Offshore Software Development Rates By Country in 2023
As technology continues to advance at an astonishing pace, businesses around the world are increasingly turning to offshore software development to meet their technological needs. Outsourcing software development projects to foreign countries has become a popular strategy for companies looking to access a vast pool of talent while reducing costs.
According to the data gathered, global software outsourcing revenue in 2022 was $116 billion (+6.3% compared to 2021), this revenue is expected to reach $145.7 billion by 2027, with an annual growth rate (CAGR) of 4.7% from 2022 to 2027.
Understanding the rates charged by offshore software development destinations is crucial for businesses contemplating outsourcing. So, let’s dive in and uncover the latest insights into offshore software development rates in 2023!
Current State of the IT Hiring Market
US-based companies and businesses in Western Europe, particularly Germany and the Netherlands, primarily seek senior software engineers for their job openings due to various reasons. These reasons include the need for quick performance and adaptability in a changing environment, the requirement for strong leadership in every role, and limited resources.
As a result, there is a high demand and limited supply of senior engineers in these regions, leading to increased salaries and considering the best cities for software engineers in 2023.
Smaller companies often have to search for talent in countries with lower living costs and offshore AI developers, such as Eastern Europe, Latin America, Asia, and Africa, which have become known for offshore software development.
However, in recent years, global pandemics and technological transformation have led to increased demand for software development services, causing a shortage of experienced engineers with the required skills and work experience.
The Average Cost of Software Development Services
The average cost of software development services can vary widely depending on several factors, including the complexity of the project, the size of the development team, the location of the development team, and the specific requirements.
Certainly! Here’s a breakdown of the average cost of software development services in different regions:
| Region | Average Software Development Hourly Rate |
|---|---|
| North America | $78 |
| Western Europe | $73 |
| Eastern Europe | $53 |
| Latin America | $64 |
| Asia Pacific | $25 |
| Africa | $36 |
Additionally, product development costs can vary based on factors such as the chosen tech stack, developer seniority, hiring model, and offshore web development platform.
Factors that Determine the Offshore Software Development Cost in Each Country?
The cost of offshore software development in each country is influenced by various factors. Here are some key determinants:
1. Cost of Living Index: The cost of living index is a measure of the average cost of basic expenses, including housing, transportation, groceries, and healthcare, in a particular country. According to Numbeo’s Cost of Living Index, as of 2021, countries like the United States, Switzerland, and Norway have higher cost of living indices, resulting in higher offshore development costs.
2. Gross Domestic Product (GDP) per Capita: As of 2021, countries like the United States, Switzerland, Luxembourg, and Norway had relatively higher GDP per capita, suggesting higher potential purchasing power for freelance developer hourly rates.
3. Exchange Rates: A stronger currency of the client’s country relative to the offshore development country’s currency can make the services relatively cheaper, while a weaker currency can make them more expensive. Monitoring exchange rates is crucial to understanding the cost implications of offshore software development.
4. Government Incentives and Tax Policies: Certain countries provide tax breaks, grants, or financial incentives specifically targeted toward offshore programmers. These incentives can lower the cost of offshore development and make certain countries more economically advantageous for outsourcing.
5. Political Stability: According to the Global Peace Index 2021, countries like Iceland, New Zealand, Denmark, and Portugal ranked among the most politically stable nations. Offshore destinations with higher political stability generally provide greater confidence.
Suggested Read: Why Do You Need a Professional Web Designer?
Offshore Software Development Rates By Country in 2023
Offshore Software Development Rates in North America:
As of May 01, 2023, the average hourly wage for a Software Engineer in the United States is $37. However, the range typically falls between $33 and $40, and this can vary depending on various factors such as education, certifications, additional skills, and years of experience in the profession.
In the context of small companies with 10-100 team members, it is more common for American software developers to earn about $40-135 per hour for their work. Moving on to mid-sized companies with up to 1000 employees, the hiring rates for American software developers can range from $100 to $200.
Here’s a table showcasing the average software development rates in North American countries, including senior and junior hourly rates:
| Country | Average Software Development Hourly Rate |
|---|---|
| San Francisco | $85 |
| Los Angeles | $58 |
| New York | $48 |
| Boston | $42 |
| Washington | $71 |
| Canada | $63 |
Offshore Software Development Rates in Western Europe:
Countries like Germany, France, the United Kingdom, and the Netherlands have some of the highest rates for the cost of hiring a software developer. These rates can range from around $40 to €100 per hour for software development services, with the actual rates being influenced by the factors mentioned earlier.
