Where To Outsource Software Development: Talent pool, Prices, Countries
In this article, we gathered information about the most popular outsourcing destinations to help you with your research. If you plan or decided to outsource development to a software development company or you plan to set up a dedicated development team, R&D or ODC feel free to contact us for a free consultation about Ukrainian market.
According to a Bloomberg report in 2018, software engineers were so scarce in the US that an average developer looking for a job would have to choose from 4 offers. Maybe it would be a great idea to try setting up distributed teams in other countries?
At Qubit Labs we have experience in providing dedicated development teams for clients from different countries. Our developers work with various tech stacks and build products for insurance companies, logistics, transport, e-learning, gaming, online rental services, e-commerce and others. Feel free to contact us to get estimations for needed product development or setting up a development center.
If you are still considering outstaffing model now we prepared a list of benefits you can get from this model.
Also, you can check our post about the average hourly rate outsourcing cost in the world.
The world switched to digital in the last century, this century, however, has been a race to win at digital. The world of tech is trying to make every aspect of our digital lives perpetually better, faster and hopefully, more meaningful. The business has undergone digital transformation, politics are well on their way, the everyday life of an average earthling is predominantly digitized.
For that to be a reality and to improve, we need people who know how to progress in this. The number of software developers has grown in millions in this century and outsourcing has rid businesses of the problem of locality and limited talent pools. Certain countries became hubs for IT outsourcing and stabilized the situation even further.
Since the tech talent supply is still lower than the demand for it, the service rates will continue rising in the foreseeable future, but this growth will vary greatly based on the technology in demand, on the geographical location of the service provider and other industry trends.
Another criterion the outsourcing prices depend on is the hiring and salary model. You will end up paying differently based on whether you outsource directly or hire a dedicated team through a vendor or whether you agree on a fixed price for the project or negotiate an hourly rate to pay. Naturally, different approaches work for different kinds and scales of projects. So it is advisable that you do your own research on what kind of skills and expertise your project requires, prior to hiring developers, not to let companies take advantage of your funds. Given the spread of offshore hiring in IT and hubs emerging all over the globe in different economic environments, you will find very different price rates for similar tasks, so it is important to remember that in some cases price directly corresponds with quality. It’s not a rule of thumb, but a helpful remedy against rash decisions.
Eastern Europe has proven to become a golden mean where you can hire high-quality software developers at lower rates without compromising the end quality of the product. The number of software developers in the region has gone up to 1 million with an impressive 1.3 developers per 100 people ratio. So, why else outsource to CEE?
Software Outsourcing to Eastern Europe
Outsourcing to Software Development Companies in Eastern Europe
Central and Eastern Europe is basically are the middle of the world if we look at time zones. The CEE countries have a working-day overlap with almost everywhere on the globe, and sometimes that matters. If your company is also in Europe, this means you and your developers can easily sync your working schedules and even arrange personal meetings, since mobility in Europe is simplified to the max. It’s 8 hours flight from New York City to most Eastern European cities and it also has great airline connection with Asia and Western Europe.
As mentioned above, the CEE region is home to over a million highly qualified software engineers, and if you are a growing business and plan to expand in the future, it is sometimes a challenge to hire a large enough group of developers within the same vendor company. How many developers are in Eastern Europe? Well, not in Central and Eastern Europe. They come from different countries and several professional “specs” may vary from culture to culture, but you can always find your best match while reaping the benefits of working with experts with a multicultural mindset.
One of the pride points of Eastern European countries is their tech education. Some of the countries have also opened a number of American and Western European universities where the cost of education is significantly lower given the overall cost of living in the region, but the education remains at exceptional levels Apart from this, young people in the CEE region seem to show interest and aptitude for programming from an early age and self-educate a lot.
Quality per cost ratio
One of the biggest perks of outsourcing to Central and Eastern Europe is the relatively low price rates paired with the excellent quality of the end product. Software engineers from the region have earned their name in the industry and are well known around the globe for their work ethic and high-performance standards. The prices for software development in these countries don’t only depend on the expertise level of a given developer but also on the economic situation in the country and its standard of living, so developers from the CEE region don’t need to blow up their rates to live comfortably in their respective home states.
