Eastern Europe has become one of the popular outsourcing destinations worldwide. Companies look here for skilled professionals, quality services, cost-effective software (and not only) solutions.
From east to west the region includes countries like Bulgaria, Romania, Ukraine, Belarus, Hungary, and Poland. Many of them are gaining momentum as beneficial outsourcing destinations. Before we explore each country let’s have a look at some major benefits of Outsourcing in Eastern Europe:
1. Reasonable Costs versus quality
Companies from North America and Western Europe seek Eastern European talent, because those professionals offer the required value at a reasonable cost. The wages of Eastern European employees may not be lower than those in countries like India and the Philippines, but they are definitely more appealing compared to the wages in Western Europe for example.
Factors for that are too complex to be discussed right now, but it’s a fact that an average salary in Bulgaria for Y2022 is BGN 1,700 (USD 921 / EUR 869 per month), whereas employees in Switzerland earn an average wage of CHF 6,257 (USD 7,004 / EUR 6,335 ) per month. Such a large difference in the cost of labor is quite beneficial for western businesses.
2. Major Talent Pool
Western countries experience a growing shortage of skilled professionals. They can (and they do) fill it with the large talent pool in Eastern Europe. For example during Y2021 the US had over 900,000 software development vacancies. Meanwhile there’re over a million tech professionals in Eastern Europe available to step into those shoes.
Furthermore the pool of skilled professionals is growing constantly in order to accommodate other fields like web development, accounting, and HR services.
3. Location and Time Zones Convenience
Eastern Europe is popular for outsourcing also in terms of location and time zone. The region is easily accessible for countries in Central Europe and North America. Travel and communication are not an issue due to the convenient location & time zones of the CEE countries. Clients from Germany, UK and the US can visit vendors within a few hours. And the time difference, ranging from two to eight hours, is compatible with real-time communication. This convenience favors streamlining project and task management.
4. Cultural Similarities
Business etiquette of Eastern Europe is similar to that of North America and Western Europe. This may not be the case with the Asian countries. The common cultural aspects make it easier for clients to interact and cooperate with their Eastern European vendors/employees, making business operations and deals more efficient. Furthermore, Eastern Europe software developer experts are also familiar with western laws and regulations. This ensures fewer compliance issues.
5. Growing hub of IT Community
According to Intellectsoft there are between 4,500 and 6,500 software development outsourcing vendors in Eastern Europe. Also, over 1.3 million developers work in the region and this number will only keep growing in the next few years. The demand for Eastern Europe software outsourcing has driven the growth of diverse tech skills – allowing the region to produce qualified IT specialists. Apart from the skills the environment is also conducive for tech startups and companies to grow (some governments providing tax incentives to aid business ventures). It creates the foundation for a tech outsourcing market that can serve international requirements. Noticing these favoring conditions multinational giants have already set up R&Ds in the region billed as the Silicon Valley of Europe.
Now, let’s have a look at some popular countries for outsourcing in Eastern Europe these days.
Popular Outsourcing destination in Eastern Europe: Poland
Poland is one of the fastest-growing economies in Central and Eastern Europe (the CEE region). The country is very popular outsourcing destination, especially for Information Technology (IT) outsourcing. Lower labor costs, convenient geographical location, and educated workforce are part of the reasons businesses choose to operate in Poland. The country is well-positioned for nearshore outsourcing of IT from Western European countries like Germany and Belgium for example. As an EU member Poland is perfect for nearshoring providing benefits like less paper work and trade restrictions, adherence to EU regulations like GDPR, and similar work culture to western countries.
Poland’s talent pool is the largest in Central and Eastern Europe (CEE). The country also has the most software developers in Central Europe – over 300,000 developers are working in Poland (estimation provided by the German Outsourcing Association).
Computer science is popular among the Polish university students. Each year, around 75,000 students apply to study IT, and approximately 15,000 IT graduates enter the workforce. As an outsourcing destination Poland ranks 14th in the 2021’s Kearney Global service location Index . The GSLI index measures locations’ business environment of 60 countries worldwide, taking into account 47 different metrics. Among the main indicators are financial attractiveness, people skills and availability, digital resonance.
