The best offshore development countries in 2021: A 360 degree overview
What set of criteria is used to define the best offshore development countries in the world? Are low development rates and availability of tech expertise enough for choosing an outsourcing destination in 2021?
While in lockdown, it’s not that easy to travel and explore outsourcing destinations by yourself. That’s why we decided to do it from our standpoint.
We’ve created a 360-degree overview of the most popular offshore development countries in the world, having taken into account financial, tech, business, digital innovation, cultural, and other criteria.
The best offshore development countries in the world
The outsourcing industry is one of the largest contributors to the global economy, aside from oil and gas. In 2019, the global outsourcing industry amounted to US $92.5 billion and is expected to grow to up to US $114 billion by 2025.
ACCORDING TO THE THOLONS SERVICES GLOBALIZATION INDEX 2020, THE OUTSOURCING INDUSTRY PREMIER RANKING, THE FOLLOWING OFFSHORE DEVELOPMENT COUNTRIES ARE LISTED AMONG THE TOP 50 DIGITAL NATIONS IN THE WORLD (SORTED BY REGION):
Eastern Europe
Asia
Latin America
Africa
A 360 degree overview of the best offshore development countries by region
The best offshore software development countries are fast-developing in terms of technical skills, competence, and tech expertise. Apart from evident offshore development advantages of these countries, such as reasonable quality-to-cost ratio and vast tech talent pool, each country has many more characteristics to take advantage of.
We’ve done a detailed analysis of offshore development countries based on the findings by Kearney, Tholons, Bloomberg, and more.
A list of the 10 best offshore development countries in four regions: Eastern Europe, Asia, Latin America and Africa:
- Ukraine
- Hungary
- Poland
- India
- The Philippines
- China
- Brazil
- Argentina
- Egypt
- South Africa
The best offshore development countries in Eastern Europe
Offshore development countries in Eastern Europe present a fraction of the Chinese or Indian software development markets in terms of talent pool sizes, but they make up an enormously competitive hotspot, exporting $13 billion worth of services as of 2020.
The best 3 offshore development countries in Eastern Europe are:
Ukraine
Eastern Europe is taking the lead in offshore software development and Ukraine is the hottest outsourcing destination in the region. Ukraine is on its way to becoming a global tech powerhouse, taking 11th place on the list of the top offshore software development countries in the world. IT outsourcing in Ukraine is the 2nd largest export services industry with nearly $5.7 billion revenue generated in 2020 and an expected revenue of $8.4 billion by 2025.
Ukraine in Global Rankings
10 Facts You Probably Didn’t Know About Ukraine:
1. Business environment
Ukraine has made significant progress on reforms designed to make the country prosperous, democratic, and transparent, including the creation of a national anti-corruption agency, the overhaul of the banking sector, the establishment of a transparent VAT refund system, and increased transparency in government procurement.
As a result of the recent reforms and increasingly closer ties with the West, Ukraine is gradually becoming an attractive destination for the international business community.
2. Technical skills and continuous excellence
Ukraine boasts the largest number of developers specializing in C++ and Unity 3D. The country is second in the world in the number of JavaScript, Magento, and Scala software engineers.
Tech jobs in Ukraine are considered highly prestigious and desired. 78% of developers claim that love for technology is their key motivating factor. Those who want to enter the IT industry invest time and resources into getting quality tech education. 63% of software engineers in Ukraine continue self-education throughout their entire career paths by reading specialized literature.
Ukraine is known for its strong technical educational background. In addition to 160 universities and colleges providing tech education, Ukrainian offshore development companies offer their own courses and certification programs to boost the number of tech specialists even further.
3. Vast tech talent pool and relatively mild competition
The number of Ukrainian software developers in 2015 was 74,000. By 2017, this number reached 166,000. In 2021, the number of tech specialists in Ukraine has reached 250,000. Ukraine’s talent pool gets a regular influx of 30,000 young tech specialists who graduate from Ukrainian tech universities every year.
