Top IT outsourcing destinations: Asia, Latin America, Eastern Europe
According to expert predictions, IT outsourcing will continue to grow in the coming years. More and more companies are choosing this approach, because of cost reduction, lack of technical professionals in their countries, and the ability to focus on core business.
The location can be an important factor affecting the choice of IT outsourcing provider. Among the popular offshoring destinations are predictably Asia, Latin America, and Eastern Europe, which has recently become a new software development hot spot.
Each country’s location, business culture, cost, tech capabilities, can be less or more suitable for different customers.
So to help businesses select the most advantageous IT destination, we’ve prepared an overview of top countries to outsource software development in 2020 & beyond.
IT outsourcing in Asia
Asia still confidently dominate the outsourcing market, offering one of the lowest prices. According to 2019 A.T. Kearney GSLI countries like India, China, Malaysia, Indonesia, Vietnam have topped the index based on categories like financial attractiveness, professional skills, availability, business climate, and digital resonance.
Over the past decades, IT has been a priority to the Indian government. As a result, India remains unrivaled as a top offshoring destination, holding about 55% of global IT outsourcing share. According to Statista survey, in 2019, the Indian IT sector annual revenue reached about 180 billion U.S. dollars.
With over 4 million tech specialists, IT companies provide solutions to various industries across the globe. Among the biggest companies, outsourcing software development to India is Microsoft, Oracle, American Express, etc.
The biggest IT hubs are Bangalore (Silicon Valley of India, with headquarters of top companies), Hyderabad, Chennai, and Mumbai.
The average rate of developers varies from $18–25, which makes it one of the cheapest outsourcing destinations.
Although the low cost of development services and availability of resources, India still has some issues with digital technologies adoption, compare to US and European countries.
So it’s facing competition from smaller countries that can offer niche expertise or higher service quality that exceeds cost benefits.
The Philippines is one of the most popular outsourcing locations in Asia.
Philippine companies have established a reputation of trusted outsourcing partners providing services like customer support, data entry and software development.
Having a large number of young technical graduates who are fluent in English, the Philippines will remain one of the top tech hubs for Western companies.
Analysts predict that the value of the IT industry in this country is going to grow up to 7 billion $ by 2020.
There are about 400 software development companies, employing around 200 000 development specialists. What is important, costs for software development rank among the lowest in the world, with an average hourly rate of 20- 28$.
Except for the Philippines capital city Manila, there are also vibrant IT centers such as Cebu with its technoparks, Davao City and Sta. Rosa.
IT outsourcing in Latin America
A lot of US companies choose Latin America as its prime outsourcing destination. Among the major reasons, probably, the most significant one is a convenient location. There is no huge time difference like with Asian countries. Therefore many issues can be resolved within regular business hours. There are also no problems getting a direct flight from the States to outsourcing partners located in Mexico or Brazil.
Being one of the largest tech talent pools in the world, Brazil is a popular choice for software development outsourcing. The Brazilian IT industry employs over 500 000 specialists with a diverse range of programming skills.
The country has many successful IT providers and a thriving startup scene. World-famous companies such as Spotify, Airbnb, Netflix have offices in Brasil. Most companies in top IT hubs such as Floripa and Curitiba can rival Silicone Valley ones in terms of workspace and employee perks.
The hourly rate of developers is slightly higher than in other top outsourcing areas and can range 30 $ – 50+ $. However, due to the good cultural compatibility with U.S. companies, convenient timezone, and still cost-effectiveness, Brazil remains one of the top IT outsourcing destinations for North America.
The software industry in Mexico has more than 223,000 specialists, according to data by Stack Overflow.
The country is making great efforts in promoting the study of technical disciplines. Over the last 10 years years, Mexico opened a bunch of technology tuition-free universities.
Government and non-profit initiatives encourage to learn programming languages from a young age.
As a result, Mexico is now one of the leaders among Latin American countries in the number of STEM graduates.
Particularly, іf we look at the number of computer science graduates, Mexican universities produce nearly as many as Americans.
The average hourly rate for software development services can range from 20 to 50 U.S. dollars, which is still quite affordable compared to North American developer’s salaries.
Mexican companies are well aware of American workplace culture because the two countries are sharing a border. This fact gives Mexico an advantage among other Latin American outsourcing destination.
IT outsourcing in Eastern Europe
Eastern Europe is one of the most vibrant software development destinations. In recent years, the main Eastern European countries have been steadily increasing their IT sectors with an average of 10% growth rate annually.
As the “middle ground” in terms of software development prices between Asia and Latin America(with some exceptions), this region is known for its big talent pool (over 1 million specialists) and excellent quality. Also, the advantage is that countries like Ukraine, Poland, Romania are only 1- 4 hours of flight from the UK, France or Germany.
Ukraine is one of Europe’s leading hubs for global software development services.
There are over 1,000 Ukrainian companies, and more than 230 000 specialists, with a vast range of expertise from fintech to gaming.
Ukrainian Universities produce around 38,000 tech graduates each year. Moreover, students have an opportunity to get a degree in cutting edge technologies such as IoT or AI.
Several tech events, conferences, and training programs take place in the biggest Ukrainian cities such as Kyiv, Lviv, Dnipro, Kharkiv.
Many international companies opened their R&D centers in Ukraine. Among the biggest ones are Microsoft, Samsung Electronics, IBM, Boeing.
The average hourly rates of developers are significantly lower than in Western countries and can vary from 25 – 35 $ per hour.
Besides, the level of English, on average, is fairly good. Usually, software development companies offer free English-speaking courses to their employees.
Romania is among the fastest-growing economies in the EU. Since the country joined the European Union in 2007, many financial and legal aspects have improved.
The favorable business climate of this country attracts many foreign companies like HP, Huawei, Ericsson, Oracle.
The Romanian IT sector has a 15% annual growth rate and employs over 95,000 IT professionals. The Government is actively promoting its development through various initiatives, including tax relief.
Major Romanian cities such as Cluj-Napoca, Bucharest, and Timisoara are vibrant IT hubs, where technology specialists can attend various training sessions and conferences.
The average rate of developers is 30-40$ per hour, which is a bit higher than in Ukraine.
Still, Western companies can benefit from some of the lowest prices in Eastern Europe.
The benefits of outsourcing are obvious. In the fast-moving world, it means more than just cheaper development, but flexibility and opportunity to innovate, which helps companies to stay at the top of the competition.
There is no one ideal outsourcing location that will suit everyone since it depends on the specific business needs. However, there are many countries to choose from.
Besides selecting a suitable location, it is crucial for businesses to partner with the right outsourcing provider.
You can find a great tips on what to consider when choosing an outsourcing software development company in our blog!