Central and Eastern European countries have been gaining increasing recognition among the UK, the US, Western European companies that outsource their software development. This region has a compelling number of benefits including highly qualified software developers, an advantageous price to quality ratio, and proximity to major global financial centers.
A lot of companies worldwide have already gained tangible business value from hiring dedicated software development teams in Ukraine or Poland. These two countries have established the reputation of leading IT outsourcing destinations in Eastern Europe. Their rapidly growing and well developed IT market, software engineering talent, and a good business environment attract many companies looking to outsource software development.
Both countries have made it to the top 10 European countries with the biggest number of professional developers. Also, Stack Overflow states that Poland and Ukraine have the largest engineering talent pools in the CEE region.
Why companies choose the dedicated development team model and how it works
Many well-known companies have succeeded by building dedicated development teams and delivery centres in Ukraine and Poland. For instance, Lebara (a global telecom provider) has set up a large development centre in Ukraine, partnering with N-iX. Also, the outsourcing vendor built a dedicated development team for OpenText, one of the biggest ERP software companies.
There are many pricing models and types of cooperation with IT outsourcing vendors such as Fixed price, Time and Material, Project Outsourcing, etc. Also, they may have various modifications depending on the business arrangement. Yet the dedicated development team is by far the most popular engagement model for long-lasting business relationships. So how does it work and what are its benefits?
A dedicated development team is an engagement model where a vendor provides a software development team to the client, usually on a long-term basis. Nearshore developers work exclusively for this customer. They cooperate closely with an on-site team and other remote developers and thus become an integral part of the client’s company.
The dedicated development team has a lot of advantages for businesses that want to have both flexible and sustainable cooperation with an outsourcing vendor. Firstly, it enables you to bring new valuable expertise to your business provided by the experts fully dedicated to your project.
Secondly, you can have a predictable bottom line. Since dedicated development teams are flexible and scalable, it’s easier to react to the changing requirements and capacity needs. Moreover, you do not have to worry about infrastructure, payroll management, office facilities, administration since this is the task of your outsourcing partner.
For instance, Novell had cooperated with the dedicated development team at N-iX for 8 years. Also, Anoto, a Swedish leader in digital writing solutions, has worked with N-iX since 2007.
So what is the secret of the Eastern European IT outsourcing market? Let’s take a closer look at Ukraine and Poland as potential destinations for hiring dedicated development teams.
IT Services Market
The Ukrainian IT sector has soared over the past few years. The country’s IT industry export volume grew by almost 30 times in the last decade, from $110 million in 2003 to $3.6 billion in 2017. Moreover, this number is expected to double in the next few years. Now, the IT industry has the third place by export volume in the country (after metallurgy and food industry). A PwC report states that Ukraine is ranked among the top 25 IT services exporters worldwide.
Furthermore, Ukraine has gained industry recognition in reputable IT ratings. Eighteen Ukrainian companies are listed in 2018 Global Outsourcing 100 by IAOP. In October 2017, Ukraine was named the “Offshoring Destination of the Year” by Global Sourcing Association (GSA). Also, Gartner included it in the list of 30 Leading Locations for Offshore Services.
Nowadays, around 1,000 IT services providers operate in Ukraine. Also, the country comprises more than 100 R&D centers, including such global companies as Microsoft, Samsung Electronics, NetCracker, Wargaming, Magento, Oracle, Siemens, IBM, and others.
Poland is one of the fastest growing economies in the CEE region. As for the Polish IT sector, its value has increased substantially in the last 20 years – from $1.2 billion in 1995 to $15.7 billion in 2015.
This growth is backed up by many industry awards and rankings. According to A.T. Kearney’s report, the country is one of the most attractive outsourcing destinations in Europe. Krakow, Poland’s second largest city, is listed in Tholons Services Globalization City Index 2017 as one of the top 10 super cities including such factors as ‘talent pool’, ‘business catalyst’, ‘infrastructure, digital & innovation’, and others.
According to The Polish Investment and Trade Agency, around 40% of outsourcing R&D centers in Eastern Europe are located in Poland. Such big brands as Microsoft, ABB, Google, Microsoft, Unilever, Motorola, Intel have R&D centers in the country.
Software Developers Talent Pool
The number of Ukrainian software developers is increasing. According to DOU, the largest development community in Ukraine, the share of Ukrainian IT specialists grew up by 27% only in 2017. As Stack Overflow reports, there are around 166,000 software developers in Ukraine and this number is estimated to surpass 200,000 by 2020.
