When you make up your mind to outsource your software project development, you still have the hardest part left – to choose the best IT outsourcing company.
If your business is located in Western Europe or the UK, you’re definitely considering nearshoring to Eastern Europe. Advantages of this destination are obvious: close cultural affinity, geographical proximity, high quality of software development services.
Any business would prefer to cooperate with an established IT outsourcing provider. So, how to choose it?
1. Choose an Outsourcing Destination
Eastern Europe has 5 of the top 30 global outsourcing destinations and is recognized as one of the top IT outsourcing markets. Besides, in Eastern Europe, the supply of outsourcing firms meets and in some countries such as Ukraine and Belarus even exceeds the demand. Others, like Poland and Romania, have moderate to high competition for talent. It means that you will hardly find reliable outsourcing companies not engaged in developing software for your contenders. Moreover, many global companies such as Microsoft, Samsung, Hewlett-Packard, Oracle, Gameloft, Google, Cisco have their R&D centers in Eastern Europe.
Although Eastern European rates for software development are moderate, some destinations have more competitive offers. That usually depends on many factors such as the country’s cost and standard of living.
In general, the choice of the outsourcing destination depends on the talent pool and its availability, local IT market development and the development cost. Let’s consider the six IT outsourcing countries in Eastern Europe – Belarus, Ukraine, Poland, Hungary, Romania, and Bulgaria.
Analyze IT Market Supply and Potential Cost Savings
In 2018, software development services became the second largest export service industry in Ukraine, standing for more than 20% of all exports. So it comes as no surprise that the country is home to over 2,200 IT companies. The number of IT professionals in Ukraine currently ranges from 160,000 to 172,000 people, according to DOU and Stack Overflow correspondingly, and is projected to reach 200,000 specialists by 2020.
According to SkillValue, Ukraine ranks 8th among the world’s top countries with the best programmers with an average score index 91.26%. And in 2018, the Global Sourcing Association recognized Ukraine as the UK’s top delivery destination of the year.
The competition for talent is low in this outsourcing destination because of the large supply. The thing is that local IT professionals earn up to 10 times more than employees engaged in other spheres. To put it into perspective, let’s consider the purchasing power of the developer in this country. A Ukrainian programmer can afford 21.444 Big Macs per year, which is the 3rd highest result worldwide after South Africa and the USA. Therefore, more and more young people want to get into the sphere as they are motivated by the decent salaries. At the same time, the competition on the IT job market keeps qualification standards at a high level.
Thus Ukraine appears to be much more affordable than the neighboring IT outsourcing hubs. In case of a big team and long-term cooperation that hourly rate difference can make a considerable saving.
In Belarus, there are about 35,000 IT professionals working in almost 1,000 local companies. As Belarussian domestic demand for IT services is very limited, the local firms offer offshoring services. As a result, in 2014, IT services export of Belarus reached 60 USD per capita.
The country’s population is about 9.5 million, which is 4 times smaller than in Ukraine. So, naturally, the local talent pool is not as big. As for the cost savings, this country also offers rather competitive prices for software development. It’s worth noting, that Belarusian software companies get the support from national government and enjoy special tax rates.
Among Eastern European countries, Hungary is known as one of the first to have started exporting software. Today, many international companies have their offices in Budapest. The country is a member of the EU. So legislation and political environment are favorable for software companies in Hungary. In addition, the geographical proximity makes Hungarian outsourcing providers popular for nearshoring among the German-speaking countries of Europe.
As a rule, Hungarian prices for software development and IT consulting services are higher compared to other IT outsourcing destinations in the region.
Romania with its impressive internet speed is another attractive country for IT outsourcing. Romanian developers are attractive for French firms because a lot of people there speak French.
Today, Romania has over 95,000 IT professionals and 15% annual growth rate. Nevertheless, it may appear a bit difficult to find the Romanian developers with necessary expertise for your software project. A large amount of talented specialists are already bound by employment contracts with global companies such as Hewlett-Packard, Huawei, Oracle, Ericsson and Microsoft. For example, Oracle employs over 3,000 IT professionals in several Romanian cities. Prices for development are moderate, still higher than that ones in Belarus and Ukraine.
