The Ultimate Guide to the Cost of Outsourcing Software Development

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Since we have worked with 100+ clients globally, offering the best software development outsourcing services, we understand the factors that impact the cost of outsourcing software development. So, we have written the guide to provide you with a complete understanding of the cost associated with outsourcing software development services.

Before exploring the detailed breakdown of the cost, let’s first explore the types of outsourcing software development.

3 Types of Outsourcing Software Development

Here are the three types of outsourcing.

• Onshore outsourcing refers to project outsourcing to an external service provider located in the same country or in a location having a similar time zone.
• Nearshore outsourcing refers to project outsourcing to an external service provider based in a surrounding or nearby country.
• Offshore outsourcing refers to project outsourcing to an external service provider in a distant location, usually on a different continent.

After knowing the types of outsourcing, let’s provide you with the quick cost of outsourcing software development.

Quick Cost for Outsourcing Software Development

The quick cost to outsource software development ranges from $30,000 to $5,00,000+.

Providing the exact cost to outsource software development is difficult, this depends on various factors, but to give you an idea of the software development rates, here is the table that provides an approximate cost range.

This may have given you an overview, but if you want to know the software development hourly rates in various regions, below is a table with software development hourly rates for different regions.

Note – The above-listed rates are approximate. These hourly rates vary based on several factors that include the complexity of the project, expertise, technology stack, and team size. The rates are provided by analyzing various reliable sources and websites like Clutch.

Now that you have an overview of the software outsourcing rates in different regions, let’s discuss the factors that can influence software outsourcing costs.

4 Factors That Impact the Software Outsourcing Cost

You might think that getting an average hourly rate for outsourcing software development projects is enough, but no, various factors influence your software outsourcing cost. Here are the factors.

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1. Outsourcing Price by Location

   Whether you outsource from a small software development partner or a large software development agency, the software development pricing depends on the location. Here is the table to give you a complete understanding of the software development hourly rates in different locations. The information provided in the table is listed after analyzing various websites like Clutch and Goodfirms to help you provide accurate pricing.

   Country	Hourly Rate	Factors Affecting Cost
   United States	$80 – $150	Locations like Silicon Valley firms cost more due to high living costs and tech competition. High level of expertise and innovation in places like Silicon Valley, which can also drive up costs.
   Japan	$25 – $70	More skilled developers or specialized languages can increase costs. Certain technologies require expensive expertise.
   India	$20 – $40	India offers cost savings due to lower wages. Different cities in India have varying costs, affecting rates.
   Germany	$60 – $130	High standards lead to more testing, increasing costs. Puts strong emphasis on precision and quality which leads to increased cost.
   Ukraine	$30 – $60	Ukraine’s time zone overlap with European countries eases real-time communication Developers offer high-quality coding at competitive rates. The combination of quality and affordability has made Ukraine a go-to for many European businesses.
   Russia	$35 – $60	Cultural alignment impacts collaboration and costs, especially in Western countries. Combination of a strong educational foundation and a drive to stay at the forefront of technology makes Russian developers a valuable asset to any project

   From the above table, you have learned that the cost varies by location and what factors influence these costs, as well as the benefits connected with different regions. Following that, let us look at the next factor that affects software outsourcing costs.

2. Outsourcing Price by Team Experience

   The team experience of the outsourced team is significant not only in the outcome of your project but also in the costs related to it. Each team member has different experiences and responsibilities that contribute to the project’s overall quality.

   Let us provide you with a table outlining the different roles of an outsourced software team, experience levels and hourly rates. The table includes all the roles except project manager since project managers are not determined by experience. Their hourly charges range between $50 and $120.

   Role	Junior (0-2 years)	Mid-level (3-5 years)	Senior (6+ years)
   Developers	$25 – $45/hr	$40 – $80/hr	$70 – $100/hr
   UI/UX Designers	$15 – $35/hr	$20 – $45/hr	$30 – $55/hr
   QA Testers	$15 – $35/hr	$20 – $40/hr	$30 – $50/hr
   System Architects	$30 – $50/hr	$40 – $70/hr	$60 – $90/hr
   DevOps Engineers	$25 – $45/hr	$40 – $70/hr	$60 – $100/hr
   Business Analysts	$20 – $40/hr	$30 – $60/hr	$50 – $80/hr

   Note – The data in the table is provided by analyzing multiple websites such as Clutch and Salary.com. These are the approximate rates. The exact cost depends on certain factors such as level of experience and seniority.

   After getting the idea of the team experience the other most important factor to consider that influences software outsourcing cost is the types of hiring models. Let’s discuss it.

3. Outsourcing Price by Hiring Models

   There are different types of hiring models for outsourcing software development that includes fixed price model, time and material model and dedicated development team. All of these models offer unique advantages and considerations that have a direct impact on the cost of outsourcing. Here are the hiring models explained to you.

   Fixed Price Model:

   This model is like setting a fixed price for your software development project which is calculated based on an estimated number of hours required to complete the software project.

   For example, if the set budget for your software project is $10,000 and the projected number of hours to accomplish the project is 200 hours, the hourly rate for the fixed pricing model would be

   Hourly Rate = Total Fixed Budget / Estimated Hours
   Hourly Rate = $10,000 / 200 hours
   Hourly Rate = $50 per hour

   Dedicated Development Team:

   This model offers a dedicated team of professional software engineers, designers, and specialists who will only work on your software development projects.

