’ rates. Regardless of where the developers can be located, either in Belgrade, Krakow, or Buenos Aires, expertise shapes the global offshore development rates. Consider the specialists’ seniority and proven track record to determine the specific prices.
- Location. Rates will significantly vary depending on the regions where developers are located. Software development prices are higher in nearshoring destinations and countries closer to first-world economies. Another important note is that developers from centralized digital hubs would charge more for their one-stop-shop services.
- English proficiency. It’s technically accurate that English proficiency can also be crucial for shaping the final price you’d pay a vendor. Because this factor is essential for establishing communication, it must be considered when looking for the right outsourcing partner. Developers with native English proficiency would generally charge more for their services.
- Engagement model. When it comes to the length of engagement, you should seriously consider how it’s being priced. For instance, some long-term projects with non-fixed prices can fluctuate your final price for full-scale development. Thus, the engagement model also plays a role in shaping the hourly rates of development specialists.
- Demand and experience. Lastly, let’s not forget the increased demand for specialists, such as SecOps, DevOps, and software architects. Usually, the more experience these specialists possess, the higher the hourly price for their services. It’s especially true for the services that rely upon prototyping, ideation, and technology consulting.
Now that you know how the prices are shaped, let’s move on and review the hourly rate distribution according to the latest industry report.
Software Engineering Contract Rates: Market Overview
Before reviewing the specific locations, let’s understand why global offshore development services are in such demand. For the most part, according to the Accelerance Analysis 2021 Report, the illustrative in-house versus outsourcing costs are $105-167/hr against $41-81/hr, respectively. With these numbers in mind, it’s no surprise more businesses look forward to outsourcing particular parts of their software development projects. Since the specific hourly rates will vary, depending on the factors enlisted before, the respective numbers could be illustrative for finding the right service provider for your business endeavors.
The North American region is often regarded as where businesses look to outsource rather than the outsourcing destination. According to the same Accelerance Report, the average software contracting rates were between $49 and $210/hr. Such a high discrepancy in hourly rates is described due to the variance in skills and regional remuneration. However, one crucial consideration is that higher rates of North American specialists correlate with nuanced and niche-specific expertise. The median hourly rates for Junior developers are $114/hr, with Senior specialists expecting to earn $182/hr for their services.
In contrast to North America, Latin America (often regarded as LATAM) is one of the booming outsourcing destinations in 2024 and beyond. With the software development hourly rate ranging from $28 to $105/hr, it’s one of the most cost-efficient destinations. Please note that this region includes developers from Argentina, Brazil, Bolivia, Costa Rica, Colombia, El Salvador, Mexico, Peru, Puerto Rico, and Uruguay. This region is also attractive for US companies due to the relative geographic proximity, similar time zone, cultural fit, and decent English proficiency. The median hourly rates for Junior developers are $48/hr, while the lead positions can expect to earn $71/hr. Compared to the North American remuneration rates, LATAM is both a cost-efficient and culturally applicable destination for opening an offshore development center.
Central & Eastern Europe
Outsourcing to Central & Eastern Europe has always been a wise decision for strategic partnerships, accompanied by flexible pricing schemes. As a whole, the region is a hub for high-end and innovation-driven specialists. The region comprises countries such as Hungary, Czechia, Liechtenstein, Romania, Bulgaria, Poland, Slovakia, Switzerland, Croatia, Germany, Austria, Slovenia, Ukraine, Lithuania, Latvia, Estonia, and Serbia. With such a variety of states, the hourly rates for contractors vary significantly, with Central European states charging more for their expertise. To make it more simple to navigate, the software development hourly rates in Central & Eastern Europe fluctuate from $21 to $108/hr.
Software specialists in these regions are well-versed in STEM education, have a solid cultural fit with the West, and have decent expertise in the global tech sector. Across the countries, Eastern Europe states (Ukraine, Poland) would charge $10-15/hr less than Central European countries (Austria, Germany). The region has seen a slight spike in software engineer contractor rates over the last few years, mainly because of the growing demand for specialists. Central & Eastern Europe is a viable option for global outsourcing, considering a solid STEM background, numerous digital hubs, and dozens of credible vendors offering recruitment and allocation services.
By South Asia, most reports mean the following countries: Bangladesh, India (Bangalore, Mumbai, Kolkata), Pakistan, and Sri Lanka. The region has one of the most favorable software development hourly rates ranging from $21 to $82/hr. South Asia, one of the most densely populated areas with incredible development potential, has shown significant progress over the last decades. For the most part, the renowned focus on tech education, coupled with solid English proficiency, is one of the region’s main drivers of IT growth.
