Because of the benefits outlined in the previous article, software outsourcing has become the solution for many firms worldwide. Software outsourcing also comes in various forms that are classified by area, such as onshore, nearshore, and offshore. If you’ve decided to go the offshore route, the next question is which country is best suited for your offshore software development.
This post will lay out a set of criteria for determining which country is best suited for outsourcing your software project. We’ve also produced a list of featured countries by continent to help you decide.
When determining the best countries for software development, there are five factors to consider
The selection of a software vendor will involve considerations such as pricing, quality, and vendor coordination. However, we have altered those criteria slightly to make them more measurable. The criteria we will be exploring are the value of cost, reliability, time zone, culture, and English competence.
1. Value of Cost
We try to resist the temptation to evaluate outsourcing options on price only because the lowest price option isn’t always the lowest cost option. Low price vendors often end up costing you a fortune; either because you end up having to re-do their shoddy work, or because they nickel and dime you to death with change orders after they’ve won the initial bid. Therefore, “Value of Cost” considers countries in which you’re likely to get the most “bang for your buck”.
Look for countries with a high number of software development firms that have worked on similar projects to yours. Finding the ideal team for your project will be easier if you are in a country with a large pool of diverse IT expertise.
3. Time zone
Countries with fewer time zone differences will find it easier to communicate because there is some overlap in their workday. This puts Asia at a disadvantage in dealing with Europe and North America. This isn’t to say that you SHOULDN’T consider Asian outsourcers, but it is a hurdle that needs to be overcome through communication plans and concessions on the part of the outsourcer, such as working late hours.
Culture is another factor that must be researched in order for the two parties to effectively collaborate. Make sure that you and the outsourcer are on the same page when it comes to expectations for things like deference to authority, speaking up in meetings, conflict resolution, etc.
5. English proficiency
Since communication is the key to a successful relationship, you want to make sure that you and the outsourcer have a lingua franca in common. In 90% of cases, this means that you want an outsourcer that speaks English well.
Top Countries for Offshore Software Development
With over 15 million developers, Asia is the region with the most software developers in the world. Its geographic distance to the US and Western Europe presents some challenges. however, the cost is substantially lower than in other locations, ranging from $18 to $40 per hour.
China is currently concentrating its efforts on the development of the information technology sector. The Chinese government has enacted rules that make it easier for technology businesses to do business in the nation.
According to Chinese government data, China today has approximately 7 million programmers, software developers, data scientists, and AI trainers. In addition, China trains and graduates 1.4 million IT workers each year. As a result, this is the country with the most dynamic IT market in Asia. China has exceptional software developers in functional programming, Python, Shell, and so on. The cost of software development in this country is relatively greater than in other Asian countries– around $35-$40 per hour.
The time difference between the United States East Coast and China is approximately 13 hours. This puts China at a disadvantage unless the outsourcer is willing to have its key staff members work late hours.
Culturally, Chinese professionals are well-known for their integrity, responsibility, and productivity. Their disadvantage is that they tend not to have strong English skills, since China is the “Jupiter of Asia” and usually has the political power to require other countries to learn Mandarin. This is changing, however, as China seeks to be more competitive in the global marketplace, they are learning English at a staggering rate. It is estimated that China has 400 million English learners. That’s more than the entire US population!
When it comes to outsourcing activities in Asia, India is the first name that comes to mind. According to Kearney, about half of the top 500 global firms have formed alliances with India. In the software development technology industry, four out of every ten IT work in India.
India has a high level of English proficiency and now has more than 5 million software engineers. In addition, the man-hour cost is relatively inexpensive, ranging from $18 to $40 per hour. This makes India perhaps the lowest price among the major outsourcing destinations. However, as previously discussed, low cost always carries the danger of lower-than-expected completed product quality. This doesn’t mean Indian developers are low-quality, rather it means that Indian firms have a reputation for building to the letter-of-the-law on their Scope of Work, and if you make any changes whatsoever, they (allegedly) hit you with expensive change orders. Furthermore, the time difference between the United States and India is around ten hours, which can cause communication issues unless there is a clear mitigation plan.
According to the Kearney 2021 Global Services Location Index, Vietnam remains in the top six in the global services value chain (in 2019 Vietnam was at the top five). The main driver behind Vietnam’s recent success is that the Vietnamese government has made significant investments in STEM and English Language education. In Vietnam, the most popular programming languages are Java, PHP,.NET, and a variety of other languages relevant to AI, machine learning, e-commerce, etc.
Vietnam’s software engineers are well-trained and have a track record of success. Investment in Vietnam by businesses such as Intel, IBM, Samsung Display, Nokia, and Microsoft demonstrates the industry’s ongoing growth pace. ITO and BPO services are frequently used by Japanese IT firms in Vietnam. The time difference between the United States and Vietnam is the same as China’s – roughly 12 hours difference from the US West Coast, which causes the same challenges as it does for other Asian countries.
Culturally, Vietnam is “naturally” different from the west, however, because of Vietnam’s colonial history and a large number of western firms in the country, Vietnamese workers have learned to adapt to western cultural differences. Perhaps the biggest benefit to Vietnam is that the overall cost of offshore outsourcing is quite low (around $20 to $40 per hour), and the quality is quite high. As a result, if you want to save money while still ensuring the effectiveness of your project, outsourcing in Vietnam is a viable alternative to explore.
