Table of contents
The role of software development outsourcing is huge in modern business. The benefits of this approach are countless. But how much does it cost to outsource software development?
When you decide to delegate your projects to external professionals, the outsourcing price is always among the top factors you will consider before making the choice. Still, there is lots of confusion concerning this matter.
To help you get on the right track, the team of Northell has prepared a detailed guide to software outsourcing rates by country and region.
From this guide you will learn:
- Why companies outsource software projects;
- Factors that determine the cost of every project;
- Top regions to outsource software development;
- Comparison of outsourcing rates by country and region
- A small guide to outsourcing software development;
- Pro tips from the Northell team for the best outcomes.
Let’s dive in!
How Much Does It Cost to Outsource Software Development?
Now you know that every region is different in terms of software development outsourcing. So, how much does it cost to outsource software development?
Let’s quickly compare the average outsourcing rates by country region:
As you can see, the range of outsourcing rates by country and region is huge. Thus, when you ask “how much does it cost to outsource software development,” you have to know that there is no single answer to this question.
The final cost will be determined by a variety of factors, which means that every company should be able to find an outsourcing partner that would match their budget.
The Main Reasons Why Companies Choose Software Development Outsourcing
Before we move on and break down the question “how much does it cost to outsource software development,” it’s vital to know why businesses choose to outsource software development in the first place. To understand this, let’s take a look at the key reasons.
Access to Sophisticated Talents and Knowledge
The first core reason why companies prefer outsourcing is that it gives them access to an infinite pool of talent. When staffing your in-house team, you are almost always limited to geographic boundaries. This basically means that you have to choose the best from geographically available talents. But, if you opt for outsourcing, these limitations are washed away.
Outsourcing enables you to access talents globally and build a development team with the knowledge and experience most relevant to your project.
Improving the Performance of Long-Running Processes
When outsourcing software development, companies get an opportunity to distribute different roles and tasks evenly, ensuring adequate workload for all in-house and external employees. At the same time, they ensure a better distribution of knowledge and expertise to relevant tasks. As a result, every employee, be it an in-house or outsourced one, can focus on what they can do best. In the long run, this allows you to increase flexibility, efficiency, and job satisfaction as well.
Delegating a Large Number of Tasks
A typical software development process consists of multiple phases, including research & analysis, design, implementation, testing, deployment, and maintenance. Every phase consists of a plethora of tasks. So, the workload on software development teams is huge by default.
Depending on the project’s scope, the load can often get nearly unbearable and that’s one more case where development outsourcing can benefit your business. When resorting to outsourcing, companies can delegate a huge number of daily tasks to outsourced professionals.
As a result, the entire development process can become more seamless and effective and, at the same time, your in-house specialists will gain more time to focus on the most important tasks.
Significant Cost Savings
Probably the biggest reason why companies outsource software development is that it allows them to significantly cut down on development costs.
How’s that? Top-level development talent isn’t cheap and the cost is always tied up to your geographical location. Let’s say your company is based in the US, then most likely you will have to pay every developer at least $50 per hour.
This can make your project rather expensive. And how much does it cost to outsource software development? If you compare outsourcing rates by country and decide to delegate software development to specialists from, let’s say, eastern Europe, this could cut the hourly rate by 2 times. Respectively, there will be significant cost savings on the entire project.
Reduced Operational Risks
Every new project is associated with certain risks. Namely, there is always a risk of failure of the end product. But, outsourcing helps mitigate related risks. First and foremost, when hiring outsourced development teams, you get rid of additional expenses. Thus, if a project fails, you lose less than if you hired in-house talents.
On top of that, when you delegate software development to an external team, you also share all the risks with it. Simply put, in this case, the quality of the end product doesn’t depend solely on you and your in-house team, but also on your outsourcing partner.
And, if you find a good partner with sufficient experience and lots of successful cases, you can rest assured that the quality of your product will be high.
Lastly, if you distribute operational tasks among different companies and set up phased rollouts, you also reduce risks linked to the product launch.
