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Offshore software development: A manual including software development costs
With offshore software development, you let other companies from overseas develop your software. By working with offshore software developers, technology companies optimize their spending on web and mobile software development, ideally without any loss of quality.
A comparison: costs for software development
Software development costs in offshore destinations such as Latin America 25 eurosper hour for junior programmers (1-4 years of experience) and 42 eurosfor senior software developers.
In Eastern Europe, the average hourly rate is around 21 euros - 42 euros. Software development costs in Asia start at 15 euro for junior and 34 euros per hour for senior software developers. In Africa, development agencies charge between 17 euros - 34 euros per hour.
Software development costs in selected countries
|Eastern Europe||€21-€42||Ukraine, Poland, Romania, Hungary, Bulgaria|
|Latin America||€25-€42||Brazil, Mexico, Argentina, Chile, Colombia, Peru|
|Africa||€17-€34||Morocco, Kenya, Nigeria, Egypt, South Africa|
|Asia||€15-€34||India, China, Philippines|
Software development costs by region
The costs given below are a rough guideline, as differences between different cooperation models are not taken into account. To find out what the real cost of software development is, you need to speak to outsourcing providers directly.
Why do German companies develop their software in Ukraine?
Find out about the state of the Ukrainian IT market and why Ukraine is an attractive location for IT outsourcing.
Software development costs in Eastern Europe
Software development costs in Eastern Europe vary from country to country. In Ukraine they are lower than in Poland. The average hourly rate is $ 25 for junior software developers and $ 50 for senior software developers. However, if you are working under the outstaffing model and only need junior, for example, the cost of software development can be as low as $ 18 an hour.
The best countries for software developers in Eastern Europe:
- Czech Republic
Software development costs in Eastern Europe
Eastern Europe is a well-known destination for software developers with a good price-performance ratio. With 1.3 developers per 100 inhabitants, the region has a high density of software developers.
The rapid growth of the IT industry in Eastern Europe has led to around 1 million software developers and has made the region a leading destination for software development.
Background information on the costs of software development in Eastern European countries (source)
Your guide to nearshore software development in Eastern Europe
The software development market in 8 of the top target countries in Eastern Europe - Poland, Ukraine, Romania, the Czech Republic, Hungary, Bulgaria, Belarus and Croatia.
Numerous technical universities and favorable business conditions promote the prosperity of the IT industry. Ukraine is one of the fastest developing countries in the region. By the end of 2020, 200,000 software specialists are expected on the Ukrainian technology market.
This makes Ukraine one of the largest IT nations in Eastern Europe, and after Poland with 255,000 software developers it is even the second largest. Software development costs in Ukraine are between $ 26 and $ 43 an hour, which is significantly lower than in Poland, where you can spend between $ 40 and $ 56 an hour.
Background information about software development centers in Eastern Europe
|country||Number of developers||Average minimum / maximum hourly rates||The most popular programming languages||IT metropolitan areas||Famous startups|
Average costs for offshore software development by region
Software developers in Ukraine, Russia and Belarus have advanced programming skills, university degrees and speak good to very good English. Because of these factors, the demand for Eastern European developers continues to grow.
Software development costs in Asian countries
Software development costs in Asia are $ 18 for a junior software developer and $ 25 for a senior software developer. Hourly rates for offshore software development in major Asian technology centers can range from $ 30 to $ 40 an hour.
Software development costs in Asia
China and India are the top technology development countries in Asia by the number of software developers - each country has nearly 5 million developers. Many service providers for software development in Asia can also be found in other countries such as Vietnam, Malaysia and Indonesia.
Low software development costs in Asian countries often go hand in hand with poor project quality. Unfavorable working conditions, cultural differences and differences in time zones have a negative impact on correspondence and lead to a loss of quality.
However, Asia has a huge pool of technical talent - more than 10 million developers. The cost of offshore software development in Asia depends on various factors and can vary widely from country to country.
