Eastern Europe is swiftly rising to prominence in the software development outsourcing sector. This ascendance is marked not only by its combination of cost-effectiveness and 1.3 million unparalleled talent but also by the attention it’s receiving from major companies.
Tech giants such as Google, Apple, Microsoft, and successful startups like Spotify and Slack have recognized the potential and established developer teams in the region. And what is the key to the successful establishment of a software development team in Eastern Europe?
At Alcor, we specialize in IT recruitment in EE and Latin America, concentrating primarily on middle, senior, and C-level positions. We cater to IT product companies eager to hire talent from countries like Poland, Romania, and other parts of Eastern Europe. Our commitment to bridging talent needs has positioned us as a go-to for organizations keen on leveraging the region’s tech expertise.
For a more comprehensive insight into IT outsourcing to Eastern Europe, read this article that provides a deeper dive into the region’s growing significance.
Eastern Europe: The Undisputed IT Outsourcing Hub
Projected global IT spending is set to reach an astonishing $4.5 trillion by 2023, as per Gartner’s recent forecast. This elevates the importance for businesses to derive maximum value from every penny spent. Validating this trend, 60% of technology companies are turning towards outsourcing partners for a certain portion of their software development needs.
While India and China have been historical leaders in IT outsourcing, there’s a notable drift towards Eastern Europe. This is driven by various factors, chief among them being the pressing concerns over Intellectual Property Rights in countries like China, accompanied by communication barriers and significant time differences. According to a comprehensive study, the Eastern European IT industry is set to grow annually by 7.84%, reaching an impressive $15.70bn by 2027.
Several factors contribute to this shift:
- Quality Over Quantity: Eastern Europe is gaining traction due to its emphasis on quality, ensuring that projects aren’t just completed but stand out in a competitive global market.
- Cultural and Temporal Proximity: Eastern Europe’s closeness to Western European and North American markets means fewer time zone issues and cultural barriers. This streamlines communication and ensures smoother project executions.
- Educated Workforce: Having over 300 higher education institutions that provide STEM programs (most of which are among the QS World University Rankings 2023), the region has plenty of highly qualified software developers.
But, what are the most significant software development trends in EE?
A Flourishing IT Landscape in Eastern Europe
Eastern Europe, encompassing nations such as Poland, Romania, Ukraine, Czech Republic, Hungary, Slovakia, Bulgaria, and Estonia, is swiftly emerging as a heavyweight in the international IT arena. The region’s allure is grounded in a blend of advantageous tax regimes, burgeoning IT advancements, and a vast reservoir of adept professionals. Initiatives from governments, like backing for startups and the proliferation of tech parks and innovation centers, amplify this attraction, spotlighting Eastern Europe as a potential IT powerhouse.
However, it’s the region’s multifaceted technical prowess that truly differentiates it. Poland, for example, is distinguished for its expertise in languages like JavaScript, Java, Python, and TypeScript. Romania excels with skills in PHP, C#, Java, and C++. The Czech Republic showcases deep knowledge in areas such as JavaScript, Java, PHP, and C#. Neighbouring countries like Hungary and Slovakia further enrich the tech tapestry, with commendable skills in areas spanning JavaScript, HTML/CSS, Python, Java, and PHP.
Understanding the Tax Landscape: Poland, Romania, Bulgaria, and Ukraine
Bulgaria stands out with its straightforward tax system. Both corporate and personal income taxes are set at a uniform rate of 10%. This simplicity is attractive to many businesses and professionals looking for clarity in fiscal matters.
Poland presents a more nuanced tax structure. CIT is typically 19%, but a reduced rate of 9% is available for smaller entities, barring certain exceptions. Individuals, on the other hand, pay 12% for income up to PLN 120,000. Beyond this threshold, they’re taxed at 32%. Additionally, high earners with an income surpassing PLN 1 million face a solidarity surcharge of 4%.
In Romania, companies face a corporate tax of 16%, while individuals are charged a 10% personal income tax. Ukraine, meanwhile, sets its corporate tax at 18%. The personal income tax is relatively low, standing at 5% for the majority, though there are specific exceptions to this rate.
Prioritizing Cybersecurity in Outsourcing
In an age where data breaches and cyber threats loom large, outsourcing shouldn’t be just about getting the job done but also about ensuring it’s done securely. However, IT outsourcing does not always let businesses reach complete security. There are cases when clients risk or even lose their intellectual property rights if they don’t sign an IT rights transfer agreement with their IT outsourcing firm. If they cooperate with IT recruitment or R&D providers, though, this never happens. Meanwhile, Eastern Europe, with its strong emphasis on IT education and rigorous data protection laws (GDPR), ensures that businesses aren’t just given quality work but also the peace of mind that their data remains secure.
The Talent Over Cost Paradigm
Although affordability is a compelling consideration, the genuine essence of value is in work quality. In the corporate realm, there’s an escalating recognition that, while trimming expenses is advantageous, skimping on talent could have long-term repercussions. This mindset is evident in Eastern Europe’s recruitment strategies, emphasizing the skills and versatility of professionals over mere hourly compensation.
Moreover, IT recruitment & R&D services companies like Alcor are setting the gold standard in IT recruitment services. Prioritizing talent ensures a symbiotic relationship where businesses get top-tier solutions, and developers get a conducive environment that nurtures their skills.
Such vendors offer IT businesses access to pre-vetted talents with their guarantee of quick and efficient hiring. Plus, software developers hired via such agencies go through a pre-screening interview stage, which boosts the overall quality of candidates. Such practices ensure businesses stay ahead of technological advances and market demands.
Navigating the IT Talent Retention Challenge
The global IT landscape isn’t just grappling with the complexities of outsourcing; it’s contending with a deeper issue of employee retention. As highlighted by a recent Gartner survey, a mere 29% of IT professionals express a solid intention to stick with their current roles. In the outsourcing model, frequent project shifts can sometimes make developers feel detached, leading to a decreased perception of value in their work. This transience often prompts them to seek new job opportunities.
Conversely, product-based companies tend to have a different dynamic. Here, developers aren’t just part of the solution-making process but are integral to business growth. Their roles and contributions directly influence their career trajectories and earnings. This sense of purpose and alignment with the company’s growth often translates to higher job satisfaction and longer tenure.