Software Development Outsourcing Price: Primary Factors
If you are wondering “how much does it cost to outsource software development,” the first thing you have to know is that there is no one-size-fits-all in this matter. The total outsourcing price for each project is affected by numerous factors, including the following ones.
Outsourcing price by Location
The cost of all kinds of goods, services, and labor is closely interlinked with a geographic location. And software development is not an exception. The cost of services depends a lot on the average salaries of software developers in the location of your outsourcing partner.
Thus, the cost of such services in the US or Australia will be the highest, whereas the rates in Eastern Europe or Asia will be the lowest.
Outsourcing price by Team Experience
If you ask “how much does it cost to outsource software development,” you must know that another factor that dictates the price is the experience of the team. Outsourcing companies that have been around for many years, have a solid experience in the industry, and can boast a large portfolio of successful projects already have certain reputations.
Their reputations speak for themselves and, thus, allow them to set higher price tags. The industry’s freshers, on the contrary, often set lower rates. They do this to acquire more customers and start building their own reputations.
Team Level of Expertise
Apart from experience, the level of team expertise also matters. Just like in the case of in-house employees, junior-level specialists charge less than senior-level ones. Respectively, the set of skills and expertise of the team you outsource will directly affect the final cost of the project.
Outsourcing price by Project Size
Depending on the size, every software development project requires a different number of professionals with different levels of expertise and skills. So, the size of your project is the next factor worth considering when talking about the outsourcing price. For larger projects, you will need more specialists with different titles. This can involve architects, designers, developers, managers, testers, etc. If that’s the case, the price will be higher.
On the contrary, if the project’s size is small and it only requires a few people to participate, the final price will be lower.
Outsourcing price by Project Length
The duration of the project plays an important role too. Regardless of the chosen pricing model, the final cost of an outsourced project always depends on the amount of time that specialists spend on completing it.
Outsourcing price by Project Complexity
Finally, the complexity of a particular project is also a part of the answer to the question “how much does it cost to outsource software development.” Every project has specific functional and non-functional requirements that can vary depending on the project’s goals. Also, there might be a need for software integrations and supplementary services, such as UX/UI design, quality assurance, etc.
All these factors determine the complexity of the project and, respectively, the scope of work. The higher the scope of work and complexity, the more human, tech, time, and other resources it will require. Respectively, the outsourcing price will be higher too.
Software Development Outsourcing: Rates by Countries
As you already know, the ranges of outsourcing rates by country and region are different. And so are the quality of talent, levels of spoken English, and many other things. Let’s look at different regions in detail to define which are the best for outsourcing software development.
Outsourcing price in Eastern Europe
By the end of 2021, the software outsourcing market in Eastern Europe has crossed the point of $103 billion, with a steady growth of $5-10 billion per year. This fact alone makes Eastern Europe a top-tier location for outsourcing software development. But that’s not all.
Apart from a rapidly growing software outsourcing market, Eastern Europe attracts companies with a top-level education, highly skilled talent, excellent communication culture, and a reasonable outsourcing price.
If you look up outsourcing rates by country, you will discover that the sweetest spots in Eastern Europe are Ukraine (avg. $30-55 per hour) and the Czech Republic (avg. $25-55 per hour). Apart from the aforementioned benefits, many companies choose to outsource software development to Eastern Europe due to convenient time zones and high levels of spoken English in this region that simplify communication.
Outsourcing price in North America
Another popular region for software development outsourcing is North America. Basically, there are only two options there. The first one – the US – sure stands for a high quality of service, but we can’t deny the high outsourcing price here. Due to this reason, nearly 300,000 jobs are being outsourced out of America every year.
But then, there is also Canada, which is known as a rather favorable country for outsourcing software development. There are two main reasons why American companies outsource to Canada. First of all, it’s the time difference, which is either insufficient or not present at all.
And the second reason is the fact that Canadian dollar trading is lower compared to the US dollar. This allows companies to keep development costs lower thanks to currency exchange rates.
