Best countries to outsource software development: top 5 of 2020
Halyna Korolevska

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Halyna Korolevska

Content Manager

Best countries to outsource software development: top 5 of 2020

Category: Business
7 min read

Software development outsourcing is a good way to save money and get quality work. Starting a company and developing a product or service requires fast and efficient work. With outsourcing, this problem can be solved as quickly as possible and at optimal cost. However, there are some features and nuances that you need to consider about outsourcing in order to be truly effective. First you need to know in which countries the software development outsourcing market is best. This will allow you to find suitable specialists there in the future. The main thing is to know where to look and this article will help you in this.

Why more and more companies from the USA choose contractors to outsource software development from other countries

Software development is a process that requires careful planning and preparation, long-term work, significant financial costs and the involvement of IT specialists. With each year, the software development outsourcing is becoming increasingly popular.

According to the Deloitte’s Global Outsourcing Survey 2016, 78% of respondents say they have a positive relationship with software development outsourcing. According to Statistics Brain survey, conducted among CTO and CEOs in the United States, 43% of US companies hire software development professionals through software development outsourcing.

This survey identified nine key benefits of software development outsourcing that motivate companies to hire foreign specialists of software development. Why are companies from the USA so positive about outsourcing. There are several reasons for this.

There is an opportunity to concentrate forces on the main activity.

A company that has outsourced its non-core IT industry can focus on basic, strategically important operations. The labor resources previously involved in the information sphere are reallocated and invested in supporting the core business. Project development and implementation now takes less time, as well as the introduction of new products to the market. In conditions of high competition, it is more profitable to focus on core business than to train employees in non-core skills.

A ready-made team of professionals.

Using software development outsourcing services, concluding a contract and getting a team of specialists with experience, narrow-profile knowledge and a desire to work for the result is profitable. Maintaining your own staff of IT professionals in the United States requires large organizational and personal costs. Among the latter are salaries, taking into account social payments and insurance premiums, a social package if it is provided in the company, and bonuses. There is still vacation, sick leave and business trips. In fact, the employee costs the employer more than the size of his salary, 2-3 times.

Innovation is faster and more efficient.

In conditions of fierce competition, the question of whether to introduce innovations or not is not considered at all. The winner is the one who succeeds in doing this faster, with greater effect and lower cost. Software development outsourcing allows you to do everything as quickly and efficiently as possible.

What criteria are taken into account by companies when choosing a country for outsource software development?

The choice of IT company in outsourcing software development is affected by a number of the following factors:

1) The range of IT services provided by the company

The development of any project is a complex process that requires a comprehensive review. It includes not only writing high-quality code, but also preliminary business studies, including IT consulting, team building, ensuring and monitoring a high level of quality, risk assessment and reduction at all stages of development, as well as post-release maintenance. An outsourcing company that provides a full range of IT services can help you realize your project idea in the best possible way, offer a non-trivial solution and create a product that can take its rightful place in the market.

2) Technological expertise

Another important criterion that will help you make up your mind about software development outsource is company’s technological stack and accumulated experience, i.e. developers professional skills and development experience. Many companies have certificates confirming the level of high quality standards. Qualification (experience and education) of the supplier team is also important. See what technologies a service provider got acquainted with in already implemented projects, reviews and evaluate its achievements in terms of quality and quantity.

3) Fine-tuned communication

Transparent and timely communication with an outsourcing company is your everything. Find out how company managers and developers interact with each other, what communication tools they use, how quickly they answer questions, correct mistakes or indicate possible ways to solve a problem if they cannot immediately provide an answer.

4) Methodology and process of project implementation

A well-established IT company follows a structured and clearly defined project management methodology (for example, such as Scrum, Kanban, etc.) in order to optimize the project development process and ensure effective cooperation between the client and the service provider.

For outsourcing projects, it is especially important to ensure their quality monitoring and coordination in real time. Find out how you, as a customer, will be involved in the development process and how you can monitor the progress of your project. Ask the provider to prepare a communications plan.

5) Commercial flexibility

Reputable IT outsourcing companies use a flexible approach to project evaluation and implementation. As a rule, fixed prices are offered for documented projects with a clear action plan and clear deadlines. For projects with an uncertain work plan, flexible prices usually apply. It is especially important that the pricing of the company is as transparent as possible.

