Is Software Development Outsourcing to China on the Decline?

According to Statista, the IT outsourcing industry will exceed $400 billion by the end of 2021, increasing from 378.1 billion in 2018. 

With many companies looking to leverage the benefits of software outsourcing, such numbers are not surprising. 

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Besides, more and more players come on to the market. Today, countries like Ukraine, Poland, and China are taking major strides to get a chunk of the lucrative outsourcing pie.

The high demand for software development solutions results from the ever-increasing drive towards digital transformation. Software development is a digital-first business strategy that the majority of companies have adopted or intend to. 

Unfortunately, not so many businesses can afford an in-house software development team or access advanced tools and technology to facilitate a successful development process.

This is where software development outsourcing comes into play.

Software development outsourcing is becoming more and more popular because it is a cost-effective way of getting high-quality solutions. 

If you’ve already decided to outsource, the next question to answer is which destination to choose. You may have heard that one of the good options, for now, is China. Let’s find out if that’s true.

4 countries to consider when outsourcing software development project

There are many outsourcing destinations worldwide. Here are five of the best countries to outsource software development.

1. Ukraine

Ukraine is a high-ranking tech outsourcing destination for several reasons. For starters, it boasts over 210,000 IT professionals. According to the IT Ukraine Association, over 20,000 tech students graduate every year in Ukraine. 

What’s more, 11 tech outsourcing companies in Ukraine were listed in the 2020 Global Outsourcing 100 by the International Association of Outsourcing Professionals. 

The perks of outsourcing to Ukraine do not stop at that. The highly qualified tech professionals are proficient in English, ensuring ease of communication when working with foreign clients. 

Another reason why Ukraine is a great software development destination is the fact that the country offers relatively low rates for top-quality services.

2. Poland

Poland has over 295,000 tech experts and more than 600 IT companies, which gives you a wide pool of developers and tech experts to pick from. 

The country’s tech experts are aware of the latest global trends in the IT industry. Therefore, they understand the intricacies of software development and are well-versed with popular tech stacks and programming languages.

3. Bulgaria

A notable advantage of outsourcing to Bulgaria is that the country shares the same timezone as the US and UK, allowing developers and clients to work in real-time. 

The country has over 70,000 tech professionals, with nearly 2000 students graduating with tech-related expertise annually.

4. China

China is one of the four leading outsourcing destinations in Asia, along with India, Singapore, and the Philippines. According to China’s Ministry of Commerce, in the first two months of 2021, businesses inked service outsourcing contracts worth a total of $26.45 billion, which represents year-on-year growth of 72.3%.

According to HackerRank, if there were a programming Olympics, China would rank first. Thanks to its large population, many tech students graduate each year, adding to their already vast developer pool. 

Below is an overview of the tech industry in the five countries mentioned above.

China’s IT ecosystem: Brief overview

Software development outsourcing to China is gaining popularity more than ever. One of the biggest reasons for this is its rapidly developing IT hubs. Below, we’ll look into some of the top locations you should consider when outsourcing software development to China.

What are the biggest tech hubs in China?

Four Chinese cities were mentioned among 20 leading tech hubs outside Silicon Valley, the KPMG’s Technology Industry innovation survey says. Find out more about each city below.

1. Shanghai

Tech experts in Shanghai are known for their expertise in the Biotech field. They are also proficient at handling projects requiring knowledge in Artificial Intelligence, Big Data, aviation, Blockchain, and strengthening of semiconductors.

Furthermore, Shanghai has plans to introduce city-wide 5G coverage to boost its IT network infrastructure and improve the city’s development. This will help support the local tech experts to keep making strides in advancing the tech industry.

2. Beijing

Beijing is well-known for its strides in AI, Big Data, 5G, and quantum computing. Thanks to the great number of businesses that make software products, it has become an excellent destination for outsourcing web development. 

With so many career opportunities and investors, it’s no surprise that many Chinese talents choose Beijing over other software development destinations.

3. Hong Kong

Key areas of development in Hong Kong are biotech, artificial intelligence, smart cities, and financial technology (fintech). Thanks to its economic connectivity, Hong Kong has made itself a hub for smart city development.

4. Shenzhen

Shenzhen is widely known for rapid technological innovations that have a positive impact on the manufacturing industry. Some of their critical developmental areas include embedded systems, artificial intelligence, hardware, and semiconductors.

Shenzhen is also known for hosting the largest electronic market in the world, Huaqiangbei. This market environment makes it a conducive city to support the growth of IT companies.

Emerging tech cities

While these four cities have established themselves as technology hubs in China, some upcoming cities are to watch out for. 

To briefly mention a few:

What are the benefits and challenges of outsourcing to China?

China software development outsourcing is a very common practice these days. But before contacting a Chinese outsourcing firm, read the section below – it will tell you about the major pros and cons of outsourcing to this country.

Advantages of outsourcing to China

Here are the key advantages of outsourcing software development projects to China.