Communication and clear understanding of set goals, expectations and abilities are at the top of priority lists for businesses looking to outsource their IT. Companies want to be able to monitor the progress of their projects and be sure the developers are doing exactly what they were hired to do without micromanaging. Since English is the number one international business language, English proficiency is of utmost importance here. Generally, Europeans show a high level of English, and Eastern Europeans aren’t an exception. Over the years, developers from the region have proven to be consistent in their fluent communication, which makes them stand out against some of the Asian developers, for instance.
Ease of doing Business
Apart from the obvious geographical proximity advantage for the European businesses outsourcing to CEE, the region is attractive for business due to the high start-up population, hence the specific young and open-minded tech culture. Another benefit of outsourcing to CEE is the solid government support for the IT and start-up scene in the number of countries. Governments of Ukraine, Belarus, Bulgaria, and Romania all offer a variety of tax reduction or exemption laws and programs specifically supporting the IT business. Of course, companies from countries belonging to the European Union benefit from additional EU tax incentives as a result of the Free Market.
Let’s take a closer look at various examples of countries in some of the world’s most prominent IT outsourcing hubs and compare their specificities and market prices, starting with the CEE region.
Outsource Development to Ukraine
What should you know before hiring software development companies in Ukraine
Ukraine has become one of the top-listers on the software developing scene in the past decade and was even named the Offshoring Destination of the Year in 2017.
Starting with the fact that the Ukrainian educational legacy focused on engineering and technology is historically strong; the country produces some of the highest-level software developers, their number nearing 160,000 currently. Ukraine is the biggest country in Europe and it’s population is around 40 mln people.
That organically feeds the country’s pool of IT companies which reaches 4,000 names at this point and biggest outsourcing providers have development hubs in the biggest cities Kyiv, Lviv, Kharkiv and others.
On The Global Outsourcing Top 100 list of 2020, 21 companies are Ukrainian. According to HackerRank, Ukraine was placed 11th in the top 100 list among the top 50 countries with the best software engineers in the world. It also ranked 6th on the TopCoder list of the best programmers.
Another factor allowing Ukraine to hold top places in these rankings stems from Ukraine’s geographical location and the country’s cost of living. Being located in Eastern Europe, Ukraine is conveniently close to all European countries, time-wise, while still being within the same-working-day overlap with the East coast of the US on one side and as far as Japan, on the other.
Similarly, being located in Eastern Europe, the cost of life in Ukraine is still relatively low compared to other European or North American countries, allowing it to keep the costs of services much lower than the counterparts in respective regions.
According to Clutch, the hourly rate of Ukrainian IT experts ranges start at $20 and grow depending on the outsourcing model, technology, developer level you need. Feel free to contact us to know rates for developers you are looking for or estimation for development project you want to outsource. Our team will be glad to give you actual rates/salaries and help you with market advice.
Outsourcing to Ukraine and the result provided will be well worth the price you pay for it, as the Ukrainian developers’ experience, knowledge and code quality certainly influence the product in the best way.
Outsource Development to Poland
What should you know before hiring software development companies in Poland
Over the last 15 years, Poland has become one of the most important outsourcing hubs in Europe and the world. Tech moguls like Microsoft, Google, PayPal, and Amazon have also entrusted their R&D to the Polish talent market.
The Polish economy has been growing and strengthening for decades now and the stable business environment has proven to be a fruitful ground for software development.
Poland has one of the largest talent pools for IT professionals (close to 300,000 software engineers) and maintains a very tempting quality per cost ratio. Naturally, this talent pool has to be sustained, and Polish universities do a great job doing just that, giving IT diplomas to about 15,000 graduates every year. On top of that, over 500 IT companies offering staff augmentation services, both onshore and offshore, operate on the Polish market.
The country was placed 9th in Tholons Top 100 Outsourcing Destinations while being ranked 3rd by HackerRank with a nearly perfect score across all challenges and beating Switzerland where the services are at least twice as expensive. Yes, despite such high ratings, Polish software engineering services remain on the lower side of price lists compared to, especially in fields like PHP, Unity, and Python coding.
Outsource Development to Belarus
What should you know before hiring software development companies in Belarus
Perhaps, and unexpected, yet quite an important player in the field of software development is Belarus. It’s a mid-sized market-oriented mostly towards the US and Western Europe, and home to over 30,000 IT professionals and around 1,000 enterprises.
