Outsourcing is an integral part of the modern tech industry. Yet one question remains: How to choose the best place to outsource?
We’ve selected 7 emerging outsourcing hotspots that have the potential to compete with the traditional industry leaders based on the tech skills, business environment, digital innovation, and English proficiency.
Software development outsourcing is the process of handing the responsibility for programming-related tasks to an external contractor rather than completing them in-house. It is a widespread business practice that allows you to cut down on development costs, add expertise to your staff and increase product time-to-market.
Choosing the right outsourcing partner requires strong professional management. First, you need to create a clear project outline that will include all relevant infrastructure requirements, tech stack specifications, team composition, not to mention your projected timeframe. Only after you know what you are looking for can you start exploring outsourcing destinations to identify the one best corresponding to your business needs.
Currently, the top 5 outsourcing countries in the world are:
They boast a seasoned information technology industry, a large talent pool of quality programmers, and a wide range of tech vendors with domain expertise in every conceivable field. However, the high demand for outsourcing providers has created a competitive market. And if your company is not one of the FAANG group, you will have to allocate a lot of resources to find capable professionals in India or any other country from the top 5.
The good news is that the global outsourcing market is not limited to these destinations. Many other countries can offer first-rate services, tech competency diversity, and a reasonable quality-to-cost ratio. Let’s have a closer look at some of these budding IT outsourcing destinations.
Key Facts about Outsourcing to Ukraine
Ukraine is one of the most promising software development locations in Eastern Europe. Its advantageous geographical position makes it a perfect destination both for offshore and nearshore outsourcing.
Despite the nation’s late-blooming interest in the IT sector, it is often featured on numerous rankings of the best software engineers by country. For example, SkillValue ranked Ukraine in 5th place in its leaders' matrix. The average score index of Ukrainian developers on this platform is 93.17%. According to HackerRank, the country secured 11th position in the global ranking, way ahead of the traditional coding giants, including India and the US.
Ukraine can boast an impressive talent pool of 200K+ certified programmers. In the coming years, the size of the Ukrainian tech community is projected to grow tremendously, as nearly 23K aspiring IT specialists are entering the workforce on an annual basis.
These numbers are driven by a spread network of technical universities around the country. The nation’s biggest software development hotspots, such as Kyiv, Kharkiv, Dnipro, and Lviv, are crawling with technology and engineering students ready to fill the market demand gap.
Ukrainian tech clusters unite over 3K IT service providers specializing in e-commerce, fintech, education, health and telecom domains. 87% of them develop quality software solutions, 7% deliver hardware products, and the remaining 6% focus on customer services.
The Clutch 1000 global ranking features 68 companies from Ukraine among the top 1% outsourcing vendors listed on the platform. In 2021 the site also recognized 12 Ukrainian vendors as the world-leading B2B service providers for sustained and fast growth.
A deep talent pool, government-backed incentives, and a good investment climate gave rise to a flourishing startup ecosystem. Several Ukrainian companies have experienced rapid revenue growth, resulting in market capitalization of $1B or more. Such internationally known unicorn startups as PetCube, GitLab, Ring, Grammarly, People.ai, and Preply all got their start in Ukraine.
Key Facts about Outsourcing to Romania
Romania is becoming a prominent player in the Eastern European tech scene. After the country joined the European Union in 2007, its IT sector started to attract significant investments, spurring local entrepreneurial culture.
These efforts eventually bore fruit, as the market value of the Romanian software industry has been constantly increasing ever since. The country has managed to ensure 15% annual growth of its tech sector. In 2020 the aggregated turnover of Romanian IT companies reached nearly 8.2B euro ($9.4B).
Stimulating the business environment propelled Romania to 55th position in the World Bank’s Ease of Doing Business Index. In 2020, the region was awarded 73.3 scores which is only 13.3 points away from the world’s best-performing economy, New Zealand.
Thanks to clear and transparent procedures for registering property, paying taxes, and enforcing contracts, Romania is drawing the attention of global tech companies. Several multinational corporations have already opened their offices in various locations around the country. For example, HP has built a software development center in Cluj-Napoca, IBM operates in Brasov, Microsoft in Timișoara, Amazon in Iasi, and Oracle in Bucharest.
