Analysis of dev agencies with hourly rates, team size and tech stack

I oversee the hiring of dev shops for a mid-sized company in the US and the rates for e-commerce/web development are all in the $120-$150/hour range.

The funny thing is that some of these companies outsourced to the Ukraine and India and the rates didn't change. I would have thought that we would at least see some of the cost savings.

Both companies that outsourced ended up being complete disasters (we are still cleaning up the technical debt 3+ years later), which happened before I was involved.

Since this is the case, it made no sense to hire any company that didn't hire all developers directly in the US or Canada (which is now a requirement).

I suppose I should thank these companies, because it's the reason I have a job today.

My impression is that Andorra has a favourable tax regime and is close to Spain and France...

> The funny thing is that some of these companies outsourced to the Ukraine and India and the rates didn't change. I would have thought that we would at least see some of the cost savings.

Why would the rates be lower if the market is one where demand for labor exceeds supply? It's not like lowering the rate is going to allow them to sell more hours, since they are still constrained by human capacity. If the quality of the work was not good, that's a different issue.

>The percentage that is overhead will vary, but only by so much. Otherwise, someone will come along and find a way to undercut your prices and take your business. It's reasonable to assume that if one hourly cost is double another, the developer's pay is higher.

That's really only true if you assume that all of these dev agencies are equal. In reality, a lot of them have different specialties (both tech wise or industry wise), better (or worse) reputations, or certain partnerships. All of these things can greatly change the amount that the dev agency can charge.

I've personally seen plenty of agencies charging $100/hr while another agency with a different "specialization" (but otherwise similarly skilled and paid devs) charge $250/hr. The bill rate hardly ever corresponds with salary, IME.

IME this is very common and in some situations can be beneficial for everyone involved. The company hiring the consultants get the flexibility of being able to quickly hire you/fire you if needed, rather than going through a lengthy recruiting/hiring/firing process. They pay the premium for it, but it can be worth it.

Then the consulting agency obviously makes a nice profit off of it.

And then the consultant themselves can usually benefit from it as well, because typically they get a higher wage than the average employee to begin with, and also it becomes a very easy conversation to have with the company "just hire me as a FTE instead of paying the consulting company. My salary is currently $50/hr, you're paying them $150/hr for my work. Instead you can just pay me $100/hr, and we both benefit." I've seen a lot of consultant -> FTE transitions happen like that.

That only does work if the company is actually looking for a long-term FTE, though. Like I mentioned above, a lot of the time the company is paying the premium in the first place is so that they can quickly and easily drop you off their payroll if needed. They lose out on that by bringing you on as FTE.