The state of the outsourcing industry in Poland
According to statista.com IT services in Poland are estimated to reach USD 6.45 bn. by the end of 2022 (a +5.5% growth vs. Y2021). Revenue by segment is presented in descending order: IT Outsourcing – USD 2.29 bn., BPO – USD 1.92 bn., other IT services – USD 1.88bn., IT consulting & implementation – USD 0.36 bn. The whole IT industry is projected to USD 9.99 bn. by 2027.
Poland is one of the world’s business service leaders. In 2021, an estimated 350,000+ people worked in about 1,600 SSCs in Poland. Additionally, the university town of Krakow has 85,000 employees in BPO and SSC (Shared Service Centers), making it the biggest hub in Europe.
Poland is a member of the European Union. Polish outsourcing vendors ensure security and compliance for their clients regarding EU regulations, especially the GDPR.
Financial attractiveness from business perspective
In terms of financial appeal Poland offers 30% lower rates compared to the US and 25% lower rates than many West-European countries. Also the cost of living in Poland is about 60% lower than the big cities in the USA.
The average wage in Poland (as of Q3/Y22) is 6,481 PLN/Month (1,467.02 USD/Month). As per the IMF (International Monetary Fund) database, the average monthly wage (adjusted for PPP) in Poland is USD 2,225 per month. On average a software developer in Poland is paid about 22,750 PLN/Month (USD 5,136.95 per month or EUR 4,863.10 per month). This is about USD 61,690.98 annually.
The average salary for a Polish Project Manager is PLN 10,416 per month (USD 2,367 per month or EUR 2,231 per month). The average additional cash compensation is PLN 13,311 (USD 3,029), with a range from PLN 3,000 – PLN 41,510 (USD 642 – USD 8,893). A senior Polish Project manager earns annually PLN 231,600 (USD 52,640 or EUR 49,585).
Foreign tech giants with operations in Poland
Many International tech companies recognize Poland’s offshore outsourcing potential and R&D in particular. Global market players like Amazon (Gdansk), IBM (Wroclaw), Microsoft (Warsaw), Capgemini (Poznan), ABB, Google, Siemens, Motorola, Intel, and McKinsey opened their R&D centers in the country.
Popular outsourcing destination in Eastern Europe: Romania
Romania is among the top EU members in terms of fast economic growth. The country has highly skilled talent pool. It is backed up by first class education institutions, specializing in computer science. The region has 41 Technical Universities, 7 of which are listed among the best computer-science institutions in the world. Romania is one of the best destinations for software outsourcing. One of its main IT hubs, Cluj Napoca, is called the “Silicon Valley of Eastern Europe.”
As an outsourcing destination Romania ranks 32nd in the 2021’s Kearney Global service location Index . As we’ve already mentioned the index measures locations’ business environment of 60 countries worldwide, taking into account 47 different metrics. Among the main indicators are financial attractiveness, people skills and availability, digital resonance.
According to the World Intellectual Property Organization (WIPO), Romania ranks 49th among 132 countries in the Global Innovation Index (GII) 2021. Romania performs best in Knowledge and Technology outputs, followed by infrastructure.
From software development perspective Romania ranks as the 3rd top location for best developers worldwide according to a 2022 Pentalog Report based on SkillValue.
The Romanian outsourcing industry
Romania is one of the leading countries in the region in terms of ITO, SSC, and BPO. Companies such as London Stock Exchange Group, Viavi, Huawei, Capgemini, Samsung, Amazon, Accenture have opened centers in Romania for R&D, business services, logistics, custom software development, etc. Romanian economy has had one of the fastest growth rates in the European Union. In Y2021 the GDP growth reached 5.1% . According to the European Commission Romanian GDP is predicted to amount to 5.8% in 2022. The software industry is of major importance when it comes to country’s economy.
Talent availability and business conditions attract foreign companies. Their continuous investment in the field makes a very positive impact on the IT sector. The value of IT outsourcing market is approximately $5.5 billion in 2021. Romanian IT exports market has been growing at about 15% annually. The annual outsourcing growth rate is 20%. Romania exports as much as 90% of its ITO services to EU countries, including Germany, France, the UK, the Netherlands, and the Nordic countries.
National and international IT and software service companies employ around 202,000 ITC professionals (45% under the age of 34 y.o.).
The ITO industry in Romania has over 110,000 active employees (54% of the workforce working in ICT). Bucharest is where 46% of all Romanian IT professionals live. 12% are in Cluj, 9% in Timisoara, and 6% in Iasi.
