software outsourcing

Software Outsourcing to Europe or Asia? Which One to Choose?

08 Feb 2017 - 5 min read

Software outsourcing has become imperative for organizations of all sizes and there are several reasons for this. First, there is the cost reduction. Then, there is the ability to focus on core business projects, while dedicated teams manage part of the work remotely. Next come the improvement of service quality, wider access to diverse resources, financial flexibility, and transparency on costs. And finally, there is the real chance for an effective business transformation. A recent survey – The 2015/2016 European IT Outsourcing Study – carried out by Whitelane Research, offers some key insights into the current progress of offshoring practices. The survey looks at the IT outsourcing landscape of 13 European countries and takes into account more than 1500 of the best IT spending companies. 78% of the participants acknowledge the continuous growth of the market and point out they will keep outsourcing at the same rates. 41%, on the other hand, confirm they will focus even more on outsourcing to other countries. But who are the best performers and which countries come top for outside resource using?

EASTERN EUROPE VS ASIA: IMPORTANCE OF SOFTWARE OUTSOURCING
IN TODAY’S BUSINESS SCENARIO

Steadily gaining more influence in this segment, Eastern Europe is turning into a more profitable alternative compared to the Asian software outsourcing solutions. Countries like China, Thailand and Malaysia face increasing competition from European dedicated service providers. Regardless of India and the Far East still being preferred for the inexpensive labor, Europe prevails in quality, reliability and data protection. Proving that the importance of quality exceeds that of price and quantity, several countries have improved their scores and have risen to the top positions in the 2016 A.T. Kearney Service Location Index. The research paper evaluates and ranks 55 countries for IT outsourcing based on metric in three categories:

  • Financial attractiveness
  • People skills and availability
  • Business environment

In this regard, in the latest ranking, Poland, Latvia, Ukraine, Czech Republic and more have moved up with +1 to +17 positions, compared to the results from the 2014 edition. Even though Bulgaria dropped 3 places down in a global perspective, it still occupies the 2nd position in Europe. Defending its status as one of the most attractive outsourcing destinations, our country also won the UK’s National Outsourcing Association Awards (NOA) in 2015, outcompeting Sri Lanka, Slovakia and South Africa. Bulgaria also scooped the award for “Offshoring Destination of the Year” at the European Outsourcing Association Awards (EOA) the same year, outrunning the shortlisted Latvia and South Africa.

Top 19 software outsourcing destinations

(Image Source: AT Kearney)

Romania is another country with a growing rate of its outsourcing sector. It is ranked 3rd in Europe and 13th globally. According to official data from the Romanian Ministry of IT and Communications, more than 60,000 people are currently working in the outsourcing industry there.

In many cases, business executives are led by the idea to hire low cost workforce and, therefore, invest in countries with more affordable software engineers. Nevertheless, by all accounts there are perceptions and requirements that seem to be shifting. Eastern Europe, then, wins over the largest continent and rules the market not only in terms of nearshoring but in terms of favorable offshoring conditions as well.

THE CONTINENT OUTCLASSES ASIA IN SEVERAL CRITICAL ASPECTS. THEY INCLUDE

  • High-skilled labor and quality of services

With a strong emphasis on efficient IT education as well as software qualifications and with the help of programming institutions, like our free Web Academies, many countries of this region demonstrate excellent technical expertise. Bulgarian IT specialists, for instance, surpass the competition in areas such as e-commerce, system integration, agile software development, computer-aided manufacturing (CAM), computer-aided design (CAD) and innovative application modernization.

  • Culture and language

software outsourcing

Quite often, language and cultural barriers become the main reason for the failure of a project. For this reason, European organizations are much easier to work and collaborate with. Multilingual capabilities (including English, German, French language skills) are more readily available in European regions rather than in Asia. The cultural alignment is further strengthened up by similar IP security requirements, EU legislation compliance and adherence to the Data Protection Act.

  • Time zones and geographical closeness

Strong economic relations between European countries and close proximity is yet another advantage of the area that frequently attracts external IT business owners. Having minimal time difference, strategic geographical location and convenient flight connectivity allows for a much quicker planning, project execution, communication and collaboration.

  • Competitive prices

Programmers in Eastern Europe usually tend to be a bit more expensive, but still they offer software outsourcing services at highly competitive rates. Cost-wise, India remains a leading software outsourcing destination but it lags behind in terms of many other key factors, such us quality workforce, strategic location and more. Relying on the combination of affordable offshoring solutions, language skills and integrity, many European countries enjoy dynamic development and large number of outside investors. At this year’s CEE Shared Services & Outsourcing Awards, which took place in Warsaw on February 1 and 2, Bratislava (the capital city of Slovakia) won the nominations for Most Dynamically Developing City. Among the winning countries was Bulgaria as well, with Plovdiv being shortlisted for emerging city of the year.

TWO IT OUTSOURCING GIANTS MEET FACE TO FACE

software outsourcing

Eastern Europe and Asia are known for being the world’s favorite destinations for offshoring services. For the last decades, countries such as India, China and Philippines have had a huge impact on the global IT and Business Process Outsourcing (BPO) market. Thus, the National Association of Software & Service Companies (NASSCOM) indicates that nearly 50% of all Fortune 500 companies outsource their business. Attracted by the large professional talent pool, freelancers and affordable labor rates, leading companies like IBM, Microsoft, AT&T, Oracle and HP choose to software development outsourcing to these macro-regions. However, even though Asian countries were the primary source of remote IT workforce in the first place, Europe (and Eastern Europe in particular) is now significantly changing pre-established outsourcing business settings and tendencies. And while India remains strong in its financial attractiveness, countries like Bulgaria, Slovakia, Ukraine, and others prevail in talent pool, language and technical skills, programming expertise, agility of work, quality, cultural and geographical closeness and more.

Bearing this in mind, which region would you choose?