Gartner predicts that worldwide tech and IT spending will increase worldwide to $5T (6.8% higher than in 2023) despite the turbulent economy. Companies are looking for new ways to optimize their operations and costs while completing their digital transformation and finding new revenue streams.
Tech expertise and engineering capabilities are key to organizations’ ability to transform and achieve their business goals. Thus, the demand for IT specialists will continue to grow. According to the US Bureau of Labor Statistics, it will increase by 22% from 2020 to 2030. Meanwhile, hiring experienced tech experts with the right skills remains challenging and costly.
To solve the problem, businesses, from tech companies to Fortune 100 leaders, partner with external suppliers to expand their engineering capabilities and often opt for IT outsourcing services in Eastern Europe.
This report explores IT outsourcing in Eastern Europe, aiming to help business and technology leaders create a winning outsourcing strategy, choose the best location for building up tech capabilities, and partner with the best IT outsourcing vendor.
About this report
The report's scope delves into the latest trends in IT outsourcing to Eastern Europe and its tech talent pool. It examines the current state of IT outsourcing in Poland, Ukraine, Hungary, Romania, the Czech Republic, Bulgaria, Moldova, and the Baltic region. The report aims to help businesses and investors decide about IT outsourcing in Eastern Europe and choose the most advantageous IT destination. We have analyzed and compiled data from 20+ sources, including reports by McKinsey, Deloitte, Bloomberg, Tholons, Kearney, and more, to the availability of resources and technical expertise in this region.
Executive summary
IT outsourcing to Eastern Europe is an excellent business opportunity that provides access to a broader tech talent pool and expertise or allows companies to find reliable tech partners to excel in their tech competencies. This report explores major outsourcing destinations in terms of the availability of resources, companies, and the overall economic and business climate.
- Four European nations consistently rank among the leaders in terms of available tech talent: Poland, Ukraine, Romania, and the Czech Republic. These countries have the largest number of skilled professionals working in IT outsourcing, and R&D. Poland has over 500K ICT specialists, but only 40% work in IT outsourcing. Ukraine has over 300K ICT professionals and still remains a top European outsourcing destination despite the war.
- Hungary and Bulgaria are also gaining attention due to constant innovation, governmental support of the industry, and a growing number of experts. These countries have 180K and 108K of ICT specialists, respectively.
- The Baltic countries are well-known for their business climate and favorable legislative system. While their tech talent pools are smaller than other locations (less than 120K combined), these countries are well-known destinations for startups and SMEs.
- And Moldova and Slovakia are increasingly popular as potential destinations for IT outsourcing in Eastern Europe.
Outsourcing to Eastern Europe: IT industry overview
In today’s highly competitive and dynamic business environment, few decisions are as critical for your success as the right outsourcing destination. Most entrepreneurs are considering outsourcing to Eastern Europe to access skilled talent, shorten staffing time, tap into rare expertise, and pursue new growth opportunities.
Eastern European tech talent pool
According to the Emerging Europe data, the combined tech talent pool of Central and Eastern Europe (along with the Balkans and some neighboring countries) exceeded 2.2M in 2022. The countries discussed in the report account for 70.46% of the CEE tech experts. It is estimated that emerging Europe has between 4,500 and 6,500 software development vendors employing over 1.4M software developers.
With the growing number of people employed in the ICT sector, their share in the overall employment also grows, meaning that there’s a steady inflow of new employees (both from ICT graduates and people who switched from other industries).
You may also be interested: How to partner with the best developers in Eastern Europe?
Eastern European vendors: overview
As of April 2024, Clutch lists 3,550+ software development vendors that provide IT outsourcing services. While most IT outsourcing providers are registered in Poland and Ukraine, large companies usually build a presence in two or more destinations in the region.
Countries in this region have versatile industry expertise, ranging from business and financial services to healthcare, education, and telecom. We will explore every country and break down companies by size and domain expertise.
Eastern Europe remains one of the most vibrant software development destinations due to its IT sector's constant growth and development and a high level of digital technology adoption. Countries like Poland, Ukraine, Hungary, and Romania have already defined IT as a major catalyst for their sustainable growth and technological advancement.
With the increasing trend of IT outsourcing to Eastern Europe, businesses can tap into a rich pool of talent and access new or rare expertise for their projects. So, which country has the biggest talent pool and the strongest technological expertise for delivering projects of any scope and complexity?
Read more: 15 best software development vendors in Eastern Europe
Top IT outsourcing destinations in Eastern Europe
Poland
When it comes to IT outsourcing to Eastern Europe, Poland is one of the top candidates. The country has an impressive tech talent pool of over 525,000 ICT professionals. Nearly 40% of the tech experts work for IT outsourcing companies. The lion’s share of Polish IT specialists work for global shared services, business processes outsourcing, and other non-IT types of companies. The country has the largest working population in Central Europe, mostly people under 34 years old.
