Technology initiatives are crucial for business growth and gaining a competitive advantage. Despite the challenges of 2023, there remains a persistent demand for innovation, digitalization, and skilled tech professionals. Deloitte forecasts that global spending on outsourced software development will reach $731 billion this year. DigitalMara has conducted an analysis of the development market and various outsourcing destinations.
The challenging economic conditions of 2023, including rising interest rates, inflation, and supply chain disruptions, continue to exert a significant impact. Consequently, companies’ budgets remain under pressure. Outsourcing development continues to be a cost-effective method for implementing digital strategies that steer businesses in the right direction.
Outsourcing can help manage evolving needs and ensure timely adjustments and resilience. In many instances, development teams can be hired for weeks instead of months, leading to overall cost savings. Furthermore, outsourcing facilitates the quick and efficient location of relevant resources.
|Country||Rates (per hour)||IT Hubs||English Proficiency||Coursera Global Skills Index||Top Programming Languages||Top Frameworks and CMS|
Today, software companies can reap the benefits of distributed teams, with members located in different countries. It has become standard practice to have the headquarters in one country and the team in others. This arrangement is achievable without sacrificing efficiency and while still maintaining processes in compliance with high security standards.
Developers often choose countries with flexible labor laws. As executives strive to find an optimal balance between cost and quality, outsourcing to countries with lower-cost yet high-quality experts can be a viable solution.
Distributing the team across various locations also reduces the risk of a complete project shutdown in the event of unforeseen circumstances and disruptions. Outsourcing enables the reallocation of technical expertise and skills, thereby maintaining a certain level of stability.
Software Outsourcing Factors and Countries
Software development outsourcing rates vary based on location, skill level, experience, English proficiency, and project duration. For instance, expertise in AI and Data Science tends to be more costly. Language barriers can exacerbate communication issues, increase the likelihood of errors, and potentially slow down the project. Significant cultural differences can complicate team integration, further impacting project progress.
It’s crucial to consider government policies and political stability in the outsourcing country, including taxation and employment regulations. Critical or extreme situations could result in loss of communication with the offshore team, leading to unexpected downtime and delivery delays.
Both client companies and outsourcing firms can benefit from business hubs and special economic regimes. Numerous countries have invested in the tech sector and established favorable conditions to attract technology companies.
Such opportunities can be found in countries like Poland, Georgia, and Kazakhstan. These benefits enable outsourcing companies with a distributed system to offer lower rates while still providing highly competent developers.
Generally, regions and countries have specific reputations in software development concerning expertise, time zone, communication, cultural differences, and rates. Costs in each country also depend on the economic level, currency exchange rate, and local wages.
For example, Eastern Europe is recognized as a region with hard-working, talented, and skilled developers. It boasts high-quality standards for projects, flexible labor laws, a relatively low cost of living, and tax benefits for software development.
The Annual World Competitiveness Rating by IMD measures the ability and readiness of an economy to explore and implement digital technologies, leading to transformations in business and society.
The Coursera Global Skills Index analyzes skill proficiency at both regional and country levels.
The EF English Proficiency Index ranks countries based on the proficiency of English language skills among adults.
Software development in Poland is recognized for its high quality and affordability. The country boasts the largest pool of tech talents in Eastern Europe. The technology industry in the country is developing rapidly, thanks to the high-quality education in the field of software engineering. Global companies such as Microsoft, Google, Oracle, Cisco, and Intel have research and development centers in Poland. Numerous international IT conferences are held in the country.
Clutch lists 1,148 software development companies in Poland, specializing in domains such as finance, business services, e-commerce, information technology, healthcare, consumer products and services, manufacturing, retail, and telecommunications. They offer extensive technology expertise, including web and mobile development, cloud, IoT, AI, and Big Data development.
- Rates: $25-$99 per hour (based on Clutch)
- IT Hubs: Warsaw, Krakow, Wroclaw, Katowice, Gdansk, Gdynia, Sopot, Lodz, and Poznan.
- EF English Proficiency Index: 13 out of 111 (very high)
- Coursera Global Skills Index: 20, with an overall skill level in technology at 92%, and 80% in data science.
- Top Frameworks and CMS: React, React Native, Node.js, Vue.js, Angular, .NET, Spring MVC, WordPress, Django.
(Including countries like Kazakhstan 🇰🇿, Georgia 🇬🇪, Armenia 🇦🇲, etc.)
These countries have earned their status as software outsourcing destinations due to reforms that have improved business conditions and the overall environment, legislation, and higher education supporting technological innovation. The salary rates here are lower than in other Eastern European countries. While developers often have moderate English proficiency, they possess strong technical skills.
There are over 150 software development companies in these regions listed on Clutch, specializing in sectors such as finance, information technology, business services, and healthcare.
- Hourly Rates: Ranging from $25 to $99, as per Clutch data.
