Cost of Developing Software in India and whats Changed Since the 90’s

The state of offshore software development industry has changed. India was once the shining gem of the tech and service industry, helping companies realize unparalleled cost efficiencies in software development and call centre operations. Cost advantages continue to decrease as software development firms begin to conglomerate, systematize, and incorporate. Theres now far less of a business case for offshoring development, while retaining the same hurdles faced by Canadian and US companies when it comes to time zone, cultural communications, and product quality barriers.

Lion laying on a boat at shore

As to Life of Pi the young men and India share commonalities as they both come of age. India’s decreasing cost advantage in software development is due to its rise as a technology powerhouse nation. Photo courtesy of Andrés Nieto Porras with limited right reserved.

Indian offshoring is increasingly less advantageous

In the early 90’s offshore development was highly utilized by corporations across Canada and the United States. Particularly for professional service organizations that required an inexpensive task force to offload development and testing work in the technology industry.

Increasing costs as outsourcing firms have conglomerated

But as corporate dollars poured in from foreign investments the outsourcing firms grew and grew. First movers who were the initial entrants serving North American corporations, stayed ahead by buying local Indian firms and later becoming national Indian entities. Fast forward almost 20 years later  these firms have grown until they became International and national brands with their very own offices in North America. Companies like Tata Consultancy Services, Infosys, and Wipro (source) saw their brand take shape as they dominated the technology space in India and began investing and making business wagers in the services space.

Value has been largely tapped by early movers

leftover coffee at an office desk with cup tipped overEarly movers were the one who benefited and paid the most on their bets on offshoring software and IT capabilities, as costs of software development then were at record lows due to India and its emerging economy status. Further companies like Ford and CISCO have discovered that working effectively with India is not about transactional relationships but equal partnering as much as a foreign office receives (source).

Rises in living standards and increased talent compensation has driven up costs

The Indian offshore advantage further eroded as the living quality of urban and highly educated nationals rose. Further outsourcing companies in key technology hubs ike Hyderabad, whom wished to retain talent, also faced pressures in offering low cost development as they were unable to if they desired to retain top talent. The local Indian development firms had to offer employees better compensation as they would otherwise be wooed by suitors in the Canadian and US tech industries.

India is no longer just an offshore development destination

growing population of India

India’s growth has led it to become one of the top 3 IT players globally

But the biggest change in the last 20 years have not been simply just because costs have gone up, corporations have moved in, but rather India is a leading nation in technology. Google and Facebook have both recognized the nation’s technology stature, and have invested notable resources in grooming and nurturing the tech communities for new ventures and companies. A big part of this feat was accomplished by investment and deals made to support to outsourcing organizations.

How to tell if your company will benefit from offshore development

PI floating on water with make shift apparatus

PI looks on to the unknown, as do companies discerning whether offshore development in India still makes sense. Photo courtesy of mendhak  some rights reserved.

 

Companies like Apple and Google have made significant investments in accelerators and the tech scene in India (source). It takes far more than budget to build software to make an outsourcing relationship meaningful for enterprises. In today’s climate without taking significant risks on software quality, time costs of key business leaders, off shoring development remains a tumultous enterprise. Here are some characteristics that can indicate whether a company can benefit from offshore development or be harmed by it.

Signs a company may benefit from offshoring development

  1. Your company is willing to invest in a satellite office in India, to maintain and screen for talent
  2. Extensive experience working with Indian or (non-Anglo Saxon cultures)
  3. Deep technical expertise to diagnose technology delivery challenges
  4. Commitment to developing offshoring partners and to provide a talent experience

Signs a company may not benefit from offshoring development

  1. The organization is chiefly concerned about cost savings
  2. Cold outreach to an off shoring partner
  3. Lack of technical expertise to audit and validate quality of technical deliverables
  4. Operational gaps like resource and process discipline

Average cost of developing software in India

Average development cost India ($13-$50 USD)
Average development cost Canada ($12.92-$41.80 USD)

As of early 2018, software development costs in India range from: $13-50 USD per hour based on input from the Quora community. Contributors note that generally the trend is for more experience developers to be priced higher. But the data also supports the main point of analysis here, as the price of North American (Canadian) software developers are in fact now comparable to offshore rates on average: $12.92-50 USD (source).

Though there are other factors when considering how much does custom software development cost, the hourly rates are a clearly indicator that the offshoring advantage from India is less evident and less accessible than in 1990’s tech golden era. Yet despite these challenges organizations have found other salient costs when working with offshore teams. Here is some guidance to working impact fully with an offshore developer.

Ways to work effectively with an offshore developer

Despite the perceived “cost” savings from working with an offshore partner, business leaders should carefully consider investing resources and time to ensure a partnership with an offshore team remains on course. Here are some guidelines from our team who have have had the opportunity to collaborate with offshore resources:

  • Clarity of functional requirements – knowing the technical outcomes of components, modules, units, and code is even more crucial in this delivery model for checks and balances during development
  • Direct channel to technical team members – having direct communication with technical staff often helps close issues quickly than working with an account manager or offshore project lead
  • Communicate through cultural barriers – learn how to ask tough questions when behind schedule, especially with a highly issue avoidant cultures  this has often posed a challenge for on-shore counter parts
  • Send a team representative – having the technical lead of the remote team visit the developer agency will greatly enhance the understanding and inform the approach to work with offshore resources effectively

The quiet onshore revolution

4 panels of people working from home and 1 panel empty officeMeanwhile in US and Canada, organizations continue to experiment with flexible work days and work from home arrangements for employees. Onshore development is contracting our assigning work to professionals who work remotely within the country. This quiet trends has been gaining traction in the last 10 years with Forbes recently featuring an article of 100 companies that offer remote work (source). Many companies are in essence adopting a onshore delivery models as they allow employees to work from home. Remote work days has been a strategy in helping reduce office space foot print and offers employees added work life balance. Companies are positioning for the long-term as they aim to create the option to deploy completely remote work forces. In fact the onshore revolution is happening in offices across Canada and the US as work from home once a week becomes a standard option for employees. CBC notes that 1.7M Canadians are now working from home (source).

Another indicator onshore delivery is the numerous job boards completely dedicated to remote work such as:

Onshore software development the new advantage

Offshore development was once an effective way to reduce costs of technical work, yet in today’s environment onshore development is fast becoming the advantage companies are looking towards for growth. It also allows companies to keep resources more accountable as they are in similar industries and geography that is far more accessible than distant locales. Organizations should perhaps consider utilizing onshore resources for custom software development, given that credentials and professional experience operate under a shared standard.

Mindfield Consulting has been delivering mission critical software for over two decades and helps organizations meet their most pressing challenges and opportunities with the right people and technology. The difference Mindfield offers is the ability to business case, delivery, and operationalize a  strategic vision enabled by technology and a fully Canadian team.

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