Fog Creek Software
Discussion Board




How Much Do Offshore Developers Cost, Anyway?

Obviously the concern over outsourced offshore development is a big topic in here and in the software world in general lately.

Everybody knows it's cheaper to use offshore development, but I have no clue how much offshore development from places like India typically costs. 

I realize there are other costs associated with offshore development, such as the time that the client must spend managing the offshore development, and the inefficiences/costs that can be associated with the distance/timezone/language differences.  Momentarily disregarding those costs, I'm simply looking for something along the lines of:  "Offshore developers from typical, reputable Indian body shops typically cost around $___ per day"

John Rose
Monday, December 22, 2003

The more reputable offshore firms in India bill at around $25-$30 per hour.  That is a large gap above the $5/hour paid to developers, but most of that difference isn't profit.  Although the Indian developer salaries are around 10-20% of their US counterparts, the office real estate and infrastructure is generally equal or more expensive than in the US.  In fact space in Mumbai costs more than in Boston.

That $25-$30 per hour is in addition to the set of on-site developers of the offshore firm who are placed at the client to assist with coordination and communication.  These are technical lead or project manager types who are billed in the region of $50-$90/hour.  Sometimes the on-site liaisons do add value, but for the most part they are overhead because if the programmers were in the same building you wouldn't need the liaisons. Remember there are also technical leads and project managers at the development centers in India who directly oversee the programmers.

The offshore firms also tend to have a fairly high percentage of developers who are paid a salary but aren't billed to anything at any given time -- often as much as 30%.  That is in addition to other nonbillable staff such as HR, various managers, network administrators, etc.

So when you're paying for an offshore developer, you're paying for much more than their salary.

T. Norman
Monday, December 22, 2003

Offshore developers from typical, reputable Russian software development company typically cost around $15-20 per hour. $8-$10 goes to developer. I can't say they are body shops, since you can live decently in Russia for such amount of money, I'm not aware of software developers who work more than 40 hours per week if they work for salary. Sure if they work for their own business they need to spend more time.

Serge
Monday, December 22, 2003

Serge, what a BS! Programmers in Russia work their asses off whether on internal or offshore projects. The company I work for outsources to Russia among other countries, and I met a few Russian programmers along the way. And programmers make much less money than you quoted unless you talk about Moscow. But Moscow is not Russia. Similarly, New York is not America.

Floridian
Monday, December 22, 2003

"I can't say they are body shops, since you can live decently in Russia for such amount of money,"
----------------------------

Oh, I'm sorry.  I didn't realize the term "body shop" had a negative connotation.  I thought it was something that referred to a company that provided IT staffing in general.

John Rose
Monday, December 22, 2003

And thanks to T. Norman and everybody else for the informative responses.

(And apologies to the corpses of my English teachers, who are rolling around in their graves at the thought of me beginning two sentences in a row with "and")

John Rose
Monday, December 22, 2003

A point T Norman overlooks is that the large difference between what offshore developers get paid and what Western companies pay goes into the pockets of middlemen, including managements at offshorers.

That's part of the reason the business is thriving.

a
Monday, December 22, 2003

In Romania, the wages for a competent software developer with 7-8 years of experience is something around US $ 10 000 per year, plus benefits (health insurance and pension fund deposits are usually the standard benefits package).

You can get a less experienced developer for less, or a very experienced and competent developer for $ 12 000.

We usually work a lot of overtime.

I hope you understand that there are other costs that have to be considered:

- office costs

- companies have to pay taxes

- also, a company has to pay some taxes for the employee (health insurance, retirement fund tax, etc)

Romanian developer
Monday, December 22, 2003

Some friends at a large firm here in Denver were recently told that their average fully loaded cost (salary, benefits, office space) was about $80/hour, or 160k a year.  Management also said they could hire Polish developers (as offshore employees, not as bodies from a third-party) for a fully loaded cost of $15/hour, or $30k a year.

Ted Graham
Monday, December 22, 2003

how could "office space" be so expensive?  i saw it for $11.99 at wal-mart!  :P

John Rose
Monday, December 22, 2003

"Management also said they could hire Polish developers (as offshore employees, not as bodies from a third-party) for a fully loaded cost of $15/hour, or $30k a year."