Outsourcing price in Latin America
The reason for the high popularity of Latin America for software development outsourcing is simple – the time zones in this region don’t differ much from those in the US. Also, the geographic proximity to North America allows companies to visit their outsourcing partners from Latin America physically. At the same time, the outsourcing price is quite low too. But the IT sector here is less developed so there is no access to a huge variety of top-level talent.
Outsourcing price in South-East Asia
Asia has always been a popular region for outsourcing software development. The core reason for that is a low outsourcing price. In fact, the lowest on the market. But there is a wide range of drawbacks. Namely, the level of spoken English in this region is incredibly low, which almost always means poor communication with customers. And the quality of talent isn’t very high either.
Outsourcing price in Middle East
Outsourcing companies located in the Middle East often attract customers from Europe due to geographic proximity and similar time zones. The low cost of services also matters. If you are wondering “how much does it cost to outsource software development” in this region, the prices can range between $20 and $4o per hour.
However, just like it is in Asia or Latin America, the quality of IT education in this region is incomparable to that in North America or Eastern Europe. So, the quality of talent that can be found here is somewhat lower.
Outsourcing price in China
Unlike many other countries in Asia, China boasts a rapidly growing IT sector. It’s popular for software outsourcing due to its large pool of productive and high-quality workforce. But there is a catch – despite a common stereotype about the low cost of work in China, the rates of local specialists vary significantly. How much does it cost to outsource software development in China? The rates can start from as low as $25, but grow up to $200.
Outsourcing price in India
One country also worth mentioning separately is India. It is among the top popular locations for outsourcing software development, also due to low operational costs. However, as in the case of many other cheap regions, India doesn’t provide top quality. The quality of IT education in India isn’t very good, so there are many low-key specialists that can harm your project.
How to Outsource Software Development and Not Lose a Lot of Money [Quick guide]
So, we’ve already answered the question “how much does it cost to outsource software development,” but that’s not all you need to know.
Although there are average rates for certain services across certain regions, a big part of how much you’ll spend on your project depends on how well you set up the process.
So, if you want to keep the outsourcing price manageable, here is how to outsource the right way.
Step 1: Define Your Company’s Goals and Needs
Before searching for an outsourcing partner, you must clearly see your overall business and particular project’s needs and goals. First of all, take time to put together all the specs of your future project, define what purpose it will serve, what kind of software it will be, and what it will bring to your audience. Knowing this will help you understand what kind of development specialists you are looking for.
When all requirements are formulated, use the SMART system to set Specific, Measurable, Achievable, Realistic, and Time-bound goals for your project. Later, you will be searching for an outsourced team that will align with your goals and needs and it will help you make the right choice.
Step 2: Set Up a Budget and Time Expectations
When you have well-defined needs and goals, you should set a specific timeframe and budget for your project. Many companies tend to overlook this matter when outsourcing for the first time. But here is a thing – it is incredibly easy to spend too much time and money on development when there are no budget and time expectations in the first place.
Thus, if you don’t want to overspend resources, don’t skip this step. Besides, defining a specific budget and timeframe for your project will also help you find the right vendor – someone who will be able to bring your ideas to life within the expected time and budget.
Step 3: Start Searching for Teams by Region
As you already know, there might be different outsourcing rates by country and region. So, once you define the budget, use the price overview above to identify where you want to outsource to stay within your budget. Also, pay attention to the needs and goals of your project to choose the outsourcing region that has the right talent, work ethics, and workflow that align with your needs.
Once you decide where you want to outsource. Start looking for available vendors. If possible, ask around to see if any of your customers or partners already had experience with outsourcing in the selected region. If not, use trusted services like Clutch and Trustpilot to find available companies with ratings and customer reviews.
Step 4: Select 10-15 Teams and Conduct Interviews
Among the options you discover, pick between 10 and 15 companies that look good to you. Then, conduct a series of interviews to assess each team.
By the time you conduct interviews, you should already be familiar with the general terms of work, portfolio, and reviews of every selected company. Thus, during the interview, you want to focus on the workflow, professionalism, infrastructure, work ethics, and skill sets available in every team. Be patient and take enough time to study every option thoroughly.
