Nearshore outsourcing has become one of the most well-known practices of profitable businesses. 79% of Dutch companies confirmed they’ll continue to outsource IT services at the same or at an increased pace. 56% of German companies stated they outsource IT tasks to external service providers.
Top 12 Reasons Why More Than 50% of Companies Opt for Nearshore Outsourcing:
- Access to modern technology
- Centralization and standardization of processes
- Access to expertise
- Quality improvement and/or efficiency of service delivery
- Modernization of the organization
- Solution to the talent shortage
- Cost reduction
- Better planning and costs distribution
- Use of modern financial instruments
- Accelerated realization
- Minimization of implementation risks
- Flexibility (a company can react more flexibly to changing requirements)
Thanks to the benefits nearshore outsourcing offers to companies, we provide the stats for the most popular nearshore outsourcing regions: Southern and Eastern Europe.
Nearshore Outsourcing to Southern Europe
According to the Global Sourcing Association (GSA), the SEE region has become an attractive location for nearshore outsourcing thanks to the low cost of qualified staff and a large number of well-educated, bilingual, qualified IT professionals.
Other advantages include high-quality control, better inventory control, no visa requirements, and the ability for better procurement and logistics to easily communicate with partners.
The overall value of the market in South Europe is $12,484 million, with an expected CAGR (compound annual growth rate) of 3.3% until 2021. The biggest market is currently Italy ($6,257 million), closely followed by Spain ($5,181 million). Portugal grows at a CAGR of 3.6%.
However, industry experts sometimes label the Southern European market “complicated,” due to insecure economic circumstances, growing migration, and the current market dynamics. These factors make it unpredictable even though the overall IT outsourcing value is still higher here than in Northern Europe. The Spanish and Italian markets are experiencing a severe lack of IT experts (Spain is expected to be 2 million short by 2020), while Portugal has plenty of young skilled workers available. A large part of software development is therefore getting outsourced to companies in Portugal.
Eastern Europe is a great alternative for companies looking for offshore or nearshore outsourcing. Eastern Europe (CEE) provides access to a labor pool that’s both affordable and highly skilled.
Nearshore Outsourcing to Southern Europe vs. Eastern Europe
|Southern Europe||Eastern Europe|
The region lies in a strategic location at the heart of Europe. You can get to Berlin in less than 2 hours via a direct flight and stay in the same time zone. It takes from 8 to 10 hours to get from Spain, Italy, and Portugal to the US.
|You can reach most Eastern European tech hubs within a couple of hours from any part of Western Europe. There are also direct connections with major US cities with the maximum time difference of 10 hours.|
The region has a highly educated labor force ranging from computer engineering to computer networking and telecom, a large part of which is fluent in both English and German.
Education is one of the main reasons Eastern European tech workers rank among the top 5 countries with the best software developers in the world. Most developers have an intermediate English level or higher.
|Culture||People in Southern Europe are easy to communicate with and open to dealing with foreign nationals in business. They tend to be trustworthy, respectful, and loyal, so doing business with them is generally easy.|
Eastern and Western Europe have multiple cultural and economic ties and only a few serious differences. Moreover, Eastern European providers usually follow international business codes of conduct, which makes it easier to set up transparent and efficient cooperation.
|Main Countries||Portugal, Spain, Greece, Italy.||Ukraine, Bulgaria, Czech Republic, Hungary, Poland, Slovakia.|
Nearshore Outsourcing to Portugal and Spain vs. Outsourcing to Ukraine
We’ve chosen the most popular outsourcing destinations in Southern (Portugal and Spain) and Eastern Europe (Ukraine) and compared the main tech market statistics.
Nearshore Outsourcing to Portugal, Spain, and Ukraine
|The Portuguese IT industry employs about 17.5K specialists. The government aims at attracting startups and investors by offering them tons of benefits (Source).|
Currently, there are 323K software developers in Spain, yet only 1 percent of Spanish university degrees are related to IT (Source).
|The local community employs over 200K IT specialists. By 2025 the number of software developers in Ukraine is expected to reach 242K (Source).|
The higher education system consists of a complex network of institutions, integrating 14 public universities, one university institute, 15 public polytechnics, and about 117 private institutions.
|There are 180 universities and vocational training centers teaching computer science, development, software, design, and programming. 25 Spanish universities are featured in the QS World University Rankings 2019, of which 13 are within the global top 500 (Source).|
Ukraine’s 402 universities (25 tech universities) and colleges boast more than 36K students each year who graduate from local universities with degrees in IT-related fields. World Economic Forum named Ukraine among the top 10 countries by the number of engineering.
Unbabel, Talkdesk, Uniplaces, Codacy, Veniam are only some of the startups that emerged in Portugal. The government offers startups a €200 million venture capital matching fund open to all startups headquartered in Portugal.
Just last year the Spanish startup scene grew by 7%. Spain has created its own version of Uber with Cabify, and its native Glovo is competing with Uber Eats on a global scale. In 2017, Spanish tech companies raised more than €784 million. (Source)
Jooble, DepositPhotos, Grammarly, GitLab, PetCube, Mobalytics, Preply, CleanMyMac, Looksery, and Readdle are only a few of the big names that got started in Ukraine. In 2018, the total venture capital investment in Ukrainian startups reached $336.9 million. (Source)
There are 66 software development companies in Portugal, according to Clutch.
According to Clutch, there are 198 IT companies in Spain.
According to Clutch, there are 368 software development companies in Ukraine.
Approximately 32% of the Portuguese speak English. The percentage goes up to 75% in a professional environment (Source).
45% of Spaniards have either no knowledge or only a basic knowledge of English. 70% confirmed their ambition to pursue it to an advanced level. (Source).
In Ukraine, 81% of software developers have an intermediate or higher level of English proficiency. Only 16% of tech professionals have a pre-intermediate English level.
Nearshore Outsourcing to Eastern vs. Southern Europe: The Choice of Dutch, German, and Israeli Companies
77% of the German companies surveyed outsource IT projects to Europe.
Where German companies outsource software development
Based on our country-level research, there are five popular countries where German companies we surveyed outsource IT services and software development:
- Ukraine — 17%;
- India — 12%;
- Romania — 10%;
- Poland — 9%;
- Belarus — 4%
Countries where German companies outsource software development
66.6% of Dutch companies outsource software development to Europe.
Where Dutch companies outsource software development
There are 5 five countries the Dutch companies we surveyed prefer as their outsourcing destinations:
- India — 18%;
- Ukraine — 14%;
- Poland — 9%;
- Romania — 9%;
- Belarus — 5%.
Countries where Dutch companies outsource software development
According to the Suvelocity Report 2019, 41% of Israeli tech companies outsource software development to Ukraine. Other popular outsourcing locations include:
- Ukraine — 41%
- USA — 12%;
- Bulgaria — 11%;
- India — 11%;
- Russia — 7%
Countries where Israeli companies outsource software development
If you’re also considering nearshore outsourcing and would like to build a software development team in Ukraine, just drop us a line. Over the last 20 years we’ve helped more than 300 companies hire developers in Ukraine — let’s find out how we can help you, too.