About This Offshore Software Pricing Guide
This Offshore Software Pricing Guide was created based on SourceSeek’s experience collaborating with thousands of offshore software developers throughout the world, and over 20 years of outsourcing experience for web, enterprise, and mobile applications for clients in the U.S.
We continually collect pricing data from software teams in order to maintain our global pricing database and assemble this guide for our readers each year. To succeed in offshore development, every client must find and engage the offshore vendor that is right for their individual needs, work style, budget, and personality. With the chaotic and noisy outsourcing marketplace growing every day, this is no easy matter for clients who just want their projects completed.
This Offshore Software Pricing Guide will walk you through a simple process to help you understand your place in the outsourced development universe, and how to use that understanding to find and hire the perfect team.
This report is written primarily for the small and mid-cap business market. Potential clients with projects valued from $25,000 to $2.5MM will benefit most from this information, as will businesses looking for ongoing offshore partners for project work, internet marketers, content authors, development services retailers, and startups.
SECTION 1: UNDERSTANDING THE 5 TYPES OF REMOTE SOFTWARE TEAMS
The software outsourcing market is approaching $100 billion annually and continues to grow all the time, so it’s not easy to divide it into neat segments. However, for our purposes, it helps to segment the vendor market as follows:
LARGE, ENTERPRISE OFFSHORE SOFTWARE COMPANIES
These large companies are found around the world, most commonly in India, Eastern Europe, and more recently in China or South America. They employ thousands of software developers, testing, and project management resources. Although these companies tend to have competitive pricing when compared in terms of hourly rates, they are generally engaged by large corporations with project budgets of $300,000 to $1MM or more, who have the ability to endure the long learning curve and ramp up period required to make enterprise-level software projects work.
BODY SHOPS AND MID-LEVEL VENDORS
This category of software vendor ranges in size from 50 to around 500 employees and covers a wide range of companies with varying levels of quality and styles. Many of these company’s founders launch with only themselves and few developers, and quickly grow to 50 or more. However, growing a software company is extremely challenging once the founder cannot be hands-on with every project. As a result, while there are many excellent companies in this category on solid ground, there are also a disproportionate number of companies experiencing growing pains and trouble maintaining quality.
The dreaded “body shop” model, frequently seen in India and now China, consists of a company that hires junior developers right out of college, then farms them out to overseas clients with minimal training, management, or leadership. As they rise up the ranks, they are frequently promoted without the solid experience required to manage technology clients. Attrition rates of up to 50% mean that clients who haven’t lucked into a stable, skilled team within the company usually don’t fare well.
Most body shops attract clients through low bids and staff projects with lower paid junior resources. These companies survive on their ability to market their services, and by taking whatever profit they can before the project ends or falls apart. Many clients report ‘it was too good to be true’ after working with a software company in body shop mode.
However, not all vendors in this range are nightmare body shops. There are good companies to be found in this range that produce solid work. These can be a good fit for clients who want to invest the time and energy to outsource large projects at low rates. In fact, we see the most success between clients and remote teams in the mid-range category of vendors, but it takes time to find quality companies in this noisy market segment.
Clients looking for the Offshore Development Center (ODC) model may fare particularly well in this category because while a remote resource or team is hired from another company, they are dedicated and managed 100% by the client.
PREMIUM, BOUTIQUE, AND EXPAT-RUN VENDORS
This is probably the best type of vendor if you are a small business, individual, or startup client looking for quality work from a legitimate provider. While these companies tend to be expensive by overseas standards, you should only expect to pay….