6) Contracting practice

Make sure the vendor is competent enough to properly administer the contracts. It is important that the offered agreement is in line with international standards and regulations. As a rule, experienced IT companies publish reviews of completed projects and detailed case studies on their website. Pay attention to whether the company had to conclude contracts similar to yours, study the technologies and frameworks that were used in a single project, evaluate the main partners of the company, and once again carefully study the supplier’s recommendations.

7) Linguistic and cultural compatibility

Pay attention to your supplier’s language skills and cultural compatibility. To facilitate communication and interaction, to avoid misunderstanding, choose an outsourcing service provider that has a cultural background similar to yours.

TOP 5 best countries for outsourcing software development

There are many country attractiveness ratings for software development outsourcing. Some of them are superficial, others include many factors, but few of them are complex, which make an assessment based on various aspects, parties that may concern not only the software part.

One of the most comprehensive is ATKearney GLSI, which analyzes software development outsourcing in 50 countries. The results of the study for 2019 show the continuing development of the Information technology offshoring & Business process offshoring industry. However, this study provides data on only four parameters: financial attractiveness, people's skills and accessibility, business environment and digital resonance. Based on our experience, we decided to approach the issue not only on the basis of the rating and the number of software developers, but also taking into account the growth prospects, new business projects environment, and government support. According to the results of our study, the best for software development outsourcing are India, Estonia, Poland, China and Ukraine. For these five countries, let's consider the software development outsourcing picture in the format: country - number of developers - rate - IT market growth dynamics - startup environment - state support.

Country: INDIA

Number of developers: 5.2 million

Hourly rate: $15-$25

IT market growth dynamics:

280+ Incubators / Accelerators work. Angel investments are growing and active investors increased by 20%.

The consumer Internet market in India ranks second in the world with 462 million Internet users, 80% of which are mobile.

Startup environment:

The number of new technology projects is about 4750.

7 million people graduate from colleges annually. 55% of young people prefer to work in startups, says StartupIndia.

IBM partners with 100 Indian big data and IoT startups.

Global investors such as Alibaba Group, Softbank, Sequoia and Foxconn are investing in the Indian startup ecosystem.

Among successful new business projects are: Ola Cabs, AddressHealth, Zomato, Paytm, FreshToHome, reshFreshMenu, Myra, Cure.Fit, InCred, DocTalk, Cars24, etc.

State support:

There is an initiative called “Startup India,” which promotes the growth of new enterprises and the creation of employment opportunities.

Convenient new business projects registration via the mobile application and website.

Anyone can fill out a simple form on the site and upload the necessary documents.

The creation of foundation to provide funds to startups as venture capital.

New business projects are exempt from income tax for 3 years after receiving certification from the Interagency Council (IMB).

Country: ESTONIA

Number of developers: 21 000

Hourly rate: $25-$100

IT market growth dynamics:

Government initiatives to convert all systems to electronic have made Estonia a progressive country: j

udicial system

tax system

medical care, etc.

The professionalism of the IT services sector in the supply chain, human resources and process automation continues to develop and grow.

Estonia is the European champion in the provision of public services on the Internet. It has high rates in digital skills and the use of the Internet by citizens.

Startup environment:

The startup ecosystem of Estonia is one of the most advanced and internationally integrated in Central and Eastern Europe.

Successful local new business projects: Skype, TransferWise, Pipedrive, Click & Grow, Grabcad, Cloutex, Erply, Fortumo, Lingvist, Taxify, Veriff, Jobbatical, Yanu, Scoro, etc. Microsoft, Acronis, SAP, and Parallels open R&D centers here. Here work more than 400 technology new projects, despite the fact that the country's population is only 1.3 million people.

State support:

Positive involvement of the private sector in public policy and legislation. A simplified procedure for registering new business projects, software ones including. Banks have their own innovative units and accelerators. So, together with Tallinn University of Technology, Swedbank created the Prototron project, which provides a prototyping infrastructure and support for innovative ideas.

Startup Estonia helps replenish the local new businesses ecosystem. The Ministry of Economics is helping to provide loans and guarantees for small businesses. Promoting innovation and strengthening entrepreneurial thinking in society. If a company doesn’t take its income, but reinvests it in business development, it’s exempt from paying tax on money that has been reinvested.

