Outsourcing to Eastern Europe: Trends & Market Insights

George Milanovic

Last updated on December 26, 2024 | 16 min read

Eastern EuropeIT marketOutsourcingSoftware developmentTrends

• Compared to other popular outsourcing destinations, such as India or China, Eastern Europe excels at AI-powered solutions thanks to the European Commission’s AI Factories initiative.
• Outsourcing costs in Eastern Europe strike a good balance between affordability and quality thanks to the regulations enforced by the European Union.

Introduction

For companies looking to speed up the development of their software applications and cut down on growing costs, outsourcing has time and again proven itself to be a reliable path toward a more optimized development pipeline.

As of 2024, the global outsourcing market boasts over $600 billion in market value, with future projections estimating an increase to over $800 billion by 2029. Despite the clear benefits of outsourcing, the question of choosing the proper outsourcing destination remains open. Due to recent market trends, Eastern Europe could just be the ideal location for growing startups and experienced firms alike. Currently, project development outsourcing dominates the revenue of the region’s IT sector, with an expected market volume of nearly $18 billion by 2029.

In this article, we’ll break down key trends that could make Eastern Europe your next outsourcing destination and how it compares to other regions in the outsourcing market across the world.

How Eastern Europe adopts the latest IT outsourcing trends

We’ll first look into some recent worldwide outsourcing trends in the IT outsourcing market that make Eastern Europe a more prospective region to outsource to when compared to established giants such as China or India.

Increased demand for nearshoring

Eastern Europe has become a prime target for outsourcing due to a global increase in demand for nearshore outsourcing. According to Eurostat analysis from 2022, 77% of companies within the European Union outsource to other countries within the EU, with other European countries being the second most sought-after outsourcing destination.

Outsourcing is especially on the rise in countries like Poland, Ukraine, and Romania, mainly due to their cultural similarities to Western markets, but also their skilled IT labor, lowered costs, and geographical location. In comparison to India or China, Eastern Europe’s time-zone proximity to the West makes it a more reliable location for outsourcing. It should be the first for companies that are looking to minimize logistical challenges and increase collaboration opportunities with their outsourcing partners, thanks to reduced lead times and more reliable communication pipelines.

Adoption of hybrid work models

Since the start of the decade, an increased demand for hybrid and work-from-home models has been perceived worldwide, and the IT industry is no different. According to Statista, an average of 22% of people across the European Union worked from home in 2023, noting an 8% increase from 2019.

Eastern Europe’s growing adoption of hybrid work models is another reason that makes it a viable outsourcing destination, allowing companies to tap into the region’s IT talent without any relocation costs.

Increased demand for data security and compliance

With rising concerns over data protection regulations around the world, companies are looking to outsource to countries with strong legal frameworks for data security. Countries in Eastern Europe that are within the European Union are in an advantageous position thanks to a number of privacy protection laws implemented since 2018.

The most obvious one is the General Data Protection Regulation (GDPR), enacted in May of 2018, in addition to the Digital Services Act (DSA) and Digital Markets Act (DMA), fully effective as of February and March 2024 respectively.

These laws ensure that countries within the European Union, especially those in Eastern Europe, remain the most appealing outsourcing locations for clients looking for reliable data protection practices while retaining lower prices and expert IT talent.

Adoption of AI-powered automation

Integration with artificial intelligence (AI) and machine learning (ML) has also become a growing trend in outsourcing.

These systems can help with anything from customer service automation to helping conduct code reviews. Robotic Process Automation, or RPA, is a subset of AI that’s widely used to automate repetitive, rule-based tasks such as data entry, system monitoring, or information processing, all the while minimizing human error. Meanwhile, tools like GitHub Copilot can provide assistance to developers by generating needed pieces of code or detecting bugs more quickly.

Countries like Poland, Romania, and Slovenia have established themselves as hubs for AI-powered solutions, mainly through the European Commission’s AI Factories initiative, which is planned to begin rollout in early 2025. These so-called factories are imagined as ecosystems that are supposed to stimulate innovation and progress in the AI field. They are planned to bring together the talent, data, and equipment necessary to create the next best AI applications across various fields, including medicine, energy, and meteorology.

How Eastern Europe compares to other regions

Next, we’ll take a look at how Eastern Europe compares to other regions, specifically Asia. According to Statista, Asia boasts the largest IT outsourcing market in the world, with projected revenue for 2024 being $114.8 billion. The revenue is further expected to grow by 9.34% annually until 2029, resulting in a market volume of $179.40 billion by the end of that year.

It is an incomparably large sum to growth projections in Eastern Europe, also estimated by Statista, at only around $7.17 billion by 2029. However, the region compares favorably when looking past sheer market value. For example, even if costs are higher when compared to tech giants such as China or India, they are still competitive and appealing to clients in Western markets.

Furthermore, the quality of these outsourcing services is much more clear-cut in Eastern Europe, in part thanks to the aforementioned regulations offered by the European Union, striking a fine balance between the work itself and how affordable it is.

The geographical difference between the regions is also something that should be considered. While outsourcing to Asian markets is beneficial to developers looking for round-the-clock availability, recent trends have shown that demands for nearshoring are on the rise. This in turn makes Eastern Europe a much more appealing location to outsource to, both in terms of time-zone differences and cultural compatibility.

The best destinations to outsource to in Eastern Europe

For anyone looking to outsource their work to a country in Eastern Europe, it’s important to know that each country can offer specific challenges but also benefits. The balance depends on their regulations, readiness to comply with EU laws, and specialization of their broader IT talent.

