Let’s be realistic. When you resort to offshore software development, your primary goal is to save costs without sacrificing the quality of the end product. And we support that. That’s why we want to help you figure out how to get the best bang for your buck.
Thanks to Acropolium’s 19 years of experience in the software development outsourcing market, in this piece, we’ll share our answers to the questions like
- What are the key factors that constitute the cost of software development?
- What are the most popular destinations for software development outsourcing, and why?
- How much will you have to pay offshore developers and other specialists in different regions of the globe?
- Should you hire freelancers or an outsourcing agency?
Now, allow us to help you weigh your outsourcing options and extract as much value from offshore development as possible. Let’s start with the cost.
Five factors that affect software development cost
Numerous factors affect the cost of offshore development. But your project’s estimation will most likely depend on the following five.
#1. Project complexity and size
You can’t calculate the cost of your project without knowing the project’s scope – the features you include in the first release.
The logic here is simple: the more features your product needs for its first launch, the more its development will cost you. And the other way around.
Plus, it’s not only about the number of features; their complexity also matters. Implementing a sophisticated AI algorithm will cost you more than a simple search and filter feature. Tasks like this take more time and require a high level of experience in fields like AI and data science.
#2. Necessary technologies and expertise
The technology stack and the level of engineering expertise you need to build your app will seriously affect the price. If a language or framework has been on the market for 5-10 years, it means there are plenty of engineers who can work with them. And the popularity of a tech stack makes the development cheaper.
In contrast, highly customizable apps with intense backend processing will require complicated frameworks and a high level of expertise, which is expensive. We mean, Rust developers are the highest paid for a reason, while web development falls into the middle range.
#3. Maintenance and support
Keep in mind that your investment in development doesn’t stop with your product’s release. Post-release product maintenance and support is a lengthy process that includes bug fixing, software modernization, feature optimization, incident management, and user/team support.
You need to factor all that in, too.
#4. Type of pricing model
The pricing model you choose for your offshore software development affects many aspects of your project, like the team composition, development time, and maintenance.
The popular outsourcing pricing models include fixed-price, time and material, benchmark-based, dedicated team, and Software Development as a Service (SDaaS) — our personal favorite. And each of them has its pros and cons. So be careful when selecting a suitable outsourcing pricing model for your business case because you’ll need to consider the type of the project, the vendor’s experience, and your budget.
#5. Rates in the selected market
Fortunately, custom software development outsourcing allows you to select a destination where the salary rates fit your budget. The difference in rates for development in different markets can be staggering, ranging from $1,800/month in Bulgaria to $9,100/month in the US for a Middle Software Engineer.
With this in mind, let’s see how offshore development prices vary across different regions and levels of expertise.
Software engineer monthly salary by region in 2022
Here’s a breakdown of the seven most popular development outsourcing regions and the monthly salaries of software engineers in them. We’ll start with the more lavish ones.
North America & Australia
The US, Canada, and Australia are known for being the driving forces of technology and the most attractive tech hubs in the world. This fact, along with expensive higher education, strong economy, and high living costs, makes these countries the most costly software development destinations in the world.
While hiring developers from this market will mean good code quality and agile development processes, it’s not sustainable for most businesses. If you are a small startup or have a large project requiring thousands of person-hours, developing software in this region will quickly drain your pockets.
The average monthly rates of software engineers in North America are $6,551 for a Junior Engineer, $9,100 for a Middle Engineer, and $11,665 for a Senior Engineer.
The Nordic countries have lately become another technological powerhouse. This success, the high cost of living, and the prosperous economies have made the prices for software development solutions in Nordic countries skyrocket.
The region is an expensive destination for software development outsourcing: the average monthly software engineer salary in this region is $4,442 for a Junior Engineer, $6,099 for a Middle Engineer, and $7,850 for a Senior Engineer.
Being the third country by the amount of venture capital (VC) investment in tech companies, the UK stands strong, allowing you to choose among 400+ thousand programmers. But can you afford to hire them?
The monthly salary rates for offshore development there are $4,587 for a Junior, $6,261 for a Middle, and $7,819 for a Senior Engineer.
South American countries like Brazil, Argentina, Peru, and Columbia have earned their way into popular software outsourcing destinations in recent years.
Due to minimal time zone differences, strong cultural compatibility, a vast pool of developers, and significantly lower rates, North American businesses contribute the most to the growth of Latin America’s software outsourcing sector.
