Analysis of Common Software Outsourcing Countries

Outsourcing software development comes with many benefits, ranging from cost savings and scalability to on-demand access to the world’s top development talent.

Earlier in this series, we looked at different outsourcing models—nearshore, offshore, onshore—along with the pros and cons that come with each option.

Here, we’ll take a closer look at the individual countries that more or less run the global outsourcing market and what you should know before you sign a contract with companies based in those locations.

Eastern Europe

Eastern Europe is home to some of the world’s top outsourcing countries and is known for providing companies based in Western Europe, the UK, and the US with top talent at competitive rates.

Countries

Ukraine. According to HackerRank, Ukrainian developers had an average score of 88.7% across all HackerRank challenges. Additionally, over 80% of IT workers speak English and Kiev’s tech scene shares many similarities with US startup culture. Meaning it should be relatively easy to find an outsourcing partner you can communicate with effectively.

Romania. Romania is one of the largest providers of IT and software services in Eastern Europe, specializing primarily in helping foreign companies digitize and automate business processes, as well as manage data.

Poland. Poland’s IT industry boasts over 295k development experts, many of whom work in the R&D offices of the world’s biggest tech companies. Polish outsourcing firms also offer a variety of services, including software development and IT operations. They further provide cost-effective access to top tech talent.

Market Share

According to a recent report, Eastern Europe’s IT sector generates an estimated $5B in revenue and $13B IT exports. It’s worth noting Ukraine’s foreign ministry has an initiative dedicated to increasing foreign IT exports.

Poland has emerged as an R&D hub due to its stable political and economic climate, tax incentives, and EU membership. The country has attracted big names like Google and Amazon and is projected to generate about 14B euros in IT service sales in 2022.

In Romania, foreign companies have invested in IT services—establishing BPOs in the country. Those investments have led to an increase in the industry’s turnover rates, with talent leaving local firms for foreign companies that can pay more.

Cost

Costs are comparable between the three countries we’ve included on this list, though within each country, the average developer salary ranges pretty significantly. Per Payscale data, Ukrainian salaries range between $12k and $47k per year, Romanian salaries range from $12k-$35k, and Polish salaries average around $26k.

Infrastructure

In Eastern Europe, former Soviet Union countries like Ukraine and Poland have long invested in IT infrastructure and educational programs that promote innovation across the country. Top universities offer IoT, data science, and AI courses–skills that directly address major gaps US firms are currently struggling to close.

Talent Availability

Eastern Europe’s collective talent pool includes over 1M working IT professionals and around 60K graduating into the market each year.

IP Protections

One of the main benefits of outsourcing to Eastern European countries is that they’re part of the European Union (EU). According to the European Commission, all EU trade agreements include high-level IP protections, which align closely with US regulations.

Time Difference

For US firms, outsourcing to Eastern Europe might not be the best choice for projects that require daily collaboration or need to move fast. Kiev is six hours ahead of NYC and nine hours ahead of Los Angeles. It may be tricky to schedule meetings and calls during work hours.

For Western European companies, on the other hand, Eastern Europe is the most logical choice if you’re looking for a nearshore partner. Cities like Berlin and Paris are in the same time zone as Poland, while London is just an hour behind, with Ukraine and Romania an hour ahead of Poland.

Latin America

Latin America is in the midst of a major digital transformation and has become an “outsourcing hotspot” due to its exponential growth, large talent pool, and relatively low cost of living.

Countries

  • Mexico. Mexico boasts the largest IT market in Latin America and is known for specializing in collaborative, nearshore partnerships with US companies. The country graduates roughly 130k new developers each year, most of whom speak English, and is home to skilled full-stack developers, engineers, QA pros, backend developers, and more.
  • Costa Rica. Costa Rica is developing a reputation as the “back office of the world,” with many of the country’s outsourcing firms specializing in helping organizations modernize digital processes and embrace technologies like IoT, big data, AI, and automation. Major players like Intel, IBM, and Hewlett Packard have Costa Rican outposts—a driving force powering the industry’s growth.
  • Argentina. Argentina’s free university system, government-sponsored tech initiatives, English proficiency, and low market rates make it an attractive outsourcing location—particularly for companies interested in blockchain.

Market Share

The Latin American tech sector has grown at an average rate of 65% per year since 2003. By contrast, China has grown at 40% annually, and the US market has expanded at a much lower 11% year over year during the same period.

The Latin America SaaS market alone is expected to grow by an estimated 25% during the 2018-2023 forecast period.

Cost

In Mexico, the median developer salary is around $14.5k, with experienced senior developers bringing in around $19k annually, and in Argentina, the average is about $13k. In Costa Rica, median annual salaries are slightly higher at about $22k.

Infrastructure

In Latin America, there are several government-run initiatives designed to grow the region’s digital economy. Mexico, for example, has launched several initiatives aimed at digitizing the government and its economy, including a national AI strategy and several partnerships with the country’s top universities.

Argentina has emerged as Latin America’s blockchain and crypto hub at a time when other countries are limiting access to cryptocurrency or outright banning it. The country formed the Federal Blockchain of Argentina to help standardize blockchain applications and is home to 30+ registered blockchain initiatives and startups.

Talent Availability

The Latin American talent pool includes over 500K IT pros, many of whom provide nearshore services to the US. The region is also known for having a high concentration of WordPress and .NET./Azure experts.

IP Protections

Unlike EU member countries, IP protections in Latin America vary by country.

The US, Mexico, and Canada Agreement (USMCA) requires Mexico-based providers to follow IP protections in line with US legal requirements, while Argentina recently joined Patent Prosecution Highway (PPH) agreements which signals a willingness to cooperate with international IP standards.

