Outsourcing software development to Eastern Europe: how to choose the right IT company?

In the fast-paced world of technology, outsourcing to Eastern Europe has become a popular strategy for companies to stay competitive and reduce costs.

According to a report by Statista, the global IT outsourcing market was valued at $92.5 billion in 2019 and is expected to reach $587.3 billion by 2027:

Eastern Europe, with its highly skilled workforce, competitive pricing, and favorable time zone difference, has emerged as a top destination for outsourcing software development.

However, choosing the location for Eastern Europe software outsourcing can be a daunting task. And this guide will help you make an informed decision!

We are going to explore the key benefits and challenges of outsourcing software development to Eastern Europe, the top countries for outsourcing, which country stands out as the most preferred destination, and how to choose the right outsourcing partner.

So without further ado, let's get started!

5 Reasons to Outsource Software Development in Eastern Europe

When it comes to outsourcing, Eastern Europe has emerged as a top destination for companies looking for high-quality software development services at a competitive price point. But there are more reasons why you should be outsourcing Eastern Europe.

To take a deeper dive into it, here are five reasons why outsourcing software development to Eastern Europe makes sense:

1. Highly skilled workforce

Eastern Europe has a reputation for producing some of the world's most skilled and talented software developers. 

Countries such as Ukraine, Poland, and Hungary have a strong tradition of excellence in science, engineering, and mathematics, and their education systems produce a large pool of highly skilled IT professionals. In fact, according to the European Commission, almost 50% of IT graduates in Europe come from Eastern Europe.

2. Favorable time zone

The time zone difference between Eastern Europe and the United States is generally favorable for companies looking to outsource software development. This means that companies can work with teams in Eastern Europe during their normal business hours, providing more flexibility and faster turnaround times for projects. 

The time zone difference also makes it easier to manage projects and collaborate with remote teams, as there is less overlap in work hours and fewer scheduling conflicts.

3. Quality services

A common misconception about outsourcing in Eastern Europe is that low prices mean low quality of service. However, it's exactly the opposite. The combination of a skilled workforce, strict security protocols, competitive pricing, and favorable time zone difference leads to high-quality results. This is why leading companies like Google, Microsoft, Gameloft, and more turn to the region for IT services.

Many top software companies in Europe have experience working with international clients and have a strong focus on delivering quality results. They use the latest technologies and methodologies to ensure that projects are delivered on time and to the highest standard.

4. Cultural compatibility

Eastern European outsourcing has strong cultural compatibility with Western Europe and the United States, making it easier for companies to work with teams in the region. 

Many professionals in Eastern Europe are fluent in English, and they are familiar with Western business practices and cultures. This means that companies can expect clear communication, transparency, and collaboration when working with teams in Eastern Europe.

5. Innovation and creativity

Eastern Europe has a thriving technology industry, with many innovative startups and established companies developing cutting-edge solutions. 

This culture of innovation and creativity translates into a workforce that is constantly pushing the boundaries of what is possible in software development. 

Outsourcing Eastern Europe software development means that companies can access this culture of innovation and benefit from the creativity and expertise of the region's IT professionals.

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Key benefits of outsourcing software development to Eastern Europe

While there are reasons, there are also some benefits of outsourcing east European companies that you might not find anywhere else. Here are some of the best benefits you can ask for!

Dynamic IT community

Eastern Europe boasts a highly skilled workforce with a strong focus on technology and engineering. Many countries in Eastern Europe, such as Ukraine and Poland, have a long history of developing software and IT services, which has led to the growth of a dynamic IT community. 

This community is supported by a range of top-tier universities, which produce highly skilled graduates in computer science and related fields. The presence of a strong IT community means that companies can easily find specialized skills and talent for their projects.

Strict security protocols

With the rise of cyber threats, data security has become a top priority for companies. Eastern Europe has a reputation for being one of the most secure regions for outsourcing software development. East European countries have stringent data protection laws and regulations, which are enforced by their governments.

In addition, any software development company in Eastern Europe adheres to international security standards such as ISO 27001, which ensures that the information security management system is robust and secure.

Competitive business terms 

Eastern Europe offers competitive pricing compared to other outsourcing destinations such as India and China. The cost of living in Eastern Europe is lower than in Western Europe and the United States, which means that the cost of hiring highly skilled software developers is relatively low. 

In addition, many software development companies in Eastern Europe offer flexible business terms, which can be customized to suit the needs of individual clients. This includes fixed pricing, time and material-based pricing, and other engagement models.

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Main challenges of IT outsourcing  

It's obvious that one can never find the same industry regulations, work timing, and expertise everywhere, and the same applies to Eastern Europe. While some regions are already leading the IT scene, there are still some challenges you might face depending on the location you outsource from.

It's important to understand that these challenges depend on geographical location more than the industry itself!

