Eastern Europe is taking over the IT outsourcing game

For the past years, Eastern Europe has become one of the top destinations for IT outsourcing, both nearshore and offshore. The top players of this region in software development are Romania, Poland and Ukraine. As more and more international brands choose to outsource software development processes, the three countries compete to offer highly qualified personnel at appealing rates. If a few years ago India was the top of the list for IT outsourcing destinations, these days, Romania, Poland and Ukraine are putting up a real fight for that spot.

Before going any further with the IT Outsourcing subject, let’s find out a little about these countries.

Ukraine is a sovereign state in Eastern Europe, bordered by Russia, Belarus, Poland, Hungary, Slovakia, Romania and Moldova. It is the largest country entirely within Europe and the 46th largest country in the world, and has a population of about 42.5 million, making it the 32nd most populous country in the world. The largest city in Ukraine and its capital is Kiev, located in the north central part of the country, on the Dnieper River, and in 2015 got to title of the 7th most populous city in Europe.

Romania is a sovereign state located in Southeastern Europe. It borders the Black Sea, Bulgaria, Ukraine, Hungary, Serbia, and Moldova. It has an area of 238,397 km2 and a temperate-continental climate. The country is the 7th most populous member state of the European Union, with almost 20 million inhabitants. Its capital and largest city, Bucharest, is the sixth-largest city in the EU, with approximately 2 million inhabitants as of 2011.

Poland is a unitary state divided into 16 administrative subdivisions, covering an area of 312,679 km2 with a mostly temperate climate. With a population of over 38.5 million people, Poland is the sixth most populous member state of the European Union. It’s capital and largest city is Warsaw.

Now that we know a few things about each country, let’s see what makes Poland, Romania and Ukraine attractive destinations for IT Outsourcing.

IT outsourcing in Ukraine – key facts

Ukraine has twice the population of Romania. Ukraine’s post-secondary education is rated as 5th best among the 50 countries from its innovation Index, according to Bloomberg. Over 16.000 IT specialists graduate annually from over 170+ state-owned institutes and universities.

In Ukraine web developers and software engineers can also choose to study at one of the hundreds private educational institutions and non-university programs teaching software development.

Ukraine has a solid reputation as an IT outsourcing destination, confirmed by the presence of giants like Microsoft and Samsung, that have been operating offshore R&D centers in this country for years. Also, the web development giant WIX has an offshore office there. The client portfolios of Ukrainian offshore software development companies include high-tech manufacturers like IBM, Boeing, and Ford.

Another reason for outsourcing IT processes to this country is that Ukrainian developers have many years of experience, in comparison to Romania.

Ukraine’s population is twice the size of Romania’s population and has 6000.000 more people than Poland, so Ukraine is ahead in the availability of technical talent.

The final argument for choosing Ukraine as a software development outsourcing destination is cost-related: the rates here are a little lower than in Romania. According to Payscale.com, Romanian software developers have an average rate of 40,1$ /hour, while Ukrainian software developers have an average rate of 36,2$ / hour and Polish software engineers have an average rate of 35,15$/hour.

There is a downside to outsourcing in Ukraine – the country is not part of the European Union and that can become a problem in terms of bureaucracy. Also, Ukraine is a country with moderate English proficiency.

IT outsourcing in Poland – key facts

Poland is the 6th biggest state among European Union members with its population bordering on 38 million citizens. After joining the European Union, NATO, OECD, WTO Poland’s infrastructure systems improved greatly.

KPMG IT Outsourcing Service Provider Performance & Satisfaction Study 2014/15 has shown that Poland is already 2nd among the most preferred locations in the world for delivering IT Services, after India.

In Ernst & Young 2012 report Poland was positioned as 7th in the world in terms of investment attractiveness. The latest edition of Tholons Top 100 Outsourcing Destinations 2015 listed Krakow as number 9 among world's 100 best outsourcing destinations. According to the report, Krakow's top score is a result of its consistent investment policy and the adopted standards of business promotion.

