What would you pay for offshore software developers these days?
I met the CEO of a small company yesterday who thinks paying $2,000 per month per software developer offshore is the going rate. Is it?
What do you expect to pay per month for a software developer in a small team of 5 to 10 programmers for an engagement of six months or longer that will give you reliable results?
Clarification added 3 months ago:
Thanks to all who provided answers to this controversial question on how much to pay for offshore programmers working together as a team. I summarized the answers in a blog post here:
http://accelerance.typepad.com/runtime/2009/08/what-would-you-pay-for-programmers.html
Most answers were very good and each added a perspective. You are welcome to add additional answers and thoughts as comments on the blog posting.
Good Answers (10)
Michael Y
CEO and Lead Consultant, Conflair Inc
Best Answers in: Commercial Real Estate (1), Offshoring and Outsourcing (1), Antitrust Law (1), Computers and Software (1)
You certainly can get this rate, even lower. The question is, though, what would be your TOTAL COST. I would suggest few factors in evaluating it:
(1) The ability of the off-shore team to understand your requirements. A team comprised of novices who have a very vague idea of the world in which software applications are implemented would cost you lots of time, effort, and frustration - which translated to dollars.
(2) How professional they are in software development? I mean skills, not the experience that shows up on the resume.
(3) Do they have a REPEATABLE PROCESS that will produce deliverables of PREDICTABLE quality? In other words, is their CMMI Level 3/4/5 real?
(4) Do they have professional and dedicated testing? As it has been mentioned before in this thread, this is quite important.
(5) Do they have any legal existence in your country? If it comes to legal action, this becomes important.
(6) Will the people dedicated to your project? As banal as that...
My personal preference is always to try a new vendor on a small project. Add lo and behold: just recently I tried a rather sizeable off-shore software vendor, for a price even a bit lower than the one you quoted, and it was quite bad. Good thing I managed it tightly, both on the legal and the professional side, and was able to transfer it to another team without major damage.
In your case it might make sense to invest some effort in evaluating vendors.
Links:
Steve,
I doubt there is such thing as "going rate". In my country we have places like Moscow and St.Pete where the rates may be two-tree time higher than
your contact has told you. But smaller cities like Perm or Novgorod
may offer you better rates - still higher than this guy quotes.
But, IMHO it is totally wrong to select your outsourcing partner based on rates only. 5-10 programmers for 6 month seem like quite a big project - i.e your CEO may need another 6 month to make modifications and then another 6-18 month of support, bug fixing and maintenance. Small company with almost zero profit margin (low rates) may not even survive that long...
Cheers,
Arcady
Links:
Even if it is possible to find a team that operates at that rate, it would be doubtful if quality of development, management, support will be acceptable.
That is so that the price defines quality of engaged resources.
Project that you are describing( 6 month 5-10 developers ) is pretty big investment - so I would recommend choosing outsourcing partner carefully. Pay attention if they have QA and if they provide warranty support.
Dean S
Founder at BluMtnWerx
Best Answers in: Offshoring and Outsourcing (3), Public Relations (1), Sales Techniques (1), Supply Chain Management (1), Software Development (1)
Hi Steve-
I'm sure that the CEO was quoted a $12/hr rate, perhaps by multiple vendors. As you know, it's common practice to share the price of the lowest cost resources, then try to stuff the project with more expensive people that have more appropriate skills, project management capabilities and effective communication ability.
As the team gets assembled with people that can actually perform well, the cost is likely to be significantly higher. The first step is winning the business, the next step is figuring out how to get it done (hopefully).
I'm guessing that he/she would find that working with a 10 person team of $12/hr resources would not be the most time/quality efficient way to complete the project.
Links:
Short answer - depends on experience!
Long answer - If it is just payroll, then it seems high, though a good Dev Lead will cost that much. If it is a fixed per month fee incuding overhead, then it sounds low and more likely, the developer will be really low on experience. Also you should differentiate between an IT application developer and a product developer. Product developers are at a premium.
Sergio C
Project Manager, Technical Sales Advisor for Software Outsourcing Projects.
Best Answers in: Project Management (3), Business Development (2), Planning (1), Using LinkedIn (1)
Hi Steve,
There are no absolute terms regarding rates. They will depend actually on many factors, involving both prospective market and prospective company.
In terms of market, the key word is location. The rates will vary, sometimes very much, depending on the place you are targeting. If you are looking for near-shore locations or off-shore locations, you can expect different prices as well. There are places where $12-$14 box an hour is fair but for other places that is way too low.
In terms of company you will find several differences as well, depending on the profiles you are looking for as well as the kind of additional support they are able to offer you: do they have project managers and architects supervising the teams? what if a person gets off the team unexpectedly, are they able to cover the event? Which is their expertise? Are the Outsourcing Product Developers or they Outsource any sort of project? Are they a good small or medium size company, or are they a big global outsourcing shop?
The kind of project you describe suggests the you are looking for a long term engagement and a team of a certain size. You need to be sure that the companies you are looking into have both the willingness and the capacity to work in such a way; that will certainly have an impact on the rates, but you will thank for that after 6 months or a year. And also certain types of companies will work out this high rates taking into account the long term engagement and looking for win-win situations.
I hope this helps.
