Software development outsourcing is where an organization chooses to hire a third-party programmer or company to provide services related to software development. Through this, companies can lower costs, balance risk and improve business processes.
One area of software development expansion is Eastern Europe, and developments here could assist many businesses. Fima Katz, CEO, Exadel, Inc., looks at the geographical an cultural shifts, and outlines the advantages of software outsourcing.
Digital Journal: How has the software landscape changed?
Fima Katz: For the past ten to fifteen years, the landscape of software development has changed and advanced at a dizzying pace. Enterprise-scale digital transformations are fueled by development methodologies like agile, and value stream methodologies for business transformation like DevOps – approaches that focus on shrinking time to market and increasing frequency and velocity of deployments.
DJ: Are there sufficient skills in the workplace to develop these solutions?
Katz: Behind this incredible acceleration is a community of skilled IT professionals and developers. However, many U.S.-based companies are now facing a dearth of skilled labor that can keep up with the pace of business. With that in mind, many organizations are turning to Eastern Europe — a growing hotbed of highly educated and skilled software engineering talent.
DJ: What does this mean for the national and international workforce?
Katz: As an example of the ways Eastern Europe is filling the talent gap faced in the U.S., look no further than Poland. Global organizations like Accenture, Credit Suisse and Goldman Sachs have all expanded operations in Poland. In recent history, Poland has hovered around tenth in European employment costs while simultaneously (and consistently) ranking in the top ten in the “Top Coder” list.
If you’re looking for an educated workforce, Poland has that as well, with 40 per cent of Polish citizens aged 25-34 holding college degrees. The United States averages 35 per cent. Polish, and other Eastern European citizens, are seeing the earnings potential in acquiring computer science and technology degrees and are taking the opportunity to cash in on the influx of foreign business by acquiring degrees in record numbers.
DJ: Are there other examples?
Katz: Poland is not alone in Eastern Europe’s growing software engineering force. Countries like Romania, Bulgaria, the Czech Republic and others continue to expand their skilled labor forces and create technology and software engineering-friendly business climates. This year alone the Czech Republic jumped up ten spots in the ATKearney Global Services Location Index to spot 16. The Czech Republic currently has approximately 65,000 employees working in the business services sector, with that number expected to grow to 100,000 in the next two years. Companies like GoPro are investing big in Romania, adding 100 hires to their Bucharest office, while Uber has a current goal to double the number of IT professionals in its Sofia, Bulgaria, engineering center.
DJ: What is driving this massive growth in Eastern European software engineering, and what makes the environment so attractive for North American and Western European organizations?
Katz: First, there is much less of a culture gap compared to other historically tapped resources like China and India. Poland, Romania, Hungary and the Czech Republic all find themselves in the top 20 in the English Proficiency Index.
India, on the other hand, sits at 27th and China at 36th. Also, the time difference is much easier to navigate. The time difference between technology epicenter San Francisco and Warsaw is just nine hours, but San Francisco to Hong Kong is a more intimidating 15 hours. The simple act of getting on a phone call to discuss a project is much more of a logistical difficulty when working with resources based in Asia.
Second, as alluded to above, is cost savings. A top-tier engineer from Eastern Europe may not be as low cost as a similar developer in India, but that engineer is still much more cost-effective than an equivalent U.S. or Western Europe-based IT professional. Further cost savings come from the fact that Eastern European nations are increasingly on the cutting edge of technologies and procedures, providing savings through reduced billable hours and faster overall time to market.
Another strong appeal for U.S.-based organizations is security. The EU is notoriously known for its strict data and security standards, which makes staying within the bounds of U.S. compliance regulations much easier. That means countries like Romania, Poland and Hungary are well-versed in strict security protocols, often going above and beyond the bare minimum.
DJ: Are there other factors?
Katz: It also comes down to simple supply and demand. The fact is that the boom in the United States’ tech sector, as well as ever-growing customer expectations that demand faster and more frequent releases, is outpacing the number of talented developers that can meet the demands. Massive technology organizations like Google and Microsoft are desperate for skilled engineers that can help their organizations achieve lofty goals. When attracting top talent in the U.S. means spending huge sums to appeal to the limited number of candidates, or outsourcing operations to equally talented and driven workforces abroad, the decision is simple.
DJ: How about language barriers?
Katz: For companies with global ambitions, outsourcing to Eastern Europe makes sense from a language perspective as well. In Romania, for example, it is common for educated individuals to speak not only Romanian and English, but languages like French, German, and Italian as well. As organizations grow globally, having resources in Eastern Europe may position them well to keep communication open and eliminate potential language barriers.
DJ: What does this mean for software development?
Katz: Eastern European companies are investing big in their IT workforces, both in terms of infrastructure and in educational opportunities within universities. These countries are recognizing the economic impact of supporting their growing reputations as software engineering resources and are embracing these roles. Furthermore, countries are recognizing that the competition amongst Eastern European nations to be seen as the “top” player in software development is growing. In response, countries are investing to grow their IT professional markets to stay competitive in their respective regions. The result is a rapidly accelerating adoption of new technology and a fiercely competitive climate that is churning out top-tier talent.
DJ: How are businesses reacting?
Katz: From a U.S. perspective, the overall appeal of quality and cost for Eastern European software engineering talent is extremely enticing. The return on investment when working with these resources is just too hard to ignore. Furthermore, as SaaS and cloud models become more common and organizations turn toward tech as competitive differentiators for their businesses, the move toward leveraging talent from Ukraine, Belarus, Romania, Poland, Hungary and other Eastern European labour forces shows no sign of slowing any time soon.