In Poland, there many companies that provide software development and employ IT professionals with excellent tech and soft skills. The country is often chosen as an outsourcing destination by firms from the English-speaking countries as it is a country with high English proficiency.
Poland has a transparent legal system and it constantly introduces reforms to improve the business climate. The country has low inflation rate and offers attractive tax incentives for IT outsourcing firms. Therefore, in 2016, local IT market reached 7.9 million USD. Moreover, the country is listed among the most innovative countries, according to Bloomberg Innovation Index 2019. So partnering with Polish developers, you may enjoy all the benefits of outsourcing to the EU country, which obviously influences the development cost. All these factors make outsourcing software development to Poland worth considering.
Bulgaria is another attractive IT outsourcing destination, accelerating at the average rate of 17%. The Bulgarian IT industry currently employs about 70,000 people, and there are 233 IT companies in Bulgaria. In 2018, the country ranked 50th in the World Bank’s ranking of ease of doing business among 190 economies. The country is also rated 47th out of 180 economies on the Economic Freedom Index in the world.
Thanks to a growing talent pool of qualified IT specialists and an attractive price-to-quality ratio, many European and US leading companies reasonably choose Bulgaria for outsourcing their software development to.
2. Do the Research on Potential IT Outsourcing Providers
Explore Engagement Models Available
Today most big and middle size Eastern European IT outsourcing firms offer a variety of engagement models.
Models by delivery method
- Dedicated development team – the provider sets up a development team that focuses only on the outsourced project; the client has full control over team building and product development. A dedicated development team is the best choice for the client’s long-term needs.
- Time and material model – used when a project cannot be estimated in advance as the scope of work may change in the process.
- Fixed price model – most effective when the scope and specifications of the project are clearly defined. Usually used in small projects.
Models by location
- Remote team – an extension of the client’s team located in the nearshore or offshore outsourcing destination.
- Mixed team – the team that consists of both onsite and nearshore/offshore developers. The provider’s team or some of its members travel to a client and work in the client’s office.
- Distributed team – employees are connected using a networking infrastructure that makes it easy for them to work together despite geographical location.
Define which model suits the needs of your project and then make sure, your potential outsourcing provider uses the cooperation model you’re interested in. Some companies share this information on corporate websites. Otherwise, ask them during the interview.
Check Company Profile
Expertise, Experience and Portfolio
Check the company’s portfolio. From portfolio, you’ll get general information about the projects, used tech stacks, teams’ sizes, time spent and other details. Moreover, success stories of cooperation with companies like yours on the projects alike will give a deeper insight into the provider’s presence on the market and their performance.
Whether you’re a FinTech, a healthcare or a telecom company, naturally, you want your outsourcing partner to know the industry. Outsourcing providers of a middle size with 501-1000 employees and bigger usually have extensive expertise and a large portfolio of projects developed for clients in different industries.
The next step should be to find out if the potential outsourcing provider has experience in working with clients similar in size to your company. Big corporations and small startups have a different style of decision making and management. Of course, it may not necessarily cause problems, but it may create some difficulties.
When you’ve shortlisted potential outsourcing partners, it’s time to contact them. Effective and smooth communication is very important for any business. And when you outsource a software project development to some remote team it is even more important. Hence, such details as how fast the company managers respond to your first email may say a lot about your future communication.
You’ve already established contact and continue further communication. Use such opportunities as Skype calls to specify any details on the candidate: their experience, portfolio, and so forth. The main question, perhaps, is if they have the sufficient understanding of your project mission and your business goals.
We also believe that meeting in person is always the best chance to mitigate any outsourcing risks. By coming to the provider’s office and meeting in person you may remove many of your doubts. Any reliable software development company will eagerly invite you and help you organize your visit. It’s not a secret that a beneficial outsourcing partnership is built on mutual understanding and trust.
Choosing the best IT outsourcing company is definitely challenging and it takes quite some time and effort. You need to take into account many factors such as potential cost savings, favorable business environment, sufficient engineering resources, etc. We hope our overview of the leading software development destinations has helped you weigh up the pros and cons of outsourcing to a particular Eastern European country. As the number of companies that offer IT outsourcing services in this region has significantly increased over the last couple of years, you have a lot of firms to choose from. So if you do your research and clearly define your priorities, you will undoubtedly find the software development partner that will meet your business requirements.