Below is a list of some of the most reliable countries within Eastern Europe that are all effective options for IT outsourcing for different reasons:

Poland

With over 400000 professionals in its IT workforce, Poland is Eastern Europe’s largest IT market. With specialists mainly in cybersecurity, AI, and software development, and thanks to its cultural proximity and geographical proximity to Western Europe, it is the prime destination for companies in the US looking to outsource their work outside of the Western region.

Poland also offers competitive prices for the quality of the work its IT talent does, with hourly rates going from $40 on the lower end up to around $100 for more demanding work.

To find a reliable outsourcing partner in Poland, take a look at some of the top picks from this article.

Ukraine

Though employing a smaller IT workforce than Poland, Ukraine still has a lot of talent to offer, with over 300000 developers specializing in AI and blockchain technologies.

Though the country continues to face significant geopolitical challenges, it has, regardless, turned into a high-activity research and development (R&D) hub, thanks to numerous benefits offered to its programmers and IT workers. Furthermore, its prices are the most effective in the region thanks to steep tax cuts, usually ranging from $25 to $50 an hour.

If you’re looking to find an IT recruitment partner in Ukraine, this article lists some of the best recruitment companies that operate in the region.

Romania

Romania is another country whose IT sector has seen a renaissance in recent years. Having been an important R&D hub in terms of AI-powered solutions for tech giants such as Microsoft or Amazon, the country has a large pool of multilingual IT professionals.

This growth has helped it achieve proficiency in fields such as embedded systems and enterprise software solutions, while its low hourly rates of up to around $65 position it as a competitive alternative to other locations.

For a list of top outsourcing companies in Romania, take a look at this article to browse some reliable picks.

Czechia (Czech Republic)

With a talent pool of around 140000 IT professionals, Czechia’s developers specialize in fields such as game development, software engineering, and AI automation. Further than that, there is a strong focus on IoT and robotics, while the geographical location it occupies within Europe makes it an excellent choice for clients based in the US.

Czechia has slightly higher, but still competitive, hourly rates of up to around $80 alongside reliable infrastructure and adherence to EU regulations and laws. The country is a great choice for those looking to outsource work on complex, high-security projects, as that is precisely what its specialized IT workforce excels at.

To browse top outsourcing agencies within the country, follow the link to this article.

How DevsData LLC could help with outsourcing to Eastern Europe

Website: https://devsdata.com/
Team size: ~60 employees
Founded in: 2016
Headquarters: Brooklyn, NY, and Warsaw, Poland

Looking to partner up with an IT recruitment agency to find top talent within Eastern Europe, but are still unsure about the best option? A company that specializes in the region and has a proven track record of working with local talent should be your priority.

DevsData LLC is a leading provider of software outsourcing services to Eastern Europe. The company specializes in helping clients find development partners with the skills they need and has over eight years of experience in IT recruitment. With highly qualified specialists from the US on the team and a vast network of over 65000 candidates in the database, DevsData LLC ensures its clients hire only the best IT experts in Eastern Europe.

In addition to its proven track record, what sets DevsData LLC apart is its flexible approach that offers competitive pricing thanks to lower overhead costs. This makes them the ideal business partner for both experienced teams, as well as startups just starting to get their footing, looking to outsource their work to talent in Eastern Europe. DevsData LLC has successfully worked with clients to hire seasoned software professionals, as seen from the company’s ratings on Clutch and Goodfirms, as well as numerous testimonials on their website.

Recently, DevsData LLC assisted an international fashion corporation. The company was interested in undergoing a thorough digital transformation and was able to revitalize several of its departments by assembling a core technology team (Machine Learning, Software UX/UI, and Operations) thanks to DevsData LLC utilizing its numerous contacts and experience. More can be read about in the specific case study.

To connect with DevsData LLC, email them at general@devsdata.com or visit their website at www.devsdata.com.

Address:
DevsData IT Recruitment Agency Poland
Al. Jerozolimskie 181B,
02-222, Warsaw, Poland
poland@devsdata.com Copy email

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Conclusion

Even if it brings in less revenue than some other regions, Eastern Europe still proves to be a top outsourcing destination. With a global increase in demand for nearshoring and robust privacy protections, Eastern Europe can fully leverage its proximity to Western Europe and the US to meet these growing needs. Its adherence to EU regulations and laws guarantees that clients should have no cause for concern, even when hiring talent for high-security projects.

Furthermore, despite less cost efficiency compared to the Asian outsourcing market, Eastern Europe enjoys a higher degree of transparency, making work in the region usually of a higher quality and achieving a fine balance with the increased costs.

In addition to all of the above, continued investments by the European Commission and tech giants like Microsoft and Amazon have made the region particularly adept at adopting AI-powered solutions. This ensures it will stay relevant in the years to come, both for startups and veteran firms looking to hire developers from its sizable talent pool.

Discover how IT recruitment and staffing can address your talent needs. Explore trending regions like Poland, Portugal, Mexico, Brazil and more.

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George Milanovic Copywriter and Marketer

Carrying a passion towards writing and storytelling for as long as he can remember, George specializes in World Literature and Literary Theory. Outside of work, George spends time writing short stories and video game reviews, running a hobbyist group of over twenty enthusiast writers with their own brand of critique. His other hobbies include playing the piano, collecting music records, and dabbling in game design.

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Eastern EuropeIT marketOutsourcingSoftware developmentTrends