IT Outsourcing to Eastern Europe in 2023: Benefits for USA

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Today, outsourcing to Eastern Europe is a popular alternative to in-house development of software and IT products, offering a range of distinct advantages. If you are considering IT outsourcing to Eastern Europe, this article will help you learn more about the local IT landscape. Let’s get down to business.
 

WHY IS IT OUTSOURCING TO EASTERN EUROPE SO POPULAR AMONG EU, UK, AND US COMPANIES? 

It has been known for quite a long time that Western countries do not have enough skilled IT specialists. In the United States, as of 2019, the open IT positions numbered about 920,000. The United Kingdom isn’t in a drastically better position, either, with about 94% of tech employers agreeing that there aren’t enough IT professionals in the country.

These shortages in IT professionals have made them turn their heads elsewhere in to fill up those empty positions. While some may decide to outsource to Asia as they provide the best rates, others may also choose London as their destination for software development outsourcing. Still, the biggest sought-after destination in Eastern Europe.

Eastern European countries like Ukraine, Poland, Hungary, and Romania have stamped their place as the world’s leading software outsourcing destinations. They have both quality and quantity to take on any given task. Big internationally acclaimed brands have development teams from Eastern Europe. Other small and developing companies are not left out; over 2,438 software development companies operate here.

Additional Reading: Dedicated Development Team: a Winning Approach to Outsourcing

Drastically Lower Software Engineer Rates and Salaries: USA vs EU vs Eastern Europe

One reason that makes people choose Eastern Europe software development is because of their fairly low rates compared to those in the UK or US.

The average hourly rate in Eastern Europe is about $34-$60, which is very cost-effective compared to countries outside the region.

How Much Does a Software Developer Make in the US?

According to various data from Glassdoor.com, Payscale.com, and Indeed.com, Junior level United States developers are estimated to make about $50,000 per year. Intermediate-level developers earn $104,700 per year, and senior-level developers earn $180,000 per year.

What About Yearly Earnings of the EU Developers?

Western Europe has lower rates compared to the US at $45-$90 per hour, but it is still generally higher than that of Eastern Europe. 

Junior developers in the UK earn about $32,000 per year, Middle developers earn about $78,454, and Senior developers earn close to $150,000 yearly.

The salaries in Eastern European countries are;

Poland: $10,000 yearly – Junior, $20,000 – Middle, $27,000 – Senior.

Ukraine: $15,000 yearly – Junior, $25,000 – Middle, $50,000 – Senior.

Romania: $14,000 yearly – Junior, $24,000 – Middle, $45,000 – Senior.

Moldova: $22,000 yearly – Middle.

Ukraine’s Outsourcing Rates

Ukrainian developers earn about $35-$60 depending on what project is to be undertaken.

The True Cost of Hiring an In-House Software Developer

In-house professional software developers come with some extra recruiting and HR hassles that are associated with additional costs, such as postings on Job boards, sourcing for potential IT developers, sorting through the resumes, interviewing, and training.

Recruiting costs could be as high as $30,000. These include interviewing costs, Applicant Tracking System (ATS) use and scale-up plans. Other costs may include onboarding, which may be as high as $400.

In total, the hiring costs could rise up to $40,000.

High Quality Education

A major reason for IT outsourcing to Eastern Europe is because of their high technical and education level. They are known to have a solid education system that strongly focuses on STEM disciplines and languages, so there’s no wonder the IT industry thrives here.

English, a universally accepted language in the IT industry for proper communication and cooperation with clients, is widespread and taught in schools. German is popular among Polish developers, and French is like a second language to Romanians.

Eastern European developers have always been known to excel at software development. Not to mention, Ukraine, Poland, and Romania are renowned for being among the Top 25 in HackerRank and Topcoder rankings. They are also well-versed in various programming languages. 

Dynamic IT Community

IT outsourcing to Eastern Europe is quite popular in the UK and US because of the solid community behind the Eastern European developers. They are active members of online forums that serve as a platform to exchange knowledge. 

They also host global tech events like iForum, which welcomes over 6,000 participants per year, and the Lviv IT Arena. This has made global brands set up their headquarters and R&D centers in the region, thus additionally strengthening the vibrant tech community.

European Business Value

IT outsourcing to Eastern Europe is made easy when you realize that the economies of the Eastern European countries are adapted to budding IT enterprises. Poland especially stands tall in this regard, with the IT industry worth $4.21 billion as of 2019. Global brands with R&D hubs in the country include Siemens, Google, and ABB. 

In 2017, Ukraine was awarded the Offshoring Destination of the year as one of the most popular outsourcing destinations. Its IT industry is currently worth about $6 billion. This contributes to around 8.3% of the country’s exports. The tax reform in place also supports companies that are looking to establish in the country.
 

5 EASTERN EUROPEAN COUNTRIES FOR OUTSOURCING 

Ukraine

Ukraine currently has over 210,000 IT professionals and is expected to hit 250,000+ by the end of 2023. The IT industry contributes to about 4% of the country’s GDP and has a yearly growth of 21%. 

The IT specialists have high proficiency in English and are well-versed in multiple programming languages. No surprise, they were ranked 7th in technical expertise by Coursera Global Skills Report in 2021.

This boom has been taken advantage of, and the country is now home to several of the world’s biggest brands. Various top tech companies have hubs in Ukraine. These include Siemens, Upwork, Gameloft, Samsung, eBay, and Huawei. Ukraine is the first stop for companies looking to outsource to Eastern Europe. 

Poland

Poland has one of the most exciting tech economies in the world. It currently has an ever-growing 400,000+ Tech Specialists, the largest number in Eastern Europe. Its market size is valued at about a whopping $13 billion. The majority of its workforce work for foreign agencies (about 66%).

