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Why Outsource Software Development to Eastern Europe in 2020?

Posted Jun 04, 2020 Trends

A convenient geographical location, a wide tech talent pool, cultural proximity to Western cultures, and a reasonable cost to quality ratio make outsourcing software development to Eastern Europe a viable option for businesses that are looking to hire experienced software developers.


Topics covered:

  1. Benefits of Outsourcing to Eastern Europe

  2. 10 Best IT Outsourcing Companies in Eastern Europe

  3. German and Dutch Businesses Choose Ukraine as Their Outsourcing Destination

  4. Why Is IT Outsourcing to Ukraine So Popular, Anyway?​

  5. Why Build Your Offshore Team in Ukraine with Daxx?

  6. Other Popular IT Outsourcing Countries in Eastern Europe

Guide to Nearshore Software Development in Eastern Europe

Software development market statistics of the tech countries — Poland, Ukraine, Romania, Czech Republic, Hungary, Bulgaria, Belarus, and Croatia.

nearshore-software-development-ukraine

Benefits of Outsourcing to Eastern Europe

  • Massive Talent Pool
  • High-Quality Technical Education
  • Convenient Geographical Location and Time Zones
  • Similar Cultures and Mentality
  • English Proficiency
  • Dynamic IT Community
  • Reasonable Costs of Stay
  • Governmental Support 

Eastern European countries have a lot in common as most of them used to be part of the USSR and share vestiges of that period. However, what connects these countries even stronger is their invincible desire to reach for improvement. Today, Eastern Europe is developing at an incredibly fast pace, which has resulted in an upsurge of innovative specialists in different industries, with tech professionals really standing out.

While Eastern European software developers have achieved great results and are renowned around the world for their high-quality work, the economies of their countries still lag behind.

IT Outsourcing Software Development to Eastern Europe in early 2000

Source: Dou

This makes cooperation with software developers in Eastern Europe rather beneficial: you receive a high-quality product for a price that is lower than the average rates in Western European countries. However, reasonable rates aren’t the only benefit that attracts business owners to hire developers in Ukraine, Belarus, Poland, and other Eastern European locations.

ukrainian it market in the beginning of 2000

Source: Dou

Here are five reasons to augment your team with Eastern European developers:

  1. Massive Talent Pool

    There are 6.1 million professional developers in Europe according to the State of European Tech report. However, the number of software developers in the world is distributed unevenly — Western Europe, for one, has been suffering from a tech talent shortage for quite a few years now. It has touched the Nordic countries in particular. 

    By contrast, Eastern Europe is now facing the opposite tendency — the number of talented developers has been constantly growing. Western business owners can benefit from these tendencies — choose skilled software developers from the vast tech talent pool in Eastern Europe and cooperate with them through the extended team model.

  2. High-Quality Technical Education

    The quality of technical education in post-Soviet states is very high. According to the QS World University Rankings, 30 universities out of the 369 top educational institutions in Europe are located in Eastern Europe. 

    Education is one of the main reasons Eastern European tech workers rank among the best software developers in the world.

  3. Convenient Geographical Location and Time Zones

    The time difference between Eastern and Western Europe is one to two hours on average, which is practically negligible for efficient daily communication. Moreover, traveling within Europe is very convenient, as 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. Although travel time obviously takes longer, the maximum time difference of ten hours still makes it possible to set up efficient cooperation with the help of daily sync-ups and flexible working hours.

  4. Similar Cultures

    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.

  5. English Proficiency

    According to the English Proficiency Index, most Eastern European countries have moderate to high English proficiency levels. Furthermore, English skills among IT professionals are typically higher than the countries’ average.

    For example, in Ukraine, 81% of software developers have intermediate or higher levels of English proficiency. Only 16% of tech professionals have pre-intermediate English level, while the remaining few are currently at an elementary level.

Why Outsource to Ukraine?

Get data on the state of the Ukrainian IT market and discover why Ukraine is one of the top destinations for outsourcing software development in 2020.

ukraine-best-it-outsourcing-destination

10 Best IT Outsourcing Companies in Eastern Europe

Daxx

Daxx is a Ukrainian tech partner with 20+ years of experience. The company has already helped 300+ clients from all over the world build dedicated software development teams in Eastern Europe, Ukraine. Apart from helping companies extend their teams with software developers in Ukraine, Daxx also has a wide range of value-added services that cover IT Relocation, Launch Workshop, Process Consulting, Quality Control, and Security Testing. Besides, Daxx is recognized as one of the best IT employers in Ukraine according to Dou and has acquired several certifications that attest the company's high quality services, including Microsoft Gold and ISO 27001:2013 certifications. 

