UK startups face soaring nearshore developer costs

nearshore developer costs

UK businesses are facing rising costs for developers, according to a study by Bristol-based developer marketplace platform Deazy.

The research found that the hourly rate of nearshore developers – outsourced software developers that have close geographical proximity to a company – has increased by 31% this year across Europe.

Deazy’s analysis, which is based on 284 software development projects in 2021, highlights a challenge faced by many UK technology startups.

“Since the pandemic there has been a rapid acceleration in the shift towards digitalisation,” said Andy Peddar, CEO, Deazy. “Enterprises find it hard to train their own people fast enough. Hence, they outsource their development requirements. However, the market hasn’t responded fast enough and demand is outstripping supply, which has led to dramatic increases in costs.”

A recent study by Microsoft predicts the UK will require an additional 1.9 million software developers by 2025 to meet demand.

Businesses choose nearshore developers due to the shorter time difference between employer and contractor, which typically varies between one and three hours. The rising cost of developers across Europe means many countries that have a shorter time difference with the UK are becoming less financially viable.

Jonathan Williams, founder of professional media platform Briefly.app, told UKTN that the rising developer costs have had a huge impact on his business and that it’s a continuation of a trend that began in 2020.

“But 2021 has seen the biggest jump in rates and availability of developers,” he said. “We have had to interview 15-20 developers to find one or two that fit what we are looking for which often then get offered more at bigger companies.”

This has resulted in a Briefly paying “50-60% more” for developers than it was in 2019, Williams said, along with an “increased attrition rate due to developers taking higher-paying roles” elsewhere.

As a small startup, it has meant a slowdown in development that has had a knock-on effect on other areas of the business.

Williams said the company now hires overseas developers instead of UK-based devs to “benefit from lower rates without compromising on the quality of work”.

The Deazy study also found that the most used platform for mobile web development in Europe is now React Native. In 2021 the platform accounted for 40% of mobile projects undertaken by Deazy’s development teams.

Other prominent mobile platforms were Kotlin (Android), which dropped from 37% in 2020 to 20% in 2021, and Swift (iOS), which fell from 42% in 2020 to 33% in 2021.

The usage of JavaScript has also grown amongst Deazy’s development teams, rising from 31% of projects in 2020 to 40% in 2021.