Top 5 Offshore Software Development Countries in Eastern Europe
If you are a startup or high growth company, you most likely are either thinking about offshore software development or are currently deep in the throes of doing it. The benefits are so plentiful that it’s hard not to have offshore development be a key strategic item on the agenda.
But which region or country you choose to house your offshore developers is often the first key question you must ask. And though there are many global offshore hotspots around the globe – such as Latin America and Asia – that offer a range of advantages, Eastern Europe is almost always in the conversation due to its reputation for deep technical expertise, broad talent pools, strong work ethic and more.
In this article, we’ll take a look at some of the most popular countries for offshore software development, including Ukraine, Romania, Poland, Hungary, and Czech Republic.
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Quick Snapshot of the Eastern Europe Software Development Market
The global software development industry is booming, and Eastern Europe is no exception. According to Statista, the software development segment in Eastern Europe is projected to grow by 13.11% from 2022-2027, resulting in a market size of US$6.04 billion by 2027. That’s a lot of software!
The software development industry is thriving in Eastern European countries for a number of key reasons. First, many of these countries have a highly educated workforce, which is critical for this type of work. And this well-educated workforce translates into a broad and deep pool of programming talent.
Second, the cost of doing business in these countries is often lower than in Western Europe or the United States, making them an attractive option for companies looking to build software in the most cost-effective way possible. As a result, it’s not surprising that the software development industry is doing so well in this part of the world.
Moreover, Eastern European programmers share a similar work ethic and attitude as their Western counterparts. Thus, productivity remains as high (and sometimes higher!) as using developers locally in the U.S. or Western Europe, and the cultural similarity means more seamless communication.
In terms of market sizing, the software development market in Eastern Europe is segmented by type, application, and geography. By type, the market is classified into on-premises software and cloud-based software. By application, the software development market is divided into web development, mobile app development, and enterprise software development.
The web development segment is expected to grow at the highest compounded annual growth rate (CAGR) during the forecast period. The geographical segmentation of the software development market in Eastern Europe includes Central and Eastern Europe, Baltics, and Balkans.
Why Companies Offshore Software Development to Eastern Europe
The increasing popularity of offshore software development over the past decade is a big part of the reason there’s been such exponential growth in the software development industry in Eastern European countries. So, let’s look at why Eastern Europe is such an awesome destination to hire offshore software developers.
Large pool of highly skilled software developers
Developers from countries like Poland and Ukraine are prized for their technical skill and ability. This is largely because the quality of education and training in these countries is extremely high. As a result, they are able to compete with developers from more established tech hubs like Silicon Valley.
Due to a lower cost of living and more favorable tax regimes, the cost of labor for Eastern European developers is often lower than Western programmers. Thus, as companies look to gain more bang for their engineering buck, they look to Eastern Europe as a way to save money without having to compromise quality.
Diverse tech stack experience
Another key advantage is the diversity of technical stack experience. You can find specialists in a wide range of programming languages and niches, from web development to mobile development to enterprise software development. This means that you can usually find the right specialist for your particular needs.
In addition, the aforementioned abundance of talent in Eastern Europe means you’ll tap into a wealth of knowledge and experience. So if you’re looking for an offshore destination that can offer you a variety of skilled specialists, Eastern Europe should be at the top of your list.
Robust security and data privacy
If you’re thinking about building software in Eastern Europe, you may be wondering about data privacy and security. It’s natural to be concerned about entrusting sensitive information to a team that isn’t directly in your headquarters.
Luckily, you can rest assured that the same norms and rules apply to Eastern Europe as the rest of Europe. This means your development partner will abide by copyright laws, non-disclosure agreements, IP protections and other policies, including the General Data Protection Regulation (GDPR). So if you’re looking for a reliable, secure offshore development partner, Eastern Europe is a great place to start your search.
In addition, many of these countries have experienced developers who are well-versed in data security protocols. As a result, companies can be confident that their data will be safe and secure when they offshore software development to Eastern European countries.
One of the top reasons why US startups and established companies offshore to Eastern Europe is the working culture. In many ways, it’s very similar to the culture that exists among software developers in the US. There’s a strong emphasis on collaboration and knowledge sharing, and a focus on delivering quality products in an efficient timeline.
