Outsourcing remains one of the ways companies are looking to reduce costs while managing an ambitious volume of work. Despite the many sources offering insight into key geographies for outsourcing few take the approach of where technology leaders are making investments or partnerships. In this article we see the top countries where leading technology enterprises are partnering with, to provide insights to leaders in order to distill hype from reality.
Devising the list of best countries to outsource software development
Based on research on this topic a number of competing sources have utilized varying approaches to determine the best countries to outsource software development. They range from economic indicators to government promises of economic stimulus. Mindfield Consulting focuses instead on top geographies that major tech companies like Google, Apple, and Microsoft are investing in for top tech talent. Beyond the many cited metrics along with input from thought leaders, we conducted an extensive search on where companies are actually going for tech talent.
Ukraine – an emerging force in Eastern Europe
BBC ‘s tagline on Ukraine’s rising tech industry featured this one liner “engineering is in our DNA”. It spoke of the long history of engineering chops from the tech service industry’s early days in Ukraine (source). Though Ukraine is fast becoming a product nation, following the trajectory of other countries that started with outsourcing, it remains a destination for major companies for software development.
- Timezone overlap with major corporate nations like Canada and US on EST with 3-4 hours of overlap
- Culturally compatible to potential clients in Canada and US given their emphasis on facts and statistics to drive decision making (source)
- Availability of tech talent compared to Eastern European neighbours with similar cost advantage (source)
Challenges and disadvantages with outsourcing to Ukraine:
It wasn’t actually easy to find any criticism of Ukraine, but a study of 10 years of software development despite the overall success noted the following areas for improvements.
- Due to the distance between the customer and development team this sometimes required two project managers thereby resulting in overhead costs (source)
- Necessitates needs to utilize an agile development delivery style, meaning your organization may need to transform its own processes prior to leveraging the resource (source)
- Ukrainian developers in general have lower language literacy than surrounding European countries like Scandinavia (source)
- Culturally less sensitive to rules and formalities (source)
Companies who outsource to Ukraine
Samsung: reported to be partnering with outsourcing companies in Ukraine for IT skillset (source)
General Electric: is another major corporation leaning on Ukraine to fill in for the technology outsourcing needs (source)
Canadian Tire: a retailer of home, automotive, and renovation products is another notable bend leveraging Ukraine for tech talent (source)
China – outsourcing giant now focusing on software
China has a strong technology service sector from years of outsourced manufacturing. They have been a recipient of extensive outsourcing dollars in the past three decades. Yet there still remains a barrier when it came to government intervention and high profile sanctions from tech companies like Google, Facebook, and Apple.
- Leading the charge of Asia’s tech growth, China took majority of the spots on the top 10 fastest growing software companies report by PWC (source)
- China has multiple economic engines including Beijing, Shanghai, and Hong Kong to provide for multiple languages for business (source)
- China remains a low cost option for outsources software development (source)
Challenges and disadvantages outsourcing software development to China:
- Every organization has deep ties to government or are closely controlled, often not suitable for government or federal projects
- Culturally in-direct and requires a consensus driven decision making approach that can often require more work in speaking with different team members for larger changes
- Language barriers have also been noted which may make code documentation and UI design more challenging (source)
- Great fire wall filters and scans all communications entering and leaving China meaning increased risk of exposing sensitive or classified information
Companies who outsource to China
Cisco: listed as a client in a Chinese outsourcing agency (source)
Honda: listed a client for a Chinese outsourcing agency (source)
Thompson Reuters: listed as a client for a Chinese outsourcing agency (source)
Google: has also added their 3rd location to China with a new co-working space in Shenzhen (source)
Canada – offers quality, close geographic, and cultural proximity
Canada is home to a mature start up ecosystem and boasts an AI global centre of excellence, with extensive foot print and history in the tech sector. One of the unexpected reasons outsourcing to Canada has become a reality is the increasing need for flexible work arrangement for experience technology professionals. In fact every one of the tech companies we’ve mentioned so far has at least one satellite office in Canada along with national head quarters. With the rising cost of offshore development Canada has recently become a strong competitor for outsourced technology work.
- Complete timezone coverage for American companies looking to outsource
- More predictable quality and reference checking due to closer proximity
- Availability of remote working resources provides extensive savings to American and European businesses (details)
- Due to lower currency exchange Canada presents a unique and untapped outsourcing opportunity
- Closest proximity of culture and language when compared to other outsourcing options
Common challenges and disadvantages with outsourcing to Canada
- Due to the diversity of Canada there isn’t one predominant culture to tailor working styles towards
- Canadians have higher living expenses than overseas countries
- Need to rely on outsource software companies to find remote talent due to wide geography
Companies who outsource to Canada
Dell: a major outsourcing client of Canada (source)
Microsoft: has been working with Canadian resources since 1985 (source).
Bosch: listed as a client by a Canadian software company (source)
Cisco: a company that delivers software leveraging Canadian resources (source)
IBM: a company that delivers software leveraging Canadian resources alongside their satellite office (source)
India – an established player in the outsourcing industry
India remains a strong candidate for outsourcing despite its increasing costs to software development, despite that major tech players continue to invest in India. Not simply as an offshore developer they can call up to do one off projects, but instead to be strategic delivery centres or tech community to position for early stage start up investments.
- One of the longest standing countries to do software development outsourcing
- Highly educated urban populations with emphasis on STEM being a key academic pathway
- Established outsourcing conglomerates like Tata, Infosys, and Wipro
Common challenges and disadvantages with outsourcing to India
- Conglomerations of technology firms have made trusted Indian software developers more expensive (source)
- Start-up and venture capital ecosystem have shown up making India a heavily contested battle ground for tech talent (source)
- India cost of living has risen over the years meaning an eroding cost advantage (source)
Companies who outsource to India
IBM: now has more staff in India than in America (source)
Google: outsources auxiliary functions like hardware management and software development to India (source)
Further Google and Apple have both made bets on the country. Their bet is on building up a tech community for start ups and innovative new enterprises. This has led Google and Apple to position themselves as leaders in the tech and emerging tech communities there (source).
Next steps for organizations considering outsourcing
Knowing which country to begin investigating is a first step to determine a successful outsourcing partnership with a prospective country. Narrowing down your top candidate firms will also require time to understand how partners perform. Here are some tips to help smooth out the process for developing outsourcing relationships
- Request references and samples of work
- Provide a pilot project for short listed partners
- Consult a knowledgable technology professional to help you determine fit of outsourcing partner
- Determine what investments will make the partnership thrive i.e. flying staff over to work with the team or bringing a resource on-site