Software Outsourcing Industries Comparison: Vietnam, India, Philippines, and Poland
Global businesses have increasingly turned to software outsourcing as a proven method to realize significant benefits. With the availability of highly skilled and committed teams or team extensions, this approach can be a great fit for both established companies and startups. Numerous professional software development services offer a wide range of options based on specific criteria such as language requirements, time zone differences, geographical proximity, and cultural similarities.
Cost is an influential factor. However, even if cost saving on any project is critical for a business, you must remember other factors. Selecting the right country and vendor for your project will comprise a range of essential elements like the availability of the required IT specialists, corporate tax rates, time zones, infrastructure, and general ease of operating business within that area.
Overview of Primary Destinations
For enterprises that are interested in beginning or enhancing their current software activities, making a wise decision regarding the right destination is critical. Below is a comprehensive guideline discussing the top outsourcing countries along with some pros and cons for every country. Your final choice will depend on your internal criteria like project requirements and financial implications. Nevertheless, all qualified software development firms will be ready to listen to your needs first before helping you make the right choice.
India is undoubtedly among the leading nations in the field. That is mainly because the country has a massive talent pool with different skill levels that combine to provide great value to any company. India is also considered to be among the best countries to offer excellent value software development services at affordable prices.
In addition to having a vibrant IT community, India has better conditions and enough resources that favor the setup of adequate offshore development facilities. Also, since the country has dedicated itself to developing its capacity of offering value-oriented, affordable, and timely services over a long period, they have a proven ability to deliver software development better than other countries.
India has Skilled Software Developers
India has the most extensive pool of talents within the software development field. It has a large number of professionals within the IT field compared to most countries. Hence, finding qualified software engineers and other IT supporting skill sets becomes more comfortable for an offshore firm.
Indians are Aggressive at Adjusting to Changes
Indian professionals are at the forefront when it comes to learning and working on the latest technologies. The latest IT competencies and skillsets include everything from artificial intelligence and IoT to blockchain and cloud computing among others. That is why Indian IT professionals are highly sought after across all industries, and you will find most of these professionals holding pivotal roles within the IT industry.
A Supportive Government
It is clear to see that India’s government is highly supportive of the software industry in the country. In 2017, the government invested over 100 billion dollars in building infrastructure and strengthening the IT sector to give companies better opportunities and strengths.
Besides the universal benefits such as cheaper and quick work, India has many advanced features that lure established enterprises, small businesses and new startups from other countries to choose this destination for their offshore software development needs. Here are
Huge Talent Pool
India is not only the second most populated country in the world, but it also has a remarkably large population of people with IT qualifications. Hence, Indian IT firms can hire plenty of tech specialists with the necessary skillsets. You can get a firm with over 200 skilled IT professionals, which is highly beneficial when working on large-scale projects.
While cost should be the only factor when choosing a destination, it is hard to ignore India’s affordable yet valuable solutions. Indian firms work on optimized, cost-effective strategies that take advantage of the readily available skilled developers, thus giving the country an edge over similar countries. For enterprises, it means better control of your budget and access to highly skilled developers at low prices.
The Language Advantage
Even though some may rightly say that English is not the first language in India, it is a language that is primarily used in the business sector. Since India was under British colonial rule for nearly two centuries, the country has deep-rooted connections with the English language.
The benefit is that you can work across multiple time zones. Productivity and overall efficiency are significantly boosted when you carry out 24/7 operations. A great example here would be US-based companies that can utilize their internal teams during the day and shift their operations to India at night to provide always-available customer support.
India was recently ranked highly among the top 100 countries in regard to ease of doing business. There are sustained efforts in the country to push positive business reforms and embolden its position as one of the preferred destinations for IT development. The security and IT laws have also been strengthened to help in preventing data leaks and theft.
Despite the language being positive, it can also be detrimental. Often the writing skills of Indians will surpass their comprehension and speaking skills. That means when you convey messages through telephone or video calls, it is likely that certain phrases or words can be misinterpreted. That is because the tone, intonation, and pronunciation vary from how Indians speak English.
Quality of Results Can Suffer If You Choose Unreliable Agencies
This industry in India is thriving, and there are thousands of companies. However, that does present a challenge for external companies to choose the best one as only a few of these firms can deliver high-quality results. Thus, you must be cautious of companies that look too eager to work with you and have very low offers. A
Different Work Culture
The work culture in India is unique in that some companies can compromise on work quality to achieve their targets. That is because certain companies may have limited people management skills and may hire unskilled developers. Also, Indians don’t give too much value to time, which may lead to delays in the entire project.