Strong English proficiency
Unlike many other regions that are popular for offshoring (such as Asia), the vast majority of developers in Eastern Europe have excellent English skills. This makes communication a breeze and ensures that there is no misunderstanding as it relates to key development specifications or requirements.
Potential Challenges With Offshore Software Development in Eastern Europe
Despite the host of benefits, there are a number of potential pitfalls to avoid when offshoring software development to Eastern Europe. These include:
As with most things in business (and in life!), be sure to pick the right partner when you are looking at doing something new. Many firms in Eastern Europe do not use clear and concise invoicing practices, which can create confusion and ultimately lead to overspending. Without a clear understanding of how much developers make, it can be difficult to budget appropriately. This ambiguity can also make it difficult to compare pricing between different offshoring partners.
As a result, companies often end up paying more than they anticipated for their development teams. To avoid this pothole, it is important to do your research and understand the billing methods of any potential offshoring partner before committing to working with them. By taking the time to understand the billing process upfront, you can help ensure that your software development stays on budget.
Note that you never need to worry about these billing problems with TurnKey. At TurnKey, we have completely transparent pricing. You always know how much your developers make and how TurnKey’s fees are broken out. Moreover, partnering with TurnKey also means:
- no upfront fees of any kind,
- no commitment – we only get paid on performance,
- 18-month guarantee for each developer you bring on board,
- and a capped fee percentage – never worry again about pricing that always seems to go up.
Complex taxation systems
Different countries in Eastern Europe have their own unique tax systems, which can make it difficult to accurately calculate and file taxes when offshoring. Additionally, some foreign tax laws may conflict with those in your home country, causing even more confusion. However, there are solutions available.
Hiring a local accountant with experience navigating the specific tax laws of your chosen country can help ensure that everything is taken care of correctly. It’s also important to thoroughly research offshore destinations before starting any cooperation to make sure that you fully understand their tax systems and compliance requirements. While the issue of complicated taxation may seem daunting, taking the necessary steps can help ensure smooth sailing for your offshoring venture.
Note that you never need to worry about this legal complexity with TurnKey. We take care of all this administrative headache for you so that you can just focus on building great software.
One of the most common concerns is unreliable or unethical offshore development partners. This can result in half-hearted efforts and bad quality software. As a result, it is important to carefully vet any potential partners to ensure that they have the skills and experience necessary to deliver high-quality work.
Additionally, companies should consider establishing clear communication channels and setting expectations upfront to help avoid misunderstandings that could lead to poor work quality down the road. By taking these precautions, companies can help minimize the risk of choosing the wrong partner when offshoring software development to Eastern Europe.
Note that you never need to worry about a bad partner with TurnKey. We pride ourselves on offering the best and most trusted service in the industry. And if you don’t believe us, just ask our customers!
Developers come “off the shelf”
Many offshore partners will give you developers that they have on their “shelf” rather than custom recruiting the development team specifically around your needs and requirements.
But taking programmers off someone’s bench often results in a mismatch in culture or values, and can often lead to high churn rates, which is a major headache for companies that are trying to maintain a consistent level of quality in their software products.
Moreover, the high churn rates can also lead to delays and cost overruns as projects are constantly being handed off to new developers.
Note that you never need to worry about getting developers “off the shelf” with TurnKey. We custom recruit each developer so we can make sure that they’re a perfect fit for your needs and your culture. This leads to much higher retention rates and increased productivity. And our interview process is based on years of experience and scientific rigor, as shown in the graphic below.
Top Offshore Software Development Countries in Eastern Europe
There are a number of highly popular offshore software development destinations in Eastern Europe, each with its own strengths and weaknesses. Here are the top 5 countries we’ve seen the most success in among our clients.
Among the various countries in Eastern Europe, Ukraine has emerged as a leading destination for offshore software development. The country has a large pool of talented developers, who are able to provide high-quality services at competitive rates.
In addition, Ukraine boasts a well-developed infrastructure and a business-friendly environment. As a result, Kyiv, Lviv, Dnipro, Odessa are one of the most popular destinations for offshore software development in Ukraine.