Country: POLAND

Number of developers: 254 000

Hourly rate: $50-$100

IT market growth dynamics:

The country's IT services market in 2018 reached $ 4.62 billion with a growth rate of 5.9%.

Local companies use the local market to adjust old products and test new ones.

International players contribute to the growth of the software development outsourcing market by placing research and development centers, as well as service centers in Poland, using the high level of qualifications of the local ICT labor market.

Startup environment:

Poland has a significant ecosystem of startups and VK. There are about 120 seed or venture funds, 70 of which are called "active volcanoes."

There are dozens of technology parks, incubators and accelerator programs. The number of working technology projects is approximately 2500 - 3000.

Among successful projects: Packhelp, Brainly, CallPage, Booksy, Brand24, Infermedica, tethoMe, AirHelp, etc.

State support:

The government supports the ecosystem with large financial injections, which provides easily accessible grants.

The Foundation for Polish Science provides modest grants to outstanding technology teams.

The Foundation Startup Poland plays the public voice role for small businesses in relation to government partners and regulators.

Startup Academy trains small business founders.

Startup Hub Poland promotes the research and development potential of the country, provides external startup pipelines, selection, as well as assessment of pre-investment risks for venture capitalists and major industry players.

Country: CHINA

Number of developers: 1,9 million.

Hourly rate: $50-$100

IT market growth dynamics:

According to the PwC report, more and more software development outsourcing companies are being created in China in order to use the country's knowledge base in the field of user interface, full-featured, mobile, corporate and gaming software.

Software developers take first and second place at the HackerRank Programming Olympics. This indicates China’s ongoing initiative to develop educational and other supporting infrastructure among its population. Which, in turn, helps to popularize information technology and software development outsourcing companies.

Startup environment:

To the most promising areas are related artificial intelligence and healthcare. The main problems of new business projects are:

capital raising, which 28% of founders consider extremely difficult, reports svb.

search for talented people with the right skills. Most of all, employees are needed in the product development / R&D department, technical and commercial departments.

According to 2018 data, China is Asia's largest venture capital market.

Since 2012, China has concentrated the largest number of unicorns in the high-tech industry. The country attracts entrepreneurs and new business projects, especially in the field of e-commerce and mobility, as well as software development outsourcing customers. Successful projects: ByteDance, Didi Chuxing, Cainiao Smart Logistics Network, Pinduoduo, Lu.com, XIAOMI.

State support:

The government has put forward a 15-year development plan for a sustainable IT economy, including software development outsourcing, which strategy is based on science, innovation and technology.

Since China became a member of the World Trade Organization in 2001, the country has effectively defended software patents and copyrights.

Main incubators and accelerators work together with universities.

The startup village Innoway, funded by the government, is surrounded by the best colleges. It has successfully incubated over 2,900 business projects.

In Shenzhen and Hong Kong, large incubators and accelerators are teaming up with industry partners such as Huawei and state-funded programs. So, promising projects and potential investors are involved in five technological clusters: green technology, electronics, biotechnology, materials science and precision engineering, ICT.

Country: UKRAINE

Country: UKRAINE

Number of developers: about 166 000

Hourly rate: $25-$50

IT market growth dynamics:

Ukraine is one of the most promising countries in Eastern Europe. It has become one of Europe's leading and fastest growing destinations for global software development services. Ukraine is one of the 20 largest exporters of software development services in the world. Over 1,000 software development outsourcing companies with 80+ employees work here. In 2017, the export of information technology grew by 20% and reached a record of $ 3.6 billion. In 2025, this figure may increase to 8.4 billion.

According to the CEE report for 2019, the country's software development sector in 2018 grew by 19% and continues to progress.

According to A.T. Kearney Global Services Location Index, Ukraine ranks 7th among the most attractive software development outsourcing countries in Europe, and 24th among the most attractive software development outsourcing countries in the world.

Ukraine ranked 20th among the leading countries in software development outsourcing business worldwide according to Statista 2019.

10 Ukrainian software development outsourcing companies were in the TOP-28 global companies according to clutch.co.

Over 100 R&D centers with 12,400 employees work here.