Similarly to Ukraine, the country can boast a very high level of tech education with a few large and prominent educational institutions located all over the country, producing a constant inflow of IT experts.
Given all that, Belarus has been included in the TOP-30 list of outsourcing destinations in the world.
Another reason for Belarus to be such an attractive IT hire hub is the solid governmental support in the form of various tax exemptions. For instance, joining Belarus’ Hi-Tech Park means a complete tax exemption for an IT company. The government has thrown significant efforts not only into establishing a thriving local IT environment but also into attracting foreign clients to invest, cooperate and open their offices in Belarus. Such strong support from the government has resulted in steady growth in numbers of high-quality software engineers as well as a solid contribution to the country’s generated income. And while the economic situation in Belarus is far from ideal and the country lags behind other European states in market numbers, this makes Belorussian developers quite competitive on the market due to their quality per cost ratio. Naturally, the costs would vary depending on the technology required for a given project or task.
Hire Developers in Romania
What should you know before hiring offshore developers in Romania
Ever since joining the European Union along with Bulgaria, Romania has become an important IT hub, joining the CEE countries and putting up the solid competition.
As an EU member state, Romania lets its companies offer benefits of legal and financial issue reduction along with tax benefits brought on by the freedom of movement of people, goods, and services within the Union. On top of that, recently the Romanian government has encouraged the growth of the IT sector and has decreased corporate tax rates for all IT companies to help them hire the necessary workforce but avoid paying the additional 16% tax.
The pool of IT professionals in Romania has more than tripled since 2007 and Romanian developers are committed to constantly improving and enlarging their expertise thanks to a number of strategies implemented, strengthening the relationship between the educational institutions (both universities and schools) and IT companies.
Romania’s educational system puts an accent on the tech field and produces around 5,000 software engineers per year. Just like the countries mentioned above, Romania offers a very competitive quality per cost ratio being located in Eastern Europe and having generally lower salary rates compared to Western European countries.
Another perk inherent to Romanian developers is multilingual proficiency – due to some cultural and linguistic peculiarities, many Romanians speak Italian, Spanish and French on top of English and are well familiar with multicultural environments. With all these advantages, Romanian IT engineers remain some of the most affordable and efficient service providers on the market.
Outsource Companies in Bulgaria
What should you know before hiring offshore developers in Bulgaria
Eastern Europe and Bulgaria, in particular, are sometimes referred to as the European Silicone Valley due to the amount of startups launched here.
The country houses over 30,000 software specialists and is home to over 500 IT companies, while the auspicious business environment with tax incentives attracts multinational IT corporations to open and maintain their R&D offices. Bulgaria’s software development industry might not compare to those of Ukraine or Poland, but it has shown stable growth of over 2% annually.
On top of that, Bulgaria has a beneficial geographic location, having access to the Black Sea and being the “connector” of the East and the West while being an EU member state.
In 2015, the UK National Outsourcing Association named Bulgaria to be the Offshoring Destination of the year. Since then, Bulgaria continues to place high in the ranks of IT outsourcing locations.
According to Clutch, the hourly rate of Bulgarian IT experts ranges between $25 and $150 which is considered average for the CEE region and just like anywhere else, the average salaries depend on the technology required and years of expertise. Bulgarian developers are most known for Python, .Net, Java and PHP programming languages.
Software Outsourcing to Western Europe
Outsourcing to Software Development Companies in Western Europe
Let’s move west and examine the scene in Western Europe.
The first thing to mention about the western software engineers, as a rule, they are times more expensive. That mainly is due to the taxes imposed on businesses there and the overall cost of living in the region, so developers simply cannot afford to charge at the rate of their Asian or Eastern European counterparts. Then again, these prices are still significantly lower than the prices US developers set, and there are exceptions to the rule, too, as we will see below.
Some Western European engineers also do have access to higher quality education sometimes, and that plays its part, too. This way, Western European countries like the UK, Portugal, Germany, Switzerland, Denmark, The Netherlands and Sweden still are in high demand for IT outsourcing.
