The information technology market shows an increased demand for software products, mobile and cloud applications. The volume of the IT outsourcing market exceeded the forecasted $3.7 trillion last year. To meet the growing demand, companies are looking for markets with companies offering the best quality IT services while minimizing financial expenses. Under such circumstances, companies have to choose between the best countries producing software products.
It is difficult to make the right choice because the global potential is scattered across five global areas operating in conditions of a rigid market. Here is the result of our global IT outsourcing market analysis, based on the research of reputable global analytical agencies. Using the generally accepted methodology, we have identified five major global markets for IT outsourcing and will focus your attention on countries in each region with the highest level of software developers.
Please note that the average outsourcing values can be increased due to additional fees. In each specific case, the cost of a developer’s work depends on their qualifications and the task complexity, therefore it can vary.
Eastern European software developers confidently occupy their niche in the field of IT outsourcing. Let’s look at the conditions of IT outsourcing in each of the countries of Eastern Europe that deserve attention.
This country rightly claims to be a leader in the Eastern European region according to all criteria important for an IT outsourcing customer:
- The service costs $25-40, average within the region. Ukrainian software developers are no worse than their North American colleagues in terms of creativity and quality, as well as managerial professionalism. Ukraine is of particular interest due to the plenty of highly educated skilled specialists, while the competition determines a low price range. Over 170,000 specialists in total are employed in the Ukrainian IT industry.
- The level of education of Ukrainian developers is one of the highest in the region – 57% of specialists have STEM degrees, most of them are fluent in English.
- The government is taking active steps in fighting corruption and improving the economic situation with the support of the International Monetary Fund. This makes Ukraine more and more attractive in terms of stability and business security.
The attractiveness of the Ukrainian IT outsourcing market is growing even despite the fact that in search of better conditions some companies are opening offices in the United States.
The small Eastern European state has more than half a century of high-tech development experience.
The IT specialists offer attractive prices of $20 to $40 per hour. More than half of 40,000 Belarusian IT specialists are employed in the outsourcing industry.
Belarus takes 57th place in the UN ranking by the level of education. Thousands of Belarusian university graduates annually add to the pool of the forty-thousand IT professionals.
The government recognizes the contribution of information technology to the economy and strongly supports the IT industry, providing tax relief.
European companies regard Poland as one of the main Central European candidates for leadership in outsourcing.
The cost of a Polish IT specialist’s work is one of the highest among the countries of Eastern Europe and reaches $99 per hour. The outsourcing industry employs 250,000 professionals, most of them work in Warsaw or Krakow.
The high level of English attracts customers. Moreover, Poland is a member of the European Union, which guarantees stability and security for outsourcing customers.
If you are looking for the lowest prices for outsourcing, Romania is not the best option. In 2019, the country has been showing steady growth in the technology services industry, and the outsourcing is characterized by excellent quality.
According to various estimates, IT companies in Romania employ up to 300,000 specialists with all the popular programming language skills. This is around 20% of people across all the countries to outsource software development in Central Europe. An hour of work of such a specialist costs $25 – $99.
The high-level qualification of software developers and fluency in English are a plus.
The government supports the IT industry, and the numerous offices of international companies such as IBM, Microsoft and Dell prove it. Romania is a member of the European Union, meeting international standards in the information technology field.
The location in the center of Europe is convenient for all European companies. The Hungarian IT industry employs more than 100,000 professionals, with software development being the fastest growing niche. Higher education institutions annually graduate about 6,000 digital technology professionals who find jobs while still learning. IT technologies account for 10% of Hungarian GDP.
The cost of a developer’s work is around the same level as Poland. A stable economic situation, competitive prices, and high-quality software products attract European customers.
Czech IT outsourcers, along with Israeli ones, are traditionally considered one of the most powerful in the world. Today, the Czech IT industry is comparable to the Ukrainian one. A high level of skills at a very reasonable competitive price attracts European software customers. The Czech Republic houses offices of IBM, NetSuite, Honeywell and Google, which proves the experience of local IT specialists.
Across Central and Easter Europe, Poland’s outsourcing is the most expensive. Ukrainian, Bulgarian, Belarusian and Romanian developers offer lower costs. The lowest prices are in Moldova, where an hour of specialist work is around $20-25.
The high quality of skills comes from the Soviet Union’s technical education system. Best countries to IT outsourcing are members of the European Union, which guarantees relevant standards, and Ukraine, which is generally known as the most popular IT outsourcing destination in Europe.
For the most part, IT outsourcing market specialists speak English, which ensures a comfortable level of communication between developers and software customers.
The IT outsourcing market in the US and Canada is growing rapidly. From 2012 to 2016, the market grew by 63%.
Despite the fact that the US is the largest global consumer of digital technology outsourcing, American IT companies are actively selling their services around the world. US developers are the highest-paid. The average salary of a specialist in 2018 was $87,333 with an hourly rate of up to $300.
Companies from developing countries with a lack of specialists are ready to pay huge amounts of money to American outsourcers for the guaranteed excellent quality of high-tech developments. Therefore, there is a consistently high annual increase in the number of jobs in the United States IT industry. It is important to note that the outsourcing value is not dropping since the number of highly qualified American specialists is still lacking.
When hiring an American outsourcer, be prepared for the business environment to be difficult for a foreigner due to federal laws. This is particularly true for high-tech products prohibited from exporting. For example, some countries cannot sell encrypted software. Therefore, before engaging in IT outsourcing in the United States, better consult with lawyers, otherwise you risk paying for a product that you cannot use in your country.
Canada provides more comfortable conditions for IT outsourcing than the United States. The hourly rate of a Canadian software developer is $50 – $200 depending on the complexity of the product. Geographical proximity, shared language, a similar mentality – all this makes Canada very attractive for American customers of digital technologies.
