The Best Countries to Outsource Software Development in 2019 Overview
Outsourcing has become a common solution in the recent for battling the IT talent gap, scaling development capabilities and cutting some operational costs in tow. As a result, their plenty of software companies on the market, offering quick access to the needed tech, expertise, and programmers. In fact, by 2021 the global software development outsourcing market will reach $843B in value.
So where exactly should you go looking for a new team of software developers? Asia (India and China primarily) and Central/Eastern Europe (Poland, Ukraine, Romania, and Belarus) are strong contenders.
But before you choose the exact region, ponder over another issue: what kind of a team do you need?
Should You Choose a Fixed Price or Dedicated Team Model?
The fixed-price cooperation model has little wiggle room when it comes to project scope and it’s best suited for short-term, non-complex custom software development projects. The dedicated team model is by far the more popular and successful. And here’s why:
- The fixed price model provides no flexibility in the development process. It assumes a rigid, predefined software development lifecycle. Further, communication or collaboration between vendors and clients is limited. In some cases, this may lead to a product that does not ultimately meet the client’s needs.
- The dedicated team model assumes a collaborative relationship between that team and your in-house staff, providing for effective staff management at both ends. Rather than a fixed price, there is agreed-upon hourly, weekly, or monthly fee. The end result is a better product that fully meets your business goals.
In our previous post, we provided a deeper level comparison of these to IT collaboration models. Be sure to check it for additional insights on the matter.
Where to Find a Dedicated Development Team?
Currently, the majority of software development outsourcing (80%) goes to Asia – India, and China specifically. But a growing popular destination is Central and Eastern Europe, as these countries house 200+ universities graduating 60K IT specialists every year.
The IT reputation of countries like Ukraine, Poland, Romania, and Belarus is growing rapidly, and given the quality of provided services and the overall costs to hire software developers. Hence, consider comparing dedicated developers that hail both from Asia and a variety of CEE countries. What follows is the comparative analysis of the most popular outsourcing destinations in those regions.
The 5 Best Countries to Outsource Software Development
Of the 1.7 billion people in India, 5.2 million are developers. And the Indian government provides a lot of support to the IT industry, considering it is one of the top-5 in the country. And even though the IT YoY growth has declined recently, it is still at about 14%.
The biggest draw for India is obviously the cost. In fact, a local outsourcing company will likely charge you the lowest rate in the world, although the low hourly rates may be somewhat offset by the number of people often required for a dedicated team.
The problem? A lot of Indian developers are niche specialists, which is both a good and a bad thing. Most local developers attend intensive training boot camps in very specific areas of coding/development and remain in that narrow specialization. A prime example is a decision by Google to train 2 million Android developers there. Full-stack developers are definitely a minority. Finding a dedicated team will mean far more “heads” involved than in other places, because of this heavy specialization, and that can impact the cost.
In general, the pros and cons of engaging with a local software outsourcing company are as follows:
- The churn rate in India is higher than in most other countries, and this can impact time-to-market.
- Most firms will require extremely detailed feature requirements and specs – the client should work on in highly detailed list of project requirements, or receive an incomplete product otherwise.
- What works best is a fixed-price model based on units of work that are also clearly fixed in scope. This is a strength of most development firms in India. Finding a vendor with an extended team model can be problematic.
Over the past 20+ years, China has become much more prolific in software development. The country is now referenced as the second leading outsourcing destination. And the local government has recognized this area as one of 7 industries for focus and support. YoY growth is expected to be about 15% over the next several years.
Hiring an offshore development team in China may seem attractive due to lower costs and wide access to talent. But there are certain challenges that come with outsourcing to this destination:
- One, of course, is the language barrier. In negotiating for an outsourcing project, Western companies will need the expertise of professional translators, and this drives costs up.
- Cultural differences make the development of trustful relationships difficult.
- IP protection is still a matter for concern, as local laws and protections within China are still evolving. Add to this the continuing evidence of cyber attacks on the part of China on governments and companies in the Western world, and there is cause for worry.
- Plagiarism of sensitive data remains an issue.
Romania is ranked among the top five EU countries with the fastest-growing economies. And a large chunk of this growth is in technology, specifically offshore software development vendors. Here are a few stats about software development in Romania:
- More than 100,000 software engineers now work in the country
- Rates of pay for software developers are much lower than in other countries, such as Poland and the Czech Republic, although quality remains high.
- TopCoder ranks developers at 16th; HackerRank, 20th
- Java and PHP are the most prevalent technologies used by developers.
The majority of software development companies specialize in the FinTech industry. This is probably a factor of bank commissions being one of the largest sectors of the economy and has given software developers lucrative in-country work.
In sum, Romania is probably a good destination for companies to look for fintech software development. It may not be the best, however, for software development in other niche areas.
Belarus boasts more than 30,000 IT specialists and over 1,000 software development companies. Many of their developers have gained global recognition:
- In a software 500 ranking, 5 Belarusian companies are listed.
- Belarus enjoys the 7th position in Top Coder’s country ranking
The overall business climate in Belarus is improving and now has a ranking of 38th in the Doing Business Rating, among 190 countries evaluated in 2018.
In general, it’s a good destination to hire an outsourcing team, offering a good cost/quality balance. However, one major concern regarding outsourcing to firms in Belarus is the attrition rate, which is about 24% according to Ernst & Young. This is a higher rate than in most other CEE firms, and it can have implications for consistency within dedicated teams as they work for clients.
Ukrainian IT outsourcing market has grown exponentially in the past few years. And the desire of this industry to gain a top position in the global outsourcing market means that local companies strive to hire and nurture the top talent and focus on quality and competitive pricing above all else.
Ukraine is home to 245+ software development companies that generate over $2 billion in revenues, with over 170K IT specialists in the workforce.
Here are additional important stats about the local IT ecosystem:
- Over 100 Fortune 500 companies have chosen Ukraine as an outsourcing destination
- Except for Russia, Ukraine has the largest number of IT pros, and the workforce is expected to double by 2020.
- Most development firms now use agile development
- YoY growth has been in double digits in recent years.
- 28 Ukrainian companies provide AI expertise compared to 226 vendors worldwide
- $630 million were invested in Ukraine’s IT by foreign businesses in the last 5 years
- English proficiency among developers and development firms has grown, although it still lags behind that of other CEE countries.
The reputation of outsourcing companies is being clearly established. In the Global Outsourcing 100 list by IAOP, 18 Ukrainian companies are listed. Further, in October 2017, the Global Sourcing Association listed Ukraine as the “offshoring destination of the year.” Adding to its reputation for quality, it is ranked 11th by HackerRank with respect to the most skilled developers, and, critically important, first is “security.” And TopCoder ranks Ukraine 6th in programming technologies expertise.
Culturally, Ukraine is close to Western countries, and English proficiency is growing – both of which make doing business there easy. What’s more, individuals from the EU and the U.S. do not need visas to enter the country.
In sum, Ukraine is fast becoming the preferred destination for outsourced development, and its prospects for leading CEE countries are great. While the political climate has had no impact on this industry, it does bear watching. Hire dedicated developers in Ukraine.
Romexsoft is a leader in the outsourcing software development industry in Ukraine. We stand ready to provide a dedicated team to your software development project and provide the quality, the relationship, and the pricing you need. Let’s have a discussion.
Written by Romexsoft on April 16th, 2019