Over the last decades, Eastern Europe has managed to become one of the top offshore destinations in the world. It all started with tech giants such as Microsoft, IBM, Apple, and Google, who opened their branches in Eastern European countries. Their example inspired the other tech companies, who saw the benefits of outsourcing to Central and Eastern Europe (CEE).
According to Clutch, there are almost 2,000 offshore software development companies in this region as of January 2020. Almost 700 firms thereof are based in Ukraine, more than 600 – in Poland, and 274 – in Romania. In this article, we are going to give an overview of these top 3 locations and compare them according to various criteria. We will also find out why clients from the US and Western European countries prefer Eastern Europe as the number one offshore destination.
As we've already mentioned, the most popular Eastern European countries to outsource software development are Ukraine, Poland, and Romania. Now we'll give an overview of the IT industry in each of them.
Poland is an EU country with a rapidly growing economy. IT services in Poland generate over 29% jobs in the Polish labor market, as per the "Business Services Sector in Poland 2019" report by ABSL. This fact makes Poland one of the most favorable offshore destinations in Eastern Europe, together with other facts and statistics, such as:
- The Polish IT industry grows by 5-10% a year.
- According to Top Coder ranking, Poland now occupies the 5th place in the world as per software development skills.
- In 2018, the number of IT professionals employed at outsourcing companies was about 45,000 as related to the total talent pool size of over 250,000.
- In 2019, the IT market revenue in Poland amounted to $11.79 billion. According to predictions, the revenue will grow up to $12.1 billion in 2020 and $12.1 billion in 2021.
- By 2022, sales of IT services in the country are expected to reach $15 billion.
Being also a member of the EU, Romania features one of the fastest growing IT markets in Central and Eastern Europe. The country is sixth in the world according to the number of certified IT specialists, specifically, about 100,000. Here are some more facts about this offshore destination:
In 2003, Microsoft acquired Romanian antivirus technology by GeCAD Software.
The IT market in Romania grows at about 40–60% a year.
The most rapidly growing segment of the IT market is offshore software development, with up to $4.2 billion in total revenues.
HackerRank challenges showed that Romania is the 20th country in the world having the best developers.
185,00 professionals are employed in the IT industry.
Here are some of the recent statistics about the state of the IT industry in Ukraine.
- Currently, about 4,000 IT companies operate on the market.
- As of 2019, there were about 160,000 IT professionals in Ukraine, over 60% of which work for outsourcing companies, mainly from the United States. It is predicted that in 2020, the number of software developers in Ukraine will increase by 20,000.
- Ukrainian IT industry grows by about 26% a year.
- As per forecasts by experts, revenues in the Ukrainian IT industry amounted to $5 billion in 2019.
- Ukraine is 20th in the T. Kearney's 2019 Global Services Location Index (GSLI). The country has moved up 4 positions as compared with 2017.
- The average score across all HackerRank challenges as of 2018 showed that Ukraine is the world's 11th country having the best developers. According to this data, Ukrainian developers had an average score of 88.7% across all challenges.
- In 2017, Ukraine was awarded the "Outsourcing Destination of the Year" by the Global Sourcing Association.
- Grammarly, Preply, and Petcube come from Ukraine.
Now let's compare the software development potential in the top 3 CEE countries by using criteria such as English skills, tech ranks, hourly rates, size of the talent pool, industry focus, and core technologies.
- English skills. In general, IT professionals in all three countries are fluent in English. According to a survey by Daxx, 80% of Ukrainian developers speak English. 33% of them have the upper-intermediate level whereas 35% have the intermediate level. As per EF English Proficiency Index, Poland is #11 of 100 countries/regions and #9 in Europe in terms of English proficiency, being ranked as "very high proficiency". The same index shows that Romania occupies the 16th and 14th places, accordingly, being ranked as "high proficiency."
- Tech ranks. Among the three countries, Poland has the best tech rank both on HackerRank (3rd place) and TopCoder (5th place).
- Hourly rates. According to PayScale, average hourly rates for the three countries are roughly the same - $16 per hour. It is greater than in India or the Philippines, but still much lower than in the US or Western Europe.
- Size of the talent pool. Poland remains the leader in terms of the talent pool size of over 250,000, which amounts to ne fourth of the total population of programmers in the CEE.
