Approximately 60% of companies outsource at least part of their software development. For decades, Eastern Europe has been one of the best places to outsource largely due to the region’s wealth of talent.
With over one million tech experts, the biggest IT hubs in Eastern Europe, such as Ukraine, Poland, Hungary, and others, have eventually become the best countries for offshore software development among Western European and US businesses.
Let’s explore the largest tech hubs in Eastern Europe, find out which countries have the most developed startup environments, and the benefits that Eastern European tech expertise can bring to your business.
What Benefits Eastern European IT Hubs Can Bring to Your Business
- Wealth of Talent
- Engineering Smarts
- Cost/Quality Balance
- Business Advisory
Wealth of Talent
While the US and Western Europe struggle to beat the pervasive local software developer drought, Eastern Europe is a booming IT talent hub offering a vast tech talent pool.
As of 2021, there is a tech talent pool of more than one million people in major tech hubs in Eastern Europe. And this number is a radical contrast to over 900,000 unfilled software development jobs in the US only.
Talented software engineers make the biggest asset of Eastern European IT top hubs. The region’s historical and political context has put the citizens into the constant survival mode. That phenomenon, coupled with the profound technical institutions of the partly post-Soviet education, has turned the citizens into top-notch professionals and excellent problem solvers.
Ukraine, Belarus, Poland, Moldova, and other Eastern European countries are traditional top-performers in PISA Mathematics and the International Mathematics Olympiad.
Software engineers around the world, especially with sought-after competencies, tend to be expensive. In the pursuit of lower costs, company leaders go to the top outsourcing countries in terms of price, like India or the Philippines.
However, experienced and successful leaders make more strategic decisions and invest in long-term outsourcing relationships with Eastern European vendors. Hence, the result lies in getting high-end products and services at a bit higher cost, but without any compromise on quality and with no overdosed hassle.
That is why Eastern Europe is called a sweet spot for outsourcing with average hourly rates of $35—$75 for a middle software developer.
With government support across all Eastern European IT talent tech hubs, the annual influx of the graduates of technical specializations makes a solid addition to the countries’ existing tech talent pools. In Ukraine specifically, there are 36,000 students graduating from local universities with IT-related degrees.
Moreover, outsourcing service companies establish their own private educational programs and provide world-class certifications to boost the number of tech experts even higher.
So, the businesses with ambitious growth plans and talent needs won’t face any challenges in scaling up their existing teams in the best offshore software development countries—be it 5 developers or thirty.
A decade ago, Eastern European countries were already widely cooperating with their Western clients and offering major software development services. However, a bottleneck has prevented Eastern Europe from establishing itself in the global business arena. Despite the high-end expertise in software development, the region lacked the necessary business savvy, thus struggling to improve its self-positioning.
Fortunately, today Eastern European vendors have accumulated jaw-dropping expertise across all business verticals and domains and have a track record of more complex end-to-end solutions. The business skills—from management to sales—are evolving. And today, Eastern European experts are not just an addition to the in-house team but play a vital role in driving business results, making them the best countries to outsource software development.
Best IT Outsourcing Countries in Eastern Europe in 2021
Ukraine is probably the most mind-boggling tech hub in Eastern Europe. Some twenty years ago, it was a half-ruined post-Soviet country, but today it’s a flourishing tech hub and a home to more than 200,000 software developers. Kyiv, the capital of Ukraine, is ranked among the top tech cities in Europe for the best startup environment. There are more than 2000 startups in Ukraine and two $1B+ unicorns: Grammarly and GitLab.
Eighteen Ukrainian IT companies were listed among the world’s top outsourcing providers by IAOP. More than 110 globally known tech giants, like Samsung, Oracle, Microsoft, and recently Google, opened R&D offices in Kyiv in early 2020 to leverage the tech potential of the country. However, the competition for the best tech talent in Ukraine is not grabbed by these giants, as the majority of the talent pool work for IT outsourcing companies.
Ukraine as best tech hub in Eastern Europe
Poland is considered the best place in Eastern Europe to start a business and boasts the largest tech talent pool in the region. Poland is ranked first on the IT competitiveness index in terms of IT employment, business climate, and IT industry exports.
Taking 34th position in the ranking of the best countries for business by Forbes, Poland has yet to realise its full potential. More than 400 R&D centers operating in the country were established by Google, IBM, Motorola, Delphi, Fujitsu, Capgemini, ShellAnother, and other foreign companies. Thus, the competition for tech talent is fierce, as the vast majority—almost 80% of IT professionals—are working for the above-mentioned R&D centers, and only 20%—for outsourcing service companies. Another area for improvement lies in overcoming the outflow of local IT experts to other tech hubs across the European Union.
Estonia, the home country for the world-known Skype, today is also a hotbed for start-ups, the number of which is six times higher than the European average. There are over 400 start-ups in the country, such as Wise, Bolt, and others.
Local government meets the IT industry halfway by investing and simplifying policies thus creating an ecosystem for the growth and development of the IT service companies.
After Poland, Estonia is considered the second most favourable startup hub in Eastern Europe. Despite quite high average salaries (around 2,500 euros), Estonia is a well-sought outsourcing country providing high-end services.
With the country’s efforts to invest heavily in research and development, the IT industry of the Czech Republic is emerging. Much lower hourly rates than in other EU countries make another competitive advantage of the Czech Republic.
The IT exports make around 2% of the country’s GDP and the government’s initiatives to roll out its innovation strategy have led to the originating of around 900 startups, one of the largest number of startup companies in Eastern European countries.
A long history of automotive manufacturing and lens production established a lasting culture of research and innovation that is dominating the tech industry today.