Poland has the highest rate for software development among those in Eastern Europe, with a Junior developer earning about $34,000 per year and a Senior dev earning $60,000 annually.

Some top companies that have decided to outsource software  development to Poland include Lenovo, Microsoft, HP inc, Cisco, Intel, Apple, and Google.

Czech Republic

The Czech Republic, or Czechia, has become a mini IT hub in Eastern Europe. Its tech specialists currently number about 150,000, and about 7,000 join the workforce every year. Prague, Ostravia and Brno are popular destinations  for software development outsourcing in Europe.

 Czechia’s biggest advantage is low outsourcing rates. This is due to the lower cost of living in the country.

Romania

Romania has gradually developed its tech industry to become one of the most sought-after in Eastern Europe. According to a recent survey by the Romanian Software and Services Association, its market size is valued at $4.2 billion dollars, and the country is home to over 60,000 tech professionals. One of its local startups is UiPath, a unicorn project founded in 2005. It has since acquired $1.2 billion from 25 investors and has grown to become a rattling $10 billion project!

Its tax policies have incentified big companies to throw in the big bucks and invest in the country’s local startups as well or outsource for European talents. Its greatest tax policy is the tax break given to companies that meet a certain requirement.

Bulgaria

Hewlett-Packard (HP) has one of its major operations in Sofia, the capital city of Bulgaria. Bulgaria is located in the heart of Eastern Europe and, and it’s easy to get to other parts of the world from here. In addition, it has a very high number of English-speaking developers . The country boasts over 2,000 IT graduates per year, with about 24,000+ English speaking tech-savvy specialists already in the industry. 
 

HOW TO CHOOSE THE PERFECT IT OUTSOURCING COMPANY

Before deciding to offshore a project, you must define what you want your providers  to do. A plan saves time by helping you narrow down who you want to outsource the project to, as different IT companies specialize in different fields of software development. .

Some platforms, such as Clutch.co and GoodFirms, have made Eastern Europe software outsourcing easier by providing detailed information on IT companies. Or, you can always turn to  Google Search to find a reliable software development partner.
 

Clutch.co

Clutch is one of the most popular websites for searching for Eastern European software developers. You can easily filter your search to whatever you may be looking out for, like location, rate, project type and size, and so on. You’ll also be able to check the software company’s portfolio to explore their past works and read in-depth reviews to make a more informed  decision. For instance, here are some links to Clutch.co rankings and reviews of the top development companies in Ukraine:

Top IT Consultants in Outsourcing
 

GoodFirms

Other than being a research platform, GoodFirms offers reviews of software development companies. The availability of the reviews enables clients to choose the best software design and development services. Have a look:
 

Google Search

Another easy way to find software development companies in Europe is through Google search. It is probably the easiest way to go. Make sure you specify your search: add location, industry, the collaboration model you want to use — project-based, fixed-price, time & material, a dedicated software development team, etc. Check websites and gather information on how your potential partners’ software development service works, how well they performed their previous tasks, and how well they fit your needs.
 

HOW TO ENSURE THAT THE DEVELOPERS YOU HIRE ARE THE BEST FIT FOR YOU

Whenever you’re outsourcing to Europe, there are a few things to look out for to make sure you are outsourcing your project to the right company. You should ensure the technology used in executing your project is one that suits it. The companies’/developers’ methodologies are also important. Ask about their development process. Good development processes make  software development hassle-free and help tackle issues easily. It’s best when a development company uses Scrum or Agile — this helps ensure a continuous feedback loop for faster development and the best possible results.

They must also have a history of early delivery, periodic project updates, and proper and effective communication skills/tools.

One red flag to look out for is when a company/developer decides not to share details of previous works with similar experience despite claiming to have done some. They indeed sign NDA agreements, but they should be able to share the details about the development process.

Afterword

Software development in Eastern Europe is thriving, with the region  fast becoming the biggest outsourcing hub on the globe. 

IT outsourcing to Eastern Europe provides some of the best benefits, such as seamless communication thanks to English proficiency, high level of technical education, geographical location, and attractive tax structures, just to name a few. Moreover, the cost of hiring is way lower compared to Western Europe, without compromising quality 

 

FAQ

What is the best Eastern European country for IT outsourcing?

While all Eastern European countries may have solid technical knowledge in IT, and a good English proficiency level, Ukraine just edges them out as it is the most well rounded and has the largest growth rate. It is also home to various major brands.

Other Eastern European countries offer their own advantages. The Czech Republic offers the lowest rate, Romania is home to diverse languages, and Poland is a powerhouse with a market size of $13 billion.

How much does it cost to hire programmers in Eastern Europe?

Eastern Europe outsourcing rates vary across Eastern European countries because of the taxes, wage limit and general standard, and cost of living.

Ukraine: $35 – $60

Poland: $40 – $66

Romania: $28 – $55

Czech Republic: $24 – $48

Bulgaria: $26 – $51

What should be included in the contract with an outsourcing company?

An outsourcing agreement is necessary to guide the scope of the contract between both parties. The contract typically includes the following;

  • Type of contract, either long-term or short-term.
  • A detailed description of the type of service provided and how it will be executed.
  • Dates of agreement. Date of commencement of the project and if there’s going to be room for extensions.
  • Conditions under which the contract can be terminated by either party.
  • Pricing fee and payment structure.
  • Conditions for fee increase or decrease.
  • Milestones for project updates.
  • Late payment penalties and early service delivery reward.

Related articles: Risks and Legal Aspects of IT Outsourcing To Ukraine: What Businesses Should Know

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