Software Development Outsourcing Prices [Cost Breakdown for 2023]

How much does it cost to outsource software development? The major concern of many startup entrepreneurs looking to save money on software development projects is whether outsourcing really helps fhem to achieve their goals towards cost-effectiveness. At ProCoders, we can write about this topic because we have saved clients up to 40-50% of costs through outsourcing. Nevertheless, there is still the challenge of determining if the entire enterprise is valuable, especially in terms of time to market speed even after reducing the costs for outsourcing software development.

Companies who take advantage of the outsourcing workflow can save up to 20% of their R & D and development budgets. How do they achieve this? Read on to explore the best practices of software development outsourcing from entrepreneurs who have succeeded in saving on software development outsourcing prices in their projects.

Reasons Why Startups and SMEs Outsource Product Development

Depending on the stage of development, companies may have different reasons to outsource product development, whether it’s a single element of their business or an entire product.

Expertise and Skills

Startups and SMEs have a lot to benefit from skillsets developed over time by each member of their development team. For business leaders, partnering with a company such as ProCoders can help you curate a meaningful discovery phase that will boost project delivery. Therefore, even if you are not a computer expert, you may improve your project delivery by acquiring professionals with complementary skillsets.

Hiring Speed

A startup needs to hire a good self-managed dedicated team quickly. But this takes time. Time is money, especially for start-ups, who need to gain market share before they run out of cash. They don’t have the time to locate applicants with the correct skill set, experience, and attitude toward your company’s culture. You may focus on finding a firm that can perform what has to be done today via outsourcing.

Development process

Most startups first build a prototype of their product before other stages. So, right away, product development is not a one-man job. It requires coordination between various functions like UI UX design, engineering, and marketing. If team members do not communicate properly with one another or do not fully grasp each other’s requirements, coordination can become a problem in and of itself. Outsourcing helps to prevent this problem by bringing in professionals who have been working together for years and are familiar with each other’s requirements.

Quality assurance

It’s not easy for any company to ensure quality unless they have a large team that can test every feature extensively before deploying it globally across all geographies and devices. It’s even harder for startups that don’t have enough resources yet but want to launch their products quickly so they can get traction. This is only possible if they outsource product development services to specialists with extensive expertise in the development process.

Costs

When you engage an outside agency for product development, you can forego a large capital investment since it does not require any equipment or infrastructure. The usual expense is only for labor costs and a fee for the outsourcing company. More so, outsourcing product development helps companies reduce costs by using more affordable talent especially offshore. The overall cost savings may be reinvested into other operations.

Factors that Affect the Cost of Outsourcing Software Development

The biggest advantage of software outsourcing is, of course, that these professionals are more efficient and skillful. But what affects software outsourcing cost? Before you can determine the cost of outsource software development project, here’s a list of some principal factors that affect the cost per hour for outsourced software development.

Project Complexity

On how to successfully outsource software development, if you’re building a mobile app with multiple screens and functions, you must be ready to expand more than if you were building a one-page website. There is increased time, effort, and resources required for analysis and design, making for a longer and more robust development circle. All these require experienced developers who can handle the complexity and liaise effectively with a project manager and the right tech stack.

Seniority Level and Expertise

Senior developers charge more than junior ones because they have more experience doing similar tasks in the past. Also, you must consider that senior developers are more likely to produce higher-quality code which can save you money on bug fixes later. If you want to hire junior programmers who will only work on small tasks, then their outsourcing software development costs can be significantly lower than those of senior developers who will be working on complex projects for longer durations.

However, they may cost you longer eventually when you must fix bugs; more so, junior developers work slower because they need a lot of supervision, which may cost your project time. It’s all about finding the right balance.

Outsourcing Hiring Model

Freelancers are the most cost-effective option of all when considering the hourly rate of outsourcing developers. However, they are not reliable, because they can disappear at any moment, and you’ll have no way to find them. This has profound consequences for the integrity of your project. Hiring agencies are quite expensive, but often, they have no developers or team leads in their staff, only recruiters and managers. So, they are not skilled enough to check the experience level of the potential candidate.

We at ProCoders provide services that have a more reliable plan like outsourcing that gives you a Discovery Phase as well as a long term dedicated team to boot. Our expert-led discovery phase will help you start your project excellently from scratch, while the dedicated team will ensure that there are no skills gaps on your team.