Romania is a member of the EU. Companies operating there can expect to be secured in terms of legislation and GDPR.
Financial attractiveness from business perspective
The Romanian government created incentives for IT companies like removing the 16% income tax levied on software development professionals. Also, there’s no income tax for R&D companies during the first 10 years. This enables companies to avail IT services at reduced costs.
The average salary in Romania is RON 8,980 (Romanian Leu) per month, which is USD 2,017 per month.
The average wage of a Project manager in Bucharest is RON 7,150 per month (USD 1,451 per month). The estimated total pay for a Project Manager is RON 14,150 per month (USD 2,870 per month). Again, based on experience, skills, and seniority mothly wages vary between RON 7K(USD 1,451 per month) & RON20K (USD 4,300 a month or EUR 4,059 per month). Keep in mind the median annual salary of a remote software developer in Romania is around RON 194,374 ( USD 41,891 / EUR 39,485). This is the base salary, not including benefits. On average, a senior software engineer based in Bucharest makes EUR 50,000 per year.
Foreign tech giants with operations in Romania
Romania provides outsourcing services to major tech companies. Moreover, the regional department of Microsoft in Romania runs two global business support centers in Bucharest and Timisoara. This alone makes a significant contribution to the development of the country’s tech industry. Additionally, Oracle employs more than 3,000 Romanian specialists. Amazon is also among the tech giants in the country employing around 3200 people in their R&D center (as per Y2020).
Popular outsourcing destination in Eastern Europe: Hungary
Like the rest of the explored nations so far, Hungary is also a country with a service-based economy. According to statista.com for the past eleven years the share of services in the gross domestic product (GDP) is 55,6%. Financial services, IT, and accounting are among the main service areas in the country. Hungary is one of the first Eastern European countries to begin exporting IT and development services. The country is one of the top outsourcing destination in the CEE region.
Hungary has a large share of outsourcing with 80,100 specialists employed in the IT sector. Approximately 3,000 IT students graduate annually on average, and about 70 institutions offer IT and computing programs in Hungary. Six of their universities have been listed in the QS World University Rankings. Systems integration (SI) and application development represent approximately a quarter of the market, while the public, finance, telecommunications, and manufacturing sectors make up around two-thirds of market revenues.
As an outsourcing destination Hungary ranks 37th in the 2021’s Kearney Global service location Index . This index takes into account 47 different metrics to measure the business environment of 60 countries worldwide. Among the main indicators are financial attractiveness, people skills and availability, digital resonance.
The outsourcing industry in Hungary
Business Process Outsourcing segment is projected to reach USD 0.40 bn. in 2022 as per the reports of statista.com . Revenue is expected to show an annual growth rate (CAGR 2022-2027) of 7.84%. Market volume is projected to USD 0.59 bn. by 2027.
Again according to data from statista.com the segment of IT Outsourcing is projected to reach USD 526.40 m. in 2023. Expected annual revenue growth rate (CAGR 2023-2027) is 8.71%. This results a projected IT outsourcing market volume of USD 735.20 m. by 2027.
Software development in Hungary represents about 6% of GDP. It is one of the most dynamic sectors, contributing significantly to the economy.
Companies with operations in Hungary can expect to be secured in terms of GDPR since the country is also a member of the EU.
Financial attractiveness from business perspective
The Hungarian government creates favorable conditions for foreign investors and domestic startup initiators. There are refundable and non-refundable incentives and cash subsidies issued by the government. For example, the country offers a 19% cash subsidy for training purposes, 14% job creation subsidy, and 5% cash subsidy for R&D activity.
Salary ranges in Hungary
The average wage (as of Oct’22) in Hungary is HUF 494,877 per month (Hungarian Forint (HUF) or 1,323.564 USD/Month. The amount in euro is 1,252.05 EUR/Month.
According to glassdoor.com the estimated total pay (salary plus additional pay) for a Project Manager in Budapest is HUF 1,643,127 per month (USD 4,413 per month or EUR 4,152 per month). Average salary of the Project manager is about HUF 793,127 per month (USD 2,128 per month or EUR 2,004 per month). The estimated additional pay is HUF 850,000 per month. Additional pay could include cash bonus, commission, tips, and profit sharing.
The median annual salary for a remote Software Developer is USD 41,761 in Hungary. This is the base salary, not including benefits.
