THE 2018 GUIDE TO GLOBAL SOFTWARE OUTSOURCING RATES - Accelerance
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THE 2018 GUIDE TO GLOBAL SOFTWARE OUTSOURCING RATES
TABLE OF CONTENTS
Introduction.......................................................................................................................... 2
The Real Difference between Onshore, Offshore, Nearshore................................... 3
Nearshore and Offshore Savings.......................................................................................... 4
Pro Tip: Don’t Select the Low Cost Provider........................................................................ 5
Total Cost of Engagement (TCE)......................................................................................... 6
How Software Outsourcing Rates are Quoted..................................................................... 7
2018 Global Software Outsourcing Rates............................................................................ 8
Five Factors That Drive Outsourcing Rates........................................................................10
THE 2018 GUIDE TO GLOBAL SOFTWARE OUTSOURCING RATES 1
INTRODUCTION
LABOR COSTS:
THE #1 INHIBITOR TO
TECHNOLOGY GROWTH
In late 2017, Accelerance reviewed available research on current software
challenges, technology growth, and software development outsourcing from
top tier players, publications, associations, including: Deloitte, CompTIA and
IDG.
The overarching theme we identified is that the
top technology growth inhibitors are labor costs
and the availability of skilled workers.
The well-documented lack of tech talent in the United States and the
high salaries engineers command are legitimate reasons to outsource
software development. For many companies that struggle to hire software
development resources, there’s not much choice but to seek talent outside
the US. With domestic talent shortage as a driver, the deep global pool of
engineering talent at lower costs make software development outsourcing
very attractive.
With the Accelerance 2018 Guide to Global Software Outsourcing Rates,
we’re pleased to present our findings from more than 700 software
development companies who reported blended hourly rates to us in 2017,
combined with our own experience helping clients find partners with the right
mix of skills, experience, location and cost.
THE 2018 GUIDE TO GLOBAL SOFTWARE OUTSOURCING RATES 2
THE REAL DIFFERENCE BETWEEN
ONSHORE, OFFSHORE, NEARSHORE
Software development outsourcing can be described
as being onshore, offshore, or nearshore -- but
what’s the real difference?
It’s all about the distance from
the hiring company.
For example, if your company is located in Western
Europe, it would be considered “nearshore” to hire
a developer team in Eastern Europe while a team in
Asia, Latin America or the US would be “offshore”.
If your company is located in the US, and you
hire a developer team in the US, that’s considered
“onshore”.
*Note: Example of onshore, offshore and nearshore are all in relation to North America.
THE 2018 GUIDE TO GLOBAL SOFTWARE OUTSOURCING RATES 3
NEARSHORE AND OFFSHORE
SAVES 40% FOR US FIRMS
Sample Cost Savings From Outsourcing
In-house Developer Offshore/Nearshore Developer
When compared to US
salaries, offshore and Number of Developers 10 10
nearshore typically provide the
best hourly rates which makes Man Hours Needed 20,000 20,000
them the most cost efficient.
By eliminating employee Hourly Rate $60 $35
overhead costs, you’ll
decrease your fully-burdened Employee Benefits
cost of employee benefits,
taxes, paid time off, company
perks, training and retention, Taxes
and gain flexibility around
growing (and shrinking) team. Training, Retention
Travel
Estimated Cost $1.6 Million Minimum $700k + Travel
THE 2018 GUIDE TO GLOBAL SOFTWARE OUTSOURCING RATES 4
PRO TIP: DON’T
SELECT THE LOW COST
PROVIDER
Beware of treating outsourcing as a pure commodity (where all outsourcing
options are equivalent). Low cost rates for outsourced software development
must not force your company to forfeit an acceptable level of quality.
Based on our experience and global outsourcing
relationships with top development firms in more
than 30 countries, Accelerance recommends that
you tread cautiously with services offered below
$25/hr.
Regardless of country or region, we believe that less than $25/hr (blended
average for a team) is a red flag that the provider may be (a) under-investing
in his company or (b) will be cutting corners in technical quality and delivery
requirements.
Select a provider with reasonable and competitive rates for their region
and you’ll be much more satisfied with process and deliverables - which will
ultimately create cost savings in other areas.
THE 2018 GUIDE TO GLOBAL SOFTWARE OUTSOURCING RATES 5TOTAL COST OF
ENGAGEMENT (TCE)
Hourly rates are important to consider but important to be mindful of other costs you
the Total Cost of Engagement, or TCE, is may not consider right away. For instance,
important for your budgeting process. The an offshore developer in a remote part of
TCE is a complex cost factor separate from Southeast Asia might quote you an amazing
compensation or hourly rate. When hiring rate, but management and travel costs should
your own developers in-house, for instance, be added to the TCE. Most outsourcing
TCE includes a base hourly rate, plus taxes, experts suggest that the TCE can be as
healthcare, retirement plans, vacation, etc. high as 30% on top of your budget, so it’s
Comparatively, when you outsource, many important to consider the costs when making
of the in-house costs disappear, but it’s an outsourcing decision.
THE 2018 GUIDE TO GLOBAL SOFTWARE OUTSOURCING RATES 6HOW SOFTWARE OUTSOURCING RATES
ARE QUOTED
When comparing one market or provider to another, buyers tend to compare a
blended hourly rate of 6 - 8 person scrum team and assume full time employment
(FTE) of that team for 12 months or more. Naturally, actual rates will vary by skill
level, technical specialty and both the term and commitment of the engagement.