Companies like Samsung, Oracle, and Microsoft have already discovered and started leveraging not only the quantity, but also the quality of Ukrainian talent, establishing offshore offices in the country and hiring software developers in Ukraine.
However, Ukraine’s tech industry is centered around providing software development services through small and middle-sized companies. The competition from the world’s tech giants is not high here, and the majority of bright Ukrainian minds work in IT outsourcing. So, if choosing Ukraine as an offshore development country, you can be sure you’ll have no trouble finding the needed tech specialists.
4. Government’s support of the IT industry
IT services export makes 29% of the overall export of the country and reached $4.5 billion in 2019.
The Ukrainian government facilitates the growth of the IT industry through a low taxation system and active cooperation with the main IT industry development organization, IT Ukraine Association.
Tech workers are registered as Private Entrepreneurs (similar to Sole Proprietorship in other countries) and can enjoy the Simplified Tax Scheme of 5%.
5. Digital transformation
All across the country there are dozens of fintech projects focused on Ukraine, but the majority of developer teams are supporting the EU and US banking sector. There are approximately 4,000 technology companies, and many of them are working on international digital transformation projects.
Ukraine was among the first countries to digitise governmental services and implement biometric passports.
6. Cost and quality of living
Ukraine has a much lower cost of living than the rest of CEE countries. The average cost of living in Kyiv, the capital of Ukraine, varies between $1,100–$1,500 per month.
The low cost of living in Ukraine doesn’t automatically mean a low quality of life. For example, the quality of life in Lviv, one of the major country’s tech hubs, is 120.55, which is higher than in Paris and Rome.
7. European Union
In 2017, Ukraine signed an agreement with the EU, Euratom, and the union’s member states. This establishes the country as a priority partner of the union.
8. Startup environment
Startups in Ukraine are booming. About 2,000 IT startups, among which Petcube, iBlazr, Grammarly, Jooble, CleanMyMac, Mobalytics, and Looksery (acquired by Snapchat), got started in Ukraine.
9. Country assets
Regardless of the developing political, legal, and financial climate in the country, Ukraine has an excellent geographic location, the largest territory in Europe, rich natural resources, and an affordable but skilled workforce.
10. Ukraine vs. Russia
Ukraine is often associated with Russia, however, these two countries took completely different paths since the collapse of the Soviet Union.
Ukraine is on its steady way to Europe and has made significant progress on reforms. The country is fighting corruption, developing capital markets, improving the business environment to attract foreign investment, privatizing state-owned enterprises, and implementing land reforms.
Find out more on why Ukraine is a top outsourcing destination in our article:
Buyer’s Guide to IT Outsourcing to Ukraine
Hungary
Business environment
Hungary enjoys a flourishing economy and is ranked 40th in the Best Countries for Business by Forbes.
Software development is one of the most vibrant industries in the country, generating almost 10% of Hungary’s annual GDP. The Hungarian IT outsourcing sector’s main priority lies in software development of anti-virus software and IT security services. Within the past years, such giants as Lufthansa, IBM, Microsoft, Nokia, and HP have chosen cooperation with the local IT specialists.
Tech talent pool
In Hungary, around 80,000 people are engaged in the IT sector. In addition, there are many R&D centers of different international companies in Hungary, including Microsoft, Siemens, Ericsson, Nokia, TATA, and others. That makes a significant contribution to the development of the IT industry in the country.
Development rates
Hungarian software outsourcing companies do have a high value for their specialists, therefore they’re most likely to pay not less than $40/hour to a middle developer.
This average hourly rate of IT specialists in Hungary is rather high compared to other Eastern European countries, like Ukraine, for example, however, net income is significantly lower because of high tax rates.
Poland
IT industry overview
Poland is a well-standing R&D hub for global companies operating in various industries. Poland’s IT industry sales are set to continue their strong growth and are projected to reach €14 billion in 2022. The IT industry in Poland counts 295,300 software development experts, 20% of whom are employed in companies that offer software development services.
Services
Polish software development companies offer a wide range of IT services from software development itself to additional activities such as IT operations and digital marketing.
