Hiring an Offshore Development Team in 2021: A Complete Guide

Krunal Shah

Jun 18, 2021 | 9 min read

hiring an offshore development team in 2021

Over the past 2 decades, The United States and other western European countries have emerged as global leaders in the technology market. However, a majority of the U.S based companies are faced with a critical challenge in the form of a shortage of local developers. Their businesses are also sometimes marred by their inability to compete with tech-giants in terms of lucrative packages for the employees. In a similar vein, western European countries are having a hard time looking for a local talent pool whilst reducing development costs.

This is where the practice of outsourcing software development plays a significant role. Modern technologies have endowed businesses with top-quality project management and communication tools that make it efficient and convenient to outsource development projects. But here’s the catch! The average cost of outsourcing software development services is not uniform all over the world – each country extracts a different price.

So how to make an informed decision in such a scenario? How does outsourcing Does software development help your business save costs? What are the offshore development rates in each part of the world?

Offshore Development Hourly Rates by Regions in 2021

offshore software development

Before we proceed to discuss the offshore development hourly rates in different parts of the world, let us first glance at the software development hourly rates in The USA and western European countries. These are the countries with the highest demand for offshore development and will help us paint a clearer picture of differences in the cost of offshore development among various regions.

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Software Development Rates in North America and Western Europe in 2021

offshore software development in North America and Western Europe

Based on the data available from Indeed.com, a software engineer earns an average hourly base rate of $47.59 in The USA as of 2020. The number may vary depending on the experience of the individual, the technology available as well as the location of work.

Some examples of location-based rates are as follows:

  • California: $58.96
  • New York: $58.44
  • Texas: $46.11
  • Washington: $55.01

In Western Europe, the average hourly rate can vary with the countries:

  • Germany: $56
  • France: $82
  • United Kingdom: $71
  • Sweden: $67
  • Netherlands: $60

Now let us review the development rates in offshore countries.

Disclaimer: The offshore development rates presented below serve as a rough guide for businesses as they don’t take into consideration the differences in cooperation models. You can find out the real rates by directly communicating with the vendors.

Offshore Software Development in Eastern Europe in 2021

Offshore software development in eastern Europe

A 2019 report by A Ventures Capital, Aventis Capital, and Capital Times states that Eastern European countries like Ukraine, Belarus, Poland, and Romania have now become among the top 5 global development centers. With more than 1 million software developers, Eastern Europe is one of the major outsourcing destinations. Incidentally, the annual number of tech graduates from these countries stands at around 60,000. This ensures a talent pool that’s highly educated, well-versed in the English language and advanced programming abilities. All these factors contributed to a progressive increase in the demand of Eastern European developers in the USA and western European countries.

The range of Average Hourly rates in the following top Eastern European countries is $25 - $50.

  • Belarus
  • Ukraine
  • Poland
  • Romania
  • Czech Republic
  • Romania
  • Hungary
  • Estonia
  • Slovakia
  • Bulgaria

Offshore Software Development in Latin America in 2021

Offshore software development in Latin America

As reported by IDC, Latin America will witness growth in the IT industry regardless of the prevalent political uncertainty. The major outsourcing destinations of this region include Argentina, Panama, and Brazil. Among them, Brazil comes out on top as the leading outsourcing country with more than 400,000 software engineers. Latin American countries are often the first preference of software companies due to their close geographical proximity to North America.

The range of Average Hourly rates in the following top Latin American countries is $30 - $50.

  • Argentina
  • Brazil
  • Chile
  • Columbia
  • Costa Rica
  • Panama
  • Peru
  • Mexico

Offshore Software Development in Africa in 2021

Offshore software development in Africa

The African IT outsourcing market is still in a phase of growth but it has already made its mark on the global IT industry as a lot of African countries continue to attract overseas clients. Growth in the region’s young population is expected to push the employment trends towards high-quality service sector jobs.

Countries such as Egypt, Tunisia, Morocco, and South Africa have emerged as key outsourcing destinations due to minor time zone differences and the absence of language barriers with regard to European countries. The East Africa nation of Kenya has a relatively higher concentration of programmers as it boasts an innovative infrastructure system, conducive to the growth of the IT sector.

The range of Average Hourly rates in the following top African countries is $20 - $40.

  • Egypt
  • Kenya
  • Morocco
  • Nigeria
  • Tunisia
  • South Africa

Offshore Software Development in Asia in 2021

Offshore software development in Asia

Asian countries are often identified as the pioneers of software outsourcing with more software engineers than any other region. India, China, and the Philippines are the most recognized Asian countries when it comes to software outsourcing. India has the most number of software developers while Chinese developers have gained a reputation for acing the most Hacker Rank challenges.

However, Asian countries also pose certain challenges such as poor working conditions, time zone disparity, and cultural differences that may affect the quality of work. Despite this, Asia still remains the top outsourcing destination for software companies as the countries charge a price That's considerably lower than other regions.

The range of Average Hourly rates in the following top Asian countries is $18 - $40.

