Offshore development unit price, market benchmark and more

Offshore development unit price is the first key factor in budget. In practice, the total budget is not a simple multiplication, such as “developing unit price per man-month”, as anyone with offshore experience knows.

In order to make a project successful, there is the difficulties of offshore development that cannot be estimated from the development unit price alone. Then, let’s think about the offshore unit price again.

1. Offshore unit price differences by country

The offshore development unit price is determined depend on country by factors such as the prices and labor cost of that country. The average unit prices of major offshore contractors in Asian countries in FY2018 is as following. The unit price of offshore in Vietnam is higher than Bangladesh and Myanmar, but lower than China and India.

• China 3,472 USD
• India 3,519 USD
• Philippines 3,070 USD
• Vietnam 2,937 USD
• Bangladesh 2,663 USD
• Myanmar 2,413 USD

（Unit：Mibn）

 2. Different purpose for each offshore countries

Initially, the purpose of offshore development was to reduce development costs with lower wages. If it were only this purpose, the offshore development trend will shift to Myanmar or Bangladesh. However the reality is different from that.

Japan continues to outsource to high unit prices countries, such as China and India. In other words, Japan decides which country to outsource as offshore development, with the reason not only low cost but also technical ability, maturity, past achievements, etc.

• China

In China, there are many companies with more than 20 years of offshore development experience. Despite the rising costs, Japan continues to outsource to China as an offshore destination due to its high technical skills and Japanese communication skills.

• India

Because Indian engineers have such a high level of technology, Japan outsource to India to supplement skills rather than offshore development. The unit price tends to be higher. Some Indian speak Japanese, but most of them speak in English, so communication may be an issue for some Japanese companies.

• Vietnam, Philippines

These countries are attractive as offshore development destination because they are still in the stage of providing a cheap offshore unit price and gradually gaining experience in offshore development. In Philippines, the official language is English, people are good at  English. In Vietnam, people are good at Japanese because school education has Japanese.

• Myanmar, Bangladesh

These countries have low labor costs and are focusing on fostering the IT industry, so they will develop as offshore destinations in the future. Myanmar people will be able to show their high Japanese skills, and Bangladesh people will be able to show their high IT skills.

However, it should be taken into account that these countries currently have weak infrastructure and unstable national situation.

 3. Vietnam Offshore Unit Price

Due to the circumstances of each country, It might be difficult to choose an offshore destination. Considering human resources supply and communication skills, etc., with the offshore development unit price as the key, we recommend Vietnam as offshore destination at this time.

Vietnam is now a popular country for offshore development. The reasons for its popularity are the many benefits listed below.

•  Familiarity with Japan
•  Serious and hardworking national character
•  Education of Japanese language
•  Low unit price
•  Offshore development as national policy
•  The distance to Japan is short

After all, one of the reasons is that the unit price is low. Actually, there are risks such as communication loss due to language differences, differences in quality consciousness due to differences in national characteristics, and the fact that Japanese thinking do not apply.

However, this is not limited to Vietnam. , This problem is always attached with offshore development. By resolving these risks with mutual understanding with Vietnamese offshore destinations, you will benefit from offshore development.

4. Offshore development unit price in Da nang, Vietnam

Da Nang is the third largest city in Vietnam after Ho Chi Minh City and Hanoi, but its labor costs are more than 20% lower than the top two cities.

Comparison of monthly wages for manufacturing engineers (mid-level engineers) – Reference: Bank of Mitsubishi UFJ AREA Report 495 Wage comparison in Asia and Oceania (May 2018)

Therefore, if you do offshore development in Vietnam, especially in Da Nang, you can further reduce the offshore development unit price, and you can expect more cost merit.

Low cost and good environment for living in Da nang.

Our company (BAP Co., Ltd.) is a Vietnamese IT development company based in Da Nang, mainly engaged in offshore development for Japanese customers.

In particular, we have strengths in blockchain and AI technology, and we have been receiving work from many Japanese companies, with the low cost of taking advantage of the land of Danang. If you are thinking about software development in Vietnam, please  contact us.

5. Future trends in offshore development unit price and the direction we should aim for

As mentioned above, we have talked about the current state of offshore development unit price. Every country is in the midst of economic development. Therefore, labor costs are naturally on the rise.

Wages in Vietnam are increasing by around 7% each year although its growth has been more subdued than before. Also, wages in other offshore development countries are also increasing similar or more.

As the offshore unit price goes up, the benefit goes down, so we have to think about what to do next. Developing and shifting to a country with lower labor costs may be one good way, but you will see its limitations.

Another way is to change the role of the offshore destination within your project structure. It is advisable to see the country as a source of talent and skills, not just an offshore destination, and to build partnerships as future business partners.In particular, our company (BAP Co., Ltd.) has reliable technical skills and abundant young human resources. We believe that we will continue to contribute not only to offshore development but also to the future development of your business.