Step 5: Choose Your Vendor and Sign a Contract
Finally, after conducting some interviews, you should already have an idea of what vendors you like the most. When you make your pick, the last important step you should take is to prepare a solid contract and sign it.
In a contract, you want to clearly define the core conditions of work. Be sure to specify:
- Access to information and source code
- Services you will receive
- Time estimate
- Contract period
- Failure to deliver services
- Liability of each party to the contract
The more detailed the contract, the more predictable outcomes you will obtain. So, take enough time to put everything together and let the chosen vendor carefully study the contract too.
How to Outsource Software Development Successfully [Tips From the Northell Team]
Now that you know how to prepare for outsourcing and choose the right vendor, our team has a few extra tips that will help you ensure success.
Adopt Agile Principles
According to Zippia, at least 71% of the companies in the US have already adopted Agile by 2022. The core idea of Agile is to roll out software projects in short iterations, often one week to one month long. Completing your projects in such short-term pieces allows more transparency, adaptivity, efficiency, and motivation. Besides, it lets you add small improvements at every stage to improve the quality of the end product.
But there is a catch. The Agile workflow relies a lot on close teamwork, which often seems incompatible with traditional outsourcing. But that’s not quite true. In fact, adopting Agile principles when outsourcing can have plenty of benefits. If you do this, you can speed up the workflow, minimize misunderstanding, boost productivity, and release better products. So, this is the first tip by Northell that you should try.
Focus on Communication
When you are hiring a software developer for a project, communication should always be at the core. This applies to in-house teams, where software specialists have to collaborate closely with other team members in order to ensure a seamless and effective workflow. But, when it comes to outsourced developers, communication is even more important.
Apart from being able to communicate effectively within their own team, outsourced specialists should also be able to communicate effectively with your in-house team. Without this, it would be impossible to implement your projects and ensure the best outcomes. Therefore, when hiring an outsourced team, always put focus on communication.
Get Involved in All Processes
From creating the minimum viable product to designing the UI/UX interface and all the way to launching the product, you want to actively participate in every process involved in your project.
Why does this matter? The reason is simple – no matter how professional and experienced the team is, they are not you and might not have the same vision as you. Therefore, if you get involved in all processes yourself, this can help you avoid lots of misunderstandings and issues. As a result, this will reduce your product’s time to market and also save you lots of money.
Track and Measure Vendor Performance
When outsourcing software development projects to professional teams, it can be easy to let go of control and go with the flow. Many companies do this as they believe that professional outsourcing agencies know what they need to do better. However, the experts from Northell believe that this is the wrong approach.
The only way to ensure the positive outcome of any business operation, including software development, is to track the performance and measure the outcomes regularly. This will let you identify the errors that might be there and find areas for improvement. In the long run, this approach can save you lots of time and money. So, the last tip from the Northell team is to always track and measure vendor performance to ensure the best results!
Why Should You Outsource Software Development to Northell?
Now that you know all the benefits and downsides of software development outsourcing, you should clearly see that choosing the right vendor is the key to success. And, if you are reading this, you’ve already found one.
Northell is a top-rated development partner that delivers impactful outsourcing services that propel business growth. Being on the market since 2019, we’ve gained the trust and affection of customers from all across the globe thanks to our professionalism and dedication.
With Northell, you can equip your projects with the right talent at a reasonable price and get a flawless product in the short term. We help businesses of all sizes and across different industries bring their ideas to life and ensure the best outcomes. So, if you are looking for an outsourcing partner that can help you attain your goals, don’t hesitate to contact the Northell team right now!
How Much Does It Cost to Outsource Software: Summary
If done right, software development outsourcing can help your business cut costs, streamline workflow, and roll out better products faster.
Hopefully, this guide will help you answer the question “how much does it cost to outsource software development” and all the other questions that might be there. Use it as an actionable plan to find the best outsourcing partner for your projects. And don’t forget that the expert Northell team is always there to give you a helping hand!