According to Glassdoor, the monthly salary for offshore development in Latin America varies from $1,166 to $3,440, depending on the location and experience.
Western Europe (Germany, the Netherlands, Austria, Switzerland, Belgium)
The tight technology outsourcing market in Western Europe understandably introduces some of the highest average rates globally.
The main factors contributing to the high salaries of developers in this region include a strong economy, high taxes, an increasing cost of living, and exceptional education. As such, this market is less popular for development outsourcing than the more available Eastern European or Asian markets.
This region’s average monthly salary comes at $4,329 for a Junior Engineer, $6,100 for a Middle Engineer, and $7,354 for a Senior Engineer.
Eastern Europe (Poland, Ukraine, Lithuania, Czech Republic)
When we talk about offshore development services, Eastern Europe hits the sweet spot between price and quality. With more than one million software developers, 3,000 highly-rated software development companies (according to Clutch), and affordable outsourcing rates, Eastern Europe has long become a popular source of offshore talents for Western companies.
You can expect to pay around $800 - 2,000 for a Junior Engineer, $2,000 - 4,000 for a Middle Engineer, and $4,000 - 6,000 for a Senior Engineer a month.
Asia Pacific (India, Vietnam, the Philippines)
Despite a significant time zone difference, serious cultural gap, and occasional complaints about quality standards, the Asia Pacific region remains one of the front runners in the offshore software development race.
The market owes its popularity to the lowest average rates for software development, charging around $454/month for a Junior, $750 for a Middle, and $1,065 for a Senior Engineer.
Now that you know the monthly salaries of software engineers, it’s a good idea to look into the hourly rates because software outsourcing vendors and freelancers often charge on an hourly basis.
Map of hourly rates by country and experience
Here’s a quick overview of the hourly rates of software engineers in companies depending on the country and level of seniority, based on the data from Glassdoor.
|Country||Junior Engineer||Middle Engineer||Senior Engineer|
While development is the bedrock of your project and heavily affects its quality and price, it will only succeed if specialists who can plan, budget, manage, and test your project are on board.
Average salaries of other specialists in different regions
On top of software engineers, your development team can include:
- Quality Assurance (QA) Engineers (manual or automated)
- Project Manager (PM)
- Scrum Master
- Business Analyst (BA)
- Software Architect
If you don’t have professionals like these in-house, then be ready to invest in outsourcing talents from abroad. Here are their monthly salaries, according to Glassdoor:
|Region||Quality Assurance||Project Manager / Scrum Master||Business Analyst||Software Architect|
|North America & Australia||$4,000 – 7,800||$4,900 – 7,100||$6,300 – 8,100||$10, 800 – 14,200|
|Latin America||$700 – 1,300||$800 – 2,200||$800 – 2,000||$1850 – 3,600|
|Scandinavia||$4,100 – 6,300||$4,400 – 7,200||$5,150 – 8,350||$8,300 – 12,600|
|Western Europe||$4,100 – 7,300||$4,300 – 7,900||$4,400 – 7,900||$6,900 – 12, 100|
|Eastern Europe||$1,325 – 2,100||$1,500 – 3,000||$1,500 – 2,500||$4,000 – 6,000|
|Asia Pacific||$390 – 650||$900 – 2,000||$600 – 900||$1,900 – 3,200|
It’s important to note that for specialists like PM and BA, the culture fit, good English, and communication skills aren’t bonuses — they’re must-have features for a successful project. So be sure to consider this when choosing the outsourcing destination and vendor.
Top IT outsourcing countries: Pros and cons
Okay, now that we’re done with the rates and salaries, let’s look into the destinations. We’ve chosen the three most popular software development outsourcing destinations to show you their pros and cons.
The birthplace of WhatsApp, Grammarly, Gitlab, and MacPaw, Ukraine has rightfully become a popular destination for offshore software development in Eastern Europe.
- Strong command of English — over 85% of Ukrainian developers and 95% of PMs and BAs know English at an intermediate level or higher
- A large pool of talents to tap into — over 200,000 engineers and 400+ software development companies
- Top-notch STEM education — over 400 technical universities and 20,000+ tech graduates every year; plus №1 in the Science&Technology index
- Some of the lowest rates in Eastern Europe that start at $15/hour
- Some of the best developers in Europe with a score of 91,26
- Time zone difference of over 7 hours with the US
- Political instability
As a leading region in the Asian tech market, India is one of the world’s most popular destinations for outsourcing software development services.