Additionally, over 13,000 IT graduates enter the Polish software development market annually. According to Statista, the number of people studying ICT subjects reached 68K in 2021/2022.
Clutch lists over 1,352 vendors offering software outsourcing services. While the lion’s share (over 90%) are smaller vendors with up to 250 employees, over 120 are midsize and large. Among the top industries in the portfolios of Polish vendors are financial and business services, IT, ecommerce, and healthcare.
The country’s IT services market reached $12.8B in 2022. Moreover, Poland was ranked 9th in the Tholons Top 100 Outsourcing Destinations ranking. The country’s IT development centers are Krakow and Warsaw, which have repeatedly made the Tholons Global Innovation City list.
In addition, Polish R&D activities are becoming increasingly financed by the private sector, thus fostering interest among global market players. For instance, companies like ABB, Google, Siemens, Motorola, Delphi Automotive, Intel, and McKinsey opened their R&D centers in Poland.
Ukraine
Ukraine is considered one of Europe’s leading global software development services destinations. The country’s software development sector is progressing steadily year by year. The country offers many benefits–from its vast IT talent pool and extensive expertise to cost-effectiveness and solid technical education.
Ukraine is home to roughly 300,000 ICT professionals. Approximately 60% of all tech experts work for IT outsourcing and IT outstaffing companies.
Over 2,000 companies in Ukraine provide many IT-related services (almost 1,000 are listed on Clutch). Over the years, these vendors have developed substantial expertise in different business verticals, including fintech, IT, healthcare, ecommerce, and retail, which helps the country maintain a competitive edge in the global IT market.
The country is home to more than 100 R&D subsidiaries of international companies in various industries, including software, gaming, telecoms, and ecommerce. Global companies like Microsoft, Samsung Electronics, Apple, Wargaming, Boeing, Skype, eBay, Siemens, and IBM have opened their R&D centers in Ukraine.
In addition, Ukraine is gaining weight in terms of IT industry recognition. The country has ranked 42nd in the Kearney Global Services Location list and 4th in its category in the 2022 Global Innovation Index by WIPO. Moreover, 15 Ukrainian IT companies, including N-iX, were featured in the 2024 list of Global Outsourcing 100 by the International Association of Outsourcing Professionals (IAOP) as the best outsourcing providers. With its growing reputation, Ukraine is becoming a preferred destination for IT outsourcing in Eastern Europe.
Read more: Software development outsourcing to Ukraine: All you need to know
How has the russian invasion of Ukraine affected the development of the Ukrainian IT industry?
Recent Statista data shows that despite the brutal invasion of Ukraine in February 2022, the Ukrainian IT sector has demonstrated remarkable resilience. Export data reveals that the country's computer services exports reached a record high of $7.3B in 2022. This surpasses the previous peak of $6.83B achieved in 2021. While there was a slight drop in 2023 to $6.7B, these figures highlight the sector's ability to weather challenges and its continued potential for growth.
Moreover, many companies could maintain delivery rates due to post-pandemic improvements to business continuity plans and already adopted hybrid and WFH models. For example, within the first month, N-iX stabilized and maintained its delivery rate above 95%.
Romania
The IT industry in Romania employs around 202,000 ICT specialists. Romanian developers have an excellent reputation in the industry for their high IT service quality—the country is ranked 23rd by SkillValue and 12th in the TopCoder lists. Experts in this location have strong knowledge of the English language. Romanian developers reached 15th position in the EF EPI English proficiency ranking.
In 2022, the IT industry accelerated and reached $3.4B. According to McKinsey, IT services account for 6% of Romania's GDP. Romania scored 32nd in the Kearney Global Services Location Index as an outsourcing destination.
This country is home to 458 companies with diverse technical and domain expertise. The most common industries are IT, business and financial services, and healthcare.
After Romania joined the EU in 2007, its IT business prospered and attracted global companies like Hewlett-Packard, Huawei, Ericsson, and Gameloft. Moreover, Microsoft's regional department in Romania runs two global business support centers in Bucharest and Timișoara, significantly contributing to developing the country's tech industry.
The Romanian government actively supports IT industry development by exempting software developers from the 16% income tax and introducing incentives for local IT companies. This favorable environment makes Romania a promising player in IT outsourcing in Eastern Europe.
Czech Republic
The Czech Republic is one of the top European locations for outsourcing IT-related services. Over 221,000 ICT professionals are employed in the information and communication sector, and approximately 3,800 ICT graduates from Czech universities enter the market every year.
