Are you a startup struggling to hire software development experts to create your product? Maybe you are a business willing to improve your main platform to support continuous growth? Or perhaps you are a global enterprise in need of implementing innovative digital solutions to transform your range of offers and strengthen the market positions? In all of these cases, the answer you’re looking for might be to set up an offshore development center, or ODC.
The high cost of hiring and the lack of available experts in the US and EU make businesses consider setting up an offshore development center in Eastern Europe. And compelling reasons like lower wages due to a lower cost of living, simplified taxation for IT companies, and access to a vast pool of skilled talents tip the scales in favor of doing so.
Over the last seven years, Relevant has mastered several approaches to delivering various types of projects, and now, we want to share them with you. Keep on reading to discover the differences between building offshore development centers and outsourcing, the offshore development center benefits, the possible destinations, and why you should decide on Ukraine to set up an offshore software development center in 2021.
Table of Contents
An offshore development center (ODC) is a physical office opened by a company in any country other than the one it’s headquartered in. ODCs get established to expand software development, cybersecurity, and other capabilities of a company. Countries with access to a wide pool of skilled IT talents, good business climate, low cost of living, and high price/quality ratio of resulting products make perfect environments for ODCs.
The process of setting up an offshore development center in Eastern Europe is pretty straightforward. Here’s our checklist:
As you can see, a decision to set up an offshore development center is no different from opening a branch in a new location for any other industry. However, many businesses prefer not to invest so much effort and opt for outsourcing instead of building their own ODC.
While many businesses use these terms interchangeably, some significant differences can be found between outsourcing and setting up an ODC.
IT outsourcing refers to the approach of hiring external expertise to speed up software development and deployment, cut costs, or scale up faster. However, these experts stick around for the duration of the project only and remain the employees of the technology service provider. Timely completion and the results of the project are the vendor’s responsibility. After the project is over, these talents transfer to their employer’s next project.
All this makes IT outsourcing a perfect choice for one-time, short-term projects, be it a landing page redesign or an MVP development.
On the other hand, an offshore development center becomes a part of your company. You only need help from a local technology partner to assemble the team. The talents you hired are your employees, and they may be more engaged and committed than temporary workers. All the project outcomes are your team’s responsibility. When the project is finished, you handle the staff, either relocating or firing them.
We will discuss the pros and cons of both approaches later, and for now, let’s define when going for an ODC makes a wise business strategy.
Generally, there are three prominent cases when outsourcing doesn’t cut it, and you need to set up your own ODC.
There’s a vast difference in the scope of work between developing a mobile dating app and building a corporate ERP platform for a global supply chain. Assessing project requirements helps define the scope of work intended, as well as the time and cost estimates. If you think the development might take more than a year and the product will require ongoing support and improvements, ODC is your way to go.
You usually only need a backbone team to develop a mobile app, but delivering an enterprise solution requires more than a dozen people. And if developing it means you’ll be working with machine learning, analyzing big data, and operating mission-critical information, you will also need rare experts like data scientists, cybersecurity and machine learning pros. When your project needs more than 40 specialists, ODC becomes preferable to outsourcing.
If your product is going to handle security-sensitive data (mission-critical business information, partner’s financial data, customer’s personal details, or any information where disclosure can result in devastating reputational, financial and political consequences), ensuring secure storage and management of such data becomes a top priority. Engaging an internal cybersecurity team or forming a long-term partnership with a reliable vendor is essential, and the ODC model suits this approach best.
There are two distinct approaches to running an ODC that differ by the degree of involvement your headquarters have in running the branch office.
This is a perfect model for startups and small to medium businesses that lack in-house resources and need end-to-end results from their offshore development center team.
This is the best solution for enterprises with sufficient in-house resources to provide complete and timely input needed for ODC to operate efficiently.
And now, we can discuss the advantages of the dedicated offshore development center in more detail. These are:
Speaking of Eastern Europe and India, let’s compare the two IT hubs.
India was traditionally considered an affordable IT hub because Indians know English well, are generally good at math and are willing to work for low wages compared to the US or EU. However, the low quality of the Indian code has long since become a byword. No doubt, there are some IT outsourcing companies in India with decades of experience under their belt, yet most Indian developers trade quality for speed quite often.
For example, when Addison Lee, a respectable London-based private taxi company, decided to transform their digital presence, they faced a choice between a team from India and a team from Russia, with nearly equal pricing. The customer prepared an identical test task for both teams, with intentional bugs, room for improvement, and structural inefficiencies in the code.
The Indian team delivered the result in four days without asking for any clarifications. None of the bugs were fixed or even reported. The team simply delivered the result according to specifications.
The Russian team, on the other hand, started with gathering input from the customer. Over the course of two weeks, they analyzed the source code and the project requirements to clarify the business model the client was going for. By splitting their goals into short-term and long-term scaling plans, the Russian team was able to focus on and improve both. They also pointed out the bugs and intentional mistakes in the code during the analysis phase and offered solutions for the structural flaws.
Do we need to tell you who was chosen as a long-term technology partner?
Another problem, partially stemming from the first one, is that India was considered the world’s best IT outsourcing destination throughout the early 2000s. Due to cheap price tags, customers were willing to trade quality for speed and iron out the mistakes later. Hundreds of billions of USD were invested in the Indian economy, leading to India having the third world’s largest startup community and more than five million software developers.
