With AI on the rise, developer rates decline

Time of India

22-06-2025

Bengaluru: The 2025 Accelerance Global Software Outsourcing Trends and Rates Guide showed a global decline in software developer hourly rates, with decreases ranging from 9% to 16% across many regions.
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Latin America is the notable exception, where rates have remained steady. The report highlighted harder client negotiations, off-rate card deals, and cost takeout deals increasingly being offered by outsourcing partners to get projects over the line. Developer hourly rates declined across several key regions, with Eastern Europe seeing a 9% drop, and both South Asia and Southeast Asia experiencing steeper reductions of 16%.
The 2025 edition of the report reviews data from 2024, comparing it to 2023 figures. It analyses median pricing across all software development roles, based on the latest survey results. This downward trend highlights a softening demand environment, driven by restrained enterprise IT budgets and increased discounting by software development firms competing for limited business in a crowded market.
Peter Bendor-Samuel, founder and chairman of the Everest Group, said, "Over the last month, we are seeing much more aggressive pricing shifts than these as firms seek to capture the benefits of AI and are using AI aggressively with their internal teams, reducing the need for external support.
The reason that Latin American rates are holding up is that in the new AI-driven apps world, time zone proximity is increasingly important, and we are seeing that translate into higher productivity, which in turn allows for higher or at least sustained rates.
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Ray Wang, chief executive of Constellation Research, said AI has driven down the cost of software development. "In fact, we just saw a new firm, Soul of the Machine, headed by the legendary Sunil Karkera, beat out a major who bid a project with over 100 people and a 12-month timeline.
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He won a bid with less than 10 people in half the time. This is AI native scale."
About 50% of Accelerance's respondents anticipate raising their rates by 1% to 5% within the next six months. This signals a departure from the double-digit growth in developer rates that defined the pandemic years. While inflation and ongoing shortages in high-demand tech roles will continue to drive price increases for some specialised skills, outsourcing providers are also offering more discounts and off-rate card deals.
The integration of AI is reshaping various aspects of the software development lifecycle. Last year, Amazon CEO Andy Jassy announced a demonstration of the tangible value of the Amazon Q Developer agent for code transformation. With its help, Amazon successfully migrated tens of thousands of production applications from Java 8 or 11 to Java 17. This effort saved more than 4,500 years of manual development work across over a thousand developers and delivered performance gains amounting to $260 million in annual cost savings—underscoring the powerful impact of AI-assisted modernisation at scale.
AI will play a much larger role in software development, with estimates suggesting that up to 70% to 90% of development tasks could be AI-driven by 2025 to 2027. Phil Fersht, CEO of HfS Research, said, "Our research shows 83% of US enterprises are increasing their investments in automation and AI because of the current tariffs and geopolitical instability." He said, "The market didn't twitch last Monday after Israel's attack on Iran, but I wonder what they will do on Monday, especially now the Strait of Hormuz is closed.
. Trump's 90-day window on tariffs is also about to close with no real deals anywhere, and traditional 'big deals' business is very slow now in our industry."