In Poland, 15.000 IT graduates enter the market annually and 99.500 high school students attend IT-specialized courses. Warsaw University of Technology features in the QS University Rankings, and it's ranked 18th among universities in Emerging Europe and Central Asia.

English is a standard in polish schools, so there are no communication issues, as most software developers from Poland speak English.

Poland's strategic position is advantageous because countries like UK or Germany can easily outsource there, having practically no time zone differences.

Poland has one of the lowest labor costs within the European Union - according to the Association of Business Service Leaders (ABSL), you can find and hire highly experienced Polish developers for under $3.000 a month. In Poland, there is no VAT reverse charge and there are no non-EU outsourcing restrictions.

Giants like Microsoft and Oracle have been running R&D centers in Poland for many years now. Polish vendors have more experience working directly for global brands, than Ukrainian and Romanian vendors.

Approximately 70% of all major IT companies in Poland are outsourced centers belonging to foreign firms including Microsoft, Google and Oracle, according to Price Waterhouse Coopers - Investing in Poland 2014 report.

Poland is one of the European countries experiencing a strong labor shortage due to overseas departures, as well as governmental policies to reduce the retirement age and wages that are still low compared to those in Western Europe, writes Bloomberg.

With the advantage of lower wages than the European average, Poland hopes to attract around 30,000 jobs in the financial and IT sector, with the first negotiations already being made with Goldman Sachs and HSBC, according to Deputy Prime Minister Morawiecki. One million Polish emigrated to the UK after the country joined the EU.

Before choosing which country suits your business needs better, it’s important to know that Romania Poland and Ukraine have trial periods for new employees of 3 months and a notice period of 2 weeks. All three countries offer employees personalized benefits packages.

IT outsourcing in Romania – key facts

Romania is one of the fastest growing IT pools in Eastern Europe. Romania is the 6th best in Europe in terms of certified IT specialists. There are 240 educational institutions of state and private ownership - 5 Polytechnic universities, 59 Technical universities, 174 colleges and schools providing technical education. The TOP IT destinations of Romania are Bucharest, Cluj-Napoca, Iasi and Timisoara.

Romania has geographical and cultural proximity to Western Europe facilitating close relationships with its clients and it’s 2-hour flight away from most countries in Western Europe and it also has the same business mentality as its western neighbors.

This country is part of the European Union, and this has its benefits:

  • Romanians have the possibility to travel freely inside the EU
  • Romania had the highest economic growth in the European Union in the third quarter of 2017 as compared to the previous quarter, according to a preliminary estimate published by the European Statistics Office - Eurostat
  • Romania has access to EU structural and cohesion funds

Another advantage Romania has when it comes to IT outsourcing is the multilingual labor force combined with its technical and soft skills proficiency. The country ranks 16th in Europe for English proficiency and 20th in the world. We have a flourishing BPO and SSC industry because we manage to accommodate a multitude of languages, both mainstream (English, French, German, Spanish, Italian) and rare languages (Hungarian, Russian, Chinese, Japanese, Arabic, Danish, Swedish, Czech).

Romanian taxation system has been very friendly to IT industry, encouraging IT specialists to join the industry: if a company’s annual turnover exceeds $100.000, the employees can get their tax exemption, therefore, get more cash. Many investors choose this country for their IT outsourcing projects because it has a fair cost/quality ratio. Romanians skill and professionalism exceed their rates when it comes to quality results.

Romania’s IT outsourcing experience and potential are confirmed by the presence of global high-tech companies such as Microsoft, IBM, P&G, HP, Oracle, Wipro, S&T, Accenture, WNS, Intel, as well as Luxoft, Ubisoft and Amazon.

Oracle, the world's largest software developer, will transfer most European hardware support activities to Romania to reduce current costs, and the liquidation process is already under way, according to British newspaper ‘The Registry’. The Romanian subsidiary of Oracle is the main player on the Romanian software market, with over 3,630 employees in 2016, being the second largest company in Europe, the Middle East and Africa, after the UK. In 2016, Oracle had 908 million RON turnover in Romania and a net profit of 23.7 million RON.

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