Top-5 Countries for Offshore Software Development

Top-5 Countries for Offshore Software Development

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 through offshoring is becoming increasingly popular.

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

This survey identified nine key benefits of offshoring that motivate companies to hire foreign specialists of software development.

There are many country attractiveness ratings for offshore software development. 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 offshoring 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 offshore software development are India, Estonia, Poland, China and Ukraine. For these five countries, let's consider the offshore 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:
  • judicial 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 offshore software development 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 offshore software development 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 offshore software development 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 offshore software development 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 offshore software development, 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 offshore software development 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 offshore countries in Europe, and 24th among the most attractive offshore countries in the world.
  • Ukraine ranked 20th among the leading countries in offshore business worldwide according to Statista 2019.
  • 10 Ukrainian offshore software development 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 offshoring service provider, Ukraine is rapidly transforming into an offshore full-cycle software developer.

State support:

  • Simplified tax system for the IT industry and offshore software development.
  • International double tax treaties with 67 countries.
  • Lack of VAT payment to exporters of software development services for non-residents, due to this, Ukrainian offshore companies are able offer foreign customers competitive prices for offshore software development.
  • 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 offshore software development.
  • 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 offshoring software development 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 offshoring. Thus, Ukraine is 7 hours ahead of the US east coast and 1-2 hours ahead of most European countries.

As you can see, of our five best countries for offshore software development, Ukraine occupies a favorable position in terms of financial attractiveness and quality of offshore software development. 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 offshore software development companies were included in the hundred of the world best offshore 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.

 Halyna Korolevska, Content Manager

Halyna Korolevska

Content Manager

Halyna is a content manager and business analyst in MassMedia Group software development company.
She is an expert in business automation and creative writing.