Foreign tech giants with operations in Hungary
The main tech hub in Hungary is Budapest. Companies like IBM, EPAM, Oracle, Microsoft, and SAP have research and development centers (R&D) in the city. Also they hire developers from the local market remotely.
Popular outsourcing destination in Eastern Europe: Belarus
In Belarus outsourcing is the primary activity for businesses. It accounts for around 60.5% of the total operations in the country. Belarus has a sizable workforce, strong technical education, convenient to Western Europe time zone, and competitive rates. The country’s IT talent stands at 55,700 professionals, backed up by 21 universities that prepare IT specialists. Each year about 2,500 software engineers graduate and join the workforce. Over the recent years, the Belarusian government implemented multiple statewide tech-friendly initiatives. Some of them are public subsidies, tax incentives, and free economic tech zones.
The outsourcing industry in Belarus
Being 5.7% of country’s GDP, IT sector is one of the major contributors to the economy. Belarus generated USD 3.1 billion from the industry in 2018. By 2022, IT’s share of GDP is projected to reach 10%.
Despite the widespread control over entrepreneurs and Lukashenko’s inclinations towards dictatorship, the government has been very supportive of the country’s IT infrastructure. Developing the Belarusian Hi-Tech Park (HTP) in 2005 was the major step to provide a special economic zone with tax and legal framework tailored to IT enterprises.
In 2021 Hi-Tech Park amounted to USD 3.2 billion at a growth rate of 18.9%. HTP accounts for more than 30% of the export of services in Belarus. With external surplus of USD 2.8 billion the Hi-Tech Park provided 75% of Belarusian foreign trade surplus in goods and services for 2021.
At the year-end of 2021 Hi-Tech Park share in the GDP of Belarus reached 4.8%. Its value in the GDP for Y2021 ensured more than a quarter in the growth of Belarusian economy.
Furthermore, some Belarusian IT companies were included in the Software Magazine’s Software 500 ranking of the world’s largest software and service providers. They were also recognized by the International Association of Outsourcing Professionals (IAOP).
Financial attractiveness from business perspective
The Belarusian government offers tax benefits to resident companies. This is also the case with the Hi-Tech Park. It’s an area, that has been complimented by low levels of government interference. HTP resident-companies are exempt from corporate income tax for 15 years and are levied with 0% VAT.
The average wage in Belarus is around 1,648 BYN/Month (USD 614.513 per month or EUR 617.13 per month ). As to the average salaries for developers, companies offer USD 600- USD 1,200 to a Junior developer. Mid developer may earn USD 1,200- USD 2,500 and Senior developer +USD 3,000. Keep in mind that a remote developer in Belarus gets on average about 4,727 USD/Month which is around USD 56,733 annually. Talking about Project Managers, their salaries vary from USD 1,000 to USD 5,000.
Foreign tech giants with operations in Belarus
Belarus’ Hi-Tech Park has clients including large corporations like Microsoft, Intel, Amazon, Jaguar & Land Rover, Bosch, Lufthansa. Google & Yandex have R&D centers in Belarus. Also, digital products that were developed in Belarus like Viber, Flo, and World of Tanks are internationally renowned.
*Since Ukraine’s overall economy and everyday life are affected by the active military actions, we’re not exploring the present outsourcing conditions of the country.
Popular outsourcing destination in Eastern Europe: BULGARIA
Services sector dominates in the Bulgarian economy. In away this confirms that the major part of the working population is well skilled in delivering quality services. For the past decade Services segment has a growing share in the gross domestic product (GDP), exceeding 60% in the last 4 years. The other two major contributors are Industry with 23.4% share (Y2021) and Agriculture with 3.73% share (Y2021) in the GDP. ( source of data: statista.com).
In terms of outsourcing Bulgaria is one of the main CEE (Central &Eastern European) countries that offer BPO and ITO services. Bulgarian professionals are well-versed in the skills required by the outsourcing industry. The country has a talented employee pool, backed up by 50+ universities. Some of them offer courses on “Outsourcing Projects and Companies”. Moreover, Bulgarian employees may speak English, German, French, Italian, and Spanish professionally. Bulgaria’s geographical and cultural proximity to Western Europe add up to the appealing conditions for collaboration with western businesses.
International recognition as popular outsourcing location
The country has earned well deserved recognition as popular outsourcing destination by various institutions over the years. Some of them are:
- Most attractive location for outsourcing in Europe in 2014 by GSLI.