The country is experiencing a 10% increase in IT outsourcing year over year. Czech IT industry growth is fueled by the strong inflow of high-value-added projects from local IT companies and the interest of global investors.
While Czechia is a popular location for IT outsourcing to Eastern Europe, the overall number of vendors is smaller than the previous three countries on our list. Of 140 vendors, 70% are small firms with under 50 employees. As for domain expertise, the top industries represented are IT, financial services, and ecommerce.
World-leading companies such as Google, Microsoft, Oracle, CA, RedHat, Skype, NetSuite, Tieto, and IBM chose the country for direct investment and outsourcing. Moreover, internationally recognized IT brands like Avast, AVG, and Socialbakers have their roots in the Czech Republic.
Hungary
The Hungarian software development industry is one of the most dynamic sectors. The country has a large share of outsourcing within the IT market in Eastern Europe, with around 180,000 specialists employed in the ICT sector. Hungarian developers rank 4th in the SkillValue ranking.
As for the selection of potential tech partners, Hungary is home to a little over 140 companies, seven of which are midsize and large vendors. Their primary specialization is IT, along with business and financial services.
According to Statista, IT services sales reached $1.35B in 2022, with the market's largest segment being IT outsourcing. Budapest remains the driving force behind the country’s development and is ranked 31st in Tholons Services Globalization City Index in 2021.
Moreover, Budapest has emerged as a popular destination for IT outsourcing to Eastern Europe, attracting several multinational companies, such as Siemens, Microsoft, Deloitte, Ericsson, Nokia, TATA, etc., to establish their R&D centers. Throughout the last two decades, the Hungarian government has launched several R&D tax incentives and provided fast access to technical knowledge through regular workshops, meetups, and conferences.
Related: Top destinations for software development: Hungary vs Ukraine
Bulgaria
When talking about outsourcing to Eastern Europe, we cannot forget Bulgaria. In 2021, its exports of ICT services constituted $2.1B and are projected to reach $2.6B by 2026. The Emerging Europe report states that the Bulgarian IT market employs around 108,600 ICT specialists.
Approximately 2,335 ICT graduates enter the market annually, and more than 220 educational establishments offer diverse opportunities for technical students.
Bulgarian outsourcing vendors offer diverse expertise, with over 230 companies catering to clients in financial and business sectors, IT, healthcare, and ecommerce.
The country also benefits from the presence of the global IT giant—Hewlett-Packard, which employs over 6,000 IT specialists. Bulgaria has a relatively high number of R&D offices of multinational IT corporations such as HP, SAP, Johnson Controls, Oracle, VMware, CISCO, ProSyst, and Atos. Moreover, due to the developed IT infrastructure and favorable business climate, the country ranks 11th in the IT Competitiveness ranking by Emerging Europe. This strong IT sector makes Bulgaria a compelling destination for IT outsourcing to Eastern Europe, with a skilled workforce and competitive rates.
You may find this interesting: Hiring Bulgarian developers: talent pool, expertise, education and more
IT market overview: Baltic countries
The Baltic region is recognized as one of Europe's most economically stable locations. It boasts high levels of digital solutions adoption and effective legislation ensuring data security. The launch of e-programs, ease of doing business, cyber security, and low corruption rates foster IT industry development in the region.
Nevertheless, the pace of software development market growth and digital technology adoption in Estonia, Latvia, and Lithuania are still moderate compared to the Eastern European market leaders.
Read more: IT outsourcing destinations overview: Estonia, Latvia, Lithuania
Lithuania
Around 55,000 specialists are employed in the ICT industry in Lithuania, with nearly 1,100 future experts graduating every year.
The country has attracted the attention of Google, AIG, and Nasdaq, which decided to set up regional development centers there. Moreover, global companies such as Uber, IBM, Wix, HP, Virtustream, and Unity have opened their R&D and IT development centers in Lithuania.
A little over 120 vendors are listed on Clutch in the Lithuanian software development and IT outsourcing landscape. These companies have experience delivering IT, business and fintech, ecommerce, and healthcare solutions. Additionally, Lithuania's reputation for quality IT outsourcing to Eastern Europe continues to grow, attracting businesses seeking cost-effective and reliable options.
Overall, IT companies in Lithuania have received substantial investments over the past years, stimulating the growth and development of the country's IT industry.
Estonia
The ICT sector in Estonia employs around 34,400 specialists, and around 1,000 people graduate with degrees in technical disciplines every year. Estonian ICT services exports reached $1.24B in 2021 and are expected to grow to $1.5B by 2026.
