In Martin Prosperity Institute’s report Rise of the Global Startup City, they found that the US dominates the rest of the countries by 68.6% as the centre for venture capital. This is followed by Asia and Europe with 14.4% and 13.5%, respectively. Consequently, these regions also suffer from local tech talent shortage.

The lack of IT professionals in these tech-concentrated countries results in high developer rates and difficulty in finding the right talent. That is why many startups and enterprises from these countries outsource their software development. Mainly to access a larger talent pool and, of course, save on operational costs.

For example, in the UK, a software engineer is paid an average of £30 ($39.45) per hour, according to Payscale. Meanwhile, outsourcing your software engineer to an Asian country can cost you an average hourly rate of £13.69-£30.41 ($18-$40). Startups and enterprises have the option to get quality output for less; that is why it is still a popular and efficient business solution.

If you’re looking to know more about offshore developer rates, continue reading for more information on average outsourcing rates at each popular outsourcing destinations and know what to look for when choosing the right IT offshore partner.

What affects offshore developer rates?

Before comparing offshore developer rates, it’s important to understand how these numbers came about. According to a 2018 Accelerance report titled The 2018 Guide to Global Software Outsourcing Rates, offshore rates depend on these five factors:

1. Location
   It’s difficult for a labour force to move to another region or country so a software development team’s labour rate is highly localised. In general, the more developed and the nearer an offshore team is to the client’s location, the higher you would have to pay for hourly rates.
   
   
2. Seniority
   Same with hiring locally, offshore senior developers would cost more than offshore junior developers due to the level of skills and experience they can provide. However, this does not apply to old-school technology, such as COBOL, as sometimes, senior developers are the only ones available because of the low demand.
   
   
3. Tech Stack
   Hiring offshore would cost a bit more if you are looking for in-demand, new, or unusual technologies or skills. Jobs with specialised skills such as data scientists are generally more expensive everywhere else, while front-end development and mobile app development are common in the industry, thus it is less expensive.
   
   
4. Team Size
   In general, a bigger team has a lower average rate. However, a large team hired for only a short period of time, such as less than a year, can actually cost more.
   
   
5. Project Length
   While many businesses prefer a flexible or short-term commitment to outsourcing, a long-term outsourcing partnership is actually more beneficial as it drives down rates.

Aside from these, another factor to consider is the outsourcing firm’s cooperation model. The right cooperation model for your business can efficiently help your project and can help determine the rates of your offshore developers. Here are three common cooperation models.

• Team Extension
  The client directly manages its offshore members just like their local team. This model requires close collaboration and communication as both local and offshore team work together.

• Development Outsourcing
  A client team creates a project in collaboration with the end-customer and outsources the project to an offshore partner who will execute and improve the project.

• Project Outsourcing
  The client designs a project and outsources the execution to an offshore team. This model is known to increase an organisation’s flexibility, productivity, and quality.

The hourly rates of a project outsourcing company can be higher than the hourly rates of the same service from a team extension company model.

Here’s a quick comparison:

Take note that the inclusions above can change depending on the offshore vendor’s services and conditions. Also, keep in mind that the offshore developer rates below are a rough guide for you to know the average hourly rate you would have to pay.

To know the exact offshore hourly rates, it is best to ask an offshore vendor’s developer pricing guide.

Where to hire offshore developers?

Offshore hourly rates per region

Asia
In the 2017 Tholons Top Outsourcing Destinations, 6 out of the top 10 cities are from countries in Asia like the Philippines and India. Aside from these top two offshore destinations, other Asian countries such as China and Vietnam have emerged as ideal offshore locations for software development as well.

Asian offshore destinations boast a large labour pool, advanced skills, and inexpensive prices that are attractive to most startups and enterprises. For example, because of Asia’s vast talent pool, offshore developer rates cost around $18-$40 per hour. These advantages make it easier to find and hire offshore developers from these countries.

Eastern Europe
Since these countries are near Europe’s tech hubs such as the UK, Eastern European countries have a dense number of software developers. The demand for these developers has risen in recent years due to the region’s advanced education and similar culture with Western clients. In addition, the average IT outsourcing rates in Eastern Europe are between $25-$50 per hour making it an ideal offshore destination for some, especially nearby countries. Popular offshore destinations are Ukraine and Poland.