Software development rates for offshore outsourcing can significantly vary between cities, with London and Paris generally having higher rates compared to Berlin or Barcelona.
Some Western European countries, such as the Netherlands or Belgium, have a trend of outsourcing software development projects to neighboring countries like Poland or Ukraine, leveraging their competitive rates while upholding high-quality standards.
| Country | Average Software Development Hourly Rate |
|---|---|
| France | $33 |
| Germany | $37 |
| Netherlands | $29 |
| Sweden | $49 |
| Denmark | $34 |
| United Kingdom | $92 |
Offshore Software Development Rates in Eastern Europe:
One of the significant advantages of Eastern Europe is the exceptional quality of its software engineers. Many Eastern European countries have a strong educational system that emphasizes computer science and engineering. As a result, software developers from this region often possess excellent technical skills and a solid foundation in programming principles.
According to Coursera’s Global Skills Index 2020, Belarus, the Czech Republic, Hungary, and Ukraine were identified as the leading technology countries in the world.
In 2022, Ukraine recorded IT exports amounting to $3.74 billion, while Poland’s IT exports reached $26 billion and Romania’s amounted to €3.2 billion. The cost of software engineering services can vary from $50 to $60 per hour.
| Country | Average Software Development Hourly Rate |
|---|---|
| Bulgaria | $51 |
| Czech Republic | $62 |
| Hungary | $51 |
| Poland | $57 |
| Ukraine | $55 |
| Romania | $56 |
You might be interested in exploring:
Offshore Software Development in Ukraine in 2023:-
Ukraine, strategically situated in the heart of Europe, has been drawing the attention of international investors since the late 1990s and early 2000s, coinciding with the emergence of the country’s first software outsourcing companies. Here are some key statistics related to offshore software development in Ukraine in 2023:
- The Ukrainian IT industry has been growing steadily, with a compound annual growth rate (CAGR) of around 20% in recent years.
- Ukraine has a vast talent pool of IT professionals, with over 200,000 software developers and engineers.
- Major cities in Ukraine, such as Kyiv, Lviv, and Kharkiv, have emerged as prominent tech hubs, and offer cost savings of up to 40-60% compared to Western European or North American rates
Poland: Poland stands out as a top-notch destination for software development in Eastern Europe. With an average offshore software development cost of $57 per hour, it offers excellent value. Whether your tech stack involves Java, SQL, Python, or C++, you can easily find skilled experts in Poland to meet your requirements.
Suggested Read: The Pros & Cons of Hiring Agency VS Freelancer – How You Will Know Who is Better
Offshore Software Developer Hourly Rate in Latin America:
Latin America region offers cost advantages without compromising the quality of work, especially when you are looking to hire Latin American developers. For example, countries like Mexico, Brazil, Argentina, Colombia, and Uruguay have emerged as hotspots for software development outsourcing.
Latin America’s proximity to North America boosts popularity due to easy communication and collaboration in the same time zone. Offshore developer rates in the region vary widely, ranging from $8 to $40 per hour. While Brazil is considered one of the top 50 most advanced digital nations, its average rates are comparatively average compared to other countries.
| Country | Average Software Development Hourly Rate |
|---|---|
| Brazil | $8 |
| Argentina | $13 |
| Mexico | $17 |
| Bolivia | $36 |
| Colombia | $12 |
| Costa Rica | $41 |
Brazil:
• IT spending in Brazil reached approximately $48.1 billion in 2020.
• The country has over 700,000 IT professionals.
• Brazil is home to numerous technology companies, including Totvs, Stefanini, and CI&T.
Mexico Software Development Outsourcing:
• IT spending in Mexico reached approximately $29.9 billion in 2020.
• The country has over 1 million IT professionals.
• Mexico attracts global technology companies, with development centers established by IBM, Oracle, and Accenture.
Argentina:
• IT spending in Argentina reached approximately $5.6 billion in 2020.
• The country has over 120,000 IT professionals.
• Argentina boasts a strong software development industry, with Buenos Aires emerging as a prominent hub for technology startups.
Offshore Software Developer Hourly Rate in Asia Pacific:
In the Asia Pacific region, the number of software developers is steadily increasing. By 2024, India is projected to surpass numerous developed nations and emerge as the country with the largest population of software engineers.