Geolocation

The total cost of outsourcing software development can vary based on location. Outsourcing companies located in developing countries often charge less than those located in developed countries. This is because they’re able to take advantage of the more affordable costs of doing business in their countries. If you want to save on software development outsourcing prices, then look towards countries such as Estonia, Ukraine (Eastern Europe), India, Mexico, Croatia, Albania, Portugal, Poland, etc.

Regional Differences in Software Development Outsourcing Prices

Businesses that outsource software development services sometimes face a unique challenge: determining the most efficient way to manage outsourced projects. As it turns out, accurately budgeting for outsourced services requires knowledge of not only the outsourcing market, but also regional differences in labor costs, time zone differences, and other factors that can impact software development pricing.

Western Europe

This region includes Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, and the Netherlands. Software outsourcing rates in this region are higher here because of their high standard of living and quality of education. Hence, this is not a cost-effective option.

USA

The US also boasts some of the best universities in the world and produces some of the most talented software engineers and developers. This makes it an attractive location for outsourcing software development projects. But in terms of cost, the United States is one of the most expensive countries in the world to outsource software development work.

South America

South America is home to several countries that offer good outsourcing options for software development projects. The continent includes Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru, Uruguay, Venezuela, and Suriname. While the cost of living in South America may be higher than in other regions, it’s still significantly lower than living in Europe or North America. This makes it an attractive option for businesses looking for low-cost offshore development solutions with a lower average rate for outsourced software developers.

India

It’s no surprise that India is one of the top destinations for this — it has been at the forefront of outsourcing since the early 2000s. On top of that, a number of talented software developers are ready to work for little compensation. It has a large talent pool of highly skilled developers as well as a large English-speaking population. This has made India a prime location for software development outsourcing. However, even among the more affordable classes, it is hard to find highly qualified developers. If you are looking for skilled professionals in India, it will be more expensive than you might expect.

Central Europe

Central Europe offers both proximity (the region is easily accessible) as well as lower offshore software development rates. It includes countries such as Estonia, Albania, and Croatia — all of which boast large pools of talented programmers who can provide quality work at a lower outsource developer hourly rate than even their Indian counterparts.

So how much does an outsourced software team cost? See the table below for ideas based on various regions.

Average (Annual) Salary for Developers Globally

Countries	Juniors	Mid-Level	Seniors
Germany (Western Europe)	$68,629	$70,988	$98,110
United States	$62,000	$84,000	$118,000
Brazil (South America)	$13,976	$21,139	$36,692
India	$12,976	$18,865	$26,721
Estonia (Central Europe)	$35,283	$54,942	$80,703

Cost Comparing for Different Engagement Models

Cost is always a crucial factor when considering engaging a company to develop your software. Different models of engagement can vary significantly, and the pricing will continue to vary based on factors such as the delivery model, contract length, functional vs. technical scope, and the time zone you are interested in hiring for.

Cost of Hiring Local Developers vs Cost of Outsourcing Software Development

Small companies and startups often lack the resources to hire dedicated teams of developers and want to know how to reduce development costs. Well, they may rely on outsourcing software development services from freelancers and agencies. Therefore, it is important for them to know the cost of hiring developers vs the cost of outsourcing software development.

Of course, regardless of the engagement methods, you owe everyone you hire a basic salary, plus other benefits applicable to the industry and role. Moreover, there may be variations depending on the location and the cost of living. Typically, software developers could earn up to $100k/year. However, with outsourcing you are not responsible to pay the developers directly; that’s the responsibility of the agency. In the end, the total outsourcing costs can amount to about $50k/year on your end.

The cost of hiring local developers can be exorbitant. You must pay salaries, benefits, taxes, and other overhead costs associated with hiring a team of people. The cost of outsourcing software development, on the other hand, is much less expensive because you only need to pay for the actual work that is performed by freelancers or companies in other countries. Outsourcing your project to ProCoders, an offshore software development company, can save you more than 40% in comparison to hiring developers locally.

If you have a budget and a desire to build a huge project, which will last for a few years, you can consider hiring the IT department in house. But even in this case, you can outsource some parts of your project and save money.

