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The rise of nearshore outsourcing to Eastern Europe.

Outsourcing in the digital age has taken on a new level of importance as enterprises across the world revamp and expand their digital offering.

As UK tech talent pools become more competitive, and recruitment environments become more cutthroat, employers have sought refuge in flexible outsourcing to tech-savvy neighbouring countries that can offer high-quality technical support, at affordable rates.

  • Nearshoring operates in the middle ground between in-house talent solutions and fully outsourcing services to another country, literally operating from a location “near” to any given company. Typically, this is in neighbouring countries or regions, for example, between the UK and Europe.

Nearshoring has become synonymous with emerging and growing tech companies who, seeking immediate support, and faced with increasing demand, need a talent resource that’s both accessible (IE. in or near the same time zone), culturally mirrored (IE. commonality of language) and cost-effective (IE. companies benefit from favourable exchange rates, tax agreements, incentives etc).

As latencies have improved, and as COVID has magnified both the need for, and accessibility of, novel tech solutions, nearshoring is having its moment. By finding technical support from a geographically closer location, and with closer cultural experiences and connections, companies are finding nearshoring is a preferred talent solution to legacy outsourcing locations.

The UK tech market is exploding with demand. StartNearshoring quotes “65% of all respondents say they will outsource at the same or more rate in the future, with one-third anticipating to outsource more”, with the primary reasons for seeking nearshore solutions being cost reduction, scalability, and core business support.

With a domestic IT industry worth nearly £130 billion and rising, investment in nearshoring has never been easier or more necessary for embattled tech teams.

The Rise of Eastern Europe as the nearshore destination of choice.

“By 2025 the number of software developers in Ukraine is expected to reach 242K…(with) 100 out of Fortune 500 companies and 20% of global leaders have their remote development teams in Ukraine…(and) 81% of software developers have an intermediate or higher level of English proficiency” (source).

Ukraine’s rise to the top of the nearshoring food chain echoes that of Bulgaria - who offer reductions in “development costs by up to 50%...Bulgarian Java and Python developers rank second and third (in global ranking, boasting) more than 40k software engineers” (source), and Romania - who offers “an 8.8% annual growth rate for employment in the IT sector” (source)…“(with) KPMG (listing) Romania as the number one country among the mature outsourcing markets” (source).

Other countries such as Poland, France, Belarus and Hungary are also frequent destinations for nearshoring tech solutions, and in total there are “around 3,000 nearshore outsourcing companies in Eastern Europe” (source).

UK tech employers have been leaning on the Eastern Europe labour market for transient labour for decades, but over the last few years, UK companies have begun to take stock of their incredibly gifted domestic tech talent pool.

Why has it grown in credibility?

With necessity comes higher demand, but Eastern Europe continues to draw positive, credible attention due to cultural parallels and focuses on STEM teaching (not to mention the EU’s commitment of €22 billion in youth employment support with a high regard for STEM subjects and female workforce inclusion), cultural parity in equality of workforce, and affordability.

Bulgaria “employs the highest proportion of female software developers in the ICT industry with 27% of the force being female”. With many UK employers and educators struggling to engage young women in IT and tech, the importation of mentor networks with leading STEM-educated women in Eastern Europe offers opportunities for our own young domestic workforce to improve their equity of representation.

Quality of delivery, improved latency and cost-effectiveness continue to also be huge draws for UK tech leaders. From flexible frameworks of nearshoring to affordable rates outside of IR35, nearshoring has become both an economic boon, as much as a technical one. In some instances, full-stack developers from nearshore resources can cost up to 30%-50% less than domestic talent.

Summary

As Accedia neatly summarised in their report IT Outsourcing Eastern Europe: Top Destinations, “Eastern Europe is a desirable location primarily for nearshore outsourcing for numerous reasons, including a large highly qualified talent pool, technology stack versatility, English language skills, lower development costs, and deep-rooted traditions in Computer Science and Mathematics”.

The growing requirement for tech talent cannot be simply wished into existence, and many UK tech companies will continue to battle against a tide of tech demand and a narrowing talent pool. But there are resources available to pressured companies seeking tech redress, and Eastern Europe continues to provide accessible, high-quality support for tech companies across the board.

Next Steps

Contact the BrightBox team today if you would like support overcoming your resources challenges.

References:

https://startnearshoring.com/knowledge/nearshoring-in-the-united-kingdom/

https://www.daxx.com/blog/development-trends/nearshore-outsourcing-eastern-vs-southern-europe

https://icon-worldwide.com/blog/nearshoring-bulgaria/

https://accedia.com/blog/it-outsourcing-eastern-europe-best-nearshore-destinations/

https://youteam.io/blog/developers-in-romania-insight-into-their-culture-and-it-market/

https://www.n-ix.com/top-nearshore-outsourcing-companies/#:~:text=There%20are%20around%203%2C000%20nearshore,the%20number%20tends%20to%20grow.

https://www.euractiv.com/section/digital/linksdossier/the-future-for-stem-in-europe/

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