Developer salaries
Though salaries of IT specialists in Poland show a strong year-to-year growth, they’re still around 46% lower if compared, for example, to Germany. The average offshore software developer rate in Poland varies between $40–$56 per hour.
Business environment
Poland has the sixth largest economy in the EU and has long had a reputation as a business-friendly country. It ranks 34th in the Best Countries for Business by Forbes.
Poland is a member of the WTO, EU, NATO, UN, the Patent Cooperation Treaty, the Berne Convention, the Paris Convention, the Madrid Protocol, and a whole host of other organizations.
That means their companies can have an easier time transferring data and information safely, which is not always the case with offshore software development companies from Asia, for instance.
Poland’s long-term business challenges include diversifying Poland’s energy mix, strengthening investments in innovation, research, and development, as well as stemming the outflow of young educated Poles to other EU member states.
Competition for talent
There are 400 R&D offices in Poland opened by such tech giants as Google, IBM, Motorola, ABB, SABRE, Delphi, Fujitsu, Capgemini, IBM, Motorola, Shell, and a number of others. Therefore, 80% of the overall number of IT experts in Poland work for these corporations and only 20% — in IT service outsourcing companies.
The best offshore development countries in Asia
Asia firmly keeps its position on the global scene. The region comprises not only the largest number of the best offshore development countries, but also the largest number of offshore developers — more than 10 million.
The following destinations in Asia stand out as the best offshore development countries due to their solid development infrastructure and decades of outsourcing experience:
India
Business environment
Almost half of the top 500 global companies have already established cooperation with India making it #1 destination for offshore outsourcing according to Kearney.
The country boasts strong English proficiency and has become a major exporter of information technology services, business outsourcing services, and software workers. Four in 10 remote workers in software development and technology are based in India.
India’s challenges, such as physical and financial infrastructure constraints, frequent policy reversals, for example, the recently introduced ecommerce rules, make the country’s business environment quite difficult to navigate, particularly for foreign players. However, a carefully chosen outsourcing provider will handle domestic challenges on its side and eliminate risks.
Digital innovation
India ranks the 1st Digital Nation in the Tholons Global Services Index 2020.
The country’s digital transformation was pushed by the demonetization launch in 2017, the implementation of improved infrastructure to enable affordable internet access across the country, and digital initiatives launched by the government, including Digital India and India Stack.
Tech population and education
The number of STEM (science, technology, engineering, and mathematics) graduates in India reaches 2.6million, with only China being ahead.
Recent developments within the IT sector include Nasscom’s new online platform for upskilling more than 2 million tech workers and educating 2 million more who could learn to do this work.
Development rates
What makes India a prime location for IT outsourcing is the fact that an average software developer in India charges between $18 and $40 per hour, making it one of the cheapest outsourcing destinations.
Culture
Over the years, India’s business culture has been widely assimilated to the Western one, however, certain aspects still remain unchanged. An Indian developer’s comfort zone rarely includes direct negotiation and critical assessment of the situation. In other words, a client’s expectations are perceived at face value and will be strictly obeyed by an Indian worker. But the client, in their turn, may be lacking the expertise and rely only on the developers’ decisions, so miscommunication is very likely to occur.
The Philippines
Business environment
The country’s software industry is valued at $7 billion and gains uninterrupted governmental support.
BPO companies in the Philippines specialize in customer service and front-end operations, mostly in the financial services and the telecommunications sector.
In August 2018, Amazon opened its first customer service center in the Philippines, immediately establishing 300 new jobs in Cebu City and anticipating up to 1,000 more by the end of 2020.
Accenture, Google, and IBM are the leaders of the Top 15 Philippine Employers to Work For in the country.
If considering outsourcing to the Philippines, you should take into account the turbulent weather conditions in this country. Tropical storms can disrupt projects during summertime and cause inconvenience for the work of developers.
The Philippines is also known for its numerous holidays, which may be quite a problem when it comes to projects that last more than six months.
Culture
The Philippines have an outstanding understanding of the Western culture thanks to their historic background as a former British colony. Filipinos are fluent in English both in verbal and written communications.