1. Large talent pool
   According to data from the Chinese government, there are more than 7 million data scientists, software developers, and AI trainers in China. With the vast talent pool, it is easier to find a tech specialist in this country than in other outsourcing destinations.
2. Cost-effectiveness
   While it may be costly to hire offshore software developers from the leading Chinese IT hubs, some upcoming companies offer software design outsourcing services at relatively lower rates. 
   Considering that businesses can get programming services that suit their budget, the varying prices attract a wide range of clients.
3. Access to technology and expertise
   Many IT companies in China deal with complex and competitive technological projects. For this reason, finding tech experts in China with in-depth knowledge and expertise to cope with complicated IT tasks is not that difficult.
4. Flexibility
   If you were a business in a non- tech-related field and needed a mobile app, what would you do?. Right – outsourcing! If you choose to outsource mobile development to China, you can hire the relevant employees to implement the project. 

Regardless of the nature of your project, you can rest assured that software outsourcing firms in China will find the right developers to handle it.

Risks of outsourcing a software development project to China

Outsourcing to China also comes with its fair share of software outsourcing challenges.

1. Weak Intellectual Properties (IP) protection

This is one of the common problems companies face when outsourcing their IT development to China. While the Chinese government has made considerable strides towards strengthening IP rights, a client cannot be sure of the uniqueness and exclusivity of their product. 

The US Department of Justice, in 2020, made a statement addressing the theft of intellectual property by China and offered steps forward to help stop or reduce the phenomenon.

2. Lower quality product

As stated earlier, some software companies in China offer services at relatively lower prices. This means the cost of development, as well as infrastructure, are limited. Overall, this translates into low-quality software.

3. Language and cultural barriers

According to estimates, only about 1% of China’s population (around 10 million Chinese people) speak English. The Chinese culture also is different from the western culture. For these reasons, you may experience difficulties working with Chinese developers, as they may not be able to understand the project’s objectives.

4. Subsequent outsourcing

When you outsource to China (or any other location), sometimes, you have limited control over what the company/team you outsource does. 

It is, therefore, possible for the company you choose to outsource the task to another party. In such instances, communicating your project goals becomes a nightmare, since your developer is only a middleman. 

With little control over the project, there is a high chance that you will end up with a poor-quality end-product.

What are the top 10 outsourcing companies in China?

Are you looking for Chinese outsourcing companies? Here are the top 10 companies to start with.

1. Insigma 
   Insigma is a major IT outsourcing company in China, developing quality products for various industries and markets, particularly for Japan.
2. Beyondsoft Consulting Inc
   Beyondsoft Consulting Inc has been offering high-quality IT services for over 20 years. They are experienced in several tech domains, including cloud, big data, analytics, and test automation.
3. Neusoft 
   Neusoft, which was founded in 1991, works with projects in several tech fields, including smart connected products, industrial solutions, software tech, cloud, and data services.
4. Exoft 
   As one of the authority software development solutions providers, Exoft is a force to reckon with on the app and web development landscape. The company also provides full-cycle development support.
5. Momentum design lab 
   Over the past few years, Momentum design lab has worked with numerous global companies. They collaborate with start-ups and established companies alike, guiding them through all stages in the development cycle.
6. CentLing Technologies
   Founded in 2009, CentLing Technologies is well-versed with application development and provides integration services for various markets.
7. CIeNET Technologies 
   This company has over 500 IT professionals with expertise in software engineering, technical consulting, and solution services. They also have several R&D centers in China.
8. China Cache 
   This CDN and Internet Solutions Provider offers clients reliable, scalable, high-performance, and flexible content delivery networks and cloud services. They have worked with clients in many fields, including banking, e-commerce, and gaming.
9. Hyperlink InfoSystem 
   Established in 2011, Hyperlink InfoSystem is a leading IT software solutions provider that focuses on mobile development and artificial intelligence.
10. ACHIEVO
    Achievo is a well-established IT software provider that has experience in various tech domains. They offer end-to-end software development services, from project analysis to testing execution and maintenance.

China vs. Ukraine: Which one is best for your outsourcing development project?

Outsourcing to Ukraine is no news for many businesses around the world. This country has gained recognition as a very reliable outsourcing provider.

In this section, we will compare China and Ukraine based on four parameters.

1. IT talent pool – China has a larger pool of IT specialists as compared to Ukraine. While finding specialists in China is easier, the quality of tech experts in China is quite lower than in Ukraine.
2. Rates – The salaries of Chinese developers are lower than in the US but higher than that of Ukrainian developers, thanks in part to the lower cost of living. When you compare a software engineer salary in China and that of a software engineer in Ukraine, the Ukrainian salary might be even lower. At the same time, the quality of work of Ukrainian companies can be just as good if not better than the work of Chinese companies. 
3. Language and cultural barriers – When you hire a developer from China, you are likely to face some language and cultural challenges, especially if you are not from an Asian country. This is not the case with Ukraine, where most developers speak English and are versed with western customs.
4. Time zone – There is a 12-hour time difference between China and the US. This makes real-time communication not that easy. The US and the UK have a 7-hour time difference, which makes scheduling communication with a developer in Ukraine pretty easy.

All things considered, Ukraine is currently a better option for outsourcing your IT project. However, reading more on Ukraine outsourcing could help make an even more informed decision.

Wrapping up

Many reasons have propelled China towards becoming one of the most attractive outsourcing destinations, one of them being the low software development costs. 

However, if you want to hire a development team, there are more things to consider besides price. For example, finding a qualified tech partner and getting quality services is of the utmost importance.

Relevant software has extensive experience in implementing the most challenging outsourcing tasks. Here are some great projects that we at Relevant have built for our clients. If you need experienced IT specialists or a skilled, dedicated team, contact us!

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