Apart from the considerable inflow of new engineering talent into the market, Ukrainian programmers demonstrate the excellent quality of services. According to DOU.ua survey, the percentage of experienced software developers in Ukraine stays high. There are 36% of middle software engineers, 19% of senior developers, and 26% of junior programmers on the Ukrainian IT market.
Moreover, Ukraine got 11th pace in the HackerRank rating of the countries with the most skilled software developers. Also, the same source ranked Ukrainian engineers as the first in the field ‘Security’. While TopCoder, a global platform for competitive programming online, rated Ukraine 6th in its programming countries list.
Most of the developers live and work in the big cities such as Kyiv (40%), Kharkiv, (17%), and Lviv (12%). Respectively, the biggest number of dedicated development teams are located in these cities.
One of the key components of successful IT industry growth in Ukraine is its strong technical education. There are over 36,000 graduates annually with degrees in technical studies in the country. Moreover, this number increases every year as IT professions are becoming more and more popular in Ukraine. Meanwhile, World Economic Forum reports that Ukraine is in top 10 countries by the number of engineering, manufacturing, and construction graduates with nearly 130,000 graduates annually.
The Polish developer population is reportedly the biggest in Eastern Europe as it reaches 254,000 people. Most of the programmers and dedicated development teams are located in Warsaw, Krakow, Wroclaw, Poznan, and Gdansk.
Information technology is one of the most popular fields of studies among Polish students. There are over 70,000 IT specialists studying in Poland. Such a constant inflow of new tech resources into the market provides the continuous development of the IT industry.
The country has an extensive talent pool of IT professionals with many experienced software engineers. Poland takes one of the leading positions (4th place) in the TopCoder ranking. It is also among the leaders (3rd place) on the HackerRank Best Developers list and the leader in Java programming.
Moreover, Poland has a large number of development teams working for well-known global companies. According to the Association of Business Service Leaders (ABSL), 66% of the Polish IT specialists working in large IT services are employed by foreign capital companies.
Ukraine introduces many reforms to simplify business operations and attract investments. Both the Ukrainian government and local authorities support the IT industry understanding its importance the development of the country’s economy.
For instance, the Ukrainian government reduced labor taxes and mandatory contributions that made the taxation system much more friendly for the IT workforce. Moreover, this is one of the factors that improved Ukraine’s position in Doing Business 2018 rating (76 places higher comparing to 2012).
The country keeps pace with the latest international trends and promotes innovations. According to Bloomberg Innovation Index 2018, Ukraine is one of the top 50 innovative economies as there have been substantial improvements in education, technologies, human capital, research and other areas.
In addition, Ukraine is culturally close to the Western culture, which facilitates communication and helps in building business relationships. There is a small time difference with major European cities and the short flight distance between Ukraine and other European countries. Although Ukraine is not the part of European Union yet, the EU and US citizens do not need a visa to enter the country.
Poland has favorable conditions for doing business with its stable business environment. Business Insider named Poland the third best country in the world to invest in. While according to AT Kearney’s Global Services Location Index 2017, Poland has one of the leading places considering such factors as financial attractiveness, people skills and availability, and business environment. Moreover, the country is in the top 30 in Ease of Doing Business 2018 by World Bank Group that measures different aspects of business regulation and their implications. As for the innovations, the country takes the 21st position in Bloomberg Innovation Index 2018.
Poland has an advantageous geographical location in the GMT +1 zone and 1-2 hour time difference with most European cities. Also, its cultural proximity to other European countries makes the collaboration much more effective.
When it comes to communication, you will not have to face any language barriers. In general, Polish people have a good command of English, especially those working in the IT industry. EF English Proficiency Index 2018 placed Poland on 11th position out of 80 countries.
Picking the best country for outsourcing software development is an important step on the way to choosing a vendor and setting up a dedicated development team. Without any doubt, both Poland and Ukraine are the destinations where you can find a lot of qualified resources for your nearshore development team. These countries have the booming IT industries, a robust tech education system, and many trustworthy outsourcing providers.
Moreover, they have a wide-ranging pool of software developers, which ensures easy ramp-up of your engineering capabilities. Such global companies as Lebara, Novell, Anoto, OpenText and others have built their long-lasting partnerships with software development service providers in Poland and Ukraine and built dedicated development teams that worked for years on their software products.