Tech talent pool
More than 200 offshore software companies and 95,000 technical positions are there in the Philippines to meet the IT outsourcing demand. Each year, more than 130,000 IT and engineering graduates are entering the market.
The IT workers are all well-versed in Java, API development, .NET, and more.
Robotics, Cybersecurity, Data Science, and DevOps are the most sought-after job fields among Filipino tech professionals.
Average developer salary
An entry-level Filipino developer earns around $8,400 per year, so hiring from the Philippines is quite a cost-effective move.
China
Best offshore development countries China
Business environment
China is one of the largest economies in the world — it even surpassed the US in 2014 for the first time in modern history.
The Chinese government focuses on improving the technology sector with friendly policies for IT companies, making it easy for any enterprise to do business in the country.
Education
Science and mathematics are the main focus areas in schools and universities, resulting in 5 million IT experts joining the IT labour market every year.
Tech expertise
Chinese developers generally excel at functional programming, Python, Shell, and more.
Culture and skills
Chinese developers are valued for their strong work ethics and high productivity. However, they’re rarely eager to learn other languages in addition to their mother tongue, and English-speaking countries should bear this in mind.
The best offshore development countries in Latin America
Latin America’s best offshore development countries are popular outsourcing destinations for North American tech companies. US companies primarily outsource software development due to considerably lower software developer rates in Latin America, high English proficiency, and negligible time zone difference.
Apart from a variety of outsourcing destinations in Latin America, like Colombia, Costa Rica, Chile, Panama, Peru, and others, the best offshore development countries in the region are:
Argentina
Business environment
The tech scene in Argentina is thriving. In 2020, their IT and software industry is expected to reap $7.33 billion.
European trends have a strong influence on Argentina’s IT market due to the country’s rich working experience with western countries.
Argentina is the number two outsourcing country in the region with a well-developed economy and a vast tech talent pool. The country is a popular outsourcing destination for US companies due to their only one-hour time difference.
Tech talent
Software engineering skills in Argentina are first worldwide, according to Coursera’s 2019 Global Skills Index. In addition, Argentine developers have the strongest English skills in Latin America and a high literacy rate.
Developer rates
Argentina has the most expensive IT development teams in Latin America. The average hourly rate of a senior developer can range from $20 to $50 depending on programming skills, languages, and seniority. However, given the rising developer salaries in the US, salaries in Argentina are comparatively affordable, while the quality of work is high.
Brazil
Business environment
Brazil is a leading outsourcing country in Latin America and is ranked third out of 50 digital nations according to the Tholons Services Globalization Index 2020.
Brazil is only 2 hours ahead of US EST and is the biggest economy in Latin America. According to Kearney, “Brazil shows an improving business environment, people skills, and availability scores, pointing to an increasingly experienced industry that can serve global firms.” Kearney reports that Brazil has advanced to the eighth spot for offshoring, making it one of the top choices for business outsourcing needs.
Tech talent pool
Rio de Janeiro is a global IT center, and the city’s technology universities produce 14,000 alumni each year. Because of this, many US companies prefer recruiting Brazilian talents.
Average rates
The outsourcing costs in Brazil are higher than in other countries, however, the choice of this offshore development country can still save up to 40–60% compared with prices in the US.
The average developer hourly rates in Brazil are:
Junior developer: $25–$34/hour
Mid-level developer: $50–$80/hour
Senior developer: $100–$120/hour
The best offshore development countries in Africa
In recent years, Africa has been showing strong outsourcing capability thanks to some of the best offshore development countries in the world located on this continent.
Egypt, Morocco, Tunisia, Kenya, and South Africa are becoming popular offshore destinations for both the US and Europe. Morocco and Tunisia are particularly compatible with France because of their high French proficiency.
The best offshore development countries in Africa are:
Egypt
Business environment
Egypt’s IT industry displays steady growth. The country has been ranked 14th among the top 20 outsourcing countries according to Kearney.
Mentor Graphics’ largest R&D center outside the United States is in Egypt, and Valeo hosts its primary R&D center in the country. IBM, Microsoft, Dell, Vodafone, Orange and other global companies have opened their centers in Egypt.
