Top 5 Software Outsourcing Destinations
Outsourcing is about finding a strategic partner for your business that will merge with your company in the day-to-day operations efficiently and cost-effectively. In an ever-smaller world, your company can find an outsourcing partner almost anywhere in the world.
Your company can find an outsourcing partner almost anywhere in the world. However, geographic distances aside, every world region has its characteristics when providing value-added services, offshore or nearshore.
This article will discuss the top world regions for outsourcing and what to look for when hiring the best fit for your business.
Firms in Western Europe especially favor outsourcing companies in Eastern Europe because of their proximity and strong programming skills.
Clients in the US often choose eastern European outsourcing partners due to their Western mindset and high level of English.
Poland, Romania, and Ukraine are among the main outsourcing destinations in this region.
Ukraine provides an excellent price to quality ratio, combining a big talent pool of experienced developers with substantially lower prices than Western Europe and the US.
Ukraine, Poland, Romania, and Belarus have positioned themselves as countries with reliable software development resources in recent years.
Software engineers in Eastern Europe quickly master and apply new skills and technologies in their works.
Also, the region hosts a massive talent pool of more than 1 million IT professionals, including senior developers in Java, Python, and other mainstream development languages.
Outsourcing software development to Eastern Europe is a beneficial decision: you receive a high-quality product for a lower price than the average rates in Western European countries.
However, this does not come without its risks and cons.
Not all countries in the region abide by GDPR. Ukraine, for example, has GDPR-like regulations on its national laws but lacks some essential GDRP concepts.
Obscure taxation, high rotation of assigned team members, and a lack of flexibility are other possible cons and risks that you should look out for when choosing a partner in Eastern Europe.
Eastern Europe key takeaways
- Top outsourcing destinations: Poland, Romania, Ukraine, Belarus.
- A large talent pool of +1M software professionals, senior profiles.
- Lower hourly rates than Western Europe.
- Not all countries in the region abide by GDPR.
- Some countries may have obscure taxation schemes.
- Some providers may pose a risk of high team member rotation.
Outsourcing in Southeast Asia has traditionally been a way for companies to save costs by sending business processes overseas.
The continuing economic expansion of Southeast Asia has turned emerging countries into relevant players.
The global market outsourcing boom has dramatically impacted the economies of Southeast Asian countries like The Philippines.
While China and India have traditionally dominated in outsourcing, Southeast Asian countries such as the Philippines, Indonesia, and Vietnam have been experiencing a steady growth in outsourcing services.
A powerful signal of a promising and robust economy in Southeast Asia is the rise of the region's middle class. It is estimated that over 50 million new consumers will join the middle class in Indonesia, Malaysia, the Philippines, Thailand, and Vietnam by 2022, expanding this class to over 350 million people.
These factors create a significant opportunity to expand your business strategy by outsourcing to Southeast Asia.
The region has a robust telecommunications infrastructure. The Philippines alone hosts more than 80% of the call centers in Southeast Asia.
This region presents an excellent strategic opportunity for getting work done efficiently at reduced costs due to the lower cost of living.
Outsourcing to Southeast Asia can save companies as much as 60% labor costs.
Despite the cost benefits, and depending on the country, there could be significant drawbacks in outsourcing to Southeast Asia from US and Western companies in general.
Cultural gaps and timezone differences can become a deal-breaker when considering a distributed outsourcing strategy.
Southeast Asia key takeaways
- India is the traditionally established outsourcing leader.
- The Philippines, Indonesia, and Vietnam have been experiencing steady growth and offer competitive outsourcing opportunities.
- Robust telecommunications infrastructure.
- When assembling a distributed team, some countries' cultural and language barriers can become a deal-breaker for a US company.
- The timezone difference is dramatic, being on average 12 hours ahead of the United States.
Due to its astonishing numbers, China deserves a separate mention from the rest of Asia. The country produces more than 4 million new IT graduates every year.
Chinese developers are often recognized as some of the best in the world, distributed among the more than 35,000 IT firms the country hosts.
One of the biggest reasons for outsourcing to China is its developing IT hubs, with main cities being Shanghai, Beijing, Hong Kong, and Shenzhen.
These hubs are usually proficient at handling projects requiring knowledge in Artificial Intelligence, Big Data, aviation, Blockchain, Smart Cities, and Fintech.
Despite the critical benefits of outsourcing to China, less than 10% of its population is fluent in English.
