offshore software development

Offshore Software Development Rates Guide 2022 www.kelltontech.com

Introduction Despite the potential impacts of the global Coronavirus pandemic and Omicron variant, 2022 is the year of digital prosperity. Businesses worldwide are getting more inclined towards technology investments, embracing new emerging technologies, and closing staff skills gaps via offshore software development. According to the Gartner latest forecast on Information Technology (IT) services spending, a significant growth of 5.1% from 2021 has been witnessed, with a forecast of a whopping $4.5 trillion in 2022 on the global IT investments.

With IT leading the charge for global digital transformation across all industries, an impressive surge can be witnessed in IT outsourcing contract investments across Asia, Europe, America, the Middle East and Africa with a significant growth. In a report, the Bureau of Labor Statistics estimated that by 2026, the entire IT workforce requirement will exceed 1.2 million. Investing in outsourced product development helps businesses to address an ever-increasing gap between technical talent supply and demand faster.

Role of Cooperation Model in Influencing Offshore Software Development Rates Before we dig deeper into region-specific or offshore development country-wise rates, let’s understand how the cooperation model chosen by your outsourcing software vendor directly influences the IT outsourcing prices. There are two basic cooperation models, the project outsourcing model, and the extended team model.

Project Outsourcing Model In the project outsourcing model, the vendor charges a fixed fee for the project plus additional cost in case you decide to change some functionality midway into the software development project. The fixed price includes fees for the services rendered by project managers, business analysts, and solution architects.

Extended Team Model Under the extended team model, you pay the developers’ fixed monthly salaries, rent for vendor’s office space, and infrastructural costs such as acquiring workstations for the developers, expenditure on HR management, etc.

Which model is better, Project Outsourcing Model or Extended Team Model?

In the project outsourcing model, the hourly offshore software development rates you’ll end up paying will be higher than the hourly development rates for the same services under the extended team model.

Another pitfall in the project outsourcing model is that you seldom get to know how skilled the developers working on your project really are, as you mostly communicate with the vendors. Some vendors exploit this situation to increase their profit margins by hiring inexperienced junior developers whose salaries are at the lower end of the spectrum but ask the client to pay the rates of experienced software developers.