The guide to nearshoring in Eastern Europe

Those who choose to outsource IT activities face a major challenge: partner selection. In addition to the availability of IT expertise, the location of the partner is one of the most important considerations in the decision-making process. Eastern Europe is an interesting nearshore region: the various countries have a large number of highly qualified IT professionals. This article provides an overview of this.

Organizations that choose nearshore or offshore outsourcing for IT activities – ranging from workplace management and helpdesk to software development – usually have one or more reasons for doing so. The main reasons are the shortage of relevant talent in the Netherlands, the need for scalability, and the desire to focus on core activities. However, those who opt for offshore outsourcing – such as traditional destinations like India or emerging ones like Vietnam – often face challenges related to time zone differences, cultural differences, and management and compliance issues. Additionally, standards around privacy and security in “farshore” destinations are not necessarily the same as in the Netherlands.

Nearshore outsourcing, therefore, is a good alternative to offshore outsourcing. With nearshoring, your IT partner is located in a nearby country, allowing you to benefit from lower labor costs while eliminating the issue of time zone differences. Moreover, cultural differences play a lesser role with nearshore service providers.

Large supply of IT professionals

In recent years, Eastern European countries have developed strongly as nearshore destinations for IT services. These countries have a relatively high number of IT professionals with strong technical skills of high quality. Many Eastern European countries were once part of the Soviet Union’s sphere of influence, which placed a strong focus on science and technology. This legacy is still visible in the educational systems of most Eastern European countries.

In 2023, 4.3% of all workers in countries like Bulgaria, Czech Republic, and Poland worked as ICT specialists, according to European Union figures. In absolute numbers, Poland has the largest group, with 744,100 ICT specialists. For comparison, in the Netherlands, 6.9% of all workers are ICT specialists, which equals 673,700 people. So, Poland has a larger supply of IT professionals than here.

Other countries with large numbers of ICT specialists in Eastern Europe include the Czech Republic (217,900), Hungary (197,700, or 4.2% of all workers), and Romania (196,200, or 2.6% of all workers).

Many of these countries are also very active in the outsourcing market. In Poland, the value of ICT exports is expected to rise to $12 billion by 2026, up from $9 billion in 2021. Bulgaria is also still seen as the ‘Silicon Valley’ of Southeast Europe, with around 10,000 ICT companies, 70% of which export their services to other countries. In Romania, the digital economy is expected to grow to a value of 52 billion euros by 2030, about 10% of the GDP.

Many qualified professionals

Outsourcing to Eastern European countries comes with many advantages. IT professionals from Eastern European countries are often highly educated. According to European Union data, over 77% of Polish IT professionals have completed “tertiary education,” which includes higher vocational education and/or scientific education. In the Netherlands, the share of ICT specialists with tertiary education is 62.9%, significantly lower than in Poland. The share is also higher in many other Eastern European countries compared to the Netherlands, including Bulgaria (76.9%), Romania (76.2%), Slovakia (65.8%), and Hungary (64.9%).

Cost-efficient with high quality standards

There are also costs to consider: they are often lower than when work is outsourced to IT service providers operating only in the Netherlands. The employment is carried out under the economic (labor) conditions that apply in that country. According to HR company Plane, the average software developer in Poland, Romania, and Bulgaria earns around 47,000 euros per year, while a Dutch developer typically earns about 60,000 euros annually.

Admittedly, those who choose offshore outsourcing – i.e., outsourcing to providers in regions such as Southeast Asia, South Asia, or Latin America – are probably even more cost-effective than in Eastern Europe. However, language, time zone, and cultural differences mean that much more management attention is needed to maintain quality at an acceptable level. In addition, Eastern Europe offers more advantages than just highly educated talent.

For example, several countries in Eastern Europe are members of the European Union, which means they must adhere to many of the same regulations surrounding technology as we do here in the Netherlands. Among others, the privacy law GDPR and the NIS2 security directive apply to all EU member states. Outsourcing organizations do not need to worry about major differences in dealing with such matters.

Limited distance

Another advantage is that the client and nearshoring partners are relatively close to each other, meaning the time difference is limited to at most one or two hours. As a client, you can therefore be confident that the team abroad is working at almost the same time as the teams in the Netherlands, which simplifies communication.

This limited distance also makes it more feasible to visit on-site or have members of the internal and external development teams visit each other. Despite technological advancements in video calls, communication is often smoother when done face-to-face in person. Additionally, it can be reassuring to see where people are working and what they are working on. It also creates a bond between the client and the executing party.