IN2 Group

IN2 Group is a company with 26 years of experience that specializes in software development in Eastern Europe for versatile business domains. The company is based in Zagreb, Croatia. Since 2018, IN2 Group has been a part of the CSI Group. IN2 Group is a reliable partner that has certificates from Oracle and Microsoft, and boasts the Magento Commerce Solution Partner status. 

Intellias 

Intellias is a software development company based in Ukraine that has been operating since 2002. The company also has departments in Berlin, Germany, and Poland. The majority of Intellias' customers come from the EU and North America. The company is on the Global Outsourcing 100 List and also appears among the top IT companies in Ukraine

STX Next

STX Next is an IT outsourcing company based in Poland that counts 350+ employees. They have 15+ years of experience in providing full-cycle web development to clients from versatile industries. STX Next’s clients are dominantly based in the US, the Middle East, and Europe.

SoftServe

SoftServe is an international outsourcing partner that has offices in several Eastern European destinations. The company was founded in 1993 to provide digital advising services and cutting-edge technology development. SoftServe accelerates customer business development by providing innovative solutions.  

Altoros

Altoros is an international IT outsourcing company that has 300+ employees working from offices in the US, Argentina, and Belarus. The company aims to provide customers with end-to-end development solutions. Among Altoros’ customers are such global giants as Allstate, WMG, Cisco, Autodesk, RightScale, Joyent, Couchbase, etc.   

Predica  

Predica is a Polish information technology and services company with 10+ years of commercial experience. The company has already provided their services to more than 300 clients, and 92% would recommend using Predica's services. Predica helps you optimize your business processes and guides you towards the most reasonable solution based on your unique situation. 

IntelligentBee 

IntelligentBee is a web and mobile app development company based in Iasi, Romania. It was founded in 2011 with an aim to provide a reliable service to businesses that are looking for quick scaling. IntelligentBee’s developers take a thorough approach to building apps for their clients and feel the responsibility for their further success. 

Webtown

Webtown is a Hungarian company that provides Agile software development in Eastern Europe. Webtown has 10+ years of commercial experience in the development of online solutions based on the Liferay Digital Experience Platform (DXP). The company puts customer expectations at the forefront of their services aiming to facilitate their business development. 

Scand 

Scand is a software development company with 20 years of experience that is based in Minsk, Belarus. Throughout these years, Scand has carried out 600 projects for clients all around the world. The core focus of Scand is product development with the help of .NET, Java, PHP, and C/C++.

German and Dutch Businesses Choose to Hire Developers in Eastern Europe

77% of German and 66% of Dutch businesses choose outsourcing software development to Eastern Europe according to Daxx’s own research. 

A country-based analysis shows that Ukraine is the most popular IT outsourcing destination among German companies — 17% of business owners have opted for Ukraine. 12% of German companies outsource to India, 10% to Romania, 9% to Poland, and 4% to Belarus.

where do german companies outsource software development

Where Do German Companies Outsource Software Development? 

Among Dutch companies, 18% outsource to India, 14% outsource software development to Ukraine. The rest of Dutch businesses also hire teams in Eastern Europe — 9% to Poland, 9% to Romania, and 5% to Belarus.

where do dutch companies outsource software development

Where Do Dutch Companies Outsource Software Development? 

Find out more about Dutch and German IT outsourcing preferences in our research: 

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Why Is IT Outsourcing to Ukraine So Popular?

why outsource software development to ukraine in 2020

Why Outsource Software Development to Ukraine? 

In recent years, the tech market in Ukraine has been rapidly growing — now there are around 200K software developers in Ukraine, 110+ R&D centers of international companies, and more than 4K tech companies.    

According to studies from Gartner and the A.T. Kearney Global Services Location Index, Ukraine has one of the largest outsourcing markets in Eastern Europe.
In 2019, Ukraine's IT industry exports grew by 30.2% reaching $4.17 billion, which exceeds the growth rate of 2018 — 28% with $3.2 billion of exports according to the National Bank in Ukraine. 

