India seems to be a fine place to outsource technological solutions to. Or is it? Eastern Europe has recently risen as a competitor to even the largest Indian companies, with decades of experience behind its back, and does not seem less appealing for businesses in terms of both quality of solutions and cost effectiveness. So can India still be considered as one of best choices to outsource IT to?
India has skyrocketed as one of world centers of cheap innovations. Businesses from all over the world have offshored their projects there in hopes of dramatic cost reduction. Sometimes quality was the currency chosen to pay for quality, but we will not focus our attention on this aspect. For now, at least.
Throughout many years, up to 2008-2009 or something, Indian companies experienced enormous growth in both profit and new customers. Let’s take companies like Tata Consulting Services, Wipro, HLC and Infosys technologies. All of them are among the largest players in the Indian market. Their sales growth in 2006 was approximately 50%, while in 2008 it was not much more than 18%. Don’t get this wrong, the rate of 18% is still nice and completely acceptable; however, when a decrease from 50% is visualized we can clearly see the bigger picture.
The Indian advantage was practically demolished with Indian success. Amounts of delivered services skyrocketed and this led to growth in the overall economy of the country and the value of the rupee was (and is) constantly growing. The workforce has gotten more expensive and so has delivered services; however, quality was unchanged leaving businesses with lots of questions like, “Why should we pay more for less?”
Thus Eastern Europe, the world’s third preferred outsourcing destination, got the competitive advantage it needed, and countries like Poland, Ukraine, Romania, Belarus and even Russia, etc. rise as new stars. Stars of IT nearshoring.
Fun fact for you to consider: Even Indian outsourcing companies are opening new offices in the EU. This step could not have been done without a serious reason. MphasiS, for example, expanded their business into Poland to gain the “nearshore advantage.” And they expect to mature their new office to 200 employees in two years. And this step does, indeed, open numerous new doors and advantages for business.
A key reason as to why the EU has become so popular is that companies are geographically and culturally closer to their customers, thus offshoring is transformed into nearshoring. Better understanding of the language; comfortable time zones; experienced, highly skilled professionals; and all that in a nice package of affordable pricing policies. EU nearshoring companies tend to deliver what many Indian business could not: balance between price and quality.
Additional researches have proven that Eastern European countries tend to provide more engagement to their clients as well. Addison Lee, for example, has chosen to work with a Russian company instead of Indian and they were clever at making their decision. Source code was sent to both potentially applicable teams, Indian and Russian. Mistakes and places for optimization, debugging and poor logic were placed there on purpose.
The team from India was very fast and efficient with their approach and did their best to deliver their solution ASAP. No questions were asked about business values, business logic, etc. The team did not notice any issues, nor did they offer fixes. No one asked for clarifications.
The team from Russia, on the contrary, had a different approach. They analyzed both the requirements and the source code before commencing with work and started asking questions about how Addison Lee’s business works, how should it function and what do they expect from the solution. Mistakes and errors in source code were pointed out and alternatives were offered. Thus, the Russian team was chosen for the job. Should it be mentioned that the rates and prices of these two companies were almost identical?
Eastern European countries have proven to be overfilled with skilled software engineers, testers, designers, and developers. In the former Soviet Union region, this has occured for a simple reason: The soviets had participated in the arms race and innovations during the Cold War, thus an enormous amount of higher educational institutions for engineers was established. Entire generations of people were forced to choose education in technology to survive.
Today, IT is the only industry that grows in the unstable economic environments of numerous EU countries, thus many young talents are attracted into technology.
This has led to a curious fact: There are 500 – 1.500 IT/technology/engineering graduates for every 100.000 people in the population. Such a background behind delivery of nearshoring services has transformed EU countries into a delicious treat for companies from the R&D and ITO spaces.
True strength of nearshoring
Much more than one fifth of the world’s top 100 sites from outsourcing providers are located and hosted from the Eastern European region, as are the firms behind those websites. Ukraine, Poland, Belarus, Czech Republic – all of these places are considered the world’s leading IT and tech service providers. Surely the availability of talents played a major role in this, but nearshoring has much more than simply skilled experts to offer. For example:
- Time zones! Considering EU is still Europe differences between your business hours and the ones of the outsourced team have no significant differences. Let’s take Ukraine, for example. More than 70% of Ukrainian IT specialists are successfully delivering quality solutions to European businesses and are fully capable of maintaining 24/7 contact if needed.
- Cultural similarities! Familiar language, traditions, values, and more are shared throughout all European countries, thus collaboration, communication and teamwork is simplified.
- It’s not just the number of experts! Lots of average or even below-average professionals could never accomplish complex projects that require constructive, analytical thinking and problem-solving skills. Luckily, experts from the EU have it all in one package. Ukrainian experts, for example, come in the fourth position in the top 10 of countries with the most certified IT professionals, according to BrainBench’s Global IT IQ Report.
A combination of all mentioned factors have transformed the EU into a rival equal to such sharks of the outsourcing world as India or China, and leave the region with all the required chances to surpass its larger competitors.