You will not find low-budget outsourcing for your startup in the USA or Canada. Unless you trust a developer who just graduated and does not have practical experience in the IT industry.
India, China and the Philippines are the top software development countries in this region.
India is a leading exporter of outsourcing services in the world today; its share in the global IT and BPO (business process outsourcing) market exceeds 50%. This activity brings the country $47 billion annually.
It seems unbelievable, but 60% of Indian outsourcing clients are American companies and 30% are European corporations engaging in high-tech, finance, telecom industry, retail, and manufacturing. About 2.5 million Indians are employed in the provision of similar highly demanded services.
Offshore outsourcing has been developing in India since the 80s, it’s been gaining momentum, encouraged by the information technology boom in the mid-90s. Western companies transferred their production to India to reduce expenses during the recent economic downturn. India is again helping them to make a “breakthrough” in the years of recovery.
So what is the reason that a former colony, a country with the highest level of poverty, turned out to be so attractive for many leading companies from first world countries? First of all, it’s low-paid work and services of Indian specialists: the average American salary exceeds the salary of Indians by 5 or even 10 times. Given that companies spend major costs on salaries, saving on wage differences is a significant source to reduce expenses.
The average annual salary of an Indian young specialist is $5-9k per year. Well-known web and software developers with 10-20 years experience get about 1/3 of the average salary of a Western specialist of that level – $17-40k a year.
However, India is leading among outsourcing service providers due to its huge staff potential: 500 million specialists! At the same time, the country’s universities annually raise 3 million graduates, 16% of them are specialists in science and modern technology. Of course, different Indian universities have different levels, but the Indian University of Technology is highly respected throughout the world, training highly qualified staff.
The Philippines are famous for quality higher education. According to statistical information, the literacy rate in the Philippines is 92.6%. The average age of the population is 22.9 years. Many specialists have practically no work experience, but they are ready to learn a lot and work hard.
The Philippines are the cheapest outsourcing option so far. The minimum salary in the country is $10 per day. Recent studies show Filipino outsourcing is 37% cheaper than Indian on average.
Right now, not many Filipinos are looking for work in outsourcing, prioritizing call centers. But today’s surveys show that 46% of IT graduates and working professionals choose outsourcing companies.
The development and promotion of outsourcing in the Philippines is not a new trend. Gradually, outsourcing is making an increasing contribution to creating more jobs in the country and significantly affects the GDP each year, so the government is focusing on the development and reliability of outsourcing in the country. Only in 2011, outsourcing provided 610,000 new workplaces.
Between 2006 and 2016, the number of Chinese outsourcing companies rose from 400 to 40,000. At the same time, the gross income increased from $1.38 billion to $106.46 billion. However, these are the statistics on the entire outsourcing market, not only the IT segment. But the government’s intentions to turn China into a world leader in IT outsourcing are bothering the competitors, especially India.
The value of specialist services depends on the level of task difficulty. The hourly rate usually does not exceed $50, but the services of a highly qualified developer can cost $100.
The Chinese IT outsourcing market has practically no protection of intellectual property. This means that your innovations are likely to be used, moreover, they will be used for free. On the bright side, the government is extremely interested in the development of the IT industry and supports software developers with tax benefits.
The quality of IT outsourcing in India cannot be doubted. As for the Philippines and China, these countries have some nuances.
Near Eastern IT companies are focused on the internal market, and Israel is the only country to actively develop the outsourcing industry. The government is taking effective measures to stimulate technology startups. As a result, the Israeli economy has grown by 100% since 2006.
More than half of young people in the country are getting higher education. There is a state program aimed at increasing the number of specialists with a STEM degree, resulting in global innovation leadership.
Depending on the complexity of the project, Israeli software developers charge $25-60 per hour.
Israel IT outsourcing guarantees high-quality software product development at quite reasonable prices.
American companies choose outsourcing due to the coincidence of working hours and geographical proximity.
In 2019, Argentina took 10th place in TOP countries to IT outsourcing. The country has over 120,000 software developers, many are working in the outsourcing industry. The highest level of English in Latin America attracts customers.
Despite the economic instability, the IT outsourcing market looks quite attractive.
According to BRASCOM, 8520 IT companies were registered in Brazil at the beginning of 2012. About a quarter of them focused directly on software development and services. The remaining are engaged in the commercialization of third-party products. More than 97% of Brazilian software development and manufacturing companies are small enterprises.
The total number of employees in the IT sector according to the national association is 1,200 thousand people, of which 400 thousand work directly in IT companies. The software developer’s hourly value is the same as in Argentina.
Brazil has a rather complicated taxation. However, competitive prices and good quality software products make IT outsourcing attractive.
Over the past few years, this country has kept the position of one of the world leaders in IT outsourcing. The income of the Mexican IT industry reached $16 billion with a growth rate of about 14%.
Today Mexico is the fourth word`s largest exporter of IT services after India, Philippines, and China.
With a population of 113 million people, the country has 2,500 companies operating in the information technology field, providing jobs for 600-725 thousand people by different sources, that is, 530-641 IT specialist per 100 thousand residents (for comparison, in Belarus, this figure ranges from 158 to 263, by various sources). The annual growth of specialists is 65 thousand people a year, and they are always lacking.
The price of software developer services ranges from $25 to $99.
Latin American IT outsourcers are of most interest to North American companies due to geographical proximity and competitive prices.
There is no single criterion for choosing the best IT outsourcing destination. You should make the decision after analyzing the costs, the location, qualifications, and technical capabilities, the political and economic situation in the country of a software developer.