Hungary is one of the leading outsourcing countries in Eastern Europe with an IT industry share of 10% of the country’s GDP. IT exports have grown by 62% between 2014 and 2019.
Approximately 63% of the IT revenue comes from R&D centers established in Hungary by US, UK, and German companies.
Hungary’s tech talent potential is 4th in Eastern Europe, the lion’s share of which lies in the high annual growth of IT students and graduates.
Since 2000, Romania has managed to ensure 15% annual growth of the IT sector. The STEM education system successfully produced a high quantity of high-quality tech talent. That coupled with English proficiency and moderate software developer hourly rates of $31-$51 allowed Romania to become a tech hub in Eastern Europe.
Bucharest, Cluj-Napoca, Timișoara, and Iași are considered the most popular outsourcing hubs in the country.
For the last seven years, IT exports in Serbia have tripled. The country’s number of IT graduates, which grew by 23% in 2019, as well as the deep expertise of its workforce have already attracted such giants as Microsoft, Adobe, Siemens, and others, which opened their R&D centers in Serbia.
There are around 2,500 IT outsourcing companies in Serbia, and the overall growth of the IT sector is the fastest in Eastern Europe.
Serbian software engineers are well-versed in gaming and blockchain technologies, which led to around $100M revenue generated by gaming companies.
With all the necessary infrastructure, Latvia is well on its way to taking the lead in Eastern European software development outsourcing. Business-friendly legislation, low cost of living, tech-driven universities, and flourishing startup scene—all these factors have brought significant steps forward for the Latvian IT sector.
Over the last decade, the number of IT companies in the country has doubled. The same result is seen in the IT service exports of around 850M euros, twice as much as it was five years ago.
Over the past decade, Lithuania has experienced a rapid transformation of the IT sector. Today, the country boasts the largest number of startups in the Baltic region—more than 1000.
In 2019, Lithuania received its first unicorn, Vinted. The country is also a world-known hub for fintech solutions. IT exports have almost tripled over the last five years. Lithuania is set to continue its path forward in the development of the IT sector by joining the number of countries offering start-up visas, simplifying bureaucratic processes, and improving their tech capabilities.
Moldova's IT industry is centered around exporting, which accounts for 80% of the overall industry. The so-called free economic zones established by the government across the country boosted the number of IT companies by providing simplified tax regimes and other privileges.
Despite the improvements in the industry, Moldova is still on its way to becoming a competitive player in software development outsourcing services. However, valuable progress has been already made—the country’s IT exports have grown by 7% over the last five years.
The Number of Software Developers in the Biggest IT Talent Hubs in Eastern Europe
To date, Eastern European countries have become go-to destinations for opening R&D centers thanks to the high concentration of talented tech talent. In addition to R&D centers and IT service companies, mature startup ecosystems draw even more techies to come to the region.
No surprise that as of 2020, altogether there were already 2 million people employed in the IT sector across Central and Eastern European countries.
The size of the talent pool in the biggest IT hubs in Eastern Europe is distributed unevenly:
|Country||№ of Developers|
Number of Software Developers in the Biggest IT Talent Hubs in Eastern Europe
The Best Eastern European Countries for Startups
The best startup tech hubs in the world include the USA, UK, Israel, and Canada. These countries have established mature ecosystems prompting the booming ventures to grow and develop within the above-mentioned countries.
Throughout recent years, the Eastern European counterparts demonstrated a relentless drive in terms of technology and innovation, paving their way toward becoming a decent player in the startup world.
Estonia’s video calling app Skype and money transfer service TransferWise, Hungary’s online presentation app Prezi, one of the most popular startups in Budapest, the Czech Republic’s cyber-security tool Avast, Slovakia’s ESET, and Ukraine’s Grammarly—all these world-known startups originated in Eastern Europe.
Eastern Europe accelerates the development of the startup ecosystem by opening incubators and accelerators for start-ups. As a result, the geography is decentralised—new ventures are being opened not only in capitals, but throughout the whole territories of each Eastern European country.
Estonia has made a significant step forward, taking 11th place in the world in the global startup ranking and thus being the best country for startups in Eastern Europe. Meanwhile, countries such as Slovenia, Latvia, and Croatia have also improved their ranking positions, claiming positions 13, 33, and 11 respectively.
Ukraine joined the top 30 startup ecosystems in the world, while the country’s capital, Kyiv, is ranked number one in Ukraine and number two in the up and coming tech cities in Eastern Europe.
Tallinn, the capital of Estonia, and Vilnius, the capital of Lithuania, make up two more growing startup cities in Eastern Europe.
Thus, the best places for tech startups in Eastern Europe are:
Global Startup Ranking (in Eastern Europe)
Famous and rising startups
Skype, TransferWise, Pipedrive
Vinted, CityBee, NordVPN
Avast, KiwiCom. SocialBakers
Brainly, DocPlanner, Allegro
Grammarly, GitLab, MacPaw, Scalarr, PetCube
Nasekomo, PayHawk, Evedo
F3, Klix, Marine Digital
Prezi, LogMeIn, Tresorit
The biggest strength of Eastern Europe lies in its talent component. The solid engineering potential of the region is a result of geopolitical context, profound STEM education, and decades of IT outsourcing experience that turned people here into the best problem solvers and innovators.
In addition to a perfect quality/cost balance offered by Eastern European IT outsourcing service companies, the pro bono benefit of cooperation with this region is a cultural fit. By bridging east and west, Eastern European countries learned to maintain good relations with both.
Daxx is the Netherlands-based software development service company with development offices across major IT talent hubs in Ukraine—Kyiv, Kharkiv, and Lviv. We help global companies from Western Europe, USA, Australia, Israel, and other countries overcome local talent shortages by building dedicated development teams.
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