Software development costs in Latin America
The hourly rate for junior software developers from Brazil, Argentina and Mexico is $ 30 and $ 50 for senior software developers. Hiring the same software developer through an outstaffing provider is usually around 20% cheaper. That means you can hire a junior software developer for $ 24 an hour. For a seasoned software developer, outstaffing expenses can be reduced to $ 40 an hour compared to project outsourcing.
Software development costs in Latin America
Latin America is a popular destination for offshore software development, especially for North American technology companies. US companies outsource their software development mainly because software development costs are significantly lower.
Another factor in US-Latin American development cooperation is the negligible time difference between the regions.
In addition, Latin American countries are geographically close to American customers, making Puerto Rico, Brazil, Argentina, and Mexico very convenient destinations for outsourcing.
Software development costs in Africa
Hiring a junior offshore software developer in Africa costs around $ 20 an hour. The comparatively high hourly rates for junior software developers are caused by a small talent pool of well-trained engineers in African countries. The hourly rates for senior software developers in Egypt, Morocco, and Kenya fluctuate around $ 40.
Software development costs in Africa
Software development costs in the US, Latin America, Eastern Europe, and Asia (source)
Relevant factors when choosing an outsourcing country
Of course, price is always an important factor when considering for or against offshore software development. Saving project costs is a priority for every company. But don't forget other aspects that can influence the selection of the outsourcing service provider, e.g. the financial attractiveness of the project, the availability of staff and offshore software developers with the necessary qualifications and skills, as well as the working environment in which the developers actually work. the knowledge and skills of offshore software engineers. You should also consider tax and labor law aspects of the outsourcing country.
It is important to know about local holidays. According to research by Mercer, Indians and Colombians have 18 public holidays per year, Mexico 7, Poland, Ukraine and Vietnam 10, Russia, Malaysia and Indonesia 14 - with this variation it is therefore advisable to consider this when thinking about offshore programming. It is also helpful to check statutory vacation entitlements; China and the Philippines have 5 days of paid vacation, while India and Indonesia have 12 days.
Working conditions and rules are also relevant if you are looking for offshore software development solutions - some countries such as Malaysia and Slovakia prohibit a 40-hour night shift. In other countries, such as Egypt and the Philippines, women are prohibited from working full-time during the night. Specific work regulations can increase personnel costs by up to 70-80% - in Brazil, for example, taxes and social benefits (e.g. 30-day vacation and meal vouchers) make externalization more expensive than it initially appears.
How to choose the outsourcing country and the outsourcing service provider
Focus on value rather than cost
Choosing the cheapest solution for your development needs is well and good, but it can result in you getting an end product that isn't even worth the low price you paid for it. For most projects, it makes more sense in the long run to hand them over to a more reliable team in order to get a financially more attractive end product - which will help you save more money in the long run.
Choose the right model for your business needs
If you want to develop a successful product, you first have to decide which cooperation model works best in your case. We have already written an in-depth article about different cooperation models to help you choose the right option.
However, you should first consider these key factors when choosing a cooperation model:
Each model follows its own pricing principles. As mentioned earlier, with the project outsourcing, you typically have to pay for the services of project managers and business analysts, as well as for the time the developer was idle with the vendor before joining your project.
However, when you work with an extended team, you work directly with the developers and only pay for the services of the developers. There will also be a fixed fee on the part of the provider for support services. But since the fee is fixed, you will always know how much you have to pay at the end of the month.
- Predictable budget and flexibility
Fixed price contracts offered in project outsourcing are very predictable in terms of budget and time frame. The provider also bears full responsibility for meeting your requirements. But there is a catch: if your needs change as development progresses, additional hours that developers have to invest will mean additional costs for you, and for any time difference the vendor will hold you responsible. The extended team model is now incredibly flexible. Since you are paying for the developer's time, not for a concrete result, you can change your requirements at any time. Nevertheless, you can plan your budget well because you always know exactly how much you have to pay at the end of each month.
