Eastern Europe Software Development Outsourcing: Is It a Good Idea in 2021?

The article was originally published on Ascendix Tech' blog.

Eastern Europe software development outsourcing has become a strong market rival for most top outsourcing locations like the Philippines, India, and Argentina.

There are lots of reasons like a mind-boggling IT ecosystem growth, reasonable rates, a large talent pool, high English proficiency level, suitable time overlapping, and solid technical background.

However, this also complicates the understanding of the key Eastern Europe software development locations, their differences, benefits, drawbacks, and factors that should impact your final decision on what outsourcing company to choose.

All these issues motivated us to prepare and share an overlook of the outsourcing IT Eastern Europe market with the key numbers, statistics, average developer hourly rates, and current trends in 2021.

Lets get started with the market overview of outsourcing in Europe.

Outsourcing in Europe: Market Overview 2021

As weve already stated, the current Eastern Europe software development outsourcing market is booming and growing at a mind-blowing pace.

Before we start looking through the statistics and numbers, its worth mentioning that weve chosen Ukraine, Poland, Belarus, and Romania as the key Eastern Europe software outsourcing locations.

Ukraine

Ukraine is among the leading Eastern Europe software development outsourcing countries building world-class software products for the following locations:

• The US companies make up to 50% of software development requests

• Great Britain companies make up to 30%

• Western European countries (NL, LU, CH, AU, BE, NO, SE, DN, etc.) make up to 20%.

According to IT Ukraine Association Report 2021, the IT industry in Ukraine has overpassed $5 bln in 2020 compared to $4,1 bln in 2019.

Below you can see the Ukrainian IT Market overlook, 2016-2025 (estimated).

Among the core benefits of IT outsourcing to Ukraine is the ever-growing number of technical specialists and tech graduates yearly providing a large talent pool.

Beetroots 2021 Report states that Ukraine has overpassed 200,000 IT specialists and 36,000 tech graduates in 2021.

So, Eastern Europe software development outsourcing to Ukraine is a great option for your business to surely find an experienced team of tech specialists with the technical background required to transform your project idea into a top-tier technology solution.

Right here you can review the core numbers about the Ukrainian IT market.

Also, Ukraine offers a high price-quality relationship through providing reasonable rates and wide range of IT professionals.

For instance, $25-$50 are the average Ukraine outsourcing rates while $55-$150 are the average US rates for the same technical expertise.

PayScale states that the average software developer salary in Ukraine is about $2,250 while US-based IT professionals get paid $4,500 per month in average.

The below chart vividly demonstrates the median IT salary in Ukraine by seniority level in USD.

Apart from affordable financial conditions, Ukraine has become a popular R&D hub for world-class companies that have set up their offices in Kyiv, Kharkiv, Odesa, Lviv, and Dnepr.

Below you can see the list of the world-known companies with R&D offices in Ukraine.

Besides, Ukraine has become an investment-intensive tech location for many startups and product-first companies.

The leading Ukraine-based tech startups with successful stories are GitLab, Grammarly, People.ai, Reface, and Restream. Right here you can look through their acquired funds during the last investment rounds.

Poland

Poland has become one of the most popular Eastern Europe software development outsourcing locations offering 430,000 IT professionals and approximately 30,000 tech graduates in 2021.

Considering the Polish IT market growth, it was valued at $4.65 bln in 2019 and it only tends to grow. Statista predicts reaching the level of $12.4 bln in 2021 including IT services, software development, and IT equipment.

Interestingly, only 34% of half a million IT experts work for the Poland-based IT companies while other 66% are employed by foreign companies.

NoFluttJobs Research 2020 states that the median IT salaries by seniority level in Poland is the following:

• Junior: $1,000-$1,800

• Middle: $2,400-$3,700

• Senior: $4,200-$5,300.

Eastern Europe software development outsourcing to Poland has become a great choice for such world-known companies as:

• Dell EMC
• HP Inc
• Lenovo
• Microsoft
• IBM Polska
• Intel
• Apple
• Cisco
• Oracle
• Google.

