As we have discussed in our earlier blog posts on the topic, Eastern Europe outsourcing has become a viable alternative to the Asian outsourcing services. In this article, we will take a deeper look at why companies are changing their preferences for outsourcing destinations.
The flaws of Asian outsourcing
For the past couple of decades, Asian countries like China, India, and Pakistan have been the go-to choice for outsourcing services. The main reasons, of course, are the cheap labor options and high amount of easily accessible freelancers. These whole economies focus on the goal to attract foreign investors. Even their culture reflects it – there is a reason the willingness to please is part of the stereotype.
These outsourcing destinations, however, started to suffer from their own success. Fierce competition and lack of educated workers to fulfill the market demands lead to reduced quality and create communication issues. The general feeling among companies outsourcing to Asia is that professionals will do exactly what you tell them. No innovation, no improvisation, no understanding of business needs and market best practices. And for most business people it is not easy to explain technical requirements which leads to communication issues and dissatisfaction. While it is always good to get a task complete fast and cheap, quality and deadlines are in most cases more important. We have seen first-hand examples of Indian professionals agreeing on doing something they have no idea how to do with the sole intention to please their clients.
In the same time, developing countries in Eastern Europe have been busy building capabilities and developing their IT industries. It is true that no-one can compete with China and India on price and quantity. However, the close proximity, familiar business culture and ease of management help set up the region as a viable competitor.
The 4 Cs of Outsourcing
There are four important factors to consider when choosing an outsourcing destination – closeness, capabilities, culture and costs. We will now discuss and apply them to Eastern Europe outsourcing companies to see how they fit.
The most important word in Eastern Europe Outsourcing is Europe. Countries in the region are under the EET (UTC +2) time zone. This means there is two hours difference with the UK and only one hour with other Western European countries. This makes it a lot easier to schedule work and meetings compared to Asian countries. We have worked with companies on a seven hours difference. Although it was still doable, it required a lot of coordination, determination and late night meetings. Having almost no time difference is a huge advantage in planning and executing an efficient workflow.
Another reason to consider are cheap flights. It is always a good practice to visit and get to know the team you are working with. The close proximity of Eastern Europe allows for regular and cheap visits for both parties. The duration of the flights is also a big advantage. For example, the direct flight from Amsterdam to Sofia or Bucharest is around three hours. In addition, because these countries are part of the European Union there is no need for Visas or other such complications.
Experts claim that Eastern Europe outsourcing companies have an advantage over their Asian colleagues because they are more willing to collaborate. It is not only the easier to bridge language barrier resulting from the Western influence. This is still Europe and it has the same EU working culture and Data Protection legislation. Professionals are skilled in understanding business and technical requirements and are in general flexible to changes. A big advantage is the open culture. For example, if the developers think a requirement is not specified correctly or it could be done better to suit your business needs they will not hesitate to discuss it. Suggestions for improvements are not only welcomed but encouraged. Most teams will prefer to collaborate with their clients on the project specifications and goals which greatly improves the work relationships and environment.
Connected to that, the biggest advantage in our opinion is the lack of “Yes Sir” attitude commonly found in Asian outsourcing destinations. We have seen plenty of examples of Indian outsourcing companies agreeing to deliver something they have no idea how to do. It is part of their culture to avoid admitting problems and questioning requirements. This leads to issues with team and project management, let alone deadlines and quality. The IT department at Addison Lee conducted an experiment in 2010 requesting a prototype from both an Indian and a Russian company for the same project. The Indian company agreed on everything without question. They repeated mistakes that were deliberately put there. In the same time, the Russian company looked at every detail, questioned the mistakes and various functionalities and ultimately proposed a lot of beneficial improvements.
When speaking about IT and software development one of the biggest issues in the industry is the difference between demand and supply for such services. There is an infamous shortage of IT professionals in Europe and US. In the same time Eastern European countries have been busy building capabilities in the field. The former Soviet Union was famous for its focus on engineering and mathematics. This culture has transferred to the next generation. In 2009 Romania had the highest growth rate in this part of the labor market with 12% increase compared with earlier years.
The main reason for this growth is the big number of technical universities in the region and the desire of young people to earn a degree. Areas such as computer science, informatics and web design are among the most popular education and career choices. Various mathematical competitions are held regularly in every high school. This is only boosted by the relatively lucrative IT industry. The quality of education is also very good. On average a Masters in computer science takes around six years in Eastern Europe. On the other hand, many East Asia developers only take short courses lasting several months before starting to work.
Finally, in terms of costs to quality ratio, Eastern Europe outsourcing companies rank very well. In most cases, the price per hour is between two and four times cheaper than in Western Europe while the quality remains high. On the other hand, it is still around twice as much when compared to India or China, the quality in most cases will be better. Add to that the cheap flights and ease of communication and you will see why so many companies are changing their outsourcing destination preferences.
Eastern Europe outsourcing summary
Eastern Europe outsourcing has a lot of advantages compared to Eastern Asia. Some analysts call Bulgaria and Romania the Silicon Valley of Europe. Experts even use the term “Offshoring” for long-distance outsourcing relations and “Nearshoring” for closer destinations. Below you can find a table prepared by Victoria Mudraya summarizing the pros and cons of these two approaches.
So what do you think about the outsourcing industry in Eastern Europe? Do you believe it is becoming the Silicon Valley of the continent? Let us know in the comments below.
At Eastsource we have experience in working with outsourcing companies from the Eastern European region. We have seen great project results from Bulgarian, Romanian, Ukrainian and Belarusian companies. Although every project requires a lot of preparation, proper planning and execution, we can say it is a lot easier to work with professionals from these countries. We are building a wide network of Eastern European software development companies providing outsourcing services. Web and mobile development, software architecture, testing and design are just part of our services. We commit to best practices, flexibility and professionalism. Contact us for more information or a quote.
Images Reference – Victoria Mudray