The Dutch cabinet is advising employers to raise salaries. This is a result of the current economic conditions and shortages in the labor market. Moreover, according to CBS, 2022 has brought a record 3.3% rise in salaries in the Netherlands. With the “great resignation” still rambling on, there is a significant risk for the tech sector. On one side, cooling off the VC market and uncertainty; on the other side, the finite talent and rising salary costs. At some point, the math for developing tech products may become negative. Our forecast in the IT sector is that hybrid work formats will gain momentum in the coming years due to outsourcing of software development. Dutch companies will begin to attract more people from other countries, practice part-time work, and outsource.
IT Outsourcing of Software Development
The volume of the global IT outsourcing market at the fiscal reporting end of 2021 reached $360 billion, an increase of almost 13% compared to the projected end of 2020. The growth started in 2020, when the world has been changing, and working from home, remote access to software and hardware became the usual trend. The IT outsourcing of software development market continues to grow even now, during uncertain times when a lot is going on politically and economically.
Western European companies want to minimize risks within their organization, so they opt for a solution that is more budgeted and works more efficiently. Thus, the market will continue to grow in the coming years. This will happen because companies that once outsource are not likely to return to the internal and traditional way of working.
Logically it is expected that global companies will want to save on software services without compromising product quality; outsourcing can help with this. The only question that remains is where to outsource in crisis 2022-2023 to benefit from software development services.
You can find contractors everywhere. However, it is better to know the specifics of each country and stay up-to-date on global rating lists of the top spots for the outsourcing of software development.
India
For example, India has gained the status of a leader in outsourcing and boasts a variety of programmers for every taste. Some businesses prefer Indian specialists because of their low rates. However, before you decide to outsource your product there, you need to weigh the pros and cons:
- Differences in cultural and business values,
- Communication in different time zones,
- Transparency and the ability of specialists to solve problems etc.
Eastern Europe
The second most popular outsourcing destination is Eastern Europe in a broad sense. Ukraine, Russia, and Belarus were in the lead until February 2022. Then the war in Ukraine began, and this fact could not but affect international clients, who must consider sanctions, the moral aspect, and other risks.
Since we at Moqod were initially focused on working with Eastern European developers, we experienced a real crisis since the war started in Ukraine. We stopped hiring developers from Russia and Belarus, but there was a question with the Ukrainian part of the team.
On the one hand, we did not want to stop hiring Ukrainians so that we continue helping the country in its struggle for freedom and support their economy. And Ukrainian software developers truly are highly-qualified and can benefit our international clients.
But on the other hand, we had to think about the clients, and we understood that Ukrainian team members entail risks for clients’ projects, even though the management team is located in the Netherlands.
Solutions
We found the solution in the following. First, we promptly relocated staff from Eastern to Western Europe if it was possible. Secondly, we diversified all risks as much as possible and increased our presence in other countries globally. There have never been any problems, but if suddenly an employee from Ukraine cannot quickly respond or complete the task, another team member will immediately respond and seize the initiative. So we can avoid even the slightest harm to the project.
But what if these country-specific teams do not suit the customer at all?
Consider Poland, Romania, and Brazil, which are also among the top five countries for the outsourcing of software development.
Poland has over 250,000 competent IT specialists and subsidiaries of large companies such as Google, Microsoft, and Oracle. However, the hourly costs of the Polish software development team are a bit higher than in Ukraine.
Romania also has a good talent pool – more than 100,000 programmers of various skill sets. Romanian specialists can earn an education in 55 different world-class technical universities, and they know English and German well
Brazil is not as attractive to European customers due to cultural differences and geographical distance. However, proximity to North American countries, top-notch technical universities, and low programmer hourly rates make them a formidable competitor for India.
These countries are a kind of IT outsourcing standard. Everyone ever interested in transferring their project to a third-party company knows about them. But there are some non-obvious countries that we can recommend for finding contractors.
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Portugal
According to Gartner analytics, Portugal is among the 11 developed countries with open growth potential for IT outsourcing. The report indicates that Portugal has excellent characteristics for software development services, thanks to a mature domestic market, with a high-qualified labor pool, robust technological infrastructures, universal business legislation, and the presence of international companies with significant financial and people investments.
Google, BMW, BNP Paribas, Zalando, Bosch, and Siemens have their offshore offices in Portugal. We all know Web Summit, Engineering & Technology (PIET), and other international conferences are held in Portugal yearly. All these are favorable environments for IT community development.
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Serbia
Serbia has almost tripled the export of IT services over the past 6 years. In 2021, it outstripped the exports of the country’s agricultural sector, which traditionally had been the leader in previous years. IT people generate 10% of the Serbian GDP. As of the beginning of 2022, their number exceeded 40 thousand, and there is already a shortage. According to officials and independent experts, the Balkan country needs at least another 15,000 IT specialists to meet the growing demand.
The lack of IT staff is filled both with the help of internal resources and from outside. In particular, against the backdrop of the crisis in Ukraine, the number of employees in the IT industry of the Balkan country began to grow rapidly due to those who moved from risky and damaged regions. We also relocated a part of Moqod’s staff to Serbia and opened an office here. However, there are quite attractive conditions for IT business here, even if there is no physical office in the country.
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Armenia
Armenia distinguishes itself by the constant growth of the IT sector, which provokes the close attention of potential investors to a small but fascinating country. Most IT professionals in Armenia speak English and have technical degrees in science, technology, and mathematics. Experts expect the growth of up to 30,000 software developers in Armenia by 2025. Armenia attracts software developers from other countries because of its low cost of living and rich culture. Programmers from Iran, India, and now Russia chose Armenia for their relocation and note reasonable immigration rules that allow them to receive an official residence status.
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Vietnam
The rate for a senior engineer in Vietnam is two to three times less than in Eastern Europe countries. This employee most likely does not speak English, but the situation is improving and you can hire a project manager who speaks English better. A broad variety of enterprises in the United States, Australia, Canada, and others are looking at ways to save money in Vietnam that’s why the tech sector in this country actively develops.
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Georgia
In 2021, Georgia was included in the Global Services Location Index 2021 for the first time.
The country ranked 19th due to its geographical position at the crossroads of Europe and Asia. Additionally, because of its competitive position in financial attractiveness, workforce skills, and business environment.
When choosing a country for outsourcing your project we recommend paying attention to the general IT community qualifications; cultural affinity, and ease of communication.
This is the first step to optimizing workflow and avoiding possible misunderstandings which cost time and budget. Recent research has shown that Eastern European engineers are more likely result-producing tech partners, which is a massive speed-up for the solution-finding process. The Hofstede Cultural Dimensions Theory places Ukraine and Poland right next to the Western European countries in terms of long-term orientation. This cultural affinity is crucial for complex regional and global strategies and mutual decision-making for time-sensitive projects.
Conclusion
Analysts believe that the cost of IT outsourcing will continue to grow. The big problem that IT outsourcing can solve is the lack of technical specialists. This is a big problem in many developed countries. The same problem is exacerbated in India. The country is considered one of the world leaders in IT outsourcing of software development. The issue of the Indian market is related to the fact that specialists there are becoming more narrowly focused and in demand.