Besides, many top-tier corporations have invested significant funds into the Polish IT market growth during the last several years.

Finally, the leading Polish product-first companies and tech startups are DocPlanner, Brainly, Booksy, Kontakt.io, SALESmanago, and Synerise.

Below you can see some of their market values, raised funds, and current market valuations:

Romania

Romania is an emerging dark horse among the Eastern Europe software development outsourcing locations providing 120,000 tech specialists in 2021.

The country has significantly invested in and grown its IT industry for the recent years due to high quality of technical education, powerful communication capabilities, affordable rates, and rapid-growing IT ecosystem.

Romania Insider stated that the IT industry market overpassed $7 bln in 2019 with a capital distribution of 27% to 73% on behalf of foreign investments.

Despite the positive trends, Romania needs to provide 300,000 more tech specialists to meet the current IT market demand and fill in the vacancies according to OfficeRentInfo.

Considering the average hourly developer rates, Romanian tech companies mostly charge $25-$49/h along with top vendors charging over $50/h.

According to IT Outsourcing Review, the Romanian median IT salaries by seniority level are as follows:

• Junior: ~ $1045/month

• Middle: ~ $1815/month

• Senior: ~ $2750/month.

Even though the Romanian IT industry is too small to compete with Poland and Ukraine, Eastern Europe software development outsourcing to Romania still offers such advantages as a multilingual nature.

Precisely, 17% of IT specialists have upper-intermediate proficiency level of English, over 10% speak Hungarian and French fluently, approximately 5% have strong skills in Italian, and about 3% know German.

Besides, Romania offers beneficial legal restrictions including:

• No profit tax for reinvested profit in new technological equipment

• No income tax for employees working as software developers and hired in R&D labs

• No income tax for R&D companies during the first 10 years.

Considering the startup ecosystem growth, Romania is featured as the #45 in the Global Startup Rankings with the following numbers:

• 1,500+ startups, VCs, and business angels

• 100+ accelerators and incubators

• 100+ active investors network.

Lets now briefly discuss the top Romania-based tech startups and their funding:

Belarus

Belarus has become a long-held Eastern Europe software development outsourcing location with more than 55,000 tech specialists and >300 IT companies.

The State of European Tech 2019 states that the Belarussian IT services export reached the level fo $3.1 bln in 2019 compared to $4.5 bln in Ukraine.

The IT Outsourcing Review provides the following average software developer salaries by seniority level:

• Junior: $900

• Middle: $1,700

• Senior: $2,600

• Team Lead: $3,600.

Apart from reasonable rates, Belarus has one of the worlds highest literacy levels with 91% global aveage among the youngest generations by UNICEF.

This means that most software engineers and tech specialists from Belarus are highly educated having 2 HE universities included in the QS World University Rankings 2020.

Lots of world-class companies are outsourcing software development to Eastern Europe and Belarus by establishing R&D offices there.

Specifically, Viber, Fitbit, IHS, Playtika, Yandex, and WorkFusion are among the top-tier companies investing much funds in Belarus IT outsourcing.

Lets now look through the Belarus-based product-first companies and tech startups:

Besides, many world-class companies have been actively investing in Belarus IT outsourcing by acquiring local Belarus-based startups:

• Facebook acquired Masquerade for $1 mln in 2016.
• Google bought AI Matter, a Belarussian AI startup, in 2017
• Microsoft invested an undisclosed amount into PandaDoc, a Belarussian document automation startup, in 2017.

Its worth mentioning, that political situation in 2020 forced over 2,000 software developers and over 50 IT companies to relocate to Ukraine and continue their operating activities due to the Internet connection restrictions and an unattractive investment environment.

Final Words

We hope our Eastern Europe software development outsourcing overlook will help you get a better understanding of the current market conditions, each country's statistics, and the reasons of becoming one of the most profitable business practice in 2021.

If you want to learn more details and statistics, check the full blog post Eastern Europe Software Development Outsourcing Overlook in 2021.