Another popular destination in Asia is the Philippines. Many international companies choose this particular country for their needs since it has numerous, top-tier software development vendors that give access to an excellent and skilled talent pool. Furthermore, like India, the Philippines' software development industry is backed by firm governmental support.
Based on data from the Philippine Software Industry Association or PSIA, the nation currently has over 120,000 software developers. The PSIA predicts that a high number of experienced developers will rise to more than 200,500 by 2020. Also, the country’s software industry, which is currently valued at $3 billion, is projected to rise to 7 billion dollars by 2020.
According to Jonathan De Luzuriaga, the PSIA President, the country will also increase its market share in the universal IT sector from 12% to 15%. Currently, the IT sector in the Philippines is going to generate approximately 10% of the nation’s GDP. Overall, the sustained growth of the IT industry here is supported by strong government incentives.
A crucial factor is English language fluency, which is critical for successful communication and cooperation. The nation is even listed amongst the top 30 nations in the world with high numbers of software specialists that can communicate fluently in English. However, despite the country making significant progress in various domains like software engineering, the volatile political situation hurts the economy.
Culture and communication
The people of the Philippines spent four decades under colonial rule by the US. Hence, the nation is quite westernized, and the English language is widely used across the country. This destination is regarded as a US-friendly country in Asia, and it is ranked highly in similarities to Western cultures.
Focus on Emerging Technologies
In addition to having a strong economy, the IT sector is one of the fastest-growing and most dynamic industries in the Philippines. Many companies specialize in various aspects of software development as well as emerging technologies like blockchain and AI.
Skills and Education
The Philippines is ideal due to its highly-educated labor pool. They have an internationally-respected education system that produces highly quailed graduates. Furthermore, there are more than 15,000 graduates from technology courses, which is among the highest rates across the world. That access to expert skills has led the state to be identified as among the leading destinations for software development.
- Outstanding Understanding of the Western Culture
Once the Americans successfully liberated the Philippines during World War II from Japan, the citizens adapted and embraced Western cultures in their daily lives. English is taught as one of the primary subjects within their education system and a large percentage of advertising, business and television are also done using English.
- The American Accent
Communicating speaking to Filipinos is possible thanks to their American accents. That strong influence by America on the Philippines wired the citizens to speak with better accents, especially when compared to a country like India.
- Cheap Labor Costs
The economy in the Philippines is not the strongest due to successive corrupt governments. In the last two decades, two previous presidents faced corruption charges and are currently under investigation. Corruption and a low performing economy mean that the American dollar is quite influential in the country compared to the Pesos. Hence, organizations interested in offshoring and outsourcing software development to this country can end up saving more than 70% thanks to cheap labor costs.
- Remarkable Talent and Unique Recruitment Processes
The leading software companies located in the Philippines hire candidates who have college degrees and proven experience in their respective fields. Additionally, the country has a unique recruitment process. Employers here can request potential candidates to sit for additional IQ exams and also to categorize the candidates using various criteria like marital status, gender, and age.
- World Class IT Infrastructure
Due to significant investments and ongoing improvements, the Philippines boasts of a similar world-class IT infrastructure as other Asian giants like South Korea, Hong Kong, and Japan. Numerous established ISPs are offering high-speed, dedicated fiber optic internet connections nationwide. Various leading technology firms like Avaya and Cisco even have local offices located in Manila to provide expert networking and data solutions for software organizations.
- Unpredictable Weather Conditions
The country experiences an average of twelve tropical typhoons per year that can cause floods and other disasters. That means there is a potential that works in specific areas could be affected by such types of weather, which could delay ongoing software projects.
- Numerous Holidays
While the US only has eleven official holidays, there are 18 non-working holidays in the Philippines. Also, since most Filipinos are Catholics, the Holy Wee represents the most extended holiday in the country. These extended breaks could be quite costly, especially when working on time-sensitive projects.
- Labor Codes Favor Employees
The labor codes here greatly favor the employees. For instance, an employer can’t fire a non-performing worker at will before providing proper documentation and cause. The termination of workers also demands that the organization offer the prescribed severance pay and any other dues.
- Extra Pay for the 13th Month
The other fascinating thing about the Filipino labor code is that it requires organizations to pay workers for an extra month annually. That incremental 13th-month pay must be paid out in December, and it acts as a compulsory bonus to employees
Despite being a moderately new concept that was started more than one decade ago, the software industry has grown quite significantly. Some of the earlier entrants into the country include Intel and Oracle who saw the potential that the country had in developing software solutions. Also, the government has implemented attractive policies to attract IT entrepreneurs along with substantial investments in the STEM fields to create robust and qualified technical engineers.