Two major cities contribute the most to the development of the Estonian IT industry—Tallinn taking the lead (67.5%) and Tartu as a runner-up (12.5%). In addition, Tallinn scored second in the 2022 Emerging Europe Business-Friendly City Perception ranking for smart city development.
Estonia is a well-known tech hub and a popular destination for startups. However, there are also a variety of small vendors with whom to partner when outsourcing in Eastern Europe.
According to IBIS, Estonia's software development companies have grown by 1.2% per year on average over the five years between 2018 and 2023. According to Statistics Estonia, 37% of local enterprises have established ICT security assessment procedures, while 62% of enterprises educate their employees about ICT security. Estonian tech companies develop robust security policies to avoid the potential risk of destruction or corruption.
Estonia is the birthplace of Skype and TransferWise, along with influential startups such as Pipedrive, Cloutex, Click & Grow, Grabcad, Erply, Fortumo, Lingvist, etc. Moreover, the country attracted global market players such as Microsoft, SAP, Acronis, and Parallels to open their R&D centers. With its strong focus on cybersecurity and strong tech ecosystem, Estonia is increasingly becoming a preferred destination for IT outsourcing to Eastern Europe.
Latvia
The turnover of ICT services reached almost $5B in 2021, with the tech market comprising 6% of the country’s GDP. Latvia's main trade partners in ICT services are Sweden, Ireland, and the USA.
The Latvian ICT sector employs around 35,000 specialists. Approximately 730+ computer science students graduate annually from Latvian universities, thus accelerating industry growth.
As for the IT outsourcing vendors in Latvia, Clutch lists 40+ companies, with only four of them in the midsize category (250-999 employees).
The evolution of the Latvian IT market led to the birth of large IT service providers in the country, such as Tieto, Evolution, Accenture Latvia, and Lattelecom Technology. Moreover, international companies like IBM, PwC, Accenture, KPMG, Siemens, ABB, etc., have already opened their R&D centers in Latvia.
Moldova
The Moldovan IT industry is one of the most dynamic sectors of the country’s economy and remains the priority area for development and expansion for the Moldovan government.
Due to the government’s reforms and incentives, ICT exports have increased by 89.6% in the last five years. Around 80% of Moldova's ICT services are exported to foreign countries, with two-thirds delivered to Western European and US enterprises.
More than 37,000 specialists are involved in the IT sector, and around 900 students graduate from Moldovan universities with degrees in computing or a related field every year.
The IT industry in Moldova is represented by 66 vendors, including some midsize and large companies, that help businesses in ecommerce, IT, business, and financial services with software development, QA, and other related requests.
Emerging Europe forecasts revenue will grow at a 7.39% CAGR in the upcoming years, resulting in a market volume of $1.95B by 2027.
Slovakia
The ICT sector in Slovakia employs over 131,000 tech professionals, constituting around 5% of the country’s workforce. Approximately 1,600 specialists graduate from Slovak universities with degrees in tech specializations every year.
As for the number of outsourcing vendors, Clutch lists 85 companies with expertise in fintech, IT, healthcare, and other business verticals.
The IT services market in Slovakia reached $670.7M in 2022. Since joining the European Union in 2004 and gaining access to the EU markets, Slovakia has greatly boosted its technological potential. The biggest IT hubs in Slovakia are Bratislava and Kosice—the cities are home to the largest technology hubs in the country, such as the Science Park at the University of Bratislava.
The country’s technological potential attracted Volkswagen, Kia, and Siemens to set up their R&D centers in Slovakia. In addition, the number of software development companies in Slovakia's industry has grown by 3.8% per year in 2018-2023. With its expanding tech sector and strategic location, Slovakia is increasingly becoming a destination for IT outsourcing to Eastern Europe.
Keep reading: Software development destinations: Slovakia vs Ukraine
Final words on outsourcing in Europe
For companies considering IT outsourcing in Eastern Europe, finding the right balance between the availability of resources and tech partners, international rankings, and industry-related reports is essential. All these details will help you find the right balance between the resources, costs, skills, and business results.
Many countries have sufficient tech talent, a variety of vendors to choose from, and a steady influx of ICT and STEM graduates every year. In the chart below, we have summarized the key aspects covered by this report.
Poland and Ukraine are taking the lead, offering many cutting-edge technology-related services. Poland has the largest tech talent pool with over 525,000 ICT specialists, although only nearly 40% of the experts work for IT outsourcing companies. Ukraine remains one of the leading destinations for IT outsourcing to Eastern Europe, boasting the second largest talent pool with around 300,000 ICT professionals, and keeps up the good work despite the war. Romania, the Czech Republic, and Hungary have also attained a competitive position among the top five Eastern European outsourcing destinations in IT market capacity and annual industry growth rate of 10-15%.
