How Much Does It Cost to Outsource Software Development?

Software outsourcing is the practice of delegating certain tasks or duties to a 3rd party vendor, a custom software development company that handles the entire project or performs certain tasks to promote project delivery. There are many advantages to this cooperation model: flexibility, managerial control, superb quality, access to a vast talent pool, and fast results. But is outsourcing a cost-efficient model? How much will it cost to hire an entire team of developers and get the project done? 

Well, the short answer is yes, outsourcing is generally more cost-efficient than hiring people on your own and onboarding them on your team. The price would vary depending on a whole bunch of factors, and there’s no fixed price, even within a single company. It would all depend on the complexity of the project, the number of people involved, the tech stack, deadline, and other factors. 

The good news is that we can give you at least the industry’s average price, and today, we are going to find out how much outsourcing software development costs, so you’ll be able to make a rough estimation of how much money you’d need to make your project happen. 

Regional Differences in Pricing

The regional differences in the cost per hour for outsourced software development make the whole idea of outsourcing so lucrative for the vendors and so cost-efficient for the clients. There’s no need to explain that the average salary in the US would be different from the average salary in Canada, and Canadian wages would be different from those in Eastern Europe. The economic disparity between different countries makes it possible for large corporations in developed countries to hire experts from developing countries at a much lower cost.

This might sound somewhat unfair but in fact, such cooperation is extremely lucrative for both sides. On one hand, you have a business saving money, and on the other, you have developers from a developing country making much more money than they would otherwise make working for their local companies. But how do you know where to hire from to cut the budget without sacrificing the quality and ensuring efficient cooperation? Well, let’s break it down region by region.

Asia

Asia has been the world’s largest IT talent pool for years now, and such countries as China and India are the most prominent. With both being two of the most populated countries on the planet, China and India have the largest number of software developers in the world, which translates into lower prices. The cost analysis of outsourcing software development in Asia shows that the hourly rates can go as low as $10. Some companies charge up to $60 per hour and in most extreme cases, you may see such prices as $150 per hour. 

As you see, the range is quite wide, and you must remember that the cheaper you go, the lower quality you can expect. It is not just about Asia; you must be reasonable and never go too cheap. Naturally, the highest price does not always mean the best quality either, so you should weigh out all the factors that make up a good vendor.

Europe

Europe is also a vast region that is not homogenous in terms of economic development. The prices here would range from about $20 to $170 per hour depending on where you want to outsource to. Western European countries are more developed and expensive, but the good news is that custom software development companies from Central and Eastern European countries can offer great quality services at a lower price. 

Again, you do not want to go dirt-cheap, unless you are alright with the same level of quality. The other advantage of hiring developers in Europe is their English proficiency. It is generally easier to communicate with European developers; they are more likely to speak fluent English, comprehend your culture, and share your values. 

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USA

That’s where we go A-list in terms of quality and prices. Hiring developers in the USA would cost you around $50-100 for a junior developer and $140-200 per hour for a senior developer. The average cost of hiring an entire development team would be twice as high as in Europe. 

Of course, we are talking about top-end developers who can deliver tangible success on any kind of project and ensure smooth market launch and continuous functioning of your product.

Intersog is an American software development company located in Chicago, and we offer reasonable prices for top-notch services. We know the value of great software, but we do not intend to drain your pockets. The American IT outsourcing market is highly saturated, and it might be hard to make the right choice if you are not sure what you are looking for exactly. 

Hiring the right team might be a challenge in its own right, which is why we offer IT consulting services to help you define the scope of your project, the size of a team, outline the timeline, and estimate the budget. 

Canada

The outsourced software development cost here would be lower than in the US but the quality is on par. Canada is one of the popular destinations for nearshoring for the US companies - the same time zones, the same language, similar culture - all of that makes Canada perfect. The prices would range from $30 and up to $160 with the average being at around $60 per hour. Of course, this would also depend on the seniority level and tech stack of the developer but you can already tell that the prices there are more affordable than in the US.

Mexico

Outsourcing to Mexico is similar to Canada in terms of prices and quality - the average hourly rate is $60 ranging from $20 and up to $150, the country is located in the same time zone, most developers speak fluent English, and the culture is not that different either. Basically, if you are located in the US and are looking to nearshore your project, Mexico is one of the best options for you. The software development outsourcing prices are lower, the developers are on par with the US experts, and the communication is rather smooth.

