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

If you read the articles, I would say that the companies listed above (like the NYT) are not the ones outsourcing, the outsourcing is quite limited in scope, and mostly is design jobs, not writing jobs.

I thought it was a great analogy.

> a large chunk of software engineering is CRUD apps and digital plumbing, which doesn't require a lot of creativity

The issue is more precision and lucidity of thought and language, and the ability to communicate ideas and emotion to others from a given culture and socioeconomic background.

Consider that when development velocity grinds to a halt because of "technical debt", this is almost always just a euphemism for developers not being able to read each other's code. (I understand there is an actual idea behind technical debt, I'm just talking about what's almost always happening in practice.)

as a 3rd world developer now living comfortably on the 1st world this is exactly my experience, people in the developing world are in general more ignorant on technology, so even if you are an excellent developer it is still going to be a hard sell to ask for a US dev rate. The emerging economies are not technology driven in most cases. In my case I had to look for work outside my own country first to more reputable South American countries and eventually in North America.

I think the problem with outsourcing is it adds a layer of indirection between the stakeholders and the developers. As a developer myself, I find it almost impossible to work effectively unless I have direct contact with the stakeholders.

Right, but that proofreader might not totally understand nuances in language and how words take on different meanings to different audiences, even if they are the same words used.

Back to the programming reality from the analogy, I've seen outsourcing happen, for businesses that revolve around American customer bases and rules and regulations- now the code is outsourced, but the basic understanding of how business logic related to the real world use was gone. So the offshore team, while technically competent, was not equipped to make decisions about software with the consumer in mind. If you were working on something and it didn't really make sense in a real world sense, as a dev, you could go to your product person and raise concerns. Without the cultural context- those concerns never get raised.

> architects that design software properly

That's a tall order, the root of a million missed deadlines is that software is notoriously hard to fully design without writing code.

Are you doing something you've done a hundred times before, or are there some twists?

Margins are much higher. Large scale IT Services pay around 40$-60$/day for skilled specialists. I briefly worked in a specialised consulting role where the charge to company was $2000 per day and my cost to the company was $55/day.

I used to do margin calculations at a mid-size US agency that staffed a lot of roles. In terms of actual project margin, we rarely got past 30% and was usually more like 15-20. The trick is that there is a lot of cost in operating an agency beyond just salary. The cost to the agency of employing a developer (or a designer or a tester or whatever) is more than just what they're paid.

We had a rate card that included both the cost to the agency per hour for a particular role and the agreed rate we had settled with the client. We had a fixed rate for each role/locale even though we paid people different amounts. I knew my own salary and handful for my direct reports and the "cost" side of the rate card was a lot more than I was getting paid. And that cost was the base on which padded to get profit from the client.

And that profit itself wasn't pure profit for the company because a lot of paid for our fixed costs (office space, hardware) and non-billable roles (HR, receptionists). And of course a lot of it ends up in the hands of our holding company and their stock holders.

Yeah, I'm thinking the simpler answer here is that this data is basically trash. Based on some of the other comments in this thread, it really seems like it is not a good quality survey with pretty poor quality control.

It reports fewer agency developers in China than in Andorra. The difference between the two represents 1% of Andorra's total population and 0.7E-4% of China's.

3x seems reasonable.

I've subcontracted out to folks, and even at a 2x markup, with the coordination, review, and other unbillable activities I made almost no profit. As a percentage, it was barely worth even having the initial leverage and I rarely did it (at 2x markup) unless it was strictly to meet a deadline. In large orgs where profit is a requirement for just about every interaction I can see how 3x or 4x would be necessary to justify doing the work in the first place.

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.

Early job in the 90s - first 'web' job (1998) - was earning around $40k - $20/hr (more or less). I was being billed out at $125-175/hr. Factor in a loaded cost for me with some 'benefits' (not much) and it was ... $30/hr? Being billed out at 4-6x your wage eats away after a while. I was given some motivational stuff about teams and overhead and such. I asked for an office with a door and $60k salary, and was rejected, so I left. Had they even just given me the office with a door, I'd probably have stayed, and life would have been a lot different. They had a new office building built to spec - with a cube farm, then a wall of offices with doors. Those were empty. "For future managers". I wasn't allowed in them - they sat there empty. :/

>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.

It's like how every company is incorporated in Delaware and has an "office" in the Caymans.