Needless to say, the advantage of professionals from Western Europe is their averagely higher level of English, common command of at least one other language and significant overlap in cultural values and lifestyle with North Americans.
Geography also plays in conveniently – it’s easy to visit any of the European countries for anyone coming from the Americas, but the western countries have the advantage of the smaller time difference, hence potentially smoother cooperation.
Meanwhile, the issue of movement and time zones is reduced to almost zero within the EU, of course. Western European countries are large economies with well-developed business environments and high levels of business ethics which can often be a valid decision-making point to consider when choosing where to outsource.
Outsourcing Software Development to Germany
German businesses have shown certain reluctance to outsource their IT to third parties, so the common practice for German companies is to keep their IT in-house or have a dedicated development team within the country. This means that the German IT market is also not a small one and can accommodate the inner demand as well as the outer one. And while the average salary rates for German developers are not the highest in Europe (Switzerland trumps them all with the average of close to $89,000 annually), it still is up there among the top index with the yearly annual average of about $55,000. So it means that the outsourcing rate if you hire a company that is physically located in Germany will be much higher, according to Clutch it’s more than $100 per hour.
The most well-paid programming languages remain C++ and iOS both in Germany and across other European countries. Since the global demand for IT experts is still above the supply level, the forecast is that the software developer salaries will continue rising until the demand is met. Germany ranked 3rd in the list of the biggest salary increases for Java engineers with 24% growth in salaries between 2017 and 2020, and 2nd among increases for PHP and C# developers with 20% increases.
All in all, outsourcing your IT to Germany won’t be the cheapest thing you’ll do, and the result provided will be well worth it, as the renowned German quality certainly applies to the IT sector, too.
Outsourcing Software Development to Portugal
When we think Western Europe, in terms of the labor market and IT specifically, we think, expensive. Yet there seems to be a certain exception to this rule. There is an emerging hub in Europe’s southwestern corner, a rising and promising player called Portugal.
Back in 2015, Web Summit, the largest tech conference in the world, moved from Dublin to Lisbon and became a game-changer for the country. According to the SEP Monitor Report, Portugal’s tech industry growth is double the European average.
Between 10K and 20K students with degrees in science, engineering and computing graduate from Portugal’s universities annually, adding to the young and highly qualified talent pool. But it’s still not there to turn country in the biggest outsourcing hub as Eastern European countries, like Ukraine for example that has a population four times bigger than Portugal. Its geolocation also makes Portugal an ideal outsourcing market for the North American and British (especially after Brexit) businesses thanks to the small or no time difference, respectfully.
The average salaries for software engineers in Portugal lie somewhere between the Eastern European rates and the German ones mentioned above, also depending on the programming language in question, where Unity and Python programmers seem to have higher than average rates. But the
Software Outsourcing to Latin America
Outsourcing to Software Development Companies in Latin America
We are now hopping across the Atlantic, to take a look at the Latin American IT outsourcing environment.
The employee turnover in IT was the highest among all industries. Hard to find a long-term, highly qualified and decently priced expert to work for you in such a climate. So, the US employers turned south.
IT Talent Pool
The outsourcing industry in LatAm is growing fast and new talent constantly enters the market. Today, the region is home to over a million qualified IT specialists, so how does it compare to other software outsourcing destinations?
The main assets here include skilled professionals, high English proficiency, real-time collaboration, travel proximity, cultural similarity, and lower rates. All of these are significant benefits for a business.
Risks and Taxes
However, the situation is not without a couple of potential pitfalls. One of them is the taxation systems in Latin American countries. In recent years, governments of a few of them have made effort to modernize and strengthen their tax systems, which, in turn, now poses extra taxation for foreign companies trying to outsource labor in the region. For instance, if you are looking for long-term partnerships with the Latin American outsourcing team you will be fully taxed as if your company had a branch there.
Some North American companies also report occasional lack of discipline and quality among the LatAm developers. It is, thereby, important to do some research prior to venturing into Latin America for IT outsourcing, but that generally goes for any outsourcing venture.