  • India
  • China
  • Pakistan
  • Bangladesh
  • Philippines
  • Vietnam
  • Indonesia
  • Malaysia
  • Nepal
  • Thailand

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India ranks number 1 on the global outsourcing destination ratings

India ranks the global outsourcing destination

The term “outsourcing" strongly resonates with India, to the extent that when you hear the word outsourcing, you automatically connect it with the Indian subcontinent. This is because India is an ideal choice for the majority of US or UK employers seeking offshore software developers and rightly so.

First of all, it is the second-largest English-speaking country in the world. Secondly, India’s education system is heavily focused on mathematics which is evident from the fact that it produces around 2.6 million STEM graduates in a single year. Global tech giants such as Microsoft, Google, Ford Motor Company, and many more have found a reliable outsourcing partner in the Indian outsourcing companies as they fulfill the growing demands of the software Industries.

By consistently providing top-quality services at competitive prices, India has now grown into a support system for most of the software companies in the western world. India’s reputation as the most favored outsourcing destination is confirmed by its #1 position on the Global Services Location Index.

Why India Has Remained the Global Favourite for Offshore Development

India has the Global favorite for offshore development

1. Availability of Talented Experts and Professionals

With a population of 1.3 billion, India boasts a massive pool of young and technically skilled trained professionals. Also, the existence of a number of dedicated tech universities in the country means software development presents a lucrative career opportunity for a lot of young students. As a matter of fact, India will further add approximately 110 million human resources to its workforce.

2. Budget-Friendly Option

The driving force that motivates western countries to choose India as their offshore partner is a lower pricing model. In India, the cost of development is 30-35% lower when compared to that in the US or Western Europe as the average hourly salary of developers is as low as $20 to $40 per hour.

3. Excellence in the Quality of Results

The Indian outsourcing companies are well-known for their quality of work which meets international standards. More than 75% of the world’s CMM Level 5 certified companies belong to the Indian subcontinent. Moreover, India is home to the highest number of ISO 9000 certified software companies.

As reported by BBC, India is now the second-largest English-speaking country in the world, with nearly 10% of its population speaking the language. This is the reason why Western countries find it very easy to collaborate and coordinate with Indian outsourcing vendors.

5. Using the Time-Zone Difference to Their Advantage

The existence of a 12-hour time difference between India and the USA makes it possible for the native companies to get their work done earlier than expected and gives them an edge over their local competitors in terms of time-to-market.

6. Policy Support from The Indian Government

The IT industry is at the heart of the Indian services sector and employs a majority of the organized workshop. Consequently, the Indian government has designed its policies so as to promote ease of business in the country. Furthermore, the government also contributes by developing various industrial parks and infrastructure facilities to promote the IT sector.

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Popular outsourcing engagement models

1. Staff Augmentation Model

Also known as an extended development team, this model enables businesses to enhance the efficiency of their in-house teams while exerting total control over the project. In Staff Augmentation Model, companies essentially “receive assistance” by adding additional engineers to their in-house teams as per their requirements. Ultimately, the responsibility for getting results falls upon the native companies.

Benefits of Staff Augmentation Model

  • Improvement in development capacity and output.
  • Substantial reduction in HR, operations, and development costs.
  • Flexibility and scalability
  • Benefits of expertise and top talent pool

When to use Staff Augmentation Model for best results

  • When your in-house development team features substantial talent and technical leadership.
  • When your in-house development team lacks a certain level of expertise.
  • When your company is in urgent need of additional technical talent.

2. Dedicated Development Team Model

Also known as Managed Team Model, it presents companies with a complete team of highly skilled and talented software development experts. The offshore teams work independently and are managed by an outsourced Project Manager who is liable to report to the native company.

In this model, both the native companies and the offshore tea share the risks and responsibilities of the project equally but the final decision is made by the native company.

Benefits of Dedicated Development Team Model

  • Higher control over development
  • Assurance of quality in results
  • Time-saving for the in-house team
  • Effective communication
  • Elimination of risk element

When to use the Dedicated Development Team model for best results

  • When you already have access to an experienced in-house project manager.
  • To fulfill the need for technical expertise in a specific area.
  • When you want to lead the decision making and development process.

3. Project-Based Model

Also known as the Outsourced Product Development model, it is the most traditional method which basically frees you from the entire burden of project development. The offshore team looks after and handles the entire process of development and delivers the results as per the predetermined specifications.

In this model, the final responsibility of achieving the desired results falls upon the offshore team. Also, your influence on project management is limited and only includes providing details and specifications.

Benefits of Project-Based Model

  • Perfect understanding of the timelines and outcomes of the projects.
  • Reduced time commitment on your part.
  • Shift of burden to the offshore team.

When to use Project-Based Model

  • When you need to build a project that’s not your own core project
  • When your in-house development capabilities are limited
  • When the scope of your project is pretty static and you don’t want the burden of project Management
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Krunal Shah

Krunal Shah is the CTO and Co-founder at Third Rock Techkno. With extensive experience gained over a decade, Krunal helps his clients build software solutions that stand out in the industry and are lighter on the pocket.

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