- Industry focus. Each country has its own IT industry focus, which makes it easier for clients to choose the preferred destination. Ukrainian IT companies specialize in startups, custom software development, and eCommerce. Polish developers tend to focus on enterprise projects whereas Romanian ones – on fintech projects.
The final section of our article is dedicated to the advantages of offshore software development in Eastern Europe, which are also the reasons why clients choose this destination.
Technical education has been important in Eastern Europe ever since the times of the Soviet Union. However, during those times, the universities focused mostly on hardware than on software. Today, the focus has been shifted from hardware to software in response to modern market requirements, thus gradually turning Eastern Europe into one of the world's most popular offshore software development hubs. Tens of thousands of certified IT specialists graduate from Eastern European universities every year, expanding the vast talent pool of this outsourcing destination.
Fluent English is one of the key requirements for work in the outsourcing IT industry. It is the preferred language for communication between international teams and successful cooperation with clients. Many Eastern European IT companies offer free English courses for co-workers on their premises, thus contributing to the improvement of this important skill. Additionally, Polish developers speak fluent German and Romanian developers – fluent French. Clients from the United States and Western Europe enjoy working with teams from these countries because there's no language barrier.
With the lightning-fast development of modern technology, self-education is crucial for IT professionals so they can always stay up to date with the latest trends. With this purpose, Eastern European developers constantly attend various conferences, both internal and external, and listen to online courses and webinars. All expenses are typically covered by employers. And these efforts are worth it -developers from Poland, Ukraine, and Romania rank highly on both HackerRank and TopCoder.
Eastern European developers offer quite affordable rates as compared to their Western peers. The highest rates are in Poland — $50-$99/hour, but it is still lower than in Western Europe. The lowest prices are in Moldova — $20-$24/hour.
Despite once belonging to the former Soviet Union, the culture of software developers in the CEE countries can be defined as western and progressive. Most developers are young people with an open mindset. Ukrainian and Polish developers have decades of experience working with global technology companies in Europe and other countries. At the same time, Romanians can sometimes lack an innovative approach because they may be reluctant to take risks.
The main reason why tech companies from the United States and Western Europe choose outsourcing is the lack of talent pool in their area. High-speed Internet and modern technologies allow employing people from all over the world even on a remote basis. The abundance of highly skilled, open minded, English speaking professionals at fair prices makes Eastern Europe an IT outsourcing paradise.
The total number of IT professionals in the region is 700,000 people employed at 2,000 companies, and this number is growing because of 60,000 IT graduates appearing every year. Each country focuses on specific technologies, offering potential clients a diverse set of various technologies to choose from. For example, Romanian developers are well versed in fintech, Poland focuses on enterprise solutions, and Ukrainian developers work with the most cutting-edge technologies, such as artificial intelligence or blockchain.
Every client has their own project requirements, but each CEE country has its own specifics. Therefore, the best recommendation here is to choose a country based on those requirements. You may find Poland or Romania more reliable because of EU membership, but these countries may lack specialists in the technology stack that you need for your project. So, here are our recommendations on making the right choices:
- Know your budget. Average hourly rates in CEE countries can be roughly the same, but they can vary for senior-level developers. Therefore, we recommend that you look up the rates of software engineers per country and choose the one that is best for your budget.
- Have a clear understanding of the tech stack needed for your project. Each Eastern European country has its own strengths regarding the tech skills of local software engineers. For example, HackerRank reports that Polish engineers are the first in Java whereas Ukrainian developers are the first in security.
- Choose according to the type of your company. If you're a startup, you can reach out to Ukrainian developers. If you're a large enterprise, Poland would be your choice, and so on.
And remember: it doesn't matter which country you choose for outsourcing software development. Companies in those countries can also be different, so we advise that you thoroughly pre-screen the company of your choice, preferably with the help of local specialists.
Eastern Europe is an attractive outsourcing destination due to several reasons such as broad technology stack, English language proficiency, affordable rates, size of the talent pool, and cultural value set. The most popular outsourcing destinations in CEE are Ukraine, Poland, and Romania. It is possible to not only open an offshore development center in one of those countries but also build a remote team.