Time Difference

One of the biggest advantages of working with teams in Latin America is—at least for US organizations—time zone compatibility.

Mexico’s time zones match time zones in the US, and, depending on the time of year, Costa Rica runs on either Central or Mountain time, making it a good choice for teams in any state.

Naturally, US companies will have an easier time working with Mexico or Costa Rica-based teams, but Argentina is a strategic location for organizations with distributed, international teams or a presence in multiple countries.

While Argentina is 7,000+ miles away from the US, Buenos Aires is just four hours ahead of California, one hour ahead of NYC, and four hours behind London.

Asia

It’s hard to evaluate Asia’s outsourcing market as a monolith. Not only are there vast differences between cultures, language, laws, and infrastructure, the cost of living varies dramatically by country.

Countries

  • India. India is probably the first country you think of when you hear the term “outsourcing” for a few key reasons. The cost of living is much lower than in the US. Outsourcing software development is a cost-effective solution for many firms that might not be able to pay market rate for local talent. The country is also home to many well-educated developers and IT professionals and is the second-largest English-speaking country in the world.
  • China. According to HackerRank, China is home to the best development talent in the world, as well as some of the world’s fastest-growing tech companies. On the other hand, outsourcing to China presents some potential issues. Compared to other outsourcing countries in Asia, China ranks lower in terms of English proficiency. International clients may face some significant communication barriers.Additionally, China tends to take a lax approach to enforcing IP protections—and while this isn’t necessarily a deal breaker, companies based in the US and Europe will need to make sure they fill in any gaps between their home country’s IP laws and those enforced by the Chinese government.
  • The Philippines. The Philippines is considered one of the most US-friendly outsourcing destinations in the world. Over 90% of Filipinos speak English, and the cost of living is significantly lower than the US—more so than any other country on this list.
  • Singapore. Singapore is an international business hub known for hosting big-name corporations like IBM, Citibank, and Microsoft. The World Bank ranked the country 2nd best in the world in its 2019 Ease of Doing Business report. While the talent pool is limited, the country is home to many robotics and automation specialists, consultants, and developers with experience working with top brands.

Market Share

According to a recent report on the global Software Development and AI market, the Asia market is projected to see greater economic gains than any other region over the 2021-26 forecasting period.

Countries like India and China have long led the charge on innovation in the AI and NLP space.

However, rising demand for AI-powered software, support for data streaming, and broader IoT adoption, along with growing interest in cyber defense infrastructure and industrial robots are powering this next wave of growth.

Cost

For example, the average annual salary for a developer in India is about $11k, and in the Philippines, that number drops to just $8.5k.

On the other end of the spectrum, you’ve got average salaries in China hovering around $34k and in Singapore, salaries jump to an average of $58k per year—though top earners command something closer to $75k-$85k.

While that may sound high, US companies still pay less than they would on hiring domestic talent—more so if you add in the costs of onboarding, training, benefits, and so on.

Infrastructure

China has been ramping up IT infrastructure investments—though they’ve long been able to support a booming tech scene responsible for the so-called “mega platforms” like WeChat that touch every aspect of modern life.

Singapore’s infrastructure is excellent due to the presence of well-funded corporations, financial institutions, and emerging startup culture. In recent years, venture capital firms have started investing in initiatives in an effort to attract investors and entrepreneurs to the country.

Talent Availability

In India, developers are everywhere—but finding highly-skilled partners is challenging as they tend to get lost in the crowd. In China, it’s easier to find top developers—the only problem is, most either work for the government or the country’s big tech companies.

Singapore is the outlier on this list. The country’s talent pool is relatively small (roughly 180K), and local tech firms often outsource to India or China or import foreign talent to fill skills gaps.

IP Protections

Here, too, you’ll see a lot of variation in the way each government handles intellectual property laws.

Singapore offers robust IP protections based on the UK’s 1977 Patents Act, which protects international patents, trade secrets, copyrights, and designs under an international treaty. The country’s IP laws are ranked “best in Asia” and second in the world after Finland.

The Philippines has PPH agreements with the US and Europe, as well as its own IP laws covering patents, copyrights, trademarks, trade secrets, and industrial designs. While the country’s IP act was passed in 1924, lawmakers have added amendments covering modern technologies.

But then you look at China and it’s a completely different story. Companies are largely on their own when it comes to protecting their IP. Organizations should be extra cautious about protecting their IP and consumer data when outsourcing to China, as IP theft has become a major issue in recent years.

India falls somewhere in the middle. They do have procedures for civil and criminal proceedings. However, it can be difficult to recoup your losses in the event of theft.

Time Difference

For US-based firms, offshoring to any country in Asia presents some challenges. Beijing is 13 hours ahead of NYC and 16 hours ahead of Los Angeles.

Still, companies might have an easier time scheduling meetings with teams in Asia than those based in Eastern Europe as there may be a few hours of overlap during the workday. The issue there is, you’ll always have to plan ahead, and it might be difficult to get a hold of someone in the case of an emergency.

Final Thoughts

The countries we’ve outlined above all boast top-tier talent, strong IP protections, and reliable infrastructure.

That said, keep in mind that skills alone don’t ensure success. Outsourcing strategies need to weigh all factors that might impact a project. Consider language barriers, cultural differences, and time zone incompatibility; they are all crucial to success.

Most of our clients are based in the US, as the country’s proximity to Mexico and cultural closeness are central to the value we create.

Companies based in Europe, on the other hand, can still access our talent pool, but they’re missing out on the benefits of nearshoring. Instead, it might make more sense to look for partners in Ukraine or Poland.

Tiempo provides access to talented software engineers who follow mature Agile practices and focus on client outcomes over specific technologies and tools. Learn more about our nearshore business model here.