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Eastern European IT Firms Challenge India’s Historical Dominance of IT Outsourcing

According to the recent report, published by Grand View Research, the global market size of IT service outsourcing is expected to touch $937.6 billion by 2027. Currently, it is growing at a compounding annual growth rate of 7.7%. A considerable number of small and large organizations outsource their IT operations to reduce their cost and due to constrained infrastructure capacities.

With the growth of emerging technologies like Artificial Intelligence, the Internet of Things, blockchain, robotic process automation, etc., one can expect an even broader range of IT outsourcing. More and more companies are starting to realize outsourcing as one of the best ways to grow their dominance in the globally competitive world.

Who Is Dominating the IT Outsourcing Market?

India has been a market leader in the IT outsourcing industry for a long time. It produces over 2 million STEM graduates per year.

Furthermore, Indian graduates even outperform American counterparts on mathematics and logic.

As per the source, India imported $177 billion worth of IT services in 2019. It’s maintaining a growth rate of 6.1%. Moreover, the researchers expect IT outsourcing size in India to surpass $350 billion by 2025. Is there any other region challenging the dominance of the Indian IT Outsourcing Industry? Yes, it is Eastern European region.

Are Eastern European Nations Challenging Indian Historic Dominance of IT Outsourcing?

India indeed has strong dominance in the IT outsourcing industry. But Eastern European IT firms are posing an intense competition to Indian IT firms. Some top IT companies like GreyLoud is also starting to outsource a significant chunk of their services to Eastern European companies.

Some major Eastern European nations offering top-notch IT services to western IT market demand are Ukraine, Poland, Romania, Bulgaria, Czech Republic, Russia, and Belarus.

Ukraine’s IT outsourcing industry is currently valued at over $3.5 billion. And it is growing at a rate of over 15%. Ukrainian IT companies offer a wide range of IT services to western European nations and major US corporations. Ukraine produces over 38,000 IT graduates per year. And the major IT corporations like Samsung, Microsoft, and IBM have over a hundred R&D subsidiaries in Ukraine.

Belarus is another emerging Eastern European nation, coming up in the IT outsourcing game. It produces over 4,000 IT graduates per year.

The IT industry revenue surpasses $4 billion now. Moreover, some major Belarus IT firms managed to cement their positions in the world’s top 500 software providers.

Romania and Poland are two significant nations that are leading the way in the IT outsourcing game. These two nations produce over 60,000 quality IT graduates each year. The IT growth market in Romania is nearly 15%. And the Polish IT market is over $7.9 billion and still growing.

The major western nations like Germany and the Netherlands outsource their IT services to India. With that said, the Eastern European countries capture around 77% and 66% of German and Dutch, respectively, outsourcing software development market share. On top of that, the Eastern European IT firms also get a lot of contracts from the US and other developed nations.

Why Are Eastern European Nations Emerging as The Top Competitors to India?

Like India, western companies have a significant cost benefit to outsourcing their IT services to Eastern European companies. On top of that, the English proficiency of Eastern Europeans is also superb. For instance, over 80% of Ukrainian software developers have an intermediate or higher level of English proficiency.

Some other reasons why western European companies prefer Eastern European nations for outsourcing their IT services are:

1.      Enormous Talent Pool

As per the State of European Tech report, there are currently over 6 million professional developers in the Eastern European region. Due to a massive talent pool, many western companies look at the Eastern European part to fulfill their skill gap. Moreover, the talent pool in Eastern Europe is growing at a steady rate.

2.      Top-Notch Technical Education

There are numerous high-quality educational institutions in Eastern Europe. Over 28 out of 400 top education providers are in Eastern Europe. And the high-quality educational institution emphasizes a lot on producing quality graduates to keep up their reputations.

3.      Similar Cultures

Many companies have problems with Indian and other South Asian IT firms in terms of transparency and cooperation. But westerners often enjoy dealing with Eastern Europeans due to similar culture. And Eastern IT service providers also follow international business codes of conduct, which make it easier for companies to work with them.

4.      Time zone and Geographical Location

The time difference between Eastern European nations and western European countries is only around 2 hours. It is a significant advantage for western societies. And it is also easy to travel from the west European nation to an Eastern European country.

In the case of the US, the maximum time difference is 10 hours. However, it is possible to manage time for meetings if needed.

Final Thoughts

India isn’t going anywhere from the game of IT outsourcing. However, Eastern European IT firms will continue to pose a serious challenge to Indian IT firms. And one can expect Eastern European IT firms to capture more and more market in the future.

Moreover, the Eastern European nations will continue to produce more qualified IT professionals in the future. However, it is yet to see how India will respond to the changing scenario of IT outsourcing in upcoming times.