The vast resource pool in countries like Pakistan, Bangladesh, and India allows states to keep decent margins without significant hourly rate increases. Region-wise, the hourly rates of Junior developers range from $31 to 41/hr, while their Senior and Lead colleagues can expect to earn from $45 to $65/hr, accordingly. While these prices are nuanced and will vary from one country to another, South Asia remains a highly competitive offshoring region. This fact is especially relevant in light of price increases in other areas, namely LATAM and Eastern & Central Europe.
It’s common to distinguish between South and Southeast Asia, with the latter region including booming destinations like the Philippines and Vietnam. Regarding software development hourly rates, they range from $21 to $61/hr, which could be one of the most attractive rates on the market. The region, as a whole, has seen solid economic growth. The technology sector has also seen a significant boom in the startup and offshoring industries. Vietnam and the Philippines remain the best outsourcing destinations in the region, especially from the price-quality lens.
When reviewing the hourly rate breakdown, one can see that Junior specialists usually earn from $26 to $29/hr. In contrast, Senior and Lead experts’ rates vary from $40 to $59/hr. Concerning the price fluctuations, one should be aware that the region has seen a noticeable increase in demand. Solid English knowledge, combined with the historically robust outsourcing sector, has boosted the competitiveness of Southeastern developers on the global outsourcing landscape.
Summarizing the regional breakdown, one can see that North America is undoubtedly the most expensive destination, especially from the perspective of software engineer contractor rates. As for Latin America, the region has an untapped potential to become a global engineering hub, with rates ranging from $28 to $105/hr. However, LATAM has seen a noticeable price increase over the last few years, usually explained by the greater interest of the US companies in outsourcing there.
From the price perspective, South and Southeast Asia could be balanced destinations, but they lack the established technical infrastructure and a wide range of specialized outsourcing providers. One of the most balanced and well-rounded destinations, Central & Eastern Europe, has long been on the radar among business executives. The region has a vast pool of highly-skilled specialists, while the hourly rates are not significantly higher than in LATAM or Asia. While you’d be making the final choice for picking the vendor from a specified location, the following advice could help shape your decision.
How to Choose the Right Outsourcing Vendor?
Once you’ve reviewed the factors that impact the software engineering contract rates and browsed through them in a regional breakdown, it could be time to choose a respective outsourcing partner. Below, you can consult the five factors that would help to make up your mind on the region where to outsource, besides the hourly rates and remuneration schemes:
- Cultural compatibility. Cultural compatibility is an important criterion when choosing the right outsourcing vendor. It’s crucial when outsourcing to a vendor in a different country, as cultural differences can affect how business is conducted. A vendor with a similar culture to your organization will likely understand your business needs better and work in a way that aligns with your expectations. They are also expected to understand the cultural nuances that can impact business success, such as communication styles and work ethics.
- Technical expertise. Another criterion is technical expertise. It’s essential to assess the vendor’s technical skills and experience in the specific area you want to outsource, whether software development, data analysis, or customer service. A vendor with a solid technical background will be better equipped to deliver high-quality work that meets your requirements.
- Service quality. The quality of service the outsourcing partner provides is another criterion to consider. The vendor should have a proven track record of delivering high-quality work on time and within budget. You can request case studies or customer testimonials that showcase their ability to deliver projects successfully to assess service quality for your specific requirements.
- Communication and collaboration. Good communication skills are essential for successful outsourcing partnerships. The vendor should have clear communication channels and be responsive to your needs and concerns. Your partners’ specialists should also be willing to collaborate with you throughout the project, providing regular updates on progress and seeking feedback to ensure the work meets your expectations.
- Security and data protection. You will share sensitive data and confidential information with the vendor when outsourcing business processes or services. Therefore, ensuring that the outsourcing vendor has robust security and data protection measures to safeguard your data is crucial. The vendor should have a comprehensive security policy that outlines their data protection practices, including encryption and access controls. A chosen vendor should also have the necessary certifications, such as ISO 27001, demonstrating their information security commitment.
Finally, when it comes to outsourcing software development in 2024, deciding which country to outsource to is critical for businesses seeking to leverage cost savings, high-quality talent, and technical expertise. Based on the current rates, companies looking for a solid balance of price and quality may consider Eastern & Central Europe. In contrast, those seeking lower prices can look forward to LATAM or Southeast Asia. However, selecting the right outsourcing vendor is equally important as the country. Businesses must evaluate potential vendors based on cultural compatibility, technical expertise, service quality, communication and collaboration, and security and data protection measures to ensure that they select the right partner for their business needs. By taking a strategic approach to choosing the right outsourcing vendor, businesses can maximize the benefits of outsourcing and position themselves for success in the competitive global market.