IT Outsourcing in Eastern Europe

Over the past decades, Eastern Europe has carved out a name for being a hub for IT outsourcing for companies worldwide. 

Companies are discovering that outsourcing to developing countries in the Eastern European region is a unique strategy for getting work completed efficiently at reduced costs. The same kind of work done in Western Europe, as well as North America, can be outsourced to Eastern European countries, where workers receive smaller pay due to the low cost of living. Outsourcing can save companies as much as 60% on their labor costs. 

In fact, it’s not surprising to find out that IT services and programming tasks are among the foremost outsourced business processes in the world today. Therein scenario, a recent phenomenon has caught the attention of many business owners, professionals, and experts — the increase of Eastern Europe as an IT outsourcing heaven.

What is IT outsourcing?

IT outsourcing is one of the industry’s most recent concepts that has already managed to prove its great effectiveness. Outsourcing a development team allows you to free up essential resources by letting hired, third-party experts or teams take a responsibility for certain parts of project or take full control of it.

By outsourcing IT services, any business can shift its focus towards its core competencies and obtain otherwise unavailable resources. This way, the in-house IT staff⁠ has a huge weight taken off their shoulders, letting them undertake other important issues.

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Why outsource your IT Services in Eastern Europe?

Almost 40% of US-based companies currently outsource their IT services to some extent, however, this number is quickly rising, and within the rising demand, the global supply of IT services also rises. 

If we generally address the situation of Eastern Europe within the STEM field, the interest and number of young blood talents rise exponentially fast. For example, from the Georgia’s Free University of Tbilisi, there are currently a couple of hundred people working for the big tech giants, like Microsoft, Google, Facebook, and so on… The International University of Kutaisi recently hosted the International Young Physicists’ Tournament of 2021. And there is much more than just that.

If we get more specific and address youngsters’ interest in the CS and review the overall business situation, there are currently about 6000 digital agencies in the region, which can satisfy the demand from all over the world. These agencies position themselves as relatively affordable (considering the US and Western Europe’s IT fields’ rates) and easily scalable companies. The difference between the rates (hiring IT services provides costs 20-60% cheap in Eastern Europe) is mainly caused by the difference between overall economic situations in the countries. For example, the average GDP per capita in the Netherlands for the year 2021 is about $58,000 but the measurement in Georgia is about 13 times lower (around $4000). 

Another reason, why it’s great to outsource IT services in Georgia is, that Georgia currently ranks as N7 in doing business worldwide, which means that there are almost 0 additional taxes, except for 5% income tax and that’s basically it. Local governments in Eastern European countries consider how important it is to get foreign clients into the country, so they help local businesses to establish long-lasting relationships with foreign companies. 

Now let’s dive deep into several Eastern European countries and address their IT sectors:

Ukraine

There are currently around 1700+ IT services providers in Ukraine and considering this number Ukraine tends to be the leader in terms of IT services companies in the region. As for 2021, the country has little less than 200,000 IT professionals and about 50% of them are employed in IT outsourcing companies. The country grows at the rate of about 4-5% per year. On paper it might seem a perfect location to outsource your IT services, especially considering the fact that it takes about 2-3 to take a flight from any of the European countries to Ukraine, however, rather disturbing political relations with Russia and time to time internal political instability might sometimes become a problem for your company.

Poland

Another great location to outsource your IT services is Poland. It ranks as 40th at an ease of doing business. Also, Polish IT graduates are well known around the world for their professionalism. The average salary in the IT field is $3000-8000 per month which might be kind of expensive for your average Eastern European IT services provider company. 

Romania

The total market size for the IT industry in Romania for 2020 was about $6B and it accounted for 2% of the country’s GDP. Since 2007, when Romania joined the EU, it attracted dozen of IT companies to scale their businesses in the country, including Microsoft, Huawei, Hewlett-Packard, and so on. With the support of the local government, software devs pay only 16% of their salary in income taxes and they have other additional benefits because of their profession.

Georgia

If you’ve ever tried Georgian food, you should also try outsourcing IT services in Georgia, because it’s so much better. As said before, because of reforms conducted by the local government back in the 2010s, there are tons of benefits for foreign companies outsourcing their services in Georgia. For example, the only fee that companies will be paying is 5% income tax. If we address the geographical location, the country is in the middle of Europe and Asia, which means that the time-zone problem is not relevant in this scenario.

In recent years, as the foreigners, trustworthiness rose towards Georgia and they started investing and exploring local businesses, new challenges and therefore new opportunities for gaining an experience appeared for the companies. For example, in 2020 Redberry became a digital agency of the year. One of the reasons for receiving this title was the international experience that was accumulated by working with foreign companies like Zara, Wolt, Miniso, several Dutch companies, and so on. 

If we address the overall economical situation, Georgia’s GDP will be rising on average by 6-8% for the next couple of years if nothing changes. The support of international funds and partners ensures political stability in the region.

Final thoughts 

To sum up, the Eastern European region seems to be a perfect place to outsource your companies IT needs. It is an emerging region in terms of IT services, has a pool of young blood talents, is especially affordable (considering Western European and US rates), and doesn’t compromise in the quality. Most of the countries receive support from local governments and the companies themselves are open to new challenges and experiences. The best thing is that foreign clients don’t have to explore the unfound lands, because most of the agencies already have some kind of experience.

Meet the authors

We are a 150+ people product design, software development, and growth marketing agency from Tbilisi, Georgia. Delivering hundreds of successful projects for industry-leader enterprise companies and startups earned us 100+ international awards, partnerships with Laravel, Facebook, and Google, and the title of Georgia’s agency of the year in 2019 and 2021.

If you are looking for a partner to extend your product or growth team or design and build a digital product, we are always open to a meeting!