If you’ve been following AgileEngine, you’ve probably seen our reports on the top outsourcing countries to watch in 2014 and 2013. In the past years, we’ve been busy establishing new nearshore development centers in Kiev and Buenos Aires and building awesome products for global brands. I guess that explains the three-year lull, but now it’s time for a new collection of stats.
Just like in 2014 and 2013, we’ll explore the major nearshore and offshore destinations in Eastern Europe, Asia Pacific and South America. Besides, we’ll take a quick look at the state of software development outsourcing in 2018.
Top reasons to outsource software development in 2018
There are good news, too. There’s still an option to find talented programmers fast — if you’re ready to hire remote software developers. According to a survey from Statistics Brain, 43% of US companies are outsourcing programming jobs. The same survey highlighted nine major benefits of offshore outsourcing that motivate companies to hire overseas talent:
Cost reduction (or better control over expenses) was the number-one reason for 44% of respondents (CTOs and CEOs from US-based companies).
Access to the IT talent that’s unavailable within the company — 34% of respondents.
Freeing up the workforce within the company — 31%.
Improvement of the company’s business and/or customer focus — 28%.
Acceleration of the company’s digital transformation or reorganization — 22%.
Faster project development — 15%.
Access to the management expertise unavailable within the company — 15%.
Reduction of time to market — 9%.
As of today, the number of computer programming jobs being outsourced by American companies exceeds 211,000. Giants like Cisco, Oracle, and Samsung have been tapping into the global talent pool for decades. All of these brands are outsourcing software development in Ukraine, Poland, or other nearshore destinations. This raises the same-old question: where should you outsource?
Top outsourcing countries in 2018
Below are 14 software development outsourcing destinations that we’ll compare based on their billing rates, market size, and a slew of other factors.
Eastern Europe
South America
Asia Pacific
Poland
Brazil
China
Romania
Mexico
Philippines
Ukraine
Argentina
India
Russia
Colombia
Malaysia
Czech Republic
Vietnam
Billing rates
The primary driving force behind outsourcing and offshoring, the price gap between western countries and offshore outsourcing locations is gradually narrowing down. This said, cost reduction remains one of the key advantages of outsourcing internationally. Today, outsourcing software development in Ukraine, Poland or, say, Argentina can still save you about 30–50% of the cost of a local hire.
The table below compares the 14 top outsourcing countries based on the average billing rates that offshore software development companies charge.
Avg cost per hour ($)
juniour
middle
senior
QA
architect
Brazil
41
46
56
40
66
Mexico
33
40
52
39
59
Argentina
34
41
53
39
58
Colombia
41
45
58
40
62
China
20
24
31
24
31
Philippines
21
28
37
30
47
India
17
21
26
20
30
Malaysia
26
34
46
33
50
Vietnam
14
17
20
17
22
Poland
31
37
50
33
59
Romania
33
42
58
39
59
Ukraine
30
36
47
33
50
Russia
25
32
42
32
44
Czech
35
41
54
39
56
Historically famous for its large pool of low-cost programmers, India holds status of one the most inexpensive outsourcing destinations. On the flip side, the quality of code produced in this location has been a concern for years. Combined with the language and time barrier, this has led to a growing number of companies opting for more expensive nearshore outsourcing locations.
Market size (approximate number of developers in the 14 outsourcing destinations)
A gradual expansion of the software developers demographic is one of the prominent engineering outsourcing trends. The stats below represent approximate numbers UI, full-stack, mobile, enterprise, and game developers from the 14 top outsourcing countries.
Brazil — 66,000
Mexico — 30,000
Argentina — 28,000
Colombia — 9,000
China — 39,000
Philippines — 35,000
India — 630,000
Malaysia — 15,000
Vietnam — 18,000
Poland — 43,000
Romania — 30,000
Ukraine — 43,000
Russia — 45,000
Czech Republic — 22,000
Innovation index
Innovation-friendly socioeconomic environment benefits the quality of software engineering services offered in a particular location. Global tech brands often prioritise software development companies from the most innovation-friendly economies. The table below covers the top outsourcing countries that rank among the Bloomberg’s top-50 most innovative economies. Note that not all of the 14 outsourcing destinations are on the Bloomberg’s list.
Attrition rates have a direct impact on developer retention, which is an important metric for any kind of business. Surprisingly, there’s been little change in the attrition rates across the 14 outsourcing destinations over the past years.
Country
Average attrition rate
Brazil
15
Mexico
12
Argentina
25
Colombia
18
China
27
Philippines
19
India
27
Malaysia
16
Vietnam
23
Poland
15
Romania
14
Ukraine
11
Russia
11
Czech Republic
15
Communications and cultural compatibility
Often viewed as inherent problems of outsourcing, cultural gap and language barrier can hamper communication in distributed teams.
There’s one thing to note, as far as cultural and language factors go. The English proficiency and cultural compatibility of developers from high-ranking software outsourcing companies are significantly higher than their countries’ averages. Still, average levels are useful for companies seeking to establish remote offices for R&D and software development. There are two indexes indicative of these averages.
Country
EF EPI
Cultural compatibility (Gartner)
Brazil
50.66
★★★★★
Mexico
49.88
★★★★★
Argentina
58.4
★★★★☆
Colombia
48.41
★★★★☆
China
50.94
★★★★☆
Philippines
60.33
★★★★★
India
57.3
★★★★★
Malaysia
60.7
★★★★☆
Vietnam
54.06
★★★★☆
Poland
61.49
★★★★★
Romania
58.14
★★★★☆
Ukraine
50.62
★★★★★
Russia
52.32
★★★★☆
Czech Republic
59.09
★★★★★
Timezones
Time gap presents another item on the list of potential problems with outsourcing to other countries. Having 3–4 hours overlapping between location is enough for most remote Agile teams to stay highly efficient. Experienced software engineers remain productive while dealing with larger time gaps, but team management typically requires additional effort under these conditions.
The infographic below compares the time zone of the 14 outsourcing locations to Eastern Standard Time:
Eastern Standard Time
8 a.m.
6 p.m.
Overlapping working hours
Brazil
9 a.m.
7 p.m.
8
Mexico
7 a.m.
5 p.m.
8
Argentina
9 a.m.
7 p.m.
8
Colombia
7 a.m.
5 p.m.
8
China
8 p.m.
6 a.m.
0
Philippines
8 p.m.
6 a.m.
0
India
5.30 p.m.
3.30 a.m.
0.5
Malaysia
8 p.m.
6 a.m.
0
Vietnam
7 p.m.
5 a.m.
0
Poland
2 p.m.
12 p.m.
5
Romania
3 p.m.
1 a.m.
4
Ukraine
3 p.m.
1 a.m.
4
Russia
4 p.m.
2 a.m.
3
Czech Republic
2 p.m.
12 p.m.
5
Bottom line: where do you outsource?
The short (and obvious) answer is: there’s no one-size-fits-all software outsourcing destination. Low-cost offshore locations like India might work for waterfall-oriented companies seeking to outsource routine tasks. In the meantime, nearshore locations with higher innovation indexes are better-suited for Agile and more tech-intensive projects.
In case Ukraine or Argentina look like the outsourcing destination that your company is likely to consider, contact us and tell us about your project. The AgileEngine dev centers in these strategic locations are home to top-3% developers well-versed in UI, full-stack, mobile, and enterprise software development.
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