The Average Cost of Software Development Services
With modern technologies, you can outsource software development to an overseas programmer team and thus save costs. However, the average cost of software development services still greatly varies from country to country. Additionally, the rates may depend on the platform that you use to hire offshore developers.
In this article, we will analyze the offshore software development rates by country and give some tips on how to hire offshore developers reasonably well. We’ll be using data from reliable sources such as PayScale, SalaryExpert, Indeed, Upwork, TopTal, and us — YouTeam, a marketplace for hiring remote teams of software engineers.
|North America||Western Europe||Eastern Europe||Latin America||Asia||Africa|
Average hourly rate for software development, 2020
Software Development Hourly Rates by Region in 2020
Now we’ll give an overview of regions and offshore software development rates by country to help you make a more informed decision when hiring from overseas. We’ll be reviewing Eastern Europe, Latin America, Asia, and Africa. But first, let’s take a look at rates in the United States and Western Europe – countries with the highest demand for offshore software development – and then compare the rates with those in offshore countries.
Software Development Rates in North America and Western Europe in 2020
According to Indeed.com, the average base hourly rate of a software engineer in the United States makes up $46.24 per hour as of 2020. This number may vary depending not only on the experience and technology but also on location. Here are some examples of rates in various states:
- California: $57.07
- District of Columbia: $48.07
- New York: $52.15
- Texas: $44.42
- Washington: $53.22
Similarly, in Western Europe, the rates can vary by country, for example:
- Germany: $56
- France: $82
- United Kingdom: $71
- Sweden: $67
- Netherlands: $60
Now let’s proceed with the rates in offshore countries.
Offshore Software Development in Eastern Europe in 2020
According to a report issued by AVentures Capital, Aventis Capital, and Capital Times at the beginning of 2019, Eastern European countries such as Ukraine, Belarus, Poland, and Romania are now among the top 5 global software development centers. The total volume of IT exports from these countries was about $13 billion. Here are some other numbers regarding the state of the IT industry in the region:
- $5 billion: the profit of the 477 IT companies that participated in the research.
- 700,000: the number of IT specialists in the region.
- 60,000: the annual number of graduates from tech universities.
- 20-25%: annual revenue growth in the region.
Offshore Software Development in Ukraine in 2020
Conveniently located in the center of Europe, Ukraine has been attracting foreign investors since the late 1990s and early 2000s, when the first software outsourcing companies started appearing in the country. Here are some numbers and facts regarding the state of the IT industry in the country:
- According to the State Statistics Service of Ukraine, in 2019, IT service exports from the country grew by 15%. Now it makes up 16% of the export of all services, which in total brought the country $15.23 billion.
- According to HackerRank test results, Ukrainian developers are 11th in the world in terms of tech skills.
- As of 2019, there were about 160,000 IT professionals in Ukraine employed at nearly 4,000 IT companies.
- The country’s IT industry grows by about 26% a year.
- The average Ukrainian developer hourly rate for software developer services in Ukraine is $26.
Clearly, there are many pros of outsourcing software development to Ukraine and it fairly earns its place in the rating of offshore software development rates by country.
Average Software Engineer Hourly Rate by Country in Eastern Europe in 2020
The average hourly rate for software developer talent in other Eastern European countries is as follows:
- Belarus: $28
- Bulgaria: $34
- Croatia: $25
- Czech Republic: $34
- Hungary: $39
- Poland: $40
- Romania: $26
- Ukraine: $37
Offshore Software Development in Latin America in 2020
According to IDC, the Latin American IT industry will be growing in 2020 despite political uncertainty and low economic growth. As predicted by Ricardo Villate, vice president of the consultancy for the region, the IT market will reach 4.8% in 2020. IDC reports an increase in business spending on technologies related to AR/VR, AI, IoT, 3D printing, cloud, security, and robotics.
Offshore Software Development in Brazil in 2020
Brazil is the leading software outsourcing country in Latin America and South America. According to an earlier study by Agile Engine, Brazil is the country with the greatest number of software engineers in the region – over 400,000. Additionally, Brazil is in second place among the top 50 digital nations in the Tholons Services Globalization Index 2019. The average software developer hourly rate in Brazil in 2020 is $40.
Average Developer Hourly Rate by Country in Latin America in 2020
The second and third offshore development countries in the region are Argentina and Panama.
- As per the same study by Agile Engine, Argentina is ranked 14th among the best software outsourcing countries and is number 2 in the region. It is also the world’s 10th digital nation in the Tholons Services Globalization Index 2019.
- According to the World Bank Group, Panama is one of the fastest-growing major economies during the last couple of years, with an incredible technological advance in the IT market.