Latin America
The rise of “TechnoLatinas” gave way to a growing pool of tech talent and tech entrepreneurs in Latin America. Not only are global startups and enterprises investing in tech ventures, but there has also been a growing need for offshore developers. Due to its proximity, low cost, and small time difference, Latin America is an ideal offshore destination for North American clients. Top offshore destinations are Mexico, Argentina, and Brazil with average hourly rates of $30-$50 per hour.

Africa
With the continent’s growing tech industry and cheap labour costs of around $20 or less, Africa has gained attention from global startups as an offshoring destination for software development. However, due to the low labour market, it can be difficult to find skilled developers and prices can cost around $40, especially in Morocco, Egypt, and Kenya.

To give organisations a better idea on offshoring rates, Accelerance compiled and listed down different outsourcing rates of various positions from qualified IT outsourcing companies. See the full list below.

Offshore rates via Accelerance

Choosing the right offshore development vendor

In the same report, Accelerance recommends businesses not to select an offshore vendor based on the lowest cost available. Price does not guarantee the quality of service an offshore vendor can give. The report also recommends to “tread cautiously with services offered below $25/hr” as this may be a sign that a provider is either under-investing on the company or cutting corners in quality or delivery requirements.

According to the report, the best course of action in this situation is to select an offshore vendor offering reasonable and competitive rates compared to other providers in the same region. In the long-run, these offshore companies can deliver consistent quality output and help you save costs in other areas as well.

Aside from looking at developer rates as a major factor, here are more key factors to consider when choosing a reliable offshore provider.

• Track record
  Consider doing a thorough background check when scouting for offshore vendors. Know how long they have been in the business, and what their achievements and contributions are. If possible, get feedback from past or current clients. This ensures that your chosen offshore provider is credible and reliable, thus eliminating risks of fraud.

• Expertise
  If you’re looking for mobile app developers, it may be better to look for an offshore vendor specialising in mobile app development instead. Narrowing down your choices to a specialised offshore provider ensures that you are getting a team skilled and experienced in their craft.

• Project Management
  If you will be fully outsourcing the execution of your project, it is best to consider partnering with an offshore vendor with a dedicated project management team. A great project manager keeps you notified on updates, progress, and setbacks so that you can immediately solve issues. If you will be opting for a team extension model, you will have to directly manage and monitor your offshore team.

Want to know what other factors you should look for? Here’s a quick guide on choosing the right IT Outsourcing Partner.

Tip: If you’re still hesitating to partner up with an offshore vendor, why not pay them a visit? This allows you to examine the working conditions of your potential offshore developers, see their work ethic, and know the people you will be working with. Remember, your offshore team and vendor are not just a resource, they are valuable partners who will help you grow your business.

Why outsource to the Philippines?

As a consistently top outsourcing destination in the world, the Philippines is one of the best countries to outsource software development. Dubbed as the BPO Capital of the World, the Philippines has also emerged as a reliable IT outsourcing resource for software engineers, and QA engineers, among other tech occupations for businesses across the globe.

At Cloud Employee, we believe the following reasons make the Philippines stand out as an ideal and top outsourcing destination in the world.

• A large pool of IT professionals
  With over 130,000 tech and engineering graduates a year, the Philippines produces a pool of globally-competitive tech professionals that is not available in countries with tech talent shortage such the UK, and the US.

• High English proficiency
  In the 2017 EF English Proficiency Index, the Philippines ranks 15th out of 80 countries topping Western countries such as Serbia (16th) and Romania (17th). As the Philippines’ second language, English is the primary medium used in school and business, thus their fluency in the language.

• Familiarity with Western culture
  Once an American colony, the Philippines has adapted Western influences into their culture thus the similarity in their culture. In addition, the country’s active use of social media and the internet keeps them up-to-date with global news and cultures.

• Great customer service
  It is well known that Filipinos are very hospitable, friendly, and have a strong work ethic. You will see this through their expertise in customer service.

• Competitive offshore developer rates
  Due to the country’s lower cost of living and labour costs, the Philippines offers reasonable rates that can help you save up to 65% compared to its offshore neighbours.

Related Article: 3 Reasons Why The Philippines is One of the Top English-Proficient Countries for Business

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