Yes, the savings potential is definitely larger when the offshore developers are employees of a US corp.  But most US corps don't have the patience, the expertise, or the balls to establish and manage a software development subsidiary in a far-away country which they have never visited.  They struggle hard enough just to manage an IT department in the same building.

T. Norman
Monday, December 22, 2003

Dear John,
                Don;t apologize to your English teacher. It is quite acceptable to begin sentences with 'And' or 'But'. Jane Austen for one did it all the time.

              The latest Tech Republic newsletter is dedicated to outsourcing. Might be worth your while nippng over to the site and having a look at some of the articles.

Stephen Jones
Monday, December 22, 2003

"Management also said they could hire Polish developers (as offshore employees, not as bodies from a third-party) for a fully loaded cost of $15/hour, or $30k a year."

I always like to think that if a manager said that to me, I'd have the cojones to say "Do it, I quit." and stand up and walk out. Preferably two weeks before a do-or-die deadline.

(and for the "you'd just leave your company in the lurch?" types - a manager saying that to an employee is purely abusive and should not be tolerated, so all's fair)

Philo

Philo
Monday, December 22, 2003

Floridian, sorry I got the numbers slightly wrong since we get salary per month not per hour in Russia, the correct numbers are $5-$10 for developer. Anyway the figures are not BS, since I was talking about reputable Russian software development companies. Sure you can find small unknown companies that will work for less and you can actually get good results from them, since CS education is pretty good in Russia. But the question was about reputable companies. Here are the real numbers: Sun Miscrosystem outsources work to Novosibirsk (far far away from Moscow) and junior developers get $5/hour. I'm not sure what companies and developers did you talk to. I think they exaggerated that they work their asses off. If you're good developer you can  get the quoted figures in any major Russian city working 40 hour/week. Of course you're right, Moscow is on the high part of the scale, other cities are on the low.

Serge
Tuesday, December 23, 2003

Serge,

$5/hour is about $1,000/month assuming a 40-hour week. It is $12,000/year. Now Russian developers can be bought for $25,000/year per head. Factoring in employment taxes, office, equipment, the need to pay for protection, the need to make huge profits for owners very quickly... I don't buy your $5/hour claim. I know for sure from independent sources that most developers make 300-400 greens a month. Sure, developers in Moscow make 1000. Perhaps, in Novosibirsk, too. I know a developer who makes 2000 a month in Moscow. But not in general. Nope.

And yeah, as a Romanian developer pointed out, developers in Eastern Europe do work very hard and long hours. It's capitalism there in its infancy.

Floridian
Tuesday, December 23, 2003

Floridian,

We are talking about different thing: I'm talking about reputable (from dictionary: Having a good reputation; honorable) companies and you're talking about second rate companies. No offense intedented, here, "second" means not (yet) reputable. In fact, your own statement "the need to make huge profits for owners very quickly" contradicts the word reputable. I know what I'm talking about since I've been doing outsourced work for years for many companies that have their stocks listed on NASDAQ. Your figures "$300-$400" are right across Russia, but wrong across reputable companies. BTW, like me, you've got monthly salary slighty wrong <wink>, $5/hour is about $800/month.

Serge
Tuesday, December 23, 2003

What do offshore developers cost?  If you're an American developer, they'll cost you your job.

Bob
Tuesday, December 23, 2003

I'm a grad student at Stanford and I have an internship with Sun. Basically, I do development for them from start to finish based on very loosely defined specs. I do the development on my own workstation in my studio apartment. What I really do is fundamentally research and development. Although Sun hired me, I send my time cards to a holding company in another state and the paychecks come from there. Something about limiting their liability and assuring they don't owe me any benefits. Anyway, my salary is $10/hr. No point here, I just thought it was interesting that sun pays developers in Russia $5/hr. Makes me wonder if all their development is done for $10 or less per hours total cost and whether there is any future in this line of work.

Bright Lad
Tuesday, December 23, 2003

Cost vary as you know, we've introduced an offshore marketplace of offshore experts so offshore developers can advertise thier services in America and bid on projects that American companies my have.

I invite offshore developers to signup and American companies to take a look.

www.offshorexperts.com

Chris Hearn
Monday, April 19, 2004

*  Recent Topics

*  Fog Creek Home