The latest data shows that the average software developer hourly rate in Latin American countries as of 2020 is:
- Argentina: $55
- Bolivia: $30
- Costa Rica: $40
- Chile: $50
- Mexico: $55
- Peru: $35
- Uruguay: $55
Offshore Software Development in Asia in 2020
A pioneer of software outsourcing, Asia boasts the biggest number of offshore software developers as compared with other regions. In 2018, only in India, this number amounted to almost 3 million.
China is also an attractive offshore development destination. Chinese developers are the first across all HackerRank challenges. The Chinese government supports the tech sector by offering economic incentives. For example, now there are more than 50 science and technology industry parks across the country.
In the Philippines, Cebu City is the country’s fastest-growing IT industry with over 200 offshore companies and 95,000 tech positions to fill. The Philippines ranks 5th among the top 50 digital nations in the Tholons Services Globalization Index 2019, with the capital Manila being the world’s second super city.
Offshore Software Development in India in 2020
India is the leading software outsourcing country in Asia, also being a top digital nation in the Tholons Services Globalization Index 2019. Every year, more than 120K IT specialists graduate from the country’s tech universities. In 2016, India was nominated as the second country in the world with the greatest number of STEM graduates – 2.6 million. The average developer hourly rate in India is $30.
Offshore Developers Hourly Rate by Country in Asia in 2020
The 2020 offshore hire rates in other Asian countries are as follows:
- Bangladesh: $25
- China: $25
- Malaysia: $30
- Nepal: $25
- Philippines: $25
- Sri Lanka: $25
Offshore Software Development in Africa in 2020
Africa’s IT outsourcing market is only emerging, but it has already demonstrated rapid growth and is now attracting overseas clients. It is predicted that the increasing number of the region’s young population will drive demand for high-quality service sector jobs and the country will soon enter the list of the best countries to outsource software development.
- North Africa, specifically Egypt, Morocco, and Tunisia, has quickly become a key outsourcing destination thanks to the time zone compatibility with Europe and a small time zone difference with New York. Besides, Morocco and Tunisia attract clients from France because of the same language. North African programmers have expertise in technologies such as Python, Ruby, and SQL.
- South Africa is another preferable destination thanks to insignificant time zone differences and high proficiency in languages such as English, German, and Dutch. Besides, the region is featured in the Tholons Digital Nations and Super Cities rankings. South African developers are skilled in C++, PHP, and SQL.
- East African Kenya has a particularly high concentration of programmers. The capital Nairobi is home to thousands of Kenyan businesses, and the city’s infrastructure encourages technical innovation among young businesses and startups. East African developers are well-versed in Java, SQL, and mobile development.
Offshore Software Development Rates by Country in Africa in 2020
The recent data shows that the software engineer hourly rate in African countries is:
- Egypt: $20
- Kenya: $20
- Morocco: $20
- Nigeria: $40
- South Africa: $40
Software Development Hourly Rates by Region in 2020: Conclusion
As you may see, the average cost of software development in offshore countries is far lower than in the United States or Western Europe. It can happen that even a senior software engineer hourly rate in an offshore country may be lower than the one of a junior or middle developer in the United States. Therefore, hiring offshore developers is the most cost-effective decision, because the cost of living in offshore countries is lower than in the US or Western Europe.
However, you must be careful when choosing a country to outsource software development services. Unfortunately, not all offshore countries offer a good price/quality ratio. A promising contract may end in paying twice because you’ll have to look for another offshore development team to correct the mistakes of the previous one. This often happens in Asian countries that offer the lowest software development rates.
Limiting your search to the best countries to outsource software development is only the first step to fruitful cooperation. You also need to keep in mind that working with remote employees requires establishing a clear system for communication and collaboration. Besides, it may be difficult for American and Western European clients to work with Asian developers because of significant cultural differences and an inconvenient time zone gap.
Benefits of Hiring Offshore Developers in 2020
In addition to affordable prices, you will get the following advantages if you hire offshore developers:
- Access to a wide tech talent pool. The Wall Street Journal reports that in 2019, employers in the US had about 918,000 unfilled IT jobs. If your company belongs to these employers, outsourcing may be a solution.
- No overhead costs. As offshore software development occurs remotely, you pay only for the services. In most cases, you do not have to bother about insurance, office space rent, perks, etc. – either developers themselves or an intermediary agency take over these costs.
- More time dedicated to your project. If your remote employees work from home, they don’t spend time commuting and thus can devote the saved time to the project.
How to Hire Offshore Developers in 2020
There are several ways to hire offshore developers:
Hiring remote developers at freelance portals seems to be quite an attractive option and here’s why:
- Vast tech talent pool – for example, Upwork features more than tens of thousands of profiles of offshore developers.
- Quick hiring – it may take you less than a week to build an offshore development team of freelancers and sign contracts with them.
- Remote cooperation – you pay only for the development services and do not incur any overhead costs.
- Direct communication – you can talk or video chat with your team at the safe space provided by your freelance portal.
