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No matter how much money you budgeted for developing a software product, it's always tempting to lower this number. And while it is almost impossible to come up with 100% accuracy on the offshore software development price, the least we can do is give you a checklist of things that make up the final price of offshore software development.
After reading this article, you'll also get to know the average offshore software development rates by country and some handy tips on how to reduce the price. Let's start!
How Does Knowing the Average Offshore Software Development Rates Can Help You Build a Profitable Startup?
A startup budget is a straightforward outline of how you plan to use your funds to cover the rising business costs. This is applicable to both pre-revenue and later-stage tech companies.
The budget will determine the amount of money you will need to get through the initial few weeks or months. It's good if your startup budget is based on market research and provides a nearly realistic forecast of your expenses.
In case when you plan to outsource part of product development, offshore rates for software development will go to that expense line in your budget. And the numbers you put in that line can differ a lot.
When you're familiar with the offshore software development rates by country, software developer contractor rates, freelance software developer rates, and average offshore software development rates – it presents an opportunity for cost savings and business investment. Overall, you make more wise money business decisions and have more chances to build a profitable business.
For example, if employees' salaries are your most significant expense, hiring a dedicated team with a lower average hourly rate for software developer can help you cut expenses on development. Ultimately, knowing the offshore software development rates helps you find an outsourcing vendor with the best quality/price ratio.
What Makes Up Offshore Software Development Rates: 5 Key Factors
If you have spent some time googling “offshore software development rates,” you probably noticed that the rates for offshore software development vary. Sometimes significantly. The thing is, there are a number of factors that make up the final check. Below I’ll explore the factors that contribute to the offshore rates for software development.
The main factor that affects offshore software development rates is location. Different countries have different rates for software development services. For example, Ukrainian developers’ hourly rates are lower than in the US or Canada. Other countries that are known for offering competitive rates include China, the Philippines, India, Poland, Argentina, and Brazil.
The rates can also vary within a country depending on the location of the development team. For instance, the rates for software development in a major city may be higher than in a smaller city or town.
Another factor that can influence offshore software development rates is the company’s profile. What do I mean by saying “company’s profile?” Well, it’s all about the company’s portfolio, previous clients, projects, and their rating on platforms like Clutch. A company with a strong portfolio and reputation may charge higher rates due to its experience and expertise.
You can check our cases and get to know how we helped to develop such awesome product as Dollar Shave Club, GOAT, Aspiration, Cardless and more. Also we have awesome project on Dribbble and Behance. Check them out!
The programming languages and tech stack used in software development can also affect the offshore rates for software development. Developers with expertise in the latest technologies or niche programming languages may have higher hourly rates than developers with more general skills.
Moreover, some technologies or platforms may require specialized knowledge and experience, which can also increase the rates. For example, developing a fintech solution may require additional expertise in security practices and may come at a higher cost.
Taxes can also impact offshore software development rates. For example, in some countries, software development services are subject to value-added tax (VAT), which can increase the overall cost.
Here's a breakdown of how VAT and other taxes impact offshore software development rates in top offshore destinations:
- In Ukraine, the standard rate of VAT is 20%. However, IT services, including software development, are exempt from VAT, making it a tax-friendly destination for offshore software development.
- In India, the GST rate for software development services is 18%.
- In Poland, the standard VAT rate is 23%. However, Poland offers a reduced VAT rate of 5% for IT services provided by small businesses.
- In the Philippines, the standard VAT rate is 12%.
- In China, the VAT rate for software development services is 6%. However, foreign companies may be subject to additional taxes and regulations, making it a more challenging destination for offshore software development.
Type of Cooperation
The cooperation model you choose for your offshore software development project can also affect the cost. The most common cooperation models are time and material, fixed price, and dedicated team.
- Time and material: In this model, you pay for the actual hours worked and the resources used. This model is suitable for projects with a flexible scope, where changes can occur during the development process. However, it can be difficult to estimate the final cost, as the scope may change.
- Fixed price: In this model, you agree on a fixed price for the entire project. This model is suitable for projects with a well-defined scope, as you can accurately estimate the cost upfront. However, changes to the scope can result in additional costs.
- Dedicated team: In this model, you hire a dedicated team of offshore software developers to work on your project. This model is suitable for long-term projects and can provide better cost control and more flexibility. However, it requires more management and communication effort from your side.
Offshore Software Development Rates by Country
When it comes to offshore software development, the location you choose can make a significant difference in the cost of your project. Here's a sneak peek at the average offshore software development rates in several popular countries.
Average Offshore Software Development Rates by Country
- Ukraine: $35-$50
- India: $20-$40
- Poland: $35-$50
- Romania: $35-$45
- Slovakia: $35-$50
- The Philippines: $25-$35
- China: $25-$45
Offshore Software Development Rates in Ukraine
Ukraine is an increasingly popular destination for offshore software development due to its large pool of highly skilled IT professionals. The average hourly rate for software development in Ukraine is around $35-$50, depending on the project's complexity and technology stack.
Offshore Software Development Rates in India
India has long been a top destination for offshore software development due to its vast talent pool and cost-effectiveness. The average hourly rate for software development in India is around $20-$40, depending on the project's complexity and technology stack.