Here are some of the major challenges companies often face when outsourcing to Eastern Europe:

• Complicated tax collection processes: each eastern European country has its own tax collection processes and regulations. This can make it difficult for companies to navigate the tax system and comply with local laws. It's important to work with a reputable outsourcing partner that has a thorough understanding of local tax laws and can help guide you through the process.

• Huge gap in time zones: while the time zone difference in Eastern Europe is favorable for many Western countries, it can still present a challenge for some companies. If the outsourcing partner is located several hours ahead or behind, it can make it difficult to collaborate in real-time. This can be particularly challenging if there are urgent issues that need to be addressed.

• Less visibility on progress: when outsourcing software development, companies are essentially entrusting a third-party to deliver a high-quality product. This can be challenging for some companies, as they may feel like they have less control over the project.

• ‍Asynchronous collaboration: with too much time gap, asynchronous collaboration can also present a challenge when outsourcing to Eastern Europe. If the outsourcing partner is working in a different time zone, it can be difficult to communicate and collaborate effectively. This can lead to delays in decision-making and can slow down the project timeline. To mitigate this, it's important to establish clear communication channels and project management processes.

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TOP 5 countries for outsourcing to Eastern Europe

1. Ukraine  

Ukraine has emerged as a leading outsourcing destination in recent years, thanks to its highly skilled IT workforce, competitive labor costs, and favorable business environment. 

The country is home to over 200,000 IT specialists, with many of them holding degrees from top universities. Ukraine's IT sector is growing rapidly, with an estimated annual growth rate of 20%. 

The country has a favorable tax regime, a flexible labor market, and a pro-business government. The most popular outsourcing services in Ukraine are software development, IT consulting, and customer support.

2. Poland 

Poland is another popular outsourcing destination in Eastern Europe, thanks to its well-developed infrastructure, highly skilled workforce, and competitive labor costs.

The IT industry in Poland is booming with new start-ups and innovative technologies. Plus, the people there are always eager to try new solutions and help develop them. There are also more and more young people choosing IT education, which means there's an increasing number of talented developers available for work. It's no wonder many companies choose to outsource their IT projects to specialists in Poland!

The country is home to over 250,000 IT specialists, many of whom are fluent in English and other European languages. Poland's IT sector is growing rapidly, with an estimated annual growth rate of 12%.

3. Slovakia 

While Slovakia is a small country, it offers a highly educated and skilled workforce, making it an attractive destination for outsourcing. Yet, the Slovak government puts a lot of effort into making sure their education system is top-notch.

They have 6 national universities with 7 ICT faculties, which produce about 3,000 tech graduates every year.  What's more interesting is that the education system in Slovakia follows a dual framework, which means that domestic IT companies and technical institutions work closely together. This helps ensure that Slovak graduates have an exceptional level of tech knowledge.

The country has a favorable business environment, low taxes, and a flexible labor market. Slovakia's IT sector is growing rapidly, with an estimated annual growth rate of 10%.

4. Hungary 

Hungary is another popular outsourcing destination in Eastern Europe, with a highly skilled workforce and a favorable business environment. 

The business culture in Hungary is heavily influenced by Western European values. They value documentation and formalities over personal relationships, prioritize tax payment transparency, and respect human rights. 

Just keep in mind that some Hungarians may not be as fluent in English as other European professionals, so there may be a language barrier in more complex conversations.

The country is home to over 70,000 IT specialists, with many of them holding degrees from top universities. Hungary's IT sector is growing rapidly, with an estimated annual growth rate of 8%.

5. Serbia 

Have you heard the saying "Serbia creates opportunities"? It's being used and promoted not just by the media but by the global business community as well.  And for a good reason! 

But it's important to clarify that Serbia is particularly creating opportunities in its IT sector. In fact, the country has become a major digital hub in Eastern Europe.

It is home to over 20,000 technical specialists, with many of them holding degrees from top universities. Serbia's IT sector is growing rapidly, with an estimated annual growth rate of 15%. 

Why should you outsource to Ukraine?

A common question companies ask is, what's the best location for outsourcing to Eastern Europe? It's the #1 on our list above!

Ukraine is currently the go-to option for large companies like Google, Grammarly, and Panasonic because while there are many benefits of outsourcing IT to Ukraine, there are also no tax complications or time-zone challenges! 

Ukraine is also listed among the "Top 10 Countries with the Technology Industry in the World" according to a Global Skills Report by Coursera. And that's not all - the talent pool in Ukraine's IT industry is diverse and knowledgeable in a variety of programming languages, not just the ones typically associated with the country.

So what makes it better than the rest of the east European locations? 

Here are a few game-changing benefits of outsourcing to Ukraine:

Technical talent 

As stated above, Ukraine has a strong focus on software development and a highly skilled technical talent pool and is home to the largest group of IT specialists in several domains.