- Low rates – to earn a reputation on a freelance portal, a freelancer needs to fill their portfolio with projects. To do that, they often agree to low-budget projects, though their rates “in real life” are typically higher.
At the same time, the cons are as follows:
- Unreliability – freelancers can leave your project at any time because they are not bound by any official agreements.
- Time zone differences – location in different time zones can be inconvenient for both you and your team because you have to catch up with each other.
- Commission fee – you have to pay a processing fee for every payment you make through freelance portals.
- Lack of commitment – freelancers can work on other projects except yours, so you cannot be sure that they will dedicate all of their time to your project only.
Collaboration with outsourcing companies is the most traditional way of forming an offshore development team. Such companies work with overseas clients and deliver software development services according to the clients’ project requirements. If you choose this hiring option, you will get the following benefits:
- Reliability – the employment will be legal, with official agreements, so the developers cannot leave the project spontaneously, as freelancers would do.
- No overhead costs – the outsourcing agency will overtake all of the expenses.
- 100% commitment – the developers will be working only on your project until it is finished.
The drawbacks of outsourcing companies are:
- Slow hiring process – due to bureaucracy, it may take months to form a team for your project.
- Lack of communication – in most cases, a local project manager takes over the communication so you can rarely talk to your developers in person.
YouTeam, a platform for hiring remote dev teams, combines the advantages of a freelance portal and an outsourcing agency. As a result, you get the following benefits:
- Reliability. Each developer featured on YouTeam undergoes a multi-level vetting process, which includes the verification of skills through HackerRank for Work.
- Quick hiring. With YouTeam, it will take you minutes to shortlist the candidates, one day to sign the contract, and a couple of weeks to kick off the project.
- Direct hiring. You personally interview developers for your project and then, after they are hired, continue direct communication throughout the project. At the same time, in the case of any disagreement, a dedicated customer success manager from YouTeam will be there for you, coordinating the communication between the two parties.
- No worries about financial and legal aspects. You pay only for the development services by using a secure payment system.
- Dedicated teams. The team of your choice will appear as booked to other clients because it will be dedicated only to your project. Developers featured on YouTeam are not freelancers and thus cannot work on several projects simultaneously.
- Scalable teams. Need to extend your team? No problem – you’ll get a re-scaled team within two weeks.
- Flexible pricing. We have an individual approach to each client and are open to discussions regarding the payment and discounts.
Average Developer Hourly Rate on Hiring Platforms in 2020
Now let’s compare the software development hourly rates on three hiring portals: Upwork, TopTal, and YouTeam. These rates depend on several factors, such as language, platform, project scope, and geography. Based on these factors, the average rates as of 2020 are:
$ per hour
$ per hour
$ per hour
|Front-end web development||50-75||20-100||20-50|
|Back-end web development||75-150||20-105||20-50|
Developer’ average hourly rates on different hiring platforms, 2020
Developer Hourly Rate in 2020 Based on Technology and Experience
General YouTeam rates based on technology, March 2020
YouTeam rates based on seniority, March 2020
The Bottom Line
Hiring a team of software developers for your project can be a daunting task. This is especially true if you’re from the United States or Western Europe looking for tech talent in your region. It may take you quite a lot of time to spot perfect candidates at reasonable prices. However, to speed up the process and avoid unexpected expenses, you can hire an offshore programming team. If you are new to hiring remotely, it is important to familiarize yourself with the best countries to outsource software development and offshore software development rates by country so you can focus your search in an effective way.
For example, the average base hourly rate of a software engineer in California is $57.07 per hour as of 2020. For comparison, this is how much you would pay a mid-level developer in offshore regions:
- Eastern Europe: $30-$40 per hour
- Latin America: $30-$47 per hour
- Asia: $24-$35
- Africa: $22-$30
Such a difference is caused by the lower cost of living in offshore countries. In many cases, you would get the same quality as from local developers, but still, you must be careful when choosing a region to outsource software development services.
If you hire offshore developers for your project, you will get the following advantages:
- Affordable prices
- Access to a wide tech talent pool
- No overhead costs
- More time dedicated to your project
There are several ways to hire an offshore software development team.
Freelance portals will open up a vast tech talent pool for you. The hiring process will be very quick, and you’ll be able to directly communicate with your team. Besides, the prices can be quite low even for highly-qualified freelancers. This is because they are new to the portal and first need to earn a reputation. At the same time, freelance portals are unreliable, and freelancers can work at several projects simultaneously, while you need 100% commitment to your project.
An outsourcing company is a more reliable option. However, it may take them months to build a team for you. And in many cases, you will get neither direct communication with your team nor the opportunity to scale the team. Good news is — we have solved this issue at YouTeam.
Contact us today, and we’ll be happy to provide you more insights into the management of outsourced development.