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Outsourcing software development has long been proven to have significant benefits for most businesses globally. Having access to highly qualified and dedicated teams or team extensions can be the perfect fit for both established companies and new startups. There are also thousands of outsourcing companies offering professional software development services. That means there are plenty of options to choose from based on your specific criteria like language requirements, time difference, geographical proximity and also cultural similarity.
Cost is an influential factor for most companies when outsourcing their software development needs. 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 of 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.
For enterprises that are interested in beginning or enhancing their current software outsourcing activities, making a wise decision regarding the right outsourcing 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 outsourcing firms will be ready to listen to your needs first before helping you make the right choice.
India is undoubtedly among the leading nations within the software development outsourcing 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 outsourcing better than other countries.
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 skillset becomes more comfortable for an offshore firm.
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.
It is clear to see that India’s government is highly supportive of the software outsourcing industry in the country. In 2017, the government invested over 100 billion dollars on building infrastructure and strengthening the IT sector to give companies better opportunities and strengths.
Besides the universal benefits of outsourcing 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 an outsourcing 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 an outsourcing 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. That means better communication in interactions between locals and outsources along with smoother workflows.
The benefit of outsourcing is that you can work across multiple time zones. The 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 regards 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 outsourcing. The security and IT laws have also been strengthened to help in preventing data leaks and theft.
Despite language being positive when outsourcing software development in India, 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
The outsourcing 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 outsourcing firms can deliver high-quality results. Thus, you must be cautious at 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 outsourcing 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 outsourcing destination in Asia is the Philippines. Many international companies choose this particular country for their IT outsourcing 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 outsourcing 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 that helps outsourcing software development ventures in the country is the 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 outsourcing 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 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 for outsourcing 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 outsourcing destinations for software development.
Once the Americans successfully liberated the Philippines during World War II from Japan, the citizens have 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.
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.
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.
The leading software outsourcing 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.
Due to significant investments and ongoing improvements, the Philippines boasts of 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 all over the country. Various leading technology firms like Avaya and Cisco even have local offices located in Manila to provide expert networking and data solutions for software outsourcing organizations.
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 outsourcing projects.
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 within the country. These extended breaks could be quite costly, especially when working on time-sensitive projects.
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.
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 outsourcing industry in Vietnam 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 in Vietnam and subsequent outsourcing services have experienced remarkable growth over the last few years. The country was recently ranked among the most attractive destination for outsourcing countries in the GSLI 2017 report. That favorable data shows that more businesses are choosing to use Vietnam over other competitors like India.
Dedicated Labor Force
Vietnam has plenty of tech-savvy, young citizens that are exceedingly interested in pursuing IT-related careers. Also, the government encourages continued investment in software parks, dedicated tech zones and provides tax incentives for the establishment of IT firms. Today, Vietnam is gradually developing its young workforce to obtain the necessary technical skills and easily compete with other Asian countries. The IT workforce continues to increase every year with more than 40,000 graduates across the over 290 universities in the country.
A Culture of Loyalty
An important factor that contributes to many outsourcing 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 as the black horse within the software outsourcing industry, as it is one of the famous, most 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 once they outsource their software development to Vietnam.
Presence of Major Companies
IBM, Intel, Canon, and Fujitsu are some of the leading investors that have already made their way into the Vietnam outsourcing industry. These companies and many others have helped to improve the country’s IT infrastructure and also assisted in increasing the interest about the IT field.
Vietnam has 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.
Besides having considerably high literacy rates, Vietnam also boasts of up to 300,000 college and university graduates annually. Outsourcing companies, therefore, have more than 50,000 fresh talent to choose from every year.
A significant benefit of outsourcing development of software to this country is the access to its vibrant, young population. Over 70% of Vietnamese 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.
A huge challenge that faces the outsourcing sector is communication. The Vietnam government has tackled this issue by heavily investing and incentivizing its citizens to speak in 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 of the young Vietnamese people can communicate fluently in English.
You can quickly hire experienced software developers in Vietnam for a significantly lower price as compared to American developers. Since cutting costs is part of outsourcing specific tasks, Vietnam developers are more cost-effective as they cost up to 30% less compared to Indian developers.
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 a positive impact on the countries ever-rising GDP.
For most young adults in Vietnam, 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 in Vietnam 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.
Despite all the extensive efforts to improve the Vietnam 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 outsourcing industry.
As the popularity and profitability of software outsourcing increases in Vietnam, 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 outsourcing 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 outsourcing software development services. Poland is the leading country in Eastern Europe and mainly across the world for efficient software outsourcing solutions. Here are some of the critical facts about this outsourcing 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 out of 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 outsourcing 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 outsourcing 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.
Data protection is a huge worry for most companies that are considering outsourcing 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.
Even though the cost per every working hour in Poland are 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.
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 ensuring 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.
Polish people have a similar work ethic and culture to most Western countries like the 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.
Poland was recently ranked the seventh position globally by Ernst & Young with regards 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.
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.
Due to the increased competition in the outsourcing 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.
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 software development outsourcing as more than external resources to use, but strategic partners that share your goal for building top quality products.
The success of your outsourcing 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 outsourcing destinations you can choose, from Poland and India to Vietnam and the Philippines. Hopefully, you know have a clearer picture of what you should expect when dealing with the countries mentioned above.
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