Offshore Software Development Rates in Poland
Poland has gained a reputation as a quality offshore software development destination in recent years. The average hourly rate for software development in Poland is around $35-$50, depending on the project's complexity and technology stack.
Offshore Software Development Rates in Romania
Romania is an emerging destination for offshore software development, known for its highly skilled IT workforce. The average hourly rate for software development in Romania is around $25-$40, depending on the project's complexity and technology stack.
Offshore Software Development Rates in Slovakia
Slovakia is a small but growing destination for offshore software development, thanks to its highly skilled and cost-effective IT workforce. The average hourly rate for software development in Slovakia is around $35-$50, depending on the project's complexity and technology stack.
Offshore Software Development Rates in The Philippines
The Philippines is becoming an increasingly popular destination for offshore software development due to its cost-effective and highly skilled IT workforce. The average hourly rate for software development in the Philippines is around $20-$35, depending on the project's complexity and technology stack.
Offshore Software Development Rates in China
China has a vast and rapidly growing IT industry, making it an attractive destination for offshore software development. The average hourly rate for software development in China is around $25-$45, depending on the project's complexity and technology stack.
How to Estimate Offshore Software Development Cost for Your Project
When things go South, most startups fail because they lack the money to deal with unexpected problems.
You should calculate the expenses as accurately as possible. Hiring a good financier can be helpful. But before hiring an offshore software development partner, you can take a few steps to estimate the offshore software development costs for your startup project.
Below I gathered some handy tips to help you. Check out what you can do to get a better picture of the final offshore software development rates.
Define Your Project Scope
Before you can estimate offshore software development costs, you need to define your project scope. Start by identifying the features and functionalities you want to include in your product. Once you have a clear idea of what you want to build, you can work with your offshore software development team to estimate the cost and timeline of your project.
Consider Your Development Partner's Experience
When choosing an offshore software development partner, consider their experience and expertise. A partner with more years of experience in your industry and relevant cases will understand your business needs and is more likely to provide a better solution but get ready that the average hourly rate for a software developer in this offshoring company can be higher. You get what you pay for.
Look Beyond Hourly Rates
Hourly rates are an important factor when estimating offshore software development costs, but they're not the only factor. A lower hourly rate may seem appealing, but if it takes longer to complete the project or the quality of the work is lower, you may end up paying more in the long run. Consider factors like the team's experience, the quality of their work, and their communication skills when choosing an offshore software development partner.
Use Agile Development
Agile development is a project management methodology that can help you estimate offshore software development costs more accurately. With Agile development, you break your project down into smaller, more manageable tasks and work on them in short sprints. This allows you to adjust your project scope and budget as you go based on your progress and feedback from your customers.
We at Uptech, practice Agile development since 2016. And we believe that it’s the best option for startups because it leaves space for maneuvers and lets us build product development in the most time and cost-effective way.
Consider the Cost of Communication
Communication is a critical factor in offshore software development projects. Make sure that you have a plan for communicating with your offshore software development team, and factor in the cost of communication when estimating your project budget. Consider using video conferencing tools, instant messaging, and project management software to help you stay in touch with your team.
Consider the Cooperation Model
I mentioned above that the cooperation model you choose for your offshore software development project also affects the cost. Depending on what model you choose: time and material, fixed price, or dedicated team – the price will differ. Note that not all outsourcing companies offer all three, so you should keep an eye on that too.
Want to Reduce the Offshore Software Development Cost? Here’re 2 Tips
When a client asks me what we adopt to reduce the offshore software development cost, I always suggest two options: choose a dedicated team cooperation model and prioritize features.
Hire a dedicated offshore team
Hiring a dedicated offshore team can be more cost-effective than hiring individual developers. When you work with a dedicated offshore team, you have access to a group of developers with a range of skills and expertise, as well as a project manager who oversees the work and ensures that it is completed on time and within budget.
Moreover, when you work with a dedicated offshore team, you have the option to scale the team up or down based on your project requirements. This means you can bring in additional resources as needed without incurring additional overhead costs.
We used a dedicated team model while working with our client Nomad – a personalized house-hunting platform for Europe and the Middle East. With all the flexibility that this model gives, we could take an idea from concept to development. Plus, dedicated model is all about team work and experience sharing. And the words of Nomad’s co-founder & CPO, Daniel Piehler describes it better than anything:
“They were always ready to teach me new methods and were willing to try new approaches, workshops, and exercises. I was definitely impressed by the intellectual rigor that goes behind their mindset and organization of the workflow.”
Prioritizing features helps you focus on what is most important for your product, avoid scope creep, and reduce the risk of going over budget. It also allows you to get your product to market faster, which can help you start generating revenue and attracting customers sooner.
Our case with Plai – a people and performance management tool, is an excellent example of how feature prioritization can speed up the product launch (especially when you’re participating in YC) and save costs.
Offshore software development rates vary depending on a number of factors, including location, company’s profile, tech expertise, taxes, and type of cooperation. By considering these factors, you can make an informed decision about outsourcing your software development and choose the best option for your needs and budget.
What are the average offshore software development rates by country?
These are the average offshore software development rates in the most popular destinations:
The Philippines: $25-$35;
How to reduce offshore software development price?
There are different options to reduce offshore software development rates. The most effective ones are: choosing a dedicated team cooperation model and prioritizing features.