On the downside, big tech companies spreading out their operations over the country puts extra pressure on the labour market. Romania currently houses around 120K high highly skilled developers, with an increment of about 5K computer science and engineering graduates per year. At this rate, it is not fit to support the growing demand for IT specialists. A tight job market has already driven up costs and forced tech companies to import talent from nearby Ukraine and other Eastern European countries.
Key Facts about Outsourcing to the Philippines
The Philippines stands at a crossroads of eastern and western business cultures and can serve as the entry point to the rest of Asia. Filipinos have a deep understanding of Western culture due to their historical background as a former American colony.
The archipelago was under US rule for almost 50 years, and this period had a great impact on the country’s public health, education and political structure. Another favorable outcome of American-Philippine relations is a high level of English proficiency among Filipinos.
According to the EF English Proficiency Index, the country has an average score of 562 points, being the 2nd best country in language skills in Asia. English is a mother tongue for nearly 37K citizens, while 92% of the population can speak it as a second language. This makes the Philippines one of the largest English-speaking nations in the world.
The imposition of English in news media, trade, and even pop culture caused a major shift in the education sector. The Philippines committed itself to research and innovation, development of e-services, digitization and profound training in STEM fields. Eventually, these efforts bore fruit, as the country is producing 81.5K IT graduates on an annual basis.
The country already houses around 190K developers, who are located in such BPO hubs as Manila, Cebu, Davao, and Bacolod. These cities have established a reputation as the best place to outsource IT services in healthcare and fintech domains. Filipino engineers are also good at robotic process automation and artificial intelligence solutions. However, the country is lagging in sectors like big data, data analytics, blockchain and digital commerce.
Key Facts about Outsourcing to Brazil
Brazil is no stranger to the global tech community. The country currently holds 5th position in the Kearney Global Services Location Index. This ranking assesses countries’ capacity to deliver high-quality services, tracking their score in financial attractiveness, people skills and availability, business environment, and the new digital resonance categories.
Brazil has been hailed as the best country to outsource software development, especially by North American tech companies. Many businesses from the US and Canada choose it as their primary partner in specialized information technology services due to close travel proximity, negligible time zone difference, and cultural similarities.
On the downside, average developer rates are higher than in other countries of the region, ranging between $25 and $80 per hour. Despite the larger price tag, outsourcing to Brazil remains a bargain compared to hiring developers in-house. Moving IT operations to LATAM locations allows North American companies to save up to 40–60% of the development costs.
In 2019, Brazil exported about $2.5B worth of telecommunications, computer, and information services. Even though the country’s technology sector is relatively small, it has grown tremendously over the past few years. Foreign investment in Brazilian startups has more than doubled since 2016. The total volume of venture capital poured into the nation’s tech ecosystem has now exceeded $3.5B.
São Paolo alone has attracted more startup investment than Chile, Colombia, Argentina, and Mexico combined. The city is quickly gaining prominence as the biggest tech hotspot in the region. It is currently ranked 6th in Tholons global network of digital hubs.
Other significant IT centers include Rio de Janeiro, Salvator and Florianópolis. The latter is often dubbed as “Brazil’s Silicon Valley” because of the number of universities, research institutes and incubators producing talent, to supplement the country’s 500K digital community.
Key Facts about Outsourcing to Vietnam
Vietnam is one of the fastest-growing economies in the Asia-Pacific region. The transition from low-tech manufacturing to a service-oriented economy transformed the country from one of the poorest nations worldwide into a dynamic destination with a welcoming business environment. With an average economic growth rate of 5.5 %, Vietnam is believed to be one of a few Asian states that could surpass larger competitors, such as China and India.
Apart from being a rising star among Asia’s bustling economies, Vietnam is gaining traction as a mighty outsourcing powerhouse. In 2020 the country’s ITC export had an estimated value of $91.5B. The software industry alone accounted for $5B revenue, making Vietnam one of the top 10 software exporting states in the world.
It’s hard to believe, but the country that barely had any high-tech companies 20 years ago is now home to 50K information technology businesses. Hanoi, Ho Chi Minh City, and Da Nang are particularly known for their vibrant start-up atmosphere. These cities have developed a robust IT ecosystem with great infrastructure and many respected universities. Tech-focused schools in the area produce 40K well-educated ITC professionals every year.