In addition, the country invests in cybersecurity. Egypt has been ranked 14th in the ITU’s Global Cybersecurity Index.
South Africa
Business environment
South Africa has made its mark on the outsourcing map thanks to political and socio-economic reforms, tax incentives, and local infrastructure. The country has been featured in the Tholons Digital Nations and Super Cities rankings.
Tech talent and skills
South Africa has a rich diversity of cultures and linguistic traditions. English is the de facto language of business and government. Dutch and German are also widely used in the country. South African developers are skilled in C++, PHP, and SQL.
How to choose the best offshore development country: 10 tips to help you out
When thinking of IT outsourcing, tech skills, cost-to-quality ratio, and smoothness of cooperation seem to be enough for choosing an offshore development country.
Still, there are other sides of the matter. These aspects may not be of direct influence, however, if the context is favorable, they may seriously impact the success of your offshore adventure.
The 10 key components and metrics to define the best offshore development country are:
1. Cost-efficiency
Cost-efficiency is one of the key drivers of offshore software development.
2. Tech expertise
To evaluate skills by country, you can refer to the Global Skills Index by Coursera. The index measures and ranks the skills of 60 countries that together account for 80% of the world’s population.
3. Cybersecurity
Kearney’s analysis indicates that the incidence of cyberattacks on organizations has been accelerating by approximately 40% over the past three years. Each offshore country has its own path towards cybersecurity, check out Global Cybersecurity Index 2020 to learn more.
4. Political climate
A country’s political climate largely determines the kind of economic growth, financial policies, GDP per capita, and other country metrics.
Volatile political climate in a country can result in unexpected slowdown of project delivery, temporary disconnection of remote developers, impossibility to visit the offshore country, and other side effects.
5. Culture
When going global, make sure to study the cultural differences you may have with target offshore countries.
For example, what might be an obvious thing in the US may need additional instruction in India.
Eastern European and Latin American offshore development regions show the closest similarity to Europe and the US, while Asia would probably require a closer investigation.
6. Tech talent pool and ability to scale
At this particular moment, you may need a team of three remote developers, and hiring just a few people is rarely too complicated. But in a few years your business may grow (and we’re all optimistic that it will) and you’ll need to scale and hire more developers — or even open your offshore development center.
Make sure there are enough skilled workers in the chosen offshore development country to meet your needs. Pay attention not only to the current number of developers in the country, but also to the annual number of university graduates entering the market.
The other important criteria is the number and the variety of offshore development companies in the country. In some countries, most developers tend to work for product startups or offshore offices of the world’s tech giants, while in others almost all tech workforce is hired by outsourcing service vendors (the ideal option for hiring remote developers in the offshore development country).
7. Diversity
The ability to tolerate cultural, religious, racial, and other differences may seem unimportant when choosing an offshore country. However, some offshore development countries may still not be mature enough to accept diversity. If this is the case for your chosen destination, make sure you voice company policies or rules of communication at the very beginning of the cooperation.
8. Startup ecosystem
Pay attention to the overall number of the country’s startups and their place on the global tech arena. The startup environment shows the capacity for digital innovation and global competitiveness of an offshore development country.
9. Time zone
Time difference is the third most important aspect determining the choice of the offshore development country after development rates and tech skills. Asian countries have the largest time zone gap with the US and European countries, while Eastern Europe and Latin America can be only 1–2 hours ahead. To compensate for the time difference, Asian countries have the lowest hourly rates.
10. Global crisis management
The most unusual aspect added in 2020 is how countries have managed and are winning over the global crisis during the pandemic.
Wrap up
The decision to outsource software development to any country mentioned in the article will bring value to your business through technical expertise and cost-efficiency. To move up the client’s value chain, offshore development countries provide a variety of benefits, cooperation models, and technical capabilities. You’ll need to carry out a meticulous analysis to choose the best one.
Our mission at Grid Dynamics is to help your business grow with the help of remote development talent. Reach out with any questions by filling out the contact form below.