In 2021, the China market emerged as the leading player in the Asia Pacific Custom Software Development Market by Country, attaining a remarkable market value of $7.1 billion by 2028. Meanwhile, the Japanese market is currently experiencing a notable Compound Annual Growth Rate (CAGR) of 20.1% from 2022 to 2028.
| Country | Average Software Development Hourly Rate |
|---|---|
| India | $12 |
| China | $73 |
| Bangladesh | $4 |
| Uzbekistan | $7 |
| Sri Lanka | $8 |
| Kazakhstan | $10 |
Here are some interesting statistics about software outsourcing in Asia:
India: India is a powerhouse when it comes to producing engineering graduates, with an annual output exceeding 1.5 million. The country also boasts a staggering number of developers, surpassing 5.2 million in total. As per the National Association of Software and Service Companies (NASSCOM), India’s IT and Business Process Management (BPM) industry achieved an impressive revenue of $194 billion in the fiscal year 2020-21.
India’s software developers earn an average hourly wage of $12 to $35, significantly lower than Western countries. India is known for its abundant IT talent, especially in software development, with cities like Bangalore, Hyderabad, Mumbai, and Chennai hosting many skilled professionals. The country’s industry dominance is evident, with over 3,800 software development firms listed on clutch.co.
China: China has one of the largest software outsourcing markets in the world. In 2020, the market size of software and information services outsourcing in China reached approximately 950 billion Chinese yuan (CNY), equivalent to about 148 billion U.S. dollars.
The IT Outsourcing segment is projected to generate a revenue of US$25.86 billion in 2023.
China boasts one of the largest talent pools globally, with around 6.96 million software engineers and IT professionals as of 2020. Cities like Beijing, Shanghai, Shenzhen, Guangzhou, Hangzhou, Chengdu, and Xi’an are renowned for software outsourcing in China.
Offshore Software Developer Hourly Rate in Africa:
Africa’s software outsourcing industry has been experiencing significant growth over the past decade, particularly in countries such as South Africa, Kenya, Nigeria, and Egypt.
African countries, including web development outsourcing providers, offer cost advantages over India and Eastern Europe. According to the e-Conomy Africa 2020 report, Africa’s IT business is projected to reach $180 billion by 2025, accounting for 5.2% of GDP. By 2050, it is expected to generate $712 billion in revenue, contributing 8.5% to the continent’s GDP.
| Country | Average Software Development Hourly Rate |
|---|---|
| South Africa | $45 |
| Morocco | $10 |
| Zimbabwe | $12 |
| Nigeria | $42 |
| Egypt | $20 |
| Kenya | $27 |
Benefits of Hiring Offshore Developers
1. Reduced overhead costs: Hiring offshore developers provides access to a global talent pool, allowing you to tap into a diverse range of skills and expertise. This can lead to higher-quality development work, increased innovation, and the ability to tackle complex projects more effectively:
- Lower Labor Costs
- Infrastructure Expenses
- Administrative Expenses
- Reduced Training Costs
2. Achieve Product Goals with Offshore Talent: Offshore teams can work on your project during their regular business hours while you’re offline. If you need to speed up development to meet aggressive deadlines or launch a new product, you can easily augment your in-house team with offshore developers who are readily available.
Offshore developers are often accustomed to working on multiple projects simultaneously and have streamlined processes in place.
3. Short Time to Fill a Position: Offshore developers can be quickly integrated into your team, minimizing the time required for onboarding and training. This eliminates the time-consuming process of sourcing, interviewing, and selecting candidates, enabling you to start the project promptly.
When hiring offshore developers, administrative tasks such as payroll, benefits, and legal compliance are typically managed by the offshore provider.
How to Choose a Reliable Offshore Software Development Company?
When choosing a reliable offshore software development company, it is essential to consider various factors to ensure a successful partnership.
- Firstly, look for the best offshore software development countries and their rates as you see in the above paragraphs. Countries like India, Ukraine, and Poland are often recognized as the best countries for software engineers.
- Next, evaluate the company’s track record and reputation. Look for reviews, testimonials, and case studies to gauge their past performance. Consider their experience in your specific industry or domain as it can be valuable in understanding your unique requirements.
- Furthermore, communication and cultural compatibility are crucial factors in offshore collaborations. Ensure that the company has effective communication channels and can provide regular updates on the progress of your project.
By considering these factors, you can choose a reliable offshore software development company that aligns with your business goals and can deliver exceptional results.
The Bottom Line
This guide provides a detailed comparison of offshore software development rates in various countries. While rates vary significantly across nations, it is important to strike a balance between cost-effectiveness and quality.
However, don’t solely focus on cost; consider expertise, technology, and cultural fit. Take your time to research and make an informed decision. Find the perfect offshore destination that aligns with your needs and budget. Make a strategic choice for your software development needs and maximize your business’s potential in the global market.
