Why are Outsourcing Development Rates Different in US & India?

In this blog, we are covering some influencing factors that cause differences between the Outsourcing Development Rates of companies from the US and India.

The global IT industry sees massive outsourcing of projects to countries like China, India, Japan, the USA, South Korea, and more. Now, there are multiple reasons behind the increasing popularity of this practice outsourcing development rates which are cheaper in countries like India, the surplus of skilled IT professionals, too many reliable and reputed organizations, and more.

According to a Statista report, India is expected to make an IT-outsourcing revenue of $7.14 billion by the end of 2022. And tentatively, this revenue is expected to cross a threshold of $12.47 billion by 2027. In this data, IT outsourcing segments like web hosting, application outsourcing, administration outsourcing, and other IT outsourcing trends are included.

Furthermore, in this blog, we are discussing a few factors that will help us in figuring out why among the best countries to outsource software development India and the US have massive differences in their development rates. Stay with us until the end of this blog to have some amazing insights -

1. The salary gap between developers of both countries

The major reason behind such a massive difference in offshore software development rates between the US vs India is the salary paid to developers of both countries. On the basis of the data provided by Glassdoor, on average outsourcing developers, or any entry-level software developers for that matter earn approximately $66,298 per year in the US. On the other hand, another Glassdoor report mentions, for an entry-level software developer, the average salary can be $7,425 per year. Also, most Indian companies pay offshore developer rates in the form of monthly salaries instead of per-hour costs of IT professionals.

2. Rising number of IT companies

A report by Nityesh shows that compared to any other market in the world, India has the most mobile app developers for outsourcing available. This creates massive competitive advantages which ultimately lead to the reduction in outsourcing costs and benefits. To stay employed and to start from somewhere, mobile app developers in India are quite comfortable working at a less hourly rate for software developers.

3. A larger young population is a factor

India has the largest young population and the country is continuously producing a massive pool of software developers with expertise in various evolving technologies. However, with more number of IT graduates each year, the demand for opportunities is always on the rise as well. Thus, to start from somewhere and gain practical experience, new developers are often easy to find with cheaper offshore rates for software development in the Indian market.

4. A large pool of freelance developers

A CNBC report states that more than one-third population of the American market works as freelancers. However, in terms of finances, freelancers in the US are again much costlier than what freelancers in India charge. In the salary comparison of India vs the USA, Indian freelancers make approximately $6,000 per year compared to the $82,000 per year that US-based freelancers make. These numbers are based on reports by Glassdoor where the data is collected from the people working in industries.

5. The race to build permanent partnerships

In a massively competitive market where there are several alternatives available, outsourcing countries like India also focus on building long-term partnerships with their clients. Mobile app development companies or software development companies apply practices such as offering extra perks along with development packages. These offers can be post-release free maintenance up to a certain time, free upgrades, free marketing assistance for a year, etc. Many examples of companies that outsource have been following these practices to influence their client retention rates and returning client rates positively.

Conclusion

Well, the cost factor is one of the major reasons why foreign companies look forward to getting their digital products developed through outsourcing developers in India. Especially for new companies in countries like the US, the UK, Poland, Australia, etc, it is a more comfortable and cost-effective option to partner with an Indian IT company for their app requirements as outsourcing companies in the US will require a much larger investment. However, there are a few factors as well that can make these partnerships a little challenging. Some challenges based on an analysis of outsourcing development requirements to India are -

• The difference in the timezone might demand going out of the way to stay in touch and maintain transparency throughout the development process
• For the verification of the company, either you need to visit the country physically or be dependent on the data you can find on the internet
• The legality factor could not be the same as it would be for companies of your same country

In the end, these were some of the drawbacks that you should consider while listing down outsourcing costs and the benefits of partnering with a company from India to get your product built. Also, hopefully, this blog helped you in understanding the major reasons that influence cost differences between the US and Indian markets.