Ukraine also has a number of tax incentives that make it an attractive destination for companies looking to offshore. For example, the government offers a reduced value-added tax (VAT) rate for software development services. As a result, many companies are able to reduce their overall costs by offshoring to Ukraine.
Poland is another key offshore software development destination in Eastern Europe. The country has a large pool of highly skilled engineers and a well-developed infrastructure.
Additionally, Poland is home to many global technology companies, making it an attractive destination for software developers to flock to. The country also offers a variety of incentives for companies looking to set up offshore development centers, including tax breaks and access to funding.
According to the Czech Chamber of Commerce, more than 1,000 American companies have operations in the Czech Republic. There are a number of reasons why these companies have chosen to offshore to the Czech Republic.
First, the Czech Republic has a highly skilled workforce. In fact, the Czech Republic ranks first in the world in the number of engineers per capita. Second, because the Czech Republic is located in the heart of Europe, it is an ideal base for companies that want to do business in multiple European countries.
Lastly, the Czech Republic offers a favorable business environment. The corporate tax rate is just 20%, and there are a number of government incentives for businesses that choose to locate in the country.
Thanks to its highly educated workforce and low labor costs, Romania has become an attractive offshore software development option for companies in a wide range of industries.
Statistics show that the software development industry in Romania is growing rapidly. And the number of people employed in the Romanian offshoring sector is expected to grow by 15% annually over the next four years.
With its strong economic growth and favorable business environment, Romania is well positioned to continue attracting new software development companies from Western countries.
There are a number of good reasons why companies might want to offshore to Hungary. One reason is the cost of labor. In Hungary, the average hourly developer wage is less than half of that found in the US.
Another reason is the availability of skilled developers. In Hungary, there are a number of universities that produce highly skilled engineers. This can be a boon for companies that are looking to offshore their operations to countries with a skilled workforce.
Finally, Hungary has a number of tax incentives that make it an attractive destination for companies looking to offshore their operations. For example, Hungary offers a reduced corporate tax rate for software companies that establish themselves in the country.
All of the above said, however, the political situation in Hungary is often fluid and may create challenges from a stability perspective if looking to build software development teams for the long term there.
How to Choose the Best Offshore Software Development Partner for Your Software Development Needs?
With the ever-growing popularity of offshore software development, there is no shortage of options when it comes to choosing a partner. However, not all offshore software development partners are created equal. When selecting a partner, it is important to follow a number of key steps:
1). Define your vision and goals for your offshore software development team
When you’re looking to hire an offshore development team, it’s important to have a clear idea of your objectives. Otherwise, you risk ending up with a partner that doesn’t meet your needs or expectations. So what should you be thinking about when defining your offshoring goals?
First, consider what specific skills and experience you need from developers. Do you need them to have expertise in a particular programming language or platform? Do you need them to be able to handle a certain volume of work? Make sure you have a good understanding of your own requirements before reaching out to potential partners.
Second, think about what kind of working relationship you want to have with your partner. Do you want a long-term relationship where they become an extension of your team? Or do you prefer a more transactional relationship where you work with them on a request-by-request basis? There’s no right or wrong answer here (though we’ve often found the former works much better) but it’s important to know what you’re looking for before you start.
Third, consider your budget. Offshore software development can be a great way to save money, but it’s important that price is not your only consideration. Make sure you’re getting quotes from multiple partners and compare not just the price but also the quality of their services.
By taking the time to define your offshore goals upfront, you’ll be in a much better position to find the right partner for your needs.
2). Evaluate top offshore software development partners
- A proven track record of building expert development teams. You'll want to make sure that the offshoring partner you're considering has a history of hiring quality teams on time and on budget.
- A robust portfolio of happy clients. Don't be afraid to ask for references and check out online reviews before making your final decision.
- Transparent pricing. Make sure you understand exactly what you're getting for your money before signing on the dotted line.
In other words, all the things that TurnKey already provides 🙂
3). Ask for an RFP
Let’s say you’ve done your research and narrowed down your options, but you’re still not sure how to choose the right partner. The best way to get more information is to ask each potential partner to send you a request for proposal (RFP).