- Offshoring Destination of The Year in 2015 by UK’s National Outsourcing Association
- 3rd most attractive outsourcing destination in BPO & Shared service location index of Cushman & Wakefield (2015)
- “Outsourcing destination of the year” 2016 by the Global Sourcing Association.
In 2021’s Kearney Global service location Index Bulgaria maintains a stable position among the top 25 business locations. In 2021 Bulgaria takes 17th position.
A reminder bout the GSLI: The index evaluates 60 countries worldwide, ranking them by 47 different metrics. Among the main indicators are financial attractiveness, people skills and availability, digital resonance.
The Global Innovation index 2022 ranked Bulgaria on 35th position out of 132 featured economies. Bulgaria performs best in creative outputs, followed by knowledge and technology outputs, and infrastructure.
The GII consists of roughly 80 indicators, grouped into innovation inputs and outputs. Global Innovation Index aims to capture the multi-dimensional facets of innovation as well as ranking the world economies by them.
The outsourcing industry in Bulgaria
Being one of the major industries in Bulgaria, outsourcing adds $4.2 billion to national’s GDP in 2021. Sector continues to grow considerably faster than the national economy. Operating revenue in the industry reaches an almost double growth of 22.4% compared to 12.7% in 2020 (data from AIBEST report 2022).
There’re over 89 000 people employed in Bulgarian outsourcing sector (as of 2021). Employment in the sector is projected to reach 120,000 by 2025. BPO is the biggest employer at the segment level (61% of the total FTE number in 2021). ITO comes second with 28% share, followed by R&D with 11% (AIBEST report 2022)
Bulgaria is a member of the European Union. Bulgarian outsourcing vendors ensure security and compliance to their foreign clients in terms of EU legal regulations, especially GDPR.
Financial attractiveness from business perspective
The Bulgarian government offers tax incentives for foreign businesses, including the second lowest corporate income tax rate (10%) in the EU. Country has one of the lowest labor costs in the European Union.
In Bulgaria a Project manager’s salary varies between 2,900 BGN/month (USD 1,300 per month) and 6,800 BGN/Month (USD 3,690 per month or EUR 3,480 per month). Ranges in salary depend on level of seniority, experience, skills, language(s) proficiency.
In Y2021 a software specialist in Bulgaria had an average gross annual employee compensation of BGN 58,284 (USD 31,634 or EUR 29,819). Equivalent to Bulgaria the same compensation in UK was GBP 62,220 and EUR 64,468 in Germany. (Amounts are calculated through PPP coefficient using the World Bank Purchasing Power Parity conversion factor). Data from BASSCOM report.
Foreign tech companies with operations in Bulgaria
More than 60 global software brands are actively operating on Bulgarian market. According to BASSCOM 2021 report entrepreneurs from over 20 nationalities continue to open R&D centers and back offices in Bulgaria. For Y 2020 only 70+ new software companies from 14 countries have opened offices in Bulgaria, says also the report of BASSCOM. Organizations such as HP, SAP, Johnson Controls, Oracle, VMware, CISCO, ProSyst, and Atos are some of the multinational IT corporations with offices in Bulgaria.
Explore a more complex and in-depth overview of Bulgaria as outsourcing destination here.
Eastern Europe has become an attractive and fast-growing outsourcing market due to location, expertise and affordability. Its tech and other outsourcing sectors help entrepreneurs and businesses source high-quality services at a fraction of what they cost in western countries. The biggest strength of the region as popular outsourcing location lies in its talent component. It has a solid engineering potential – a result of geopolitical context, STEM education, and decades of IT outsourcing experience. Such factors turned people here into the best problem solvers and innovators. Besides that, Eastern European (IT) vendors have a solid reputation for delivering highly satisfactory results.
Are you considering outsourcing to Bulgaria? Or you’d like to level up your operations here?
Then let’s have a talk. As we’ve already established, Bulgaria is one of the popular outsourcing destinations in Eastern Europe for many international companies seeking quality, reasonable costs and professionalism. Being your outsourcing partner, we ACS Bulgaria can establish and manage various outsourcing operations, as per the needs of your business. Models we offer are Agency contracting (staff augmentation) , Managed service, and Transition & transformation of processes. Our team has the required knowledge and experience you can rely on.