There are government-backed legal and financial incentives for the IT workforce. Tech companies are eligible for a corporate income tax exemption for up to 4 years. They can also enjoy a 50% tax reduction for up to 9 years.
Sustainable growth, enormous talent pool, incentives packages and heavy investments in education placed Vietnam among the top 50 digital nations. The country has secured 25th position in Tholons Global Innovation Country Index. Moreover, Hanoi and Ho Chi Minh City are both included in the top 100 “Super Cities” ranking, appearing in 50th and 58th positions respectively.
Key Facts about Outsourcing to Colombia
Colombia is a part of the CIVETS group that also includes Indonesia, Vietnam, Egypt, Turkey and South Africa. They are regarded as up-and-coming states with dynamic economies, diversified exports, and large populations of people under 30 years of age. These are also the countries with relative political stability, robust financial systems, and great emphasis on higher education.
Despite the somewhat young workforce, Colombian developers scored 66% on HackerRank assessments, making the country a great place to find junior developers. This also allowed the Colombian tech community to join the top 50 nations for software development outsourcing.
Colombia is the 3rd largest supplier of IT services among Latin American countries. The market value of the country's tech industry has grown 38% since 2016, and it is now estimated at nearly 2.4B. To foster continued growth, the government is investing $6.5B into its science, technology, and innovation sectors.
Colombia is aiming to bring the number of programmers and developers to 100K people over the next few years. This is a pretty realistic plan, as the country already has 65K+ tech specialists. The majority of these individuals live in the area’s hottest cities for tech talent: Bogotá, Medellín, and Cali.
The country is constantly increasing its spending on education, which currently accounts for 4.5% of GDP. Thanks to government strategy Colombia has doubled its number of tech graduates in the past decade. Last year 13K newly-minted IT and engineering alumni joined the labor market.
Key Facts about Outsourcing to Egypt
The competition in the offshore outsourcing industry is constantly increasing. As global leaders, China and India, age and their IT service sectors mature, tech companies started to look for alternatives. Many Western firms have turned to North Africa, due to the fact that this region has a growing young population, tech-savvy workforce, and time-zone compatibility with Europe, making it a perfect spot for nearshore outsourcing.
Egypt is emerging as the next frontier in software development on the African continent. It has been ranked 53th out of 108 nations in Coursera Global Skills Report. According to this index, Egypt can boast 93% performance in mobile development, 70% in software engineering, and 63% in web development. Local digital practitioners are also good at data analysis and data visualization, with 81% and 85% respectively.
Egyptian vendors are particularly well-versed in technologies like Linux, Python, Ruby, and MySQL. They have an impressive track record of working with European and Northern American tech corporations. Some of the world’s leading companies such as Vodafone, Orange, Dell and Intel chose Egypt as a formidable outsourcing provider.
Egypt’s astounding achievements on the global tech scene spring from the high-quality resources. The country today has about 150K employees working in the IT outsourcing sector. Moreover, the Egyptian government has launched a new initiative called “Our Future is Digital”. It aims to engage 100K young people, and help them develop their ICT skills in areas like digital marketing, data management, computational thinking, and graphic design.
Initiatives like this are possible because Egypt has a dynamic economy with a mature financial system. It is the 2nd country in Africa by economic power, with nominal GDP amounting to $394B in 2021. The information and communications technology sector contributed nearly 4.4% of this amount.
Hire World-Class Programmers with Grid Dynamics
Finding the right team to build your product is a pretty hard task no matter where in the world you’re located. However, you can streamline this process by partnering with a reliable software development company.
Grid Dynamics is a digital-native technology services provider that accelerates growth and bolsters competitive advantage for Fortune 1000 companies. The company has 15+ years of experience in digital transformation and software innovation, most notably open source cloud-native programs.
Our clients have the option of choosing the engagement model which best suits their requirements, including team extension, dedicated teams, pod teams, and remote development centers. Grid Dynamics has offices in the US, Ukraine, Mexico, Serbia, Poland and Moldova, meaning that we have the resources to cater to the needs of companies of any size, no matter where they are located.