   For example, suppose you use this model to outsource a software project and the team consists of two programmers billing $50 per hour each and a designer at $40 per hour. If they labor 600 hours in a month, the total cost is $84,000.

   You must need to consider these outsourcing models when exploring different software development outsourcing companies since this will help you in making informed decisions.

4. Outsourcing Price by Project Complexity

   If you want to outsource a low-complexity software project for your company, the cost will most likely be lower than if you were to outsource a higher-complexity project. This is due to the fact that software developers require less time to build and develop the functionalities of a low-complexity project.

   To determine the average hourly rate of projects based on their complexity, we have provided you with a table that contains all of these details. As we know that software developers are assigned based on the project’s complexity and level of expertise. So, the hourly costs in the table are presented based on the level of software developers assigned to the project’s complexity.

   Complexity	Hourly Rate	Project Examples	Features
   Low Complexity	$50 – $110/hr	Personal Budgeting Software	Expense tracking Budget management Financial analysis
   Medium Complexity	$110 – $180/hr	Inventory Management Software	Expense tracking Product tracking Order management Stock control User accounts
   High Complexity	$180 – $250/hr	Custom CRM Software Solution	Expense tracking Customer data management Sales tracking Reporting Analytics Integration with third-party systems

   Now that you are aware of the factors that can influence the cost to outsource software development. If you are looking to get information about the cost and benefits of software development outsourcing in different regions, then let’s discuss it.

Pros and Cons of Outsourcing in Different Regions

Let’s take a look at the pros and cons to outsource software development in different regions.

1. North America

   North America includes countries such as Canada, the United States, and Mexico. The average hourly rates of software development outsourcing in North America range from $80 – $150.

   Pros	Cons
   Access to a highly skilled and experienced workforce in the software development field.	High labor and operational costs lead to higher project expenses.
   Exposure to innovation hubs like Silicon Valley to ensure working on cutting-edge technologies and trends.	Navigating local rules and following the law is complex.
   Adhere to high-quality standards and precise code reviews that ensure well-crafted software solutions.	Skilled professionals are less likely available due to competition.
   Strong IP protection measures safeguard your proprietary information and innovations.	Skilled professionals are less likely available due to competition.

2. East Asia

   East Asia includes countries such as Japan, China and South Korea. The average hourly rates of software development outsourcing in East Asia range from $25 – $50.

   Pros	Cons
   Countries like India and the Philippines offer competitive labor costs, which enables cost-effective development and operational savings.	Language differences in East Asia affect smooth communication.
   Availability of a 24/7 work cycle with various time zones for continuous development.	Diverse cultural differences there directly impact the dynamics of teamwork.
   Known for constant technological advancements and innovations.

3. South Asia

   South Asia includes countries such as India, Bangladesh and Sri Lanka. The average hourly rates of software development outsourcing in South Asia range from $20 – $40.

   Pros	Cons
   Lead to significant budget-friendly advantages.	Projects there require extra monitoring and supervision to maintain quality standards.
   Cultural diversity contributes to creative and innovative solutions.	Complexity in remote team management and coordination.
   Teams in South Asia can provide round-the-clock development cycles and support.
   Quick turnaround is possible for projects due to efficient resource allocation.

4. Western Europe

   Western Europe includes countries such as the United Kingdom, Germany, and France. The average hourly rates of software development outsourcing in Western Europe range from $60 – $130.

   Pros	Cons
   Provide access to up-to-date software tools and technologies.	The cost to outsource software in Western Europe tends to be higher due to the region’s higher living standard and overall cost of doing business.
   Familiarity with western business culture ensures smooth communication.	Complex legal and regulatory landscapes impact project timelines and processes.
   Teams can support various languages, facilitating effective communication.

5. Eastern Europe

   Eastern Europe includes countries such as Ukraine, Poland, and Romania. The average hourly rates of software development outsourcing in Western Europe range from $30 – $50.

   Pros	Cons
   Provides scalable solutions suitable for projects of varying sizes and complexities.	The availability of specialized expertise in certain niche areas is limited.
   Outsourcing developers there emphasize robust and clean code for dependable software solutions.	Smaller market size there restricts scalability for large-scale projects.
   Proximity to major markets allows for convenient collaboration and reduced travel costs.

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6. Central Asia

   Central Asia includes countries such as Kazakhstan, Uzbekistan, and Tajikistan. The average hourly rates of software development outsourcing in Western Europe range from $35 – $60.

   Pros	Cons
   English language proficiency among IT professionals is increasing there.	Infrastructure development is not as advanced as in established outsourcing destinations.
   Offers favorable cost structures for cost-conscious outsourcing.	Despite shared norms, adapting to their local work culture requires adjustment.
   Provide creative solutions for unique technical challenges.

Now that you have a clear understanding of the rates and advantages of outsourcing in different regions. If you want to have additional information regarding this then we have provided a few FAQs that might help you.

Find Out the Cost to Outsource Software Development with Our Support

You are now aware that the cost of outsourcing software development is not fixed and is influenced by various factors. These factors include location, team experience, types of hiring models and the project’s complexity.

If you are looking to create software and want an outsourcing partner that helps you simplify your software development process, Space-O Technologies is here to help you. Whether it’s a small project or a complex one we understand your requirement thoroughly and provide you a complete work breakdown structure with the estimated cost and timeline for your software projects. Here are a few software solutions we developed.

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