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Top 5 Countries for Offshoring Software Development
In today's dynamic business environment, offshoring software development has become a prevalent and strategic practice. Offering numerous benefits, including reduced costs, increased productivity, and access to a larger pool of talents, it's no surprise that the IT outsourcing market is expected to reach $397.6 billion worldwide by 2025.
Global IT spending is also on the rise, expected to reach $4.6 trillion in 2023, marking a significant increase of 5.5% from the previous year. Notably, the software segment is experiencing remarkable growth, with a double-digit surge of 12.3% projected for this year, amounting to a substantial $891,386 million, as per Gartner.
Considering these trends and statistics, IT outsourcing is set to continue its upward trajectory in the coming years. For companies contemplating this option, exploring the best countries for outsourcing becomes crucial to ensure a successful and fruitful partnership.
What are the Best Countries for Offshore Software Development?
The Information and Communications Technology (ICT) sector in Vietnam is one of the fastest-growing industries in the country and has grown dramatically over the past few years. Specifically, Vietnam’s IT outsourcing sector has experienced a remarkable annual growth rate of 13.31% and is anticipated to reach $881.90M by 2027. Recognized as one of the top 6 best locations for IT outsourcing in Kearny’s Global Service Location Index, Vietnam boasts a favourable business environment, robust technology ecosystems and highly-skilled IT specialists - all while maintaining cost efficiency.
The country also demonstrated significant progress in its technology infrastructure, as evidenced by its climb of 7 positions in the government’s AI readiness index 2023, securing the 6th rank among ASEAN nations and 55th globally. This progress is further emphasized by the establishment of the National Innovation Center (NIC), underscoring Vietnam’s commitment to fostering technological breakthroughs.
Another reason for such strong growth in the offshore software development sector is highly skilled tech talent. Thanks to early STEM education that cultivates solid programming skills, Vietnam holds an impressive 22nd position globally in the Global Skills Index 2020, boasting a workforce of 480,000 IT engineers. With their proficiency in English, adaptability, and eagerness to learn, Vietnam's tech talent presents an excellent choice for companies seeking to drive innovation.
India is renowned for its well-established and mature IT industry, which has a remarkable history of successful outsourcing engagements. In 2023, it is projected to generate an impressive revenue of US$8.81 billion, as reported by Statista.
What sets India apart is the abundance of IT professionals, with an estimated 12.25 million accounts on the GitHub platform alone in 2022. This impressive number reflects the thriving and vibrant IT tech community in the country, highlighting the vast talent pool available for businesses looking to outsource their software development projects.
Another primary factor that makes India attractive for outsourcing is its cost advantage. The labor costs in the country are relatively lower compared to many Western countries, allowing businesses to save significantly on development costs.
Furthermore, India's political environment enjoys relative stability, creating an ideal climate for the growth of its IT sector. The country boasts an impressive number of software companies with ISO 2000 certification, surpassing all other nations worldwide.
According to the Outsourcing Journal, the Philippines has been considered the BPO capital of the world, boasting a remarkable 13% share of the global IT-BPM market and ranked first in voice-related services in 2021.
A notable advantage of offshoring with Filipino developers is the high level of English proficiency among its workforce. Approximately two-thirds of the country’s population is fluent in English, making it one of the world’s largest English-speaking nations. This proficiency in English facilitates smooth communication between businesses and Filipino workers, making collaborations highly efficient.
As IT outsourcing plays a vital role in driving the country’s economy, the government actively supports the industry by offering tax perks and incentives as strategic efforts to accelerate growth in IT outsourcing services.
With an impressive count of 89,931 software developers and an income of $10 billion in 2021, Poland has secured 7th position among Europe’s most successful IT sectors, contributing 8% of the Polish GDP.
Being a member of the European Union, Poland maintains stringent regulations to safeguard data and intellectual property, ensuring a secure outsourcing environment. Despite offering lower tax rates than many European and North American counterparts, Polish IT specialists are highly regarded and often command higher service payments than their peers in Asian countries. While Poland's time zone perfectly aligns with Western Europe, businesses in America may encounter slight challenges due to the time zone differences.
Ranked 2nd in the Latin America regional leaders in business, technology and data science skill proficiency by Coursera, Brazil is ideal for outsourcing software development for businesses in or close to the LATAM region. It has a large-scale candidate pool of over 500,000 professionals participating in offshore software development.
According to the Brazilian Software Association (ABES), Brazil IT represents 40% of the Latin American market. Due to its advantageous time zone compatibility with the US, Brazil has emerged as a highly convenient outsourcing destination. As a result, numerous US companies are irresistibly drawn to invest in and forge partnerships with the thriving IT companies in Brazil.
However, Brazil's tax structure is considered complicated and often challenging to navigate, especially for foreign companies operating in the country. Coping with this tax system may require hiring an expert, which would increase the outsourcing cost.
Technology vendor evaluation process
Once you have identified your preferred country that aligns with your geographic, time zone, and cultural requirements, the next crucial step is to evaluate the available software providers in that country. Here are some essential factors to consider during this evaluation:
- Expertise: Look for an offshore partner that possesses the expertise and experience in the specific technologies and domains relevant to your project. Their knowledge should match your requirements and contribute to successful project execution.
- Language Proficiency: Effective communication is crucial for project success and collaboration. Ensure that your vendor has a high level of English proficiency beyond just the top management level to avoid language barriers.
- Security Measures: Offshore development involves sharing sensitive data and proprietary information. Verify that the offshore partner has stringent security protocols in place, including non-disclosure agreements, to safeguard your data and intellectual property.
- Track Record: Evaluate the offshore partner's track record in related industries. Review their portfolio of high-quality work and case studies that demonstrate successful project execution to ensure they can deliver on their promises.
Check out our comprehensive vendor evaluation checklist to confidently assess potential vendors and ensure they meet your exact requirements for expertise, reliability, and technological prowess.
Overall, Vietnam, India, the Philippines, Poland, and Brazil are great countries for businesses to outsource software development, boasting a great pool of tech talent, affordable rates, stable socio-economy, and English proficiency. If you believe Vietnam is the suitable destination for your outsourced IT project, KMS could be an excellent candidate tech partner.
With over 14 years of experience in the industry and access to a vast pool of tech talent across Vietnam, we have the expertise and resources needed to assist you in developing innovative and cost-efficient digital solutions. Contact us today, and let us help you maximize your success.