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An Overview Of The Rates And Cost Savings When Outsourcing

An overview of the rates and cost savings when outsourcing IT staffing

Niels Siskens

CEO of Parrolabs
September 3, 2020
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An Overview Of The Rates And Cost Savings When Outsourcing

Understanding Outsourcing: A Comprehensive Overview

Outsourcing can take many forms, but the underlying principle remains constant: delegating tasks to another entity. Whether you're seeking process optimization or cost savings, understanding the nuances of each type of outsourcing is crucial.

On-shoring, Near-shoring, and Far-shoring: What's the Difference?

The Basics of Outsourcing

All these terms pertain to contracting services to an external entity. On-shoring refers to domestic outsourcing for process enhancements, while nearshore and far-shore methods prioritize both process improvements and cost-saving, leveraging differing labor costs across regions.

Benefits of Near-shoring

Having a Software Development Team from an outsourcing provider offers advantages. While far-shoring may incur hidden costs due to time differences, near-shoring, especially within the same or adjacent time zones, negates these concerns. As Nearshore partners, our viewpoint at Parrolabs might seem skewed towards near-shoring. Yet, it's worth examining the prevalent market rates for more clarity.

Market Rates and Their Implications

On-shore Outsourcing

With hefty payrolls, on-shore development agencies often charge rates upward of $150-$250 USD per hour. This covers the salaries and operational costs. While there are communication advantages to on-shore teams, these rates can be prohibitive for many clients. Some on-shore agencies even collaborate with offshore partners to offer more competitive rates.

Far-shoring Complexities

Mainly beneficial for large corporations, far-shoring brings its own set of challenges. Remember, Fortune-500 companies aren't necessarily pursuing the lowest costs. They're often addressing talent pool deficiencies locally, accepting the inherent complexities of far-shoring.

Rates in Asia

Countries like India, Pakistan, and Bangladesh have rates that hover between $25-$45 per hour, though there are exceptions based on provider and location. It's vital to remember that top talent anywhere demands competitive salaries. If rates appear too low, it's wise to approach with caution.

European Near-shore Rates

Near-shoring in Eastern Europe offers a range between $30 USD - $75 USD per hour, with countries like Poland on the higher end.

Near-shoring in the Americas: A Deep Dive

The Rise of Costa Rica

Historically, Costa Rica has been the go-to nearshore destination in the Americas. However, due to increasing rates, companies are exploring alternatives like Colombia, Mexico, Argentina, and Brazil.

The Shift to Colombia and Argentina

Many companies formerly based in Costa Rica have transitioned to Colombia and Argentina. The larger talent pools and more competitive rates make these countries attractive options. At Parrolabs, based in Colombia, we've observed significant price differences between resources based on their English proficiency levels.

Current Colombian Tech Rates

Presently, tech resources in Colombia typically range between $35 - $55 per hour.

Written by Niels Siskens

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