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However, while growing in numbers, most of these developers barely grow in skills, though their services become increasingly expensive. The value of the rupee is growing due to a steady influx of foreign investments, but the quality of IT services doesn’t improve, making the customers wonder if there’s an alternative.
There is, indeed! Eastern European countries — Poland, Ukraine, Bulgaria, Romania — rise in prominence as reliable and affordable IT outsourcing destinations. Aside from costs, the benefits of outsourcing to Eastern Europe include:
Let’s take a closer look at the popular IT offshoring destinations in Eastern Europe.
Continue reading to discover the offshore development center benefits you’ll gain from offshoring to Poland, Ukraine, Bulgaria, or Romania.
Poland is home to nearly 300,000 software engineers working in seven major IT hubs: Krakow, Warsaw, Wroclaw, Poznan, Lodz, Katowice, and Tri-city (Sopot, Gdansk, Gdynia). Polish developers regularly win awards and retain high positions in international developer rankings.
The salaries vary from 9 to 31 Euros/hr, depending on the technology, seniority level, and geographical location.
Ukraine is a powerful competitor for Poland in terms of costs, quality, and variety of IT services. Its IT community consists of almost 200,000 software engineers, 35% of whom are Seniors, and 30% are Middle-level developers with 3-10 years of experience, according to research from DOU, the leading IT portal in the country. The IT industry grows by nearly 30% YoY due to favorable taxation for IT companies. The quality of technical education in Ukraine is quite good, so almost 20,000 talented tech graduates join the industry annually.
The largest IT hubs are Kyiv, Kharkiv, Lviv, Odesa, and Dnipro.
There are more than 1,600+ IT service companies and over 4,000+ tech companies in Ukraine. Global corporations like Samsung, Boeing, Apple, Microsoft, Sony, and others opened more than 100 R&D centers in Ukraine
The average software developer’s salary in Ukraine ranges from $10/hr to $26/hr*, depending on seniority, technology stack, and location.
* Note that the salaries mentioned above don’t equal the cost of hiring software developers through Relevant. Read more about how offshore software development cost is formed in our article.
The IT sector is booming in Bulgaria, showing 30-45% YoY growth since 2017. The country is home to more than 2,000 IT companies, 70% of which are exporting their services through outstaffing and outsourcing. The Bulgarian IT market is valued at around $3,2 billion as of 2018 with a 2,5 billion Euros turnover. The country currently has the 5th largest IT economy sector in the EU, and it is estimated to grow 4-5% YoY due to steady support from the government.
There are more than 70,000 software developers in Bulgaria, and the demand surpasses the supply two or three times, so all talented STEM (Science, Technology, Mathematics) students get employed instantly. An average hourly wage of an IT engineer in Bulgaria ranges from $9/hr to $31/hr, based on seniority level, technology stack, and location.
Romania is the 6th country in the world in terms of the number of certified IT specialists, ahead of the UK, Canada, and Germany. Global corporations like Oracle and IBM established their customer support and R&D centers in Romania, as it is a multicultural and multilingual country with nearly 80% of IT specialists fluent in English and customer support specialists speaking 15 European languages.
As you can see, each of these countries can be a viable choice for setting up an offshore development center in Eastern Europe. So…
We have covered the ten most compelling reasons to offshore or outsource to Ukraine in detail, so you’re welcome to read that overview. But if you don’t have the time, here are the six most important reasons for setting up an offshore development center in Ukraine.
As you can see, Ukraine really is a great destination to set up an offshore development center. And should you decide to outsource instead of building an ODC, Ukrainian technology partners can help you deal with those kinds of tasks too!
If you feel like setting up an ODC is too much work, outsourcing is a nice alternative. In software development outsourcing, there are usually two price models that vary based on the scope of your project: fixed-price contracts and dedicated development teams.
Fixed-time contracts are an excellent choice for launching a product or building an MVP for a startup without a tech team. A technology partner gathers your requirements, provides project estimates, and signs a contract to design, develop, and deliver the required software. But mind that the project scope cannot be adjusted easily, and an additional agreement should be formed for every case. However, this is the best choice for limited-budget projects.
This is one of the most popular project engagement models, where you pay for quickly scaling up your expertise by hiring ready teams from the service provider. Hiring a dedicated development team is the best solution for projects with tight deadlines, startups that need to scale fast and without issues, or enterprises needing instant access to specific expertise. Due to fluid workflows, staffing can happen in under a week, and you get an external development team under your control while avoiding administrative hassle.
As you can see, setting up an offshore development center in Eastern Europe is a wise choice if your company wants to get access to a pool of skilled IT engineers quickly and save money in the process. You can select from a variety of locations and choose the most fitting collaboration model for your business. The most important aspect of this process is finding a reliable technology partner who will handle all administrative and managerial tasks, so you could concentrate on growing your business while having your back covered.
At Relevant, we’ve got you covered. We are a software development company with over seven years of experience and 200+ projects delivered to customers globally. Our teams work under various project management models, from dedicated teams and talent outstaffing to building offshore development centers for customers from retail, real estate, fintech, travel, and construction industries.
With a commitment to do more with less, deliver services that amaze, be proud of what we deliver, and build outstanding teams, we have a vision of becoming your software engineering partner of choice in Eastern Europe. So don’t hesitate and contact Relevant today.