The technology industries and subsequent services have experienced remarkable growth over the last few years. The country was recently ranked among the most attractive destination for countries in the GSLI 2017 report. That favorable data shows that more businesses are choosing to use offshore software development in Vietnam over other competitors like India.
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Dedicated Labor Force
Vietnam's abundance of young, tech-savvy citizens is a boon for the software outsourcing industry. Many of them are highly interested in pursuing careers in IT, making it easier for software outsourcing companies in Vietnam to find qualified employees. The government also supports the industry's growth by encouraging investment in software parks and dedicated tech zones and offering tax incentives to IT firms. Consequently, Vietnam is gradually developing a highly skilled workforce capable of competing with other Asian countries in the IT sector. With over 290 universities across the country, the IT workforce continues to grow each year, with more than 40,000 graduates acquiring the necessary technical skills.
A Culture of Loyalty
An important factor that contributes to many software development firms choosing Vietnam is the remarkable staff loyalty. Most people practice the base concepts of Buddhism within the country. An important principle here is the importance of loyalty, and the local people immensely value it. That means that you should expect reduced staff turnover rates. The employee retention data in the IT industry varies between 92% and 94%. In comparison, India has an 80% retention rate, with many Indian skilled engineers willing to relocate outside the country to pursue IT careers abroad.
Economic and Political Stability
Vietnam is considered the black horse within the software industry, as it is one of the most famous, consistent, and fastest-growing BPO markets. The country’s GDP has also snowballed every year by about 7% during the last decade of globalization. Also, Vietnam enjoys a safe and peaceful working environment with minimum conflicts in religion and social politics. All these factors add up to create a stable ecosystem for international companies to thrive with minimal risks.
Presence of Major Companies
IBM, Intel, Canon, and Fujitsu are some of the leading investors that have already made their way into the industry. These companies and many others have helped to improve the country’s IT infrastructure and also assisted in increasing interest in the IT field.
- IT-Specialized Education Institutions
Massively invested in its education system with multiple IT-related courses and easily accessible universities and vocational schools. There result is that more students now have the chance of pursuing IT careers like software development.
- High Level of Education
Besides having considerably high literacy rates, Vietnam also boasts up to 300,000 college and university graduates annually. The companies, therefore, have more than 50,000 fresh talents to choose from every year.
- Young and Vibrant Population
A significant benefit to this country is access to its vibrant, young population. Over 70% are below 35 years, which means that more active people are ready to work. Additionally, the high literacy rate means that nearly all these people are well-educated and skilled in their respective areas.
- Proficient English Communication
A huge challenge that faces the sector is communication. The government has tackled this issue by heavily investing and incentivizing its citizens to speak English. There are numerous native English teachers hired across the country, and there has been a considerable improvement in English proficiency in the country over the last decade. Also, most young people can communicate fluently in English.
- Affordable Labor Costs
You can quickly hire experienced software developers for a significantly lower price as compared to American developers. Since cutting costs is part of specific tasks, developers are more cost-effective as they cost up to 30% less compared to Indian developers.
- Calm and Stability
Compared to other Asian countries like Sri Lanka, Vietnam doesn’t have any political instability. The past three decades have been quite calm and stable, which has had a positive impact on the country's ever-rising GDP.
- Attitude and Motivation
For most young adults, the IT sector is highly valuable as it guarantees better job opportunities along with greater pay. Hence, most students are choosing IT jobs when selecting their future work life and careers because it is a trend and not because they are passionate about this sector.
When these students complete their college or university training, most enter IT and make lots of money. That makes some to become easily satisfied and arrogant in their line of work. It also explains the reasons why some software engineers are falling behind when it comes to keeping up with current trends. Hence, if they don’t have sufficient dedication and stronger work ethics, then they could end up losing out to their Indian counterparts.
- Lack of Soft Skills and Practice in Education
Despite all the extensive efforts to improve the education system, the country still lags in overall soft skills and practice. The educational teaching methods used in most schools, particularly in rural regions could significantly affect students’ creativity and motivation. The result is that students aren’t entirely equipped with the necessary soft skills that will be critical in their future careers, such as negotiation, presentation, and teamwork skills. These soft skills have become crucial in the software development industry.