- Some of the lowest rates in the world
- Great English proficiency — India is the third largest English-speaking country in the world
- A vast pool of tech talents with a staggering 5,8 million developers
- A booming $226-billion technology market with a developed infrastructure
- Lack of quality standards control
- Time zone difference of over 9 hours with the US
- Cultural gap and different work ethics that may lead to communication difficulties
The booming Brazilian offshore software development market has a lot to offer, being especially popular among startups from North America.
- Some of the lowest rates in the world
- Robust technological infrastructure with over 13,000 startups
- Time zone overlap with the US
- High quality of STEM education with over 15,000 engineers graduating every year
- Cultural similarities with the US
- Potential communication challenges due to the cultural gap with Europe and a possible language barrier (only 5% of the population speaks English)
- Time zone differences of over 5 hours with Europe
Which country is the best fit for your project? That depends on your location, goals, and preferences. All three destinations offer excellent cost savings paired with high-quality development services. If you choose the right vendor, that is.
How to hire offshore developers
To build a stellar offshore team that will deliver excellent results, you need to select the right platform and type of cooperation.
When it comes to hiring offshore tech specialists, you have four options.
Using freelance platforms like Upwork or Fiverr, you can hire independent specialists of any seniority level from all over the world. You can filter specialists by the technology type, rating, hourly rate, or the number of accomplished projects. You can also read reviews left by their previous clients to get a better picture of what to expect from the cooperation.
If you plan to hire an agency, the best place to explore your options and find the highest-rated contractors would be review platforms like Clutch or GoodFirms. They provide you with reviews and ratings of top service companies, their minimum project price tag, hourly rate, and the number of employees.
Consulting and recruitment agencies
If you don’t have the time or skills to source the best candidates, you can always hire a consulting specialist or a recruitment agency to do this for you. Thanks to an extensive network, a large pool of candidates, and a well-established recruitment process, they will do all the heavy lifting of the hiring process.
If you know businesses that have successfully outsourced their product development to offshore contractors, you can always reach out to them for a recommendation. Direct references are most valuable when they come from reliable sources with similar goals and expectations from offshore software development.
Now you’re probably thinking that working with freelancers might not be a bad idea: they’re easy to find, and working with them is cheaper than contracting an outsourcing vendor. Technically, yes. But those savings will come back to bite you.
Freelancers vs. Outsourcing companies
Thinking that you save money on hiring cheaper developers means you’re just looking at the problem from one side. The final cost of your project depends on multiple factors, and programming is only one of them. So be careful when hunting for a bargain.
We’re not saying working with freelancers isn’t viable. It is, in particular cases. But if you’re developing a large solution with high security demands, hiring freelancers is not your best bet. Plus, putting five freelancers from different countries into the same project chat doesn’t magically make them a team. You’ll have to (micro)manage each of them separately.
Even experienced and responsible freelancers can’t guarantee what outsourcing vendors already have covered. When you hire the latter, everything works like clockwork.
- Outsourcing agencies provide you with the specialists and tools needed to accomplish every step of the development life cycle on time and within budget.
- Companies always value their reputation on the market more than individual developers because they have more to lose. A freelancer can deactivate an account with bad reviews and create a new, clean one.
- Unlike freelancers, software development outsourcing companies have legal responsibilities to finish projects. They won’t abandon you halfway because they have legal obligations. A freelancer? They can just disappear, contract or no contract.
- Hiring a company saves you time on things like getting all the developers on the same page and managing their work. And did we mention they also handle all the leaves, vacations, and the social package (insurance, gym, corporate events, MacBooks for everyone, etc.)?
- Agencies have policies that guarantee high standards and quality control of the end product. Plus, they organize seminars, trainings, and workshops to help their employees grow.
Overall, software development outsourcing companies have a higher legal and corporate responsibility before their clients, which generally helps you avoid the common risks of IT outsourcing.
When you decide to outsource software development, the rates of engineers in different regions are the first factor that will affect the cost. But it’s not the only one. You should also consider the pricing model, the country you’ll be outsourcing from, and even if you need to be looking for a vendor or a bunch of freelancers.
True, software development isn’t easy. But we know what can make the process easier. You could try Acropolium’s subscription-based service that covers the most popular requests for software development projects at an affordable monthly fee. No headaches. No hidden costs. All value.
Contact our team to discover how this revolutionary pricing model can save you money and ensure better product quality.