Countries like Moldova, Bulgaria, and Slovakia are falling behind market leaders in innovation adoption and overall technological capacity. Nevertheless, they’ve introduced several incentives to attract foreign investments and foster IT industry development. Meanwhile, Baltic countries launched several e-programs and created a favorable business environment in the region.
Read more: Developers in Eastern Europe: expertise, hubs, and more
Business strategies in the digital age
With the volatility of the modern world, businesses have redefined the understanding of IT outsourcing (including Eastern Europe). According to the Deloitte Global Outsourcing Survey 2022, 76% of executives indicated that some organizational functions are outsourced. However, the question remains: Why do companies outsource these functions?
- 57% of companies still view traditional outsourcing as the primary tool for cost reduction. However, around 50% of respondents also mention shifts in business models and access to new expertise. From startups to leading enterprises, companies are forced to optimize their operations, automate processes, and find new ways to reduce costs or use them wisely.
- Despite certain economic uncertainties, many businesses want to accelerate digital transformation and augment their expertise. Deloitte reports that 62% of respondents view managed services as a great way to address the growing speed of digital and technology transformations.
- Cybersecurity and industry regulations are now significant risks outsourcing vendors manage to mitigate while fostering innovation. According to the same survey, 45% of C-level executives seek new forms of outsourcing cooperation to address changing regulatory requirements, and 30% look for ways to overcome increasing and complex cybersecurity threats through the same channel.
Among other benefits that IT outsourcing offers are:
- presenting the vast availability of all kinds of IT resources;
- giving the flexibility to change the size and scope of any IT activity;
- enabling easier and faster project scaling;
- creating an effective way to automate manual processes and improve their efficiency;
- allowing companies to focus on core functions.
What service or engagement model can bring you the most value?
Depending on your needs and reasons for outsourcing, there are four major services that you might want to consider:
- Team extension is an excellent choice for businesses that know their needs but require external resources to scale and complete the tasks.
- A dedicated development team allows companies to share risks and responsibilities with their vendors while delegating team management.
- Custom solution development helps companies tackle technical challenges, modernize existing systems, or address specific business needs.
- Technology consulting is the way to address complex business problems that seem to have no clear, immediate solution.
Afterword
Overall, IT outsourcing in Eastern Europe is an excellent opportunity for companies worldwide to access rare tech expertise and find reliable tech partners for digital acceleration. The collected data reflects the dynamic growth of the IT market across Eastern European countries. This region has become the number one choice for many global companies looking for a software development partner due to its extensive talent pool, technological excellence, and high price-quality ratio.
N-iX: 21 years of experience powered by 2,200 experts and engineering excellence
- N-iX is a global software solutions and engineering services company that helps the world’s leading organizations turn challenges into lasting business value, operational efficiency, and revenue growth using modern technology.
- Numerous industry associations have recognized N-iX as a reliable IT outsourcing vendor (GSA UK, IAOP).
- N-iX partners with technology leaders in various industries, including finance, manufacturing, supply chain, retail, ecommerce, healthcare, and more.
- We offer expert solutions in cloud, data analytics, embedded software, IoT, AI, machine learning, and other tech domains.
- N-iX has formed strategic partnerships with many global businesses, including Lebara (a renowned telecom brand), Gogo (the world’s leading in-flight connectivity provider), and Currencycloud (global payments platform), to name a few. N-iX has cooperated with over 160 clients across the globe, such as Fluke, OpenText, Travelport, TuneIn, and many Fortune 500 companies;
- N-iX adheres to international regulations and complies with ISO 27001:2013, PCI DSS, ISO 9001:2015, and GDPR.
Sources
- State of Hybrid Work 2023 | US Report
- Global software marketplace insights: Eastern Europe by SourceSeek
- State of European Tech 2023
- Regenerative talent pools: The 2023 Kearney Global Services Location Index
- Tholons Services Globalization City Index
- Bloomberg Innovation Index
- World Bank Group. Doing Business Report
- Global Innovation Index 2023 by Wipo
- The World Bank. Service Exports
- The World Bank. ICT Service Exports
- The Hays Global Skills Index
- tradingeconomics.com
- Clutch.co
- Future of IT Report by Emerging Europe
- QS World University Rankings 2023
- ABSL
- Global Startup Ecosystem Index 2023 by StartUp Blink
- TopCoder Ranking
- 2023 Global Shared Services and Outsourcing Survey by Deloitte
- ABSL Publikacje - EMEA's Business Services Landscapes
- European Cities and Regions of the Future 2024 by fDi Intelligence
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