Startup environment:

Successful projects: TripMyDream, Petcube, Grammarly, Looksery, Augmented Pixels, Kwambio, Settle, Ring, People.ai, MacPaw, etc.

The number of current technological startups totals approximately 2,000.

Technological investments are supported by business angels, several dozen venture funds, as well as several foreign organizations, including the EBRD, USAID, and the Soros Fund.

Several local grant programs are organized by Microsoft and Cisco, work here. From an software development outsourcing service provider, Ukraine is rapidly transforming into an offshore full-cycle software developer.

State support:

Simplified tax system for the IT industry and software development outsourcing. International double tax treaties with 67 countries.

Lack of VAT payment to exporters of software development services for non-residents, due to this, Ukrainian software development outsourcing companies are able offer foreign customers competitive prices.

In 2016, Law No. 4496 was adopted, which facilitated the work of foreign clients with Ukrainian freelancers.

The state program for free higher education, including technical, allows the country to have the second largest pool of software developers in Central and Eastern Europe. High-quality technical education is provided by 390 universities and colleges. This forms the basis of Ukraine’s IT ecosystem and strengthens Ukraine as a strong player in software development outsourcing.

Annually, about 40,000 IT industry specialists graduate from Ukrainian universities. 44.6% of software developers in Ukraine speak English fluently, 37.6% speak intermediate level.

For more detailed information on software development outsourcing in Ukraine, read our detailed study.

The country is in the UTC +2 time zone, which is also quite convenient for communicating with the software development team while working on software development outsourcing. Thus, Ukraine is 7 hours ahead of the US east coast and 1-2 hours ahead of most European countries.

5 reasons why Ukraine - best country to outsource software development

Affordable cost of software development

For customers from the United States or Western Europe, Ukrainian prices still remain very attractive. By transferring all of its “production capacities” in the IT sector to Ukraine, Western companies can reduce their costs by 40-60%. In general, there are several key recruitment models:

You can describe the idea of ​​a project for an outsourcing company. They will draw up the project specification, and then create the project from scratch on a turn-key basis. If your team lacks several specialists, they can be "rented" in such a company for a certain period of time. Such employees may even work exclusively on your project, but you won’t have to hire them for a few months.

Another option is to open an entire office in Ukraine: with a project manager, developers, designers, testers, business analysts, HR managers, and accounting. The latter option can save a large amount of money for an American company: the cost of maintaining an office in Ukraine is about $500 per month, and in San Francisco - $10,000.

High level of competence

Every major city in Ukraine has technical universities, more and more young people choose technical specialties. Ukraine ranks third in the world in the number of people with higher education, second in the number of holders of a master's degree, and fourth in the world in the number of certified IT specialists. Ukrainian developers show high results in the global online competitions for IT professionals, in which 11 million people from 50 countries participate. 56 Ukrainians were the first in individual disciplines in different programming languages, web frameworks, working with databases and graphics.

Large number of IT specialists

Every year, tens of thousands of engineers leave universities, of which 16,000 are IT professionals. Almost 60% of such specialists work in outsourcing companies. In 2020, an increase in the number of IT professionals is expected to reach 200,000.

Convenient time zone

The time zone of Ukraine is GMT + 2. It is very convenient for Europe - the working hours are the same. And even for companies from America, Ukraine is the best choice compared to the time zones of Russia, India or China.

A large number of IT startups in Ukraine

Currently, Ukraine has seen a rapid increase in the number of IT startups. This indicates a developed IT infrastructure and the presence of good specialists in the field. The USA even considers Ukraine as one of the key R&D partners.

As you can see, of our five best countries for software development outsourcing, Ukraine occupies a favorable position in terms of financial attractiveness and quality of software development outsourcing. With a highly educated workforce, it has always been strong in software development. In addition, Ukraine has a constantly evolving IT infrastructure with a rapidly growing innovation ecosystem. The country has an extensive staffing potential in the IT sector, which continues to grow, as well as high-quality technical education. This also confirms the fact that 18 Ukrainian software development outsourcing companies were included in the hundred of the world best software development outsourcing IT companies in 2018. If you are guided by the rule of the golden mean in decision-making, then Ukraine is what you should choose.