Actual engagements can be structured one of three
ways, ordered from most desirable to least.
Option 1: Dedicated Team Option 3: Fixed Bid
A dedicated team is a relationship where the partner commits individuals to
you full time and you pay for them on a per month basis. The assumption is A fixed bid relationship occurs when
that the developers are part of your team, will sit together and will integrate you deliver the partner a detailed
with your development activities. You build maximum rapport with your team project spec and they commit to
and, importantly, they will feel like they are part of something bigger. complete it for a fixed price. This setup
can work with smaller, highly specified
projects (e.g. developing a mobile app
Option 2: Staff Augmentation or MVP) but is not well suited to agile
development processes since larger
Staff augmentation is a relationship where you hire engineers to augment projects tend to be defined as they
activities domestically and pay them hourly. Staff augmentation can be progress.
valuable when you need resources temporarily, but you’ll need to track and
approve hours carefully and will have to work harder to keep the engineers
engaged and on task, as they will not feel the connection to your team.
THE 2018 GUIDE TO GLOBAL SOFTWARE OUTSOURCING RATES 72018 GLOBAL SOFTWARE Rates as reported
by highly-qualified
OUTSOURCING RATES
software outsourcing
companies working
with Accelerance.
Note: Latin America includes: Mexico
Title of Full Time United Latin Eastern and Central and South America
Asia
Employee (FTE) States America Europe Eastern Europe includes: Armenia,
Belarus, Czech Republic, Poland,
$110-$205 $45-$55 $40-$63 $30-$42 Romania, Russia and the Ukraine
Business Analyst
Asia includes: Pakistan, Sri Lanka,
India, Bangladesh, Vietnam and the
Architect $198-$292 $60-$72 $50-$77 $35-$48
Philippines
Project Manager $133-$233 $55-$66 $45-$70 $35-$48
Jr. Developer $105-$111 $35-$44 $25-$42 $18-$24
Mid-level Developer $132-$140 $30-$52 $35-$56 $24-$35
Lead Developer $176-$187 $50-$61 $45-$70 $30-$42
Sr. Developer $154-$163 $45-$55 $45-$70 $30-$42
Junior QA $77-$81 $30-$39 $25-$42 $15-$24
Mid-Level QA $99-$105 $35-$44 $30-$49 $20-$30
Senior QA $143-$169 $40-$50 $40-$63 $25-$36
Graphic Designer $79-$163 $40-$50 $35-$56 $25-$36
THE 2018 GUIDE TO GLOBAL SOFTWARE OUTSOURCING RATES 8Accelerance has investigated more
than 7,000 software companies around
the world to ensure our clients work
with the most qualified, reputable and
trustworthy global teams. Only the top
3% are qualified to join the Accelerance
We’ve Searched the
Global Network.
Our outsourcing professionals monitor
World So You Don’t
global conditions and watch for
economic, technical and political
conditions that mean increasing or
Have To.
decreasing risk or value. Our partner
team travels extensively to investigate
top providers and perform due diligence
analysis across more than 200 data
points.
Talk to us
THE 2018 GUIDE TO GLOBAL SOFTWARE OUTSOURCING RATESFIVE FACTORS THAT DRIVE
OUTSOURCING RATES
There are five main factors that drive outsourcing rates.
Location Seniority / Work Experience
Labor tends to be illiquid - it’s difficult, even for digital nomads Pretty simple really: senior developers with solid current
to up and move from one region country to another in any experience will cost more than junior developers. The only
number - so labor rates for software development teams are exception to this is where you need an old school technology that
highly localized. Generally, the more developed a local economy isn’t in demand (e.g. COBOL); sometimes very senior engineers
is and the closer to America or Western Europe, the higher the are all that’s available and economical because they’re not in
hourly rates you’ll pay for a team of engineers. Because of this demand
development dependence rates within a region can vary widely:
Rates in Argentina and Uruguay - both well developed economies
are significantly higher than those in Bolivia, a less developed
Team Size
economy. Generally, the bigger the team, the lower the average rate
will be. However, if you’re looking for a large team for a short
Tech Stack term assignment - say less than a year - you may actually pay a
premium.
Like the market for engineering talent in America and Western
Europe, you’ll pay up for newer or more unusual technologies or
for skills that are in demand. Data scientists tend to be expensive
Length of Engagement
everywhere, as are engineers fluent in microservices. On the If you’re willing to commit to a longer term engagement (e.g.
other hand, mobile app development and front end work is more than a year), you should be able to drive down rates. Most
common in just about every market, so is less expensive folks though, want the flexibility to terminate a relationship, so
this isn’t always an option.
THE 2018 GUIDE TO GLOBAL SOFTWARE OUTSOURCING RATES 10Sure, you want all the cost-saving
benefits of offshore or nearshore
software development. But building
a global team is more than a
procurement activity. And most
companies don’t have the expertise
they need to avoid risks and create
The best teams
global partnerships that work. That’s
why you need Accelerance. Mitigate
risks and outsource with confidence.
Ask us about Accelerance Coach
and our 15 Risk Indicators you can have a great coach.
Do you?
use to guide successful global
partnerships.
Talk to usYou can also read