The same language

English is the standard language in ICT, both for communication and documentation as well as in modern programming languages. Among the countries where English is not the native language, the Dutch still have the best command of the English language, according to research by the education organization EF Education First. However, Eastern European countries such as Romania, Poland, Bulgaria, Hungary, and Slovakia rank 12th, 15th, 16th, 17th, and 18th in Europe, respectively. Other Eastern European countries where the language is spoken well include Estonia (20th), Lithuania (23rd), and the Czech Republic (25th). Therefore, language need not be a barrier, but it is still a consideration when selecting a partner. In addition to exchanging technical specifications, language is also crucial for transferring domain knowledge to a development team.

Comparable cultural practices

Although Europe is relatively small and countries share many similarities, there are also cultural differences. Some countries are more conservative than others, and their values and norms may slightly vary. However, these differences are often small enough that they do not directly create obstacles in work. Eastern European countries are also known for their strong work ethic, which can benefit productivity and quality. Additionally, their relatively direct communication style aligns well with the Dutch mentality.

Five Eastern European nearshoring countries at a glance

Polen

Poland is a technologically strong country, with major tech hubs in Warsaw and Krakow. According to the Polish government, over 70,000 people graduate in IT each year in Poland, and the IT market is expected to continue growing. The e-commerce sector alone is projected to reach $42 billion by 2027.

Key facts: 

• 14.3% of all exported services in Poland consisted of ICT services. The value of Poland’s ICT industry is expected to reach 12 billion euros by 2026.
• 744,100 ICT specialists work in Poland, including 250,000 programmers. 77% of Polish ICT professionals have higher education.
• Poland ranks 13th on the 2023 Kearney Global Services Location Index as one of the most attractive locations for outsourcing services. 
• Poland is a member of the European Union.
• Polish citizens speak good English (#15 in Europe).

Romania

Romania has the best English language proficiency compared to all Eastern European countries, making it an attractive destination for nearshoring. In recent years, Romania has made significant investments in improving its IT infrastructure, with €3.6 billion allocated for the country’s digital transformation. Efforts are focused on enhancing 5G coverage and developing more people with digital skills. Although the number of IT professionals is still relatively behind compared to other European countries, the number of ICT graduates is steadily increasing, and they are highly educated.

Key facts: 

• Romania has 196,200 ICT specialists, with 76.9% having completed higher education.
• Romanians generally speak good English, ranking 12th in Europe.
• The country is working hard to improve its digital infrastructure and digital economy. Romania’s digital economy is expected to reach a value of €52 billion by 2030.
• Romania is a member of the European Union.

Bulgaria

Although Bulgaria was not a member of the Soviet Union, it was a close ally, and like the Soviet Union, the country has had a strong focus on technology, which remains visible today. Around 4.3% of the workforce in Bulgaria are ICT specialists, and the country focuses heavily on areas such as software development, fintech, and outsourcing. In 2022, Bulgaria also saw the emergence of its first “unicorn” (a company valued at over a billion dollars): Payhawk.

Key facts: 

• 4.3% of all workers in Bulgaria are ICT specialists, totaling 126,100 people, with 76.9% having completed higher education.
• Bulgaria has approximately 10,000 ICT companies, 70% of which export their services to other countries.
• Bulgarians speak good English, ranking 17th in Europe.
• Bulgaria is a member of the European Union.

Czech Republic

One of the largest universities in the Czech Republic is the Czech Technical University in Prague, which gives a good indication of the country’s ICT industry. According to the country itself, there are over 27,000 university students studying ICT, and the country has more than 13,000 ICT companies, including security companies like Avast and AVG. The country has a robust IT infrastructure and is heavily invested in outsourcing.

Key facts: 

• The Czech Republic has 217,900 ICT specialists, which accounts for 4.3% of the total workforce. 56.3% of them are highly educated.
• The country has 13,000 ICT companies.
• In the 2023 Kearney Global Services Location Index, the Czech Republic ranks 31st among the most attractive locations for offshore services.
• Czech citizens speak good English, ranking 25th in Europe.
• The Czech Republic is a member of the European Union.

Slovakia

Slovakia is one of the countries heavily investing in its tech industry. It has innovation hubs in the cities of Bratislava and Košice, which are designed to support companies in working with cloud computing, big data, and AI. The country is also on par with its neighbors: 4.2% of the workforce is composed of ICT specialists, and a relatively large portion of them are highly educated.

Key facts:

• Slovakia has 110,700 ICT specialists, which represents 4.2% of the total workforce. 65.8% of them are highly educated.
• Slovak citizens generally speak good English, ranking 18th in Europe.
• Slovakia is a member of the European Union.

Why choose nearshoring in Eastern Europe?

The Eastern European ICT sector is on par with services in the Netherlands, and there is a wide range of service providers with many highly skilled IT specialists. Those looking to benefit from flexible scaling, highly qualified and experienced developers, cost advantages, short distances, and minimal cultural differences can do well in Eastern Europe. Want to learn more about nearshoring in Romania? Read more here.

Are you interested in NetRom’s services? Take a look at our outsourcing page as well.

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