Latin America

Here, you’ll see a wider range of prices - anywhere from $20 to more than $100 per hour, according to Statista. There also are other things to consider if you plan to outsource to Latin America. First of all, the region has never been exactly notorious for its developers, and secondly, you may have problems finding people who speak good English, as it is a predominantly Hispanic region. Communication breakdowns are quite plausible and the quality of the product might not be as high as you might expect.

Why Outsource to North America?

There are three major destinations for outsourcing in North America - the US, Canada, and Mexico. All three have their merits - the developers are great, people speak English, the prices are quite reasonable, and the overall quality of cooperation is satisfying. Of course, this would depend on the vendor you choose, but as a rule of thumb, you can count on satisfying results.

Obviously, the US is the country where some of the world’s largest and wealthiest tech giants are headquartered, and it is usually them who outsource their projects to other countries. However, it is also commonplace for American businesses to outsource their projects to other US-based companies. It is much more comfortable for them to work with fellow Americans who have the same worldview and values, and though it might be expensive, it usually means successful project delivery.

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When it comes to Canada and Mexico, you have the same quality and the same level of compliance between you and your vendor but it all comes at a lower price. If you are an American business, it is a good idea to consider Mexico or Canada as the potential destination for outsourcing.

Why Outsource to Europe?

Europe is a well-developed region, though not homogenous in terms of economic wealth, which means that you can find all kinds of hourly rates across the continent. Central Europe is quickly becoming an international IT hub offering lower hourly rates and quality that is on par with the world’s highest standards.

The price to quality ratio is not the only advantage of European developers; they offer top-shelf expertise and clean code as well as fairly affordable support and maintenance services. What is especially attractive about developers in countries like, say, Ukraine is that they speak fluent English and are culturally close to the Western countries. Considering the value you get from outsourcing your project to Europe, this destination must be on your list. 

How to Find a Professional Software Outsourcing Company?

Finding the right partner for your project is not just about money; of course, nobody wants to spend more than necessary but there are many factors that make up a good partner and the price is not the most important of those. If you choose your vendors based on the hourly rate they offer, you’ll end up with a cheap and poorly developed product that is nowhere near the industry’s standards.

The best idea is to start by checking out the vendor’s portfolio; see what they’ve been working on before, who their clients were, what projects they delivered, what problems they solved. This will give you a general idea of the expertise level the vendor can offer.

Check the references, contact their previous clients, make sure they have a good reputation with the clients, and rank high on the rating platforms like Clutch. Well, you can take chances, if you feel like risking it but it is more reasonable to partner with a widely trusted and reputable vendor.

Schedule a meeting with the vendor, whether in person or via video call; talk to them, ask the questions that concern you the most, see what they are like – a personal meeting can give you more clarity than any e-mails or ads. That way you can really see who you are dealing with and whether you want to have any business with those people.

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How to Determine the Project’s Cost?

Since we are talking about money here, you may want to know how to determine the cost of outsource software development project. The answer would depend on a wide variety of factors and metrics that we can only outline after defining the scope of your particular project. However, we can give you a pretty rough estimation of the project cost based on our experience at Intersog.

Let’s say we are looking at the average developers who charge around $60 per hour and let’s just say you’ll need 6 developers for a project that lasts 6 weeks. With an adequate skill set and experience, 6 developers can deliver a minimum value product in under 6 weeks, but let’s just stick with that timeline. Basic math, and voila, we are looking at some $86,000 for a functional MVP.

Of course, the price would be changing dramatically depending on the size of the team, seniority of the developers, timeline, tech stack, whether you need support and maintenance or not, and many more things. Some projects may go up to hundreds of thousands and even millions of dollars, so you should keep that in mind.

How Much Does a Cheap Vendor Cost?

The cheaper you go, the greater the chance of you having to pay twice the price for the poorly written code. If you want to save money and headache, the best option is to partner with a reliable vendor who charges reasonable money and gets a product that is up to the highest quality standards and corresponds to your highest expectations. The price of going too cheap might be more than you’d expect, so you should be reasonable here – work with the best to get the best results without a headache.