If you want to manage your team personally using the tools and methods you know, the extended team model is the right choice, as you have full control over the development team. However, you need to understand that the responsibility for the product development process is entirely yours as you are the one leading the team. If you do not have the necessary technical expertise to manage the development process on your own, you should choose project outsourcing, as the provider provides the team with its own project manager and only involves you in the development process for requirements and feedback.
The factors listed show that project outsourcing is ideal for short-term projects with clear requirements that are unlikely to change. The extended team model is perfect for long-term cooperation. The choice of a cooperation model should be based on your needs.
Visit the outsourcing service provider
Visiting the country / the outsourcing service provider beforehand always makes sense, no matter which project you want to outsource. This is especially the case when it comes to potential long-term cooperation. Business visits enable you to check the working conditions of your future software developers, to get a feel for the work ethic and to get to know the culture with which you are realizing your project. Make the most of your trip - don't forget to visit the local tech community and meet with recruits to see if the local developers meet your criteria.
Meet with the people who work in the software development industry. Are you hardworking and enthusiastic? Most importantly, do you have a similar passion for creating great products? Such people become part of your team - not just a resource - so interact with them as if you were hiring them to yourself.
The advantages of outsourcing in Ukraine
At Daxx we are working to bring the talent of Ukrainian software developers to other countries. Here are some reasons why you should consider Ukraine as an outsourcing destination country.
The largest number of IT specialists
The training of skilled workers makes Ukraine an attractive country for offshore software development. Ukraine has approximately 36,000 IT graduates per year, the majority of whom are college graduates with a good command of English. Ukraine is among the top countries on the list of the most engineering graduate countries and ranks 11th as the country with the best software developers.
An often overlooked advantage of outsourcing in Ukraine is the time zone - with only an hour or two difference to Western Europe, efficient communication becomes problem-free. In fact, it's perfect for regions like the US East Coast, where it's morning when it's evening in Ukraine. A customer can set a task, go to sleep and be woken up with a completed task that has now been processed by a team of Ukrainian software developers.
Low corporate tax / expenses
Among the world's technology capitals, Kyiv has a relatively low corporate tax rate, at just € 2.010 / 40.211 per year, while Berlin is € 8.953 / 40.211 per year and New York is € 6.031 / 40.211 per year. The cost of living in Ukraine is also interesting: a 1-room apartment in the center of Kiev costs an average of € 315.40 per month, and outside the city around € 174.24 a lunch in the city costs around € 4-5. This is great for the employees who can live well on their wages, which can have a positive effect on their work performance.
Pleasant business climate
Ukraine, which jumped from 24th to 20th in 2016, is considered a great place to do business. It is a legitimate concern that even doing simple business abroad can be difficult. But Ukraine has is proof that the realization of great projects is a combination of a work ethic and culture that is appropriate to Western European countries and a favorable business climate.
Internet in Ukraine is fast and cheap - an unlimited data connection via Cable / ADSL costs € 2.59 per month. This helps your team to upload updates quickly, to communicate efficiently and to always be online for quick uploads about your project.
A strong IT community
Ukraine has an incredibly developed and vibrant IT community that hosts regular hackathons, international (and local) tech conferences, and networking events. Many people who have a passion for software development take part in these events. This community has a very positive influence on offshore software development in Ukraine - Ukrainian developers articulate their views and thus create a healthy working environment for everyone involved by abolishing a "yes-say" culture.
Growing startup environment
There are more than 2,000 IT startups in Ukraine, and that number is growing every day. These include many well-known companies such as Petcube, iBlazr, Grammarly, Jooble, CleanMyMac, Mobalytics and even Looksery, which was acquired by app giant Snapchat in 2015.
Moderate prices for IT services
A lot of people are misled to think that Ukrainian wages are low. The demand for Ukrainian developers is high for the reasons mentioned above, which raises the standard of living. As a result, wages are rising - developer salaries do not follow the standard logic because their skills are important in the global job market and are independent of their own location. Productivity is higher than ever, but the good news is that wages are lower than in Scandinavian countries, London or Silicon Valley. This allows you to get world class offshore software development for less than at home while employing motivated and creative developers.
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