Cost of Outsourcing Software Development vs Cost of Outstaffing Development

Outsource software development model differs from outstaffing in that outsourcing is used when an external company provides a service or product that your company needs. Outstaffing is when you hire a developer which will act as your employee and will do all necessary work for you, but legally he will be the employee of the outstaffing company, so you don’t have to pay any vocation, sign-in bonus, sick days and so on.

Outsourcing is usually more expensive because you have to pay for management services as well. With outstaffing, you have no such costs because all management is on your side. Hence, outstaffing gives you more control over the direct impact of your project, which means you can be better aligned with your set budget.

Hidden costs and How to Avoid Them

Because there are many steps involved in how to outsource software development, it is important to have a clear plan for your development process. Otherwise, you risk losing your budget and receiving unfinished products. This is why a proper discovery phase is important because it will bring into consideration all the various factors that affect the costs, including technical requirements and cultural differences especially when there is no fixed price.

Such efficient communication right from the beginning of the project is necessary to avoid unexpected expenses. To achieve this, the outstaffing model can help you retain full control and visibility over your project when you hire remote offshore developers who work as a team.

How Can Outsourcing Save The Project’s Budget?

With the growing demand for software products, it is something that every business has started to use. Although outsourcing software development seems a cumbersome and expensive task, there are many ways in which you can save on the budget of your project. Let’s see how?

Resource optimization

When you outsource your project, you can get access to more resources than your own team possesses. This means that if one developer is unavailable due to some reason, and you need someone fluent in your drag-and-drop website builder of choice, they can be replaced by another developer from the same company who has similar expertise and is available for work. In case there is no replacement available at short notice, outsourcing companies usually have backup resources in place so that they can assign another resource to take over when needed.

This allows you to keep your project moving forward even when one person isn’t available for work at any given time. The same cannot be said about in-house developers who are employed full-time by your company and hence cannot be swapped out easily.

Focus On Core Competencies

Software development outsourcing allows you to delegate your project to another company and control the development with a minimum of management resources. So, you don’t have to hire a whole new IT department, just describe your needs as detailed as you can to partner with a reliable company. Even if you have skilled resources in-house, they may not be able to handle all these tasks at once or deliver them in time for the next release date. This is where outsourcing comes into play.

Research & Development (R&D)

In this phase, you need to conduct extensive market research, analyze the trends in your industry, define your target audience and then create a prototype of your product. The companies that don’t have enough in-house R&D resources must spend their money on it. Making a clear development plan may cost you a small amount of your budget, but it can save you a lot of money eventually because it engenders transparency between you and the outsourcing company.

With ProCoders’ discovery phase, for instance, you’ll have a scope of work with all budget and time planning, so you’ll know that you’ll not receive a finished product that aligns with your requirements.

How Much Does it Cost to Outsource Software Development by ProCoders?

At Procoders, we have already worked with many diverse types of projects: mobile applications, websites, CRM systems, ERP systems, and many other types of software products. We focus on value-added services, including software development, testing, support, and maintenance. We provide innovative technology solutions that help clients improve their business processes and increase project efficiency by up to 30%. We also cut development costs by up to 50%.

We understand that every business is unique and needs a customized solution for its business needs. That is why our engagement models are flexible enough and we can switch between outstaffing, dedicated development, R & D and outsourcing models, depending on your tasks, budgets, and industrial expertise. Therefore, we help businesses find the most profitable way to deliver software solutions.

Our experienced team will work with you to find the best solution for your company’s needs by working closely with our clients throughout the entire process, from the discovery phase to product launch with an affordable outsource software development price. The discovery phase costs about $3,000 to $5,000. The MVP development starts from $10,000 depending on the requirements and the complexity of the project.

Conclusion

• The dependence on software, coupled with the rapid evolution of application development technologies, has brought about new ways of outsourcing software development to foreign countries.
• The biggest advantage is, of course, that these software professionals are more efficient, in skill and cost.
• Central Europe has become an increasingly popular destination for developing software because it offers both proximity (the region is close enough geographically to be easily accessible) as well as lower labor costs.
• ProCoders provides innovative technology solutions that help clients improve their business processes and increase project efficiency by up to 30%. We also cut outsourced development rates by up to 50%.