The Ukrainian IT industry comprises around 5% of the country's total GDP and is a leading sector in the economy. Tech exports now surpass the country's wheat exports, which reached $3.65 billion during the previous year. 

Dynamic IT Community

There are around 200K Ukrainian developers, 54% of whom are currently employed in outsourcing and outstaffing companies, while 28% work in product companies. 
67% of all IT professionals in Ukraine are located in Kyiv, Kharkiv, and Lviv — the largest Ukrainian IT hubs. 37% of developers work in Kyiv region, 15% in Lviv region, 14% in Kharkiv region, and 8% in Dnipropetrovsk region. 

Annually, Kyiv and other major Ukrainian tech cities hold 1000+ IT events which present plenty of opportunities to exchange innovative tech ideas and share professional knowledge. Among the most popular events are: Outsource People, Lviv IT Arena, ITEM, and Mobile Beach Conference.

Reasonable Costs 

According to lonelyplanet.com, the average daily budget needed for staying in Ukraine ranges from $20 to $75. This sum covers a room with breakfast in a good hotel, a three-course dinner in a nice restaurant, and transit costs. 

To put this into perspective, a similar experience in Poland would cost you $60$90 per day. This means you can visit your offshore development team as often as you wish while investing minimal efforts and costs.

Concerning tech salaries, the average monthly programmer salary in Ukraine ranges between $2K and $5K per month. Depending on the developer's specialization and seniority level, their annual income varies between $24K and $72K.

Find more information about the average software developer salary in Ukraine in a related article:

Governmental Support

The Ukrainian government has recently simplified legal and financial regulations that control the IT services export. Besides, 90% of tech specialists formally perform as individual entrepreneurs and enjoy simplified tax policies. 

They only contribute 5% of their revenue and a unified social tax, calculated as 22% of the minimal salary in Ukraine, which currently makes around $40. What’s more, many Ukrainian banks offer special service terms for tech specialists.

Read more about how much it costs to hire developers in Eastern Europe vs. other regions: 

Visa-Free Travel

Citizens of the EU and the US don’t need a visa to travel to Ukraine. However, the stay is limited to 90 days within a 180-day period. 

Since 2017, Ukrainians have also been able to travel visa-free to the Schengen Area. As for 2020, Ukrainian citizens can visit 128 countries, 92 being totally visa-free, while the rest require visitors to pass online registration beforehand or get a visa on arrival.  

Why Build a Dedicated Development Team in Eastern Europe with Daxx?

Daxx is a tech partner with 20+ years of commercial experience. So far, we've helped 300+ clients extend their local teams with dedicated software developers in one of our offices in Ukraine — Kyiv, Kharkiv, Dnipro, and Lviv

You're the one to choose, hire, and manage your remote development team with the tools and methods you love. You can start from hiring 13 developers or hire a cross-functional team from the get-go — it's up to you. 

Besides, Daxx has a well-developed set of value-added services that ensure each client can manage their business processes smoothly. These services include IT Relocation, Launch Workshop, Process Consulting, Quality Control, and Security Testing.

Other Countries in Eastern Europe Where You Can Hire a Development Team 

Poland

Poland IT Software Outsourcing

Number of software developers: 295,300 
Average software development rates: $40–$56
Main IT hubs: Warsaw, Kraków, Łódź, and Wrocław
Famous startups: DocPlanner, Nightly

Most of the tech sector income in Poland comes from computer equipment sales, IT services, and software distribution. It’s expected that the revenue from the industry will reach $13 billion by the end of 2022. 

The tech market grows consistently by 510% per year. The Polish IT sector accounts for 3.3% of the country's GDP, a number that is forecasted to reach 3.5% by 2021. 
Poland has a wide tech talent pool with 8 developers per 1000 citizens, adding about 80K tech graduates annually.

Bulgaria

Bulgaria IT Software Outsourcing

Number of software developers: 56,000 
Average software development rates: $34–$51
Main IT hubs: Sofia, Plovdiv, Burgas, Varna
Famous startups: EnhanCV, Connecto.ai

The IT outsourcing sector hit 4.8% of the Bulgarian GDP back in 2017, however, this number is predicted to double by 2021, reaching 7.9% of the country's GDP. 

The tech market in Bulgaria is also a leading tax payer — 1.3% of all funds in the economy come from the IT sector. Bulgarian IT companies spend on average 0.7% of their revenue on taxes. 

The majority of tech companies in Bulgaria are owned by local businessmen, while the rest are outsourcing partners that are mainly based in Western Europe.