This is a significant drawback when thinking about assembling a globally distributed team.
Some global firms outsource to China to implement a geographically-distributed risk strategy. This may not be the case for small or middle-sized businesses.
China key takeaways
- Together with India, China is a world leader in outsourcing.
- Very competitive costs.
- Top technology hubs are located in Shanghai, Beijing, Hong Kong, and Shenzhen.
- Massive talent pool, more than 4 million new IT graduates every year.
- Wide-range expertise, from Artificial Intelligence and Big Data to Blockchain and Fintech.
- Significant timezone difference with the US
- Less than 10% of the population is fluent in English
- Cultural barriers with Western companies.
Africa offers coding talent at competitive hourly rates. South Africa, Kenya, and Mauritius are among the market leaders, with Nigeria also emerging as a relevant outsourcing services provider.
In North Africa, Egypt's situation is similar to Nigeria's, having a vast talent pool at affordable salary levels.
Africa poses an attractive non-traditional option for most western businesses. African developers have good fluency in English for the southern countries and French for the North African region.
However, the cost and availability of software developers vary significantly from one country to another.
While South Africa has a larger talent pool, it is not as competitive as North Africa. In some cases, it may even be less competitive in pricing than Eastern Europe or Southeast Asia.
Africa key takeaways
- Market leaders in the region are South Africa, Kenya, and Mauritius.
- Nigeria (South African region) and Egypt (Nort African Region) are emerging outsourcing markets.
- Fluency in English in the Sub-Saharan area and French in the Nothern region
- Cost and availability may vary significantly from one country to the other.
- South African hourly rates may be less competitive than Eastern Europe or Asia
- Timezone difference with the US is still significant, good time zone alignment with Western Europe
Latin America has a strong reputation in the software development industry and has become the top choice as an outsourcing destination for software development.
The region has significant advantages for US-based companies over their European and Asian counterparts.
Countries like Argentina, Uruguay, Brazil, Colombia, and Mexico have become attractive destinations for anyone looking for highly skilled engineering professionals.
These countries host some of the most thriving software development companies globally. Argentina, Brazil, and Mexico are home to more than 30 unicorns alone.
Companies in Latin America have impressive portfolios that include some of the biggest names in the market and cover a wide range of projects, from e-commerce and mobile applications to AI-based algorithms, Fintech products, and software for the Internet of Things (IoT).
There are countless software development companies in Latin America to outsource your project. The resulting partnership between US-based and Latin American companies can significantly benefit US businesses.
Latin America has developed an excellent outsourcing infrastructure during the last two decades. While it may not offer rates as low as Eastern Europe and Asia, professionals in the region are far more cost-effective to hire than American software developers.
Another critical success factor is that Latin American offers an exceptional timezone, culture, and language fit for US companies.
Argentina, Uruguay, Colombia, and Mexico have some of the highest professional English proficiencies globally.
Latin American countries share plenty of similarities with the United States' culture. While Spanish and Portuguese are the native languages of this region, English is the third most spoken language.
Technology in Latin America is booming; this means a vast talent pool, more skill choices, and competitive prices.
Latin America has time zones that are very similar to the US. Buenos Aires (Argentina) and Montevideo (Uruguay) are roughly 5,300 miles from the United States but only two hours ahead of New York City timezone.
Regarding privacy, data security, and intellectual property, countries with the biggest GDP in the region have passed up-to-date laws and regulations.
These countries ensure that their software development professionals meet internationally accepted standards for using and sharing intellectual property and accessing, storing, and transporting sensitive user data.
Latin America key takeaways
- The region has a decades-long strong reputation as an outsourcing provider for the software development industry.
- Top choice for US-based companies.
- Home to more than 30 tech unicorns.
- Unique culture and language fit for US companies.
- English is the third most spoken language.
- Great time zone alignment with the US and Europe
- Up-to-date privacy, intellectual property, and data protection regulations.
- Rates comparable to Eastern Europe, not as low as Asia, but more cost-effective to hire than American software developers.
The software development outsourcing industry is booming globally. There are great options such as Eastern Europe, Southeast Asia, China, Africa, and Latin America.
Latin America emerges as the best choice for US-based and Western Europe companies, combining competitive rates with a large pool of top-tier software developers and an exceptional time zone, cultural and language fit.
Are you planning your software development outsourcing strategy? Consider Latin America and drop us a line!