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Market Overview
Why Companies Prefer to Develop Software in Poland than in other Eastern European countries?
As businesses seek to expand their operations, the need to scale software development and cut costs will become even more prominent. The global market is becoming increasingly competitive. Thus, companies that want to retain their user base or customer pool need to continually upscale their technology. However, factors like the high cost of living and staff shortage make these upscale attempts quite expensive for both American companies and companies situated in Western Europe. Nearshoring was developed to solve this problem.
As such, in this article, we will discuss the concept of nearshoring, the position of Eastern Europe as a region of choice for nearshoring, and why Poland is generally preferred by companies as a nearshoring destination.
What is Nearshoring?
Nearshoring is a software development technique that involves outsourcing development operations to a nearby country or region. Companies that engage in nearshoring often seek a strong software development team outside their borders due to different reasons. It must be noted that nearshoring is different from offshoring. Unlike nearshoring, offshoring involves outsourcing software development operations to a completely different region. In this case, a Boston-based company may outsource its software development to an Asian team. Offshoring is often the cheapest form of outsourcing however, it has some disadvantages.
Why is Nearshoring Important?
In today’s world, many companies and start-ups often find that their workforce does not retain the requisite expertise for software development. This could either be due to the limited talent pool within the country or the company’s limited funds. For example, according to Forbes, many American companies have been affected by a shortage of American developers over the years. The issue of talent and staff shortage has informed the rise of nearshoring. With nearshoring, companies can gain access to a relatively global talent pool to which they can outsource their operations.
Another advantage of nearshoring is that it helps to cut costs. Because talent recruitment is outside the borders of the specific company, hourly wages are often lower due to factors like exchange rate and overall economic development. For instance, according to the Global Offshore Developer Rates Index, the hourly rate of a Romanian developer ranges from $30-$65. This is in deep contrast to THE US where hourly rates of a senior software engineer could tower at $130. More importantly, amid this nearshoring trend, the Eastern European region has stood out as the nearshoring destination for both Western European and American companies.
Eastern Europe: The Hub of Software Nearshoring
In the past decade, many European countries have experienced significant economic development. More importantly, these countries have invested heavily in educating their citizens and creating a friendly environment for foreign direct investment (FDI) to thrive. For instance, in a country like Bulgaria, the adult literacy rate has been pegged at over 98%.
In addition to this, Eastern Europe is a significantly comfortable location for Western companies. The region’s geographical proximity ensures that distance and time zone problems are rarely encountered. Already, statistics have begun to show the preference of the region for nearshoring activities.
According to reports, companies like IBM and Dell have been outsourcing their software development activities to Eastern Europe for over a decade. There are equally reports that Eastern Europe has a workforce strength of about 1.3 million software developers. While countries like Ukraine, Romania, and Bulgaria have been at the forefront of many of these nearshoring activities, Poland has remained a favorite for many companies— and good reason.
Why Companies Prefer to Outsource Software Development to Poland
Poland’s software development industry has grown steadily in recent years. This is because it has become a preferred destination for companies seeking to outsource software development to the Eastern European region. By 2021, Poland’s software development industry was pegged at €8.8 billion. More importantly, there are reports that over 66% of the developers that drive this industry value are employed by foreign companies. However, whilst Poland is undoubtedly a destination of choice, the preference is due to the following reasons.
1
Lack of Communication Barriers
One of the primary problems that are often encountered in the process of nearshoring is communication barriers. Many times, the developers in the host country may lack a strong English proficiency. This could result in consistent miscommunication that could severely affect the progress of the project. However, in Poland, this communication barrier is largely non-existent. According to the English Proficiency Index, Polish people are highly proficient in the English language. This means that little or no challenges will be encountered during team communication.
2
High Professional Expertise
Poland has a robust pool of developers. According to reports, there are over 250,000 developers in Poland. In addition to this, Polish developers are highly rated for their sound technical knowledge and software proficiency. This is particularly important, as it ensures that companies that experience a shortage of experienced local staff can easily source talent from Poland.
3
A Friendly Business Environment
Globally, Poland is highly rated for its friendly business environment. Infrastructure is generally available, and technical workers can thrive conveniently with little or no bottlenecks. For example, Poland is ranked 40th of 190 countries in the ease of doing business index. Essentially, Poland ranks highly in competitiveness and this is a strong incentive for countries that seek to outsource their software development operations.
Conclusion
The global outsourcing market has continued to grow. In the coming years, there are strong expectations that more companies would continue to outsource software development to Poland for reasons ranging from lower costs to the abundance of professional expertise. Thus, as a company that seeks to scale its software operations, it may be advisable to look towards Poland as an outsourcing option.
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