7 key factors that determine software outsourcing rates

May 13th, 2023

The rates for software outsourcing can vary depending on a number of factors. We nailed it down to 7, just to give you a high-level overview of its composure.

A heads up: key factor number 7 is a bonus: The Intangibles. 

7 key factors for rates:

1 - Location.
2 - Global Demand for THAT Tech Expertise.
3 - The 2 kinds of Experience.
4 - English Proficiency in ALL its formats.
5 - Scope Size and Long-term Potential.
6 - It’s not you, it’s me: Timing.
7 - Bonus: the Intangibles

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1- location:

There are many regions and tech hubs to outsource software development from. Each tech hub has its own reputation for its tech expertise, prices, and time zone constraints.

Rate range chart 2022-2023:

North America $60-200
Southeast Asia $20-70
Eastern Europe $30-100
LATAM $30-95

This one is the no-brainer...

2- Global Demand for THAT Tech Expertise:

Due to the scarcity of specific technical skills, you can predict higher rates when looking for cutting-edge and highly specialized expertise. This is independently from the location you’re seeking to outsource from!

For example, today AI and Data Science experts are highly demanded due to macroeconomics and trends in the industry.

Make sure to check macro demand patterns to know where you're standing.

3- The 2 kinds of Experience:

Software developers and engineers are likely to be more expensive as they gain more years of experience. But make sure to consider the following: a software dev can have many years of experience in the tech industry, yet few years of experience crafting with the technology your product requires. Make sure you have that discriminated well.

Working with teams with previous experience in your industry is also a key element that has an impact on rates. Teams with previous experience will likely be more familiarized with the challenges of your industry. That's a great advantage for productivity, too.
The more productive, the more expensive.

4- English Proficiency in all its formats.

Communication is a key asset in any software development process because it has a direct impact on efficiency and productivity. Efficiency and productivity is what you'll be charged for.

When you work with a nearshore or offshore outsourcing partner, make sure you get to validate their communicational skills in all formats and not just written or speaking, but listening skills too.

5- Scope Size and long-term potential.

Software outsourcing partners will also consider the length of engagement to determine their rates. Sounds reasonable, right?

The longer is the opportunity you provide them, the more valuable you are to them. Mainly because you give them financial stability, and financial predictability.

Make sure to communicate to your outsourcing partners your long-term engagement opportunity right from the start, so they can take that into consideration for establishing more competitive and attractive rates for you.

If your more valuable as a client for your financial impact, rates can be a little flexible on your favor.

6- It’s not you, it’s me: Timing.

Software development companies have the challenge of balancing in-house tech talent with client demand.

In other words, having their team busy. Meaning that tech firms that have available talent are more willing to negotiate a lower rates than other tech firms that require higher efforts to find and provide the tech talent you need.

Availability has an impact, not always on your favor.

7- Bonus: the Intangibles

You are not just a client, you are also a new case study to the tech firm's portfolio.

If you add value to their portfolio, they could and should use that as a marketing strategy to obtain new deals and clients. This could have an impact on their rates they offer you, because your worth more than just what you'll be paying them.

So, you're not just a client, you're a means to attracting even more clients for them. You need to understand how big is the value you are providing to their portfolio for a better negotiation.

Another intangible is the chemistry between both parts. Nobody wants to work with assholes, and thats a two way street.

If they feel this relationship will run smoothly, they might also consider that on rates.

Looking for outsourcing partners?

For guidance in finding your ideal tech partner in LATAM, Rooftop is the most personalized way of doing so.

Contact us to know more about how we vet and match you with top-level tech firms.

Thanks for reading.

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