Outsourcing to Argentina
It’s no secret that the main force behind a business’ decision to outsource is money, or the quality per cost ratio, to be precise. This is why Latin America and Argentina in particular, are the main offshore or “nearshore” destinations for US companies. EF ranks Argentina first in Latin America and 15th in the world for English skills. That and the cultural similarities brought by common historically European roots automatically makes Argentina the most appealing country to outsource for North America. On top of that, the Argentinian government invests more into education per capita than almost any other developing country contributing to the steady talent pool growth. This allows Argentina to head the list of top 15 countries that have cutting edge skills on Technology and be the only Latin American country on that list, too. Argentinian currency runs quite low compared to the US dollar and Euro and allows the Argentinian software engineers to provide their services at some of the most competitive rates out there. An average programmer in Buenos Aires would make anywhere between $1000 to $2000 a month.
Software Outsourcing to Southeast Asia
Outsourcing to Software Development Companies in Southeast Asia
Asia boasts a 10 million talent pool of developers and often, very attractive rates. It was the first region that emerged as an IT outsourcing destination, starting with India and China, but recently countries in Southeast Asia have been catching up to the giants, offering a considerable competition in expertise and price.
The cost of outsourcing to Asia has definitely always been the biggest selling point. Western businesses cannot resist the rates of Asian developers, because let’s be fair, they are hard to beat. More companies, however, start to realize that some other aspects of the business are worth the money. Aspects like clear communication, code quality, speed of project development, work ethics and cultural values, if disregarded can cost you more than you’d save on the labor.
The level of English proficiency in the region is quite specific to the given country. For example, in the Philippines, 92% of people speak English, while in Indonesia or even India, the percentage is lower.
Work culture is also quite different across the Orient. So, while Asia is a huge and mostly reliable workforce hub, the emergence of other outsourcing hubs like Latin America and Eastern Europe has put some of the characteristics of offshore hiring in Asia into perspective for businesses all over the world. It is without a doubt, that you would always be able to find a developer or a team of developers for your project in the region, you just cannot be certain as to how much time or how many attempts it would take you to do that, given the amount of available workforce and some of the region’s professional peculiarities.
Outsourcing Software Development to Malaysia
Malaysia is one country on the map of the region that stands out with higher proficiency of the labor pool and salary rates closer to the European counterparts.
All that is owed to the country’s economic stability and growth over the recent years. In fact, Malaysia has one of the most vibrant Asian economies and has been enjoying a steady GDP growth for the past 5 years.
English is taught as a primary language and 80% of urban business transactions are conducted in English. The IT focus in Malaysia is concentrated on smaller projects and BPO unlike in Europe.
It is considered a popular outsourcing destination for design, graphics, and animation.
HackerRank placed Malaysia 47th on the top 50 list of best developers, Meanwhile, the rates for the services run close to those of Bulgarian engineers who are 12th on that list.
Depending on where in the world you’re outsourcing from, there might be certain obstacles to keep in mind. Some projects are sensitive to time zones, others – to cultural and behavioral differences, some might be more demanding technologically or dependent on a larger team. This is why businesses often face the dilemma of whether to hire in Malaysia or Eastern Europe.
Hiring Offshore Developers in Indonesia
Indonesia is #40 on the Top 50 list of countries with the best software developers as suggested by HackerRank and is undeniably a big offshore IT outsourcing hub, mostly due to the lowest rates if compared to the other countries we looked at above.
Developers’ hourly rates here start at surprisingly cheap levels. One could find a developer to do a small job for them for as low as $10 per hour. These affordable services attract businesses from all over the world and have built Indonesia up as a prominent offshore outsourcing destination over the years. But recently, with new tech hubs emerging in other regions, the whole Asian market has uncovered and presented one of the biggest challenges for companies looking for affordable developers, and the challenge is reliability, quality of development, speed of development, communication and outcome.
Stemming from the enormous number of vendors offering engineering services and big differences in skill, professionalism and experience, it has become rather difficult to find good match for one’s business fast. It is not impossible, and many businesses have had and continue having successful partnerships with developers in Indonesia and Asia in general, but It sometimes takes time to find that successful match and some projects simply don’t allow for such time.
So while Indonesia offers some of the lowest rates for hiring software engineers, sometimes those rates might come at a cost of quality and anyone looking to save money on developers would be advised to at least consult with other businesses outsourcing their IT in Asia and perhaps, consider alternatives like Eastern Europe.
Check salary tables where to outsource development by developers rates