- Too Many Vendors
As the popularity and profitability increase, more vendors are now entering this industry. Nevertheless, that haste causes most new software sourcing firms to make multiple wasteful mistakes. Most vendors try to grab lots of money while sacrificing on the delivery of quality solutions. Also, there is minimal knowledge sharing going on such that various software offshore startups are lagging far behind.
Eastern European countries are highly ranked when it comes to software development services. Poland is the leading country in Eastern Europe and mainly across the world for efficient solutions. Here are some of the critical facts about this destination and why it continues to attract numerous multinational organizations.
Highly Educated Society
The primary reason for the increasing interest in offshoring software development to Poland is having access to the best-educated and youngest society. Poland trains over 2 million students annually, and nearly 500,000 graduate from higher learning institutions per year. These students become highly successful in the IT sector, which is seen by how they beat other countries at prestigious software and programming competitions.
Poland Has the Latest Cutting Edge Tech Solutions
The technologies and tools used in Poland are quite modern, and the vendors there work with the most up-to-date products. Most importantly, these firms use scrum and agile methodologies to provide timely, high-quality results.
No Cultural Differences
For companies located in Europe or the US, working with Poland is a no-brainer as there aren’t any cultural differences, particularly when compared to India and Vietnam. That means simple communication, and the result is successful collaborations with agencies or teams.
An Acceptable Time Difference
There is a nine-hour difference between Warsaw and San Francisco. Even when dealing with US companies, Polish companies will still find the right time for communication that fits both teams. For closer destinations, you will see that the time difference is quite smaller, which allows for smooth cooperation and an excellent experience for all who are involved.
- Strict Security Standards
Data protection is a huge worry for most companies that are considering software development, mainly when dealing with critical customer details or financial records. Choosing an EU country like Poland which has stringed data protection laws is, therefore, a smart decision. Poland follows strict guidelines regarding how the vendors manage and operate the data.
- Relatively Low Prices
Even though the cost per every working hour in Poland is not necessarily quite low as those in India, Polish contractors provide higher skill levels along with better quality products. Also, since Polish developers use better procedures and technologies, they can complete projects quickly and significantly help to keep the overall costs very manageable.
- Well-Established Software Development Process
It is likely that the agency you choose in Poland has completed numerous software development projects. That extensive experience means that the vendors here have already created good practices and methodologies for communication, product design and also ensure that the results fit your needs. Also, the country has highly advanced technology infrastructures in place ready to support a wide range of software requirements.
- A similarity in Work Ethics and Culture
Polish people have a similar work ethic and culture to most Western countries like America, Germany, France and the UK. It is why communication and cooperation tend to go more smoothly in software projects that are outsourced to Poland.
- Healthy and Stable Economy
Poland was recently ranked seventh position globally by Ernst & Young with regard to investment attractiveness. Also, during the period from 1990 to 2015, the country experienced the largest per capita GDP growth among OECD and European countries. The GDP increased more than seven times during that period, which was quite remarkable.
- Eye-catching Tax Incentives
Most Polish states, including the major ones like Katowice or Krakow, are considered as distinct economic zones that grant some attractive tax benefits and exemptions. These states offer technology incubation, tax exemptions and even land to companies that are interested in setting up IT services in the country. The entire market is geared towards supporting innovative technologies.
- High Turnover Rates
Due to the increased competition in the software development industry in Europe, many local agencies struggle with retaining software developers. Most developers are always looking for better job opportunities due to the high costs of living, which mean high turnover rates. For local vendors, it’s also easier to replace employees than retaining the existing labor.
- Higher Developer Costs
When compared to other Eastern European countries, Poland vendors pay their developers up to $1,000 more than their neighboring countries. For instance, while developers earn $2,000 per month in Ukraine, the same professionals would make over $3,000 in Poland. Nevertheless, most Polish companies dedicated lots of attention to developing their employees, which is done through organizing workshops, training, and other professional development courses.
Finally, you should consider visiting the vendor or country before initiating the project. That allows you to examine the quality of work and working conditions of your future software engineers. It also gives you a better feel of that vendor’s work ethic to check if it aligns with your project and even the surrounding culture of the area. Most importantly, think of more than external resources to use, but strategic partners that share your goal for building top-quality products.
The success of your project for software development services will ultimately depend on how well you communicate your requirements and have them adequately fulfilled. There are several pros and cons of all the various destinations you can choose from, from Poland and India to Vietnam and the Philippines. Hopefully, you now have a clearer picture of what you should expect when dealing with the countries mentioned above.
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