Best,
Sergio.
Nick K
Chief Technology Officer at PDR
Best Answers in: Offshoring and Outsourcing (6), Software Development (3), Corporate Governance (1), Project Management (1), Small Business (1), Computers and Software (1)
Talking about ongoing rate on offshore resources is like speaking about ongoing prices for houses ;) Even when you narrow it by geography, skill, engagement type the rates would fluctuate dramatically from company to company. Throw into the mix exchange rate, salesperson abilities, your own negotiation skills and you get no benchmarks to look at. And the most important element here is that rate is not too important comparing to other factors that will affect your Total Cost of Outsourcing in most significant manner. I put a few references to my blog below for more insight in this rather popular and controversial topic. Best of luck, nick
Links:
Steve
2000/month sounds low. It may be signs of desperation for projects ( and hence taking assignments at below cost) or a company with severe cash flow issues or somone who will deploy junior resources.
Like Arnold mentioned, a fixed bid may be a safer bet financially , if time to market is not an issue.
Feel free to ping me.. I have done this for 22 years..
Good luck
Steve, $2,000 per month per developer is low. I have already seen some very good answers regarding quality vs price, so I will not go into this. Everything said above is TRUE.
I will only try to help you with a rough idea on what would cost you to hire a team of senior developers in Eastern Europe.
A realistic price for good programmers in Romania for instance would start at $3,000 per month depending on skillset and seniority.
For instance - if you want to hire C# developers with ASP.NET and some Ajax knowledge "technology-only" is one thing, while hiring experienced BI developers (Oracle middleware) with good background in a specific industry like Telecom is a totally different thing... Also a sound Java expert, with decent knowledge in Banking and who has played with many frameworks is usually evaluated higher.
The requirements can differ quite a bit, so it is not realistic to assess offshore services in terms of "flat-rate-only".
Anyways, for the project scope you mentioned, I recommend you should be working with a professional, experienced outsourcing company, not freelancers.
Check out www.itsix.com for more information on Romania and skillset available in the country.
Sorin
Steve,
For 5 – 10 developers for 6 months or more you begin to get to a level at which there are additional and important issues to consider. For example, what about the model? You might want to consider a longer-term agreement which enables a greater level of partnering between you and the provider, striving for shared goals, rather than just project work. Other issues to consider might include if pricing should be more outcomes based? Also, what about exploring a dedicated “Software Product Lab (SPL) model” where the team lives on for the length of the engagement rather than comes and goes with the project? This will help enhance communication and ensures focused resources who are “right-sourced” for the project.
Surely a focus on cost is always important, but studies have suggested that a focus on costs actually leads to cost escalation, but a focus on outcomes generally yields a more positive relationship/success.
More Answers (7)
Arnold B
ITO/BPO specialist within Travel and Hospitality domain
Best Answers in: Offshoring and Outsourcing (3), Mergers and Acquisitions (1), Internationalization and Localization (1), Project Management (1)
Steve,
If cost is the compelling factor, I would recommend going the Fixed Price route - 6 months or so and 5-10 resources is a small transaction for either party to sweat on the risk factor of a Fixed price engagement.
Why go the T&M route ($2000-$4000/month) and open yourself to the lowest bidder at the cost of quality?
Regards,
Arnold
The answer is you get what you pay for. $2,000 was the going rate for developers 5 years ago in India. India is the IBM of offshoring. It has the longest tenure and is proven. You can pay $2,000 for a developer in some 2nd tier and 3rd tier regions of the world. Bottom line though is that you will most likely lose your people after 6 months.
Here are the facts:
Development Team Lead - $32-$35/hour
Architect - $28-$34/hour
Developer - $25-$32/hour
Please reach out to me if you have any additional questions.
Yes, it all depends on the volume, skill set and level of experience required.
We do have proven track record of experienced team worked on several offshore projects for $2800/month/resource. How ever due to current demands we have to charge $2000/month, as we do not want to loose these resources. But still we are able to deliver/cater the services with out affecting the other businesses. For web developer with 2 years experience we still charge $1950/month on T&M model.
Best Regards
Pavan M
Links:
Steve, I think that perhaps it's past time to be just talking about resources and rates. At Symphony Services we're trying to re-establish the link between outsourcing activities and results by moving towards offering performance-based engagements where clients pay based on outputs delivered or outcomes achieved.
Links:
Go to http://www.odesk.com/trends. There are real-time rates for every specific type of programmer based on the actual freelancers using the oDesk service. You don't have to sign up or pay anything to view all of this information. Hope this helps.
Links:
Susan S
Oppenheimer & Co. Inc., financial marketing writer.
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I'd rather bring it in house to whatever degree is possible. Especially help desks.
Sai G
Head of Technology Solution Provider Practice
Best Answers in: Computers and Software (2), Offshoring and Outsourcing (1)
Steve
I think what Michael Bertoni has referred is the right mark for team of this size or for good quality resource with decent experience band and comparable productivity. Anything lower will get you what you pay for.
12 $ an hour can be for somebody just out of college post training for 6 months in the company and also has been a shadow for a 6 M / year seems right. But again has to be for a volume of couple of hundred developers and not for 5-10.
- Sai,
CSS Corp,
New York, NY
