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Offshoring for AI Development Popular in The US

April 8, 2024

by Hannah Hicklen

With more and more US-based businesses looking to build and implement custom AI solutions, many are choosing to hire offshore AI development companies. By conducting a global search for AI development services, American businesses can access a broader talent pool and can potentially lower development costs. 

Since the launch of ChatGPT in early 2023, businesses around the world have been looking for innovative ways to implement artificial intelligence in their daily operations. Custom AI solutions, in particular, have been proven to enhance customer experiences, streamline operations, improve productivity, and allow companies to make data-driven decisions.

As a result, even small businesses have begun to invest in developing their own AI solutions to stay competitive. To do so, though, many companies are expanding their search for AI development partners beyond US borders.

In fact, 36% of Americans looking to hire AI development services on Clutch are looking to hire partners outside of the United States.  

36% of Americans looking to hire AI development services on Clutch are looking to hire partners outside of the US

Benefits of Hiring A Global AI Development Team 

Due in large part to the rising cost of labor in the US and the widespread adoption of remote work since the COVID-19 pandemic, outsourcing has become increasingly popular, especially in fields like technology, development, and product services.

With AI development, which often requires highly skilled teams, it can be beneficial to tap into a global talent pool.

“Particularly when filling positions requiring specialized skill sets, geography constraints limit the number of potential hires and available expertise,” explains Sergei Dubograev, VP of Development at Clutch.

To fill these gaps, many business leaders look to service providers in regions like Eastern Europe, where a strong education system focused on filling positions in a growing tech industry makes it easier to find well-qualified development teams.

“By expanding the talent pool, businesses gain access to top-tier talent crucial for maximizing growth potential,” says Dubograev. In short, outsourcing AI development enables businesses to connect with experienced and highly-skilled professionals in a field that requires significant training and education.

AI Development Costs Is a Motivating Factor

Yet, the most appealing reason some companies are looking to hire AI developers abroad is the cost. Bespoke AI development can be a pricey endeavor — most AI development projects on Clutch cost between $10,000–$49,999 depending on the type of AI application, project complexity, and location.

Unsurprisingly, companies in North America often have higher hourly rates for AI development than those in other areas of the world. Notably, the average hourly rate for AI development in the US is $50–$99 per hour, while average rates in India and Ukraine charge an average of $25–$49 per hour.

This is pretty consistent with larger development trends — generally, developers in Eastern Europe and Southeast Asia have lower rates due, in part, to the lower cost of living, as well as government fiscal policies and tax incentives that encourage foreign investment. As a result, hiring offshore AI development teams can help US-based businesses reduce costs without compromising on quality.

Learn more about how much it costs to hire an AI Development Company in Clutch’s ‘AI Development Pricing Guide.

If Not Stateside, Where Are Business Leaders Looking to Hire AI Developers?

Outside of the US, Canada is the most popular country for US-based businesses to search for AI development services, followed by India and then China.

The average cost of hiring an AI development company in Canada is roughly the same as the US, indicating that, while price is often an important criterion for selecting an AI development company, it’s certainly not the only factor business leaders consider.

Instead, business leaders are likely considering elements like what it would be like to work with a service provider as well as broader economic factors before selecting a service provider.

Top Locations for AI Development on Clutch

  1. Canada 
  2. India 
  3. China 
  4. United Kingdom 
  5. Germany

It appears that the global AI industry may be influencing where businesses are looking to hire AI development. A recent report on Technopedia attempted to rank the top 10 countries leading AI research and technology based on rankings from the Global AI Index, Mirae Assets’s Global X AI investment survey, and Stanford’s Artificial Intelligence Index Report.

Top locations for AI development on Clutch: Canada, India, China, UK, Germany

With this data, they determined that the US, China, The UK, Israel, and Canada currently lead AI research and development.

It makes sense for businesses looking to hire AI developers to research and interview service providers where investment in AI is high. While the US continues to pave the way for AI with companies like OpenAI, Google, and Meta, extensive private and public investment in AI in China makes it a close second.

At the same time, India has an exceptionally high rate of AI skills, meaning that their workforce is highly skilled and ready to take on development work, while 144 generative AI startups in Canada make it a logical place to search for qualified developers. 

Offshoring vs. Nearshoring For AI Development

US-based businesses may choose to hire in places like Canada and the UK over other locations because of the convenience of collaborating with them.

Known as nearshoring, the practice of outsourcing to companies in nearby countries rather than those far away or within the same country allows companies to collaborate more effectively. The time zone overlap enables more aligned working hours, ensuring real-time interaction and quick responses, which is crucial for the agile development of AI technologies.

Since the cost to develop AI solutions in Canada and the UK are comparable to the US, companies looking to hire nearshore developers should also consider Central and South American development companies.

These development companies work the same or similar hours to those in the US and Canada, making it easy to set up meetings, provide feedback, and collaborate, but offer more globally competitive rates. For instance, the average hourly price for AI development services in Mexico is roughly $25–$49 per hour, similar to India and Ukraine. 

Offshore Outsourcing Indicative of Global Nature of The AI Industry 

While cost is a significant factor driving businesses away from domestic AI development options, there are other reasons companies choose to outsource. Access to a broader talent pool, specialized skill sets, and the pursuit of high-quality development teams are equally compelling.

Countries like India and Ukraine offer competitive pricing and bring diverse expertise and innovative approaches to AI development. At the same time, countries with a high investment in AI development — like Canada and China — are popular destinations for development services.

For companies looking to build their own AI solutions, offshoring helps businesses manage their budgets more efficiently and ensures they remain competitive in a fast-evolving digital landscape.

As AI continues to assert its dominance in various sectors, the willingness to look beyond geographical boundaries for development partners will likely grow, further emphasizing the importance of a globally interconnected workforce in the tech industry.

Looking to hire an AI Development company? Search for industry-leading service providers on Clutch
 

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