Eastern Europe is at the forefront of offshore software development. There are almost 5.5 million professional software developers in the former Soviet bloc. Costwise, Eastern Europe’s hourly fees are, on average, similar to costs in Asia. However, there is quite a large range–, averaging more than $40 per hour in Hungary, $25-$46 in Ukraine, and $40–$56 per hour in Poland. So, depending on the country you pick, labor costs in Eastern Europe can be higher than in Asian countries.
According to Giz’s Ukraine’s Information Technologies Sector report, there are currently over 200,000 active IT workers in Ukraine, with over 25,000 IT graduates joining the market each year. Additionally, the Ukrainian government has created the “Ukrainian Startup Fund” to give a jump-start to their Information Technology Sector. . As a result, the newer Ukrainian firms can be as inexpensive as $25/hour whereas the more experienced ones can cost $46/hour.
The time difference between the Eastern United States and Ukraine is around 7 hours, which provides SOME overlap in the business day, and Ukrainian developers are used to working later hours to provide some additional support. This puts them at an advantage to Asian firms, particularly for Western European clients.
The main downside to working with Ukraine is political instability. At the time of this blog post, Russian soldiers are gathering on three sides of their shared border, preparing to invade. A Russian occupation is certain to cause some disruptions in business relationships with Western countries.
Hungary has a time difference from the United States of around 6 hours. Forbes ranks Hungary as the 40th best country for business. There are over 150,000 software developers in Hungary. Every year, 12,000 new IT graduates enter the industry. They prioritize the development of anti-virus software and IT security services in this sector. Popular programming languages include Java, JS, SQL, C++, Shell, and Python.
Foreign firms have always valued Hungary. Many major technology companies, including IBM, Microsoft, Nokia, Ericsson, and HP, have collaborated with local outsourcing firms. Furthermore, major multinational corporations have developed numerous R&D centers in Hungary. As a result, as compared to other Eastern European countries, IT specialists in Hungary have higher rates. For a mid-level developer, the average hourly rate will most likely not be less than $40.
Poland is ranked 41st in the Open for Business Rankings and 34th on Forbes’ list of the Best Countries for Business. Poland is a member of the World Trade Organization, the European Union, NATO, the United Nations, the Patent Cooperation Treaty, the Berne Convention, the Paris Convention, the Madrid Protocol, and numerous more organizations. They are striving to be culturally and economically integrated into the western world, and their English skills are generally strong.
Poland is a well-known R&D center for multinational corporations in a variety of industries. According to N-iX data, the IT industry in Poland employs over 355,000 software developers, with almost two-thirds of this country’s IT specialists working for international firms. In Poland, software development companies offer self-developed technology as well as activities to support IT and digital marketing. Python, Shell, Ruby, Java, and PHP are the most popular programming languages in Poland.
Both Poland and Hungary are in Central European Time– the same time zone as Berlin, Paris, Barcelona, and Rome. This gives them a one-hour advantage over Ukraine and several advantages over Asia. The downside is that remuneration of IT specialists in Poland is increasing year after year. The average is roughly $40–$56 per hour today, but before long, Poland may be pricing itself out of the “overseas” outsourcing consideration set.
Latin American countries are becoming desirable outsourcing destinations for American projects. Time zone, culture, and even language differences are smaller in this region as compared to Eastern Europe and Asia. Consequently, the hourly cost is fairly high, ranging from $30 to $55 per hour.
Argentine developers have the best English skills and the highest literacy percentage in Latin America.. Furthermore their time zone is favorable for North American firms– they are between 2 and 3 hours ahead of Eastern Time, depending on the time of year. As a result, Argentina’s IT development staff is the most expensive in Latin America. Depending on programming skills, language, and seniority, pay ranges from $20 to $50 per hour.
Brazil has Latin America’s largest economy. Considered a leader in the industry of software development outsourcing. Brazil is highly regarded by Kearney, and it is in the top five of the 2021 Global Services Location Index. According to Brasscom, Brazil has approximately 1.6 million IT workers by the end of 2021, a 3.3 percent rise from March 2021. Brazil is known for its expertise in programming languages such as Java, Python, and SQL. As a result, many American companies choose to hire Brazilian workers.
Brazil, like Argentina, is only 2-3 hours ahead of the EasternUnited States. They also are quickly learning English as they strive to be a bigger player in the world economy.
Brazil’s hourly rate is mostly comparable to Argentina.
Mexico is the closest geographical country to the United States and is the US’s main economic trading partner. There is almost no time difference, and there are many Americans in the tech sector of Mexican descent. It is also geographically close enough for Americans to visit without requiring visas or an overnight flight. Because of this geographical advantage, numerous Mexican outsourcing firms have established operations in the United States.
The technological focus in Mexico includes infrastructure and information security, with commonly used programming languages such as .NET and MySQL, along with Java, LAMP, and mobile application development.
Mexican IT workers are generally familiar with English, however, it is generally easier to work with them if the client is proficient in Spanish. This usually isn’t a problem, as many US IT workers have enough working knowledge of Spanish to make communication possible. . Mexican firms have a wide cost range– from as low as $20/hour to as much as $60/hour. The more expensive firms tend to have US-based client service and stronger English skills.
Choosing an outsourcer for your project is often the right business decision. However, it is necessary to carefully research the location in which you select your vendor, because factors such as communication language, time zone, culture, or the ratio of cost to quality need to be taken into account.