- Major IT Hubs: Tbilisi and Batumi in Georgia, Almaty in Kazakhstan, and Yerevan in Armenia.
- EF English Proficiency Index: Ranked 45 out of 111, indicating moderate proficiency.
- Coursera Global Skills Index: Ranked 32, with an overall skill level of 82% in technology and 49% in data science.
- Top Frameworks and CMS: React, React Native, Node.js, Laravel, .NET.
The Baltic countries, including Estonia, are seen as one of the most economically stable regions for IT outsourcing in Europe. The country has a high level of digital solutions implementation, and legislation that ensures data security and smooth business activity.
Estonia is the birthplace of many startups and generally has a favorable business climate. Global companies like Microsoft and SAP have research and development centers here. Estonia hosts international events for developers and startups.
Clutch lists 153 software development companies in Estonia, specializing in domains such as e-commerce, business services, finance, information technology, healthcare, and retail. They offer web, mobile, and cloud development.
- Rates: $25-$99 per hour (based on Clutch)
- IT Hubs: Tallinn and Tartu.
- EF English Proficiency Index: 26 out of 111 (high)
- Coursera Global Skills Index: 42, overall skill level in technology 62%, 75% in data science.
- Top Frameworks and CMS: React, React Native, Node.js, Vue.js, Angular, Django, WordPress.
India is renowned for its vast population of developers proficient in various programming languages, its lower rates, and flexible government policies. However, there are certain drawbacks, such as potential miscommunications and a lower quality of development. Concerns related to data protection and privacy also exist. Given the multitude of companies, selecting one that can assure high-quality service is not a straightforward task.
There are 4,270 software development companies from India listed on Clutch, specializing in domains such as e-commerce, information technology, business services, consumer products and services, finance, healthcare, education, and retail.
- Rates: $25-$49 per hour (based on Clutch)
- IT Hubs: Bangalore, Hyderabad, Chennai, Mumbai, Kolkata, Ahmedabad, Delhi, and Chandigarh.
- EF English Proficiency Index: 52 out of 111 (moderate)
- Coursera Global Skills Index: 68, with an overall skill level of 46% in technology and 26% in data science.
- Top Frameworks and CMS: WordPress, Angular, Node.js, Laravel, React Native, React, .NET.
Cyprus is striving to create an innovative tech environment and an investor-friendly business climate. The country is home to numerous startups and divisions of international tech companies such as NCR, Amdocs, Microsoft, and SAP. To address its tech-talent shortage, the country is attracting specialists from other countries and enhancing its educational offerings.
Clutch lists 23 software development companies in Cyprus, specializing in finance, ecommerce, healthcare, and information technology.
- Rates: $25-$99 per hour (based on data from Clutch)
- IT Hubs: Limassol, Larnaca, Nicosia
- Coursera Global Skills Index: The overall skill level in technology is 67%, and 60% in data science.
- English Proficiency: 76% of the population is able to speak English.
- Top Frameworks and CMS: React, React Native, Ruby on Rails.
The USA is a leader in all global IT and digital rankings. The country is full of tech talent and maintains high standards for software development, including data privacy and security standards. The high rates are a result not only of high quality but also of high taxes. It’s worth mentioning that you can find developers in the US with lower rates. Some companies have their legal entity in the country but have a team distributed in other locations, and their rates are set in accordance with this.
The USA has the largest number of software development companies represented on Clutch, totaling 5143. These companies specialize in various domains such as business services, finance, information technology, healthcare, ecommerce, consumer products and services, education, and retail.
- Rates: $25-$199 per hour (based on Clutch)
- IT Hubs: Austin (Texas), Dallas (Texas), Raleigh (North Carolina), San Jose (California), Charlotte (North Carolina), Seattle (Washington), San Francisco (California), Atlanta (Georgia), Huntsville (Alabama), Denver (Colorado), and others.
- English: No language barriers.
- Coursera Global Skills Index: 29, overall skill level in technology is 43%, and 54% in data science.
- Top frameworks and CMS: WordPress, React, React Native, Angular, .NET.
Choosing the right software development partner can be quite a challenging task. Here are some basic steps to select a vendor:
Collect Basic Information: Gather details such as the official name of the company, its business structure, date of foundation, headquarters and development locations, number of employees, certifications, and the contact person.
Study Their Previous Experience: Do they have cases in their portfolio from your business domain that solve similar problems? What international standards do they adhere to?
Understand Their Project Management and Delivery Process: Investigate how they organize project management and delivery. What development methodologies and tracking systems do they use?
Review Client Feedback: Study reviews and references from existing and former partners and clients. Websites like Clutch can be a good source for this information.
Compare Vendors: When choosing from a number of vendors, compare their rates, pricing models, technology stacks, and average timeframes.
As a first step, you need to define your business needs and ensure that the developers possess the required competencies. These may include skills in cloud solutions, legacy code modernization, UI/UX design, and web and mobile development.