Czech Republic

Czech Republic IT Outsourcing

Number of software developers: 104,300 
Average software development rates: $34–$53
Main IT hubs: Prague, Brno, Olomouc, Ostrava
Famous startups: Kiwi, Apify

The IT exports in the Czech Republic have already reached $1.78 billion. No wonder Czechia is 27th out of 82 countries by the overall tech capacity.

The Czech Republic is among the top 20 countries that strongly invest in the development of the tech sector. Total funds make 2% of the country's GDP, surpassing such tech giants as Canada and the UK. 

The tech talent pool of the Czech Republic is still growing, adding 7K tech graduates yearly. Besides, there are 10 developers per 1000 citizens in the Czech Republic. 

Romania

Romania IT Software Outsourcing

Number of software developers: 119,100 
Average software development rates: $26–$45
Main IT hubs: Bucharest, Cluj-Napoca, Timișoara, Iasi.
Famous startups: UiPath, TypingDNA

It’s forecasted that the worth of the Romanian tech market will grow by 10% by the end of 2020. As for now, the country's IT market totals €1 billion. 

The average year-on-year growth of the Romanian IT sector has been 15% since 2000. This means that the tech industry is becoming the core contributor to the country's GDP.  
The Romanian government fosters the development of the IT infrastructure. So far, 70% of the market is under the control of foreign investors, allowing local companies to earn €50 million annually. 

Besides, the tech talent pool is constantly growing — there are around 7K tech graduates entering the Romanian IT market every year. Concerning density, there are 6 programmers per 1000 citizens in Romania.

Hungary

Hungary IT Software Outsourcing

Number of software developers: 84,500 
Average software development rates: $39–$52
Main IT hubs: Budapest, Miskolc, Debrecen, Pecs, Szekesfehervar
Famous startups: Prezi, LogMeIn, Ustream

The lion's share of the Hungarian tech sector is composed of foreign businesses having their R&D centers or remote teams in the country. Thus, 66% of the IT revenue comes from those international companies, which are mainly located in the US, the UK, and Germany.

The value of ICT grows continuously, adding between 68% annually. The revenue of the Hungarian tech market is expected to reach $2.8 billion in 2021. 

The great potential of the Hungarian software development market is further intensified by governmental support — lower employment taxes, new strategic partnership opportunities, improvement of a dual education system, etc. 

The Hungarian tech talent pool keeps growing — there are around 20K tech students graduating from ICT colleges and universities every year. There are 9 developers per 1000 citizens in Hungary.

Belarus

Belarus IT Software Outsourcing

Number of software developers: 55,700 
Average software development rates: $28–$43
Main IT hubs: Minsk, Gomel
Famous startups: PandaDoc, MSQRD (Masquerade)

Due to the vast number of foreign businesses establishing their dedicated development teams in Eastern Europe, the Belarusian IT industry's contribution to the country’s GDP is constantly growing and is expected to reach 45% by the end of 2020. Though 90% of the tech market in Belarus is strongly tied with exports, governmental support promotes further development of the market. 

For example, the Hi-Tech Park state initiative is a system created to help tech professionals and businesses. Resident companies enjoy versatile benefits of governmental support: they’re released from most of the taxes, with income and value-added taxes among them. 

Apart from that, the number of software developers in Belarus keeps increasing — there are 13K tech graduates annually. In terms of density, there are 6 programmers per 1000 residents in Belarus. 

Croatia

croatia as a software outsourcing destination
Number of software developers: 35,300 
Average software development rates: $25–$49
Main IT hubs: Zagreb, Split, Dubrovnik
Famous startups: Agrivi, ExRey

The tech industry in Croatia makes around €3.5 billion yearly. The government sees the necessity to further develop the tech industry, thus it has introduced e-Schools projects to integrate information technology studies into early education. 

Another state initiative, the eGovernment, proves that the country strives for practical use of technologies, ensuring transparency of the public sector. The eGovernment provides over 40 governmental services online.  

The Croatian tech talent pool adds 4K tech graduates annually. At the moment, there are 9 programmers per 1000 citizens in the country. 

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Olena Herasymchuk

Digital Content Creator

Olena Herasymchuk is a tech-driven Digital Content Creator at Daxx. She is eager to discover latest trends of the IT world and share valuable insights with the readers of the Daxx blog.

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