An RFP is a document that outlines the scope of work and includes details about the company’s experience, capabilities, and pricing. By requesting an RFP, you can get a better sense of which offshore partner is the best fit for your software development efforts. And, if you’re still not sure, you can always expand your search before making your final decision.
4). Learn the legal protections
When companies move their software development overseas, they need to be aware of the different legal protections that may be in place.
Thankfully, all Eastern European countries have strong intellectual property laws that allow for IP to be assigned to companies as work-for-hire deliverables. This is key to a vibrant offshore market.
In addition, Ukraine has a specific law that governs the offshoring of software development and helps companies confidently set up their development operations there.
So, regardless of which country you choose to offshore your software development to, be sure you are familiar with the legal landscape before you start working with a development partner there.
5). Sign the contract
When reviewing a contract, it’s important to have legal counsel that has experience in the field. The specific documentation you’ll need varies depending on who you are contracting with but may include things like an NDA and/or MSA (Master Services Agreement). These documents usually outline the development scope so there’s no room for unexpected delays.
Tips for Successfully Working With Eastern European Developers
As discussed extensively above, with a large pool of talented developers and relatively low wages, Eastern Europe has a lot to offer companies looking to offshore their software development. However, there are also some challenges that come with working with Eastern European developers. Here are a few tips to help you build a successful partnership with them:
Make sure you clearly communicate your expectations
Developers in Eastern Europe may have different standards for quality and timeliness than you are used to. By setting clear expectations from the outset, you can avoid misunderstandings down the road.
Be generous with feedback
Feedback is essential for any process, but it’s especially important when working with developers in another country. By being proactive about providing feedback, you can ensure that the development stays on track.
Make efforts to minimize the cultural gap
Working with offshore developers can sometimes be a challenge due to different time zones, cultural differences, and often a language barrier to contend with. But if you want your team to be efficient, it’s important to make efforts to minimize the cultural gap.
One way to do this is to only recruit developers that are familiar with your culture and have a good understanding of your objectives. Another way to bridge the cultural divide is to carefully communicate your expectations and objectives from the start.
Why TurnKey Is The Absolute Best Partner For Offshoring Your Software Development to Eastern Europe
Having started and ran SaaS-based companies in the past, we know how daunting it can be to find the right offshore development partner for your specific product needs. You need a trusted, experienced partner that will bend over backwards to make you successful.
More importantly, TurnKey offers more than just offshoring; we give clients an upgraded version we call Yourshoring. This is YOUR team built around YOUR needs and embedded in YOUR culture.
Our clients love our Yourshoring model—and you will, too. Here’s why:
- You get a team of highly skilled developers that are custom recruited to your specifications.
- You have full control over when your developers work and what they work on.
- You get a talent management program that ensures the highest retention rates in the industry.
- You have total transparency when it comes to pricing–you will never be left in the dark again.
- You always have someone local to call if a problem pops up (we are based in Silicon Valley).
- You don’t have to worry about any administrative headaches (taxes, benefits, payroll, legal and more).
So if you’re looking for a hassle-free way to get an amazing team of offshore developers, look no further—we’re here to help!
Eastern Europe is seeing an explosion in offshore software development due to its broad talent pool, cultural similarity and comparatively lower wages. Within the region, the three most popular countries are Poland (a destination of choice for large public companies looking to offshore), Ukraine (one of the highest densities of developers per capita in the world) and Romania (strong reputation for specialized technical expertise).
The region now accounts for nearly 10% of the global software development workforce. This growth is largely due to a strong math and science-based education system and high demand for developers, which causes more people to go into the field. While the cost of living and wages are typically lower in this region, the quality of work is often just as good as what you find in Western Europe or the United States. As a result, more and more companies are turning to Eastern Europe for their software development needs.
First, the cost of labor is significantly lower than in the US or Western Europe. This can be a major advantage for companies working on tight budgets. Second, Eastern European developers tend to be highly skilled and experienced, and speak great English. Third, they also tend to be more familiar with the latest technologies than their Western counterparts and have a strong cultural similarity to the West. As a result of these factors, productivity rates for Eastern European developers tend to be equal to or greater than their Western counterparts.