The country has an excellent educational system that produces many IT professionals who are proficient in English, making communication a breeze. On top of that, Ukraine has a vibrant tech community, and its software development companies have won numerous international awards.

Hands-on experience 

Some of the largest companies work within Ukraine, so you can already see the value in availing of IT services from Ukrainian professionals. 

However, other than the amazing experience working with the biggest companies, software developers in Ukraine are also highly educated, vetted, and trained from their college days to work in the industry. It's because software development companies in Ukraine are also actively involved in educating students. They offer traineeships, give lectures, and have mentorship programs, among other things.

Competitive pricing 

Not only does Ukraine offers a highly skilled technical talent pool and a convenient time zone, but it also has a competitive pricing structure. 

According to a report by Clutch, the average hourly rate for software development in Ukraine ranges from $25 to $49 per hour, depending on the complexity of the project. This is significantly lower compared to the hourly rates in neighboring countries like Slovakia, Hungary, Poland, and Serbia.

The reason behind this is the lower cost of living in Ukraine, which translates to lower salaries for software developers. All things combined make Ukraine an attractive option for companies looking to minimize their costs while still getting the highest quality software development services.

Simple and effective tax laws 

In terms of operating costs, Ukrainian legislation offers IT-related companies a significant advantage. Compared to other industries, the taxes and social contributions required for IT firms are relatively low. 

One of the key factors behind this is the ability of IT firms to work with self-employed specialists. This allows them to save money on labor costs since they only need to pay 5% of the total income and a unified monthly tax (which is currently 22% of the minimum wage - $40).

In addition, the Ukrainian government has implemented several measures to support the development of the IT industry in the country. These measures include tax exemptions for IT startups, subsidies for IT events and conferences, and funding for IT education and training programs. This demonstrates the government's commitment to fostering the growth of the IT sector and promoting Ukraine as a hub for tech innovation and development.

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How to choose the right outsourcing software development companies in Europe

You've made it this far, and you've probably made up your mind about outsourcing your IT services. But even if you have a certain location decided, the success of your project(s) depends on the company you choose.

Selecting the right IT outsourcing company is a critical decision that requires careful consideration. Instead of wondering whether to hire Eastern European developers, the focus should be on finding the best outsourcing service provider. 

There are several essential factors to consider when making the selection, including:

Skills and experience

The competence of the vendor's developers is critical to the project's success. To determine their skill level, you can either read customer reviews from other clients or check their skills yourself.

Technology 

It's vital to partner with an outsourcing company that has technical expertise in multiple areas, such as platforms, web, mobile, databases, DevOps, ML/AI, and cloud computing. Additionally, they should have the suitable infrastructure, including equipment and software, to perform the job.

Reliability 

It is essential to choose a reliable outsourcing provider that can provide uninterrupted services, regardless of what happens on their end. Examining their portfolios for long-term relationships with previous clients is a way to determine the vendor's reliability.

Scalability

An excellent outsourcing company should be able to adjust the team size according to your project needs. It is better to check whether the vendor has the resources to scale up or down in case your needs change, especially if you plan on forming a long-term deal.

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COAX Software – your trusted partner for outsourcing in Europe

In the end, outsourcing software development to Eastern Europe, particularly Ukraine, is a smart investment decision due to the many benefits it offers. 

COAX Software is a Ukraine-based team of experts that fulfill all criteria! With us, you can supercharge your IT needs with and benefit from our proven track record of success, personalized approach to projects, deep technical knowledge and skills, and transparent communication at every stage. Our cooperation models and highly skilled team enable us to deliver quality solutions at competitive prices.

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If you're looking for a reliable outsourcing partner in Eastern Europe, 

‍Contact us today to learn more about how we can help you realize your project goals!

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FAQ

Why is outsourcing to Eastern Europe so popular? 

To summarize in the best way possible, it is popular due to the region's highly skilled talent pool, lower labor costs, favorable time zones, and cultural similarities with Western countries.

What are the best Eastern European countries for software outsourcing? 

The best 5 Eastern European countries for software outsourcing are Ukraine, Poland, Slovakia, Hungary, and Serbia. A few other popular locations also include Romania, Bulgaria, and Belarus for their growing IT industry.

How much does it cost to hire programmers in Eastern Europe? 

The cost to hire programmers in Eastern Europe varies depending on the country, the complexity of the project, and the experience level of the developers, but it is generally lower than in Western countries. A typical range is between $35–90 per hour.

What online collaboration tools are required to work with remote developers? 

In the current era, with so many SaaS platforms taking over remote work collaboration, most software companies use online collaboration tools such as Slack, Zoom, Jira, Trello, and GitHub to connect with clients all over the world efficiently and in real-time.