The worldwide business software and services market was worth approximately USD 430 billion in 2021. It is anticipated to grow at a compound annual growth rate of 11.3% from 2022 to 2028. The main cause of this unprecedented, rapid growth is the expansion of generationa digital transformation based on mobile technology, and cloud computing technologies.
Alongside with the market growth the total number of software developers worldwide has exceeded 27 million. The largest share of software developer jobs is in North America, where more than 5.7 million people work as software developers — representing nearly 21% of the world’s total workforce. The number of IT job postings, and has increased by more than 100,000 over the past year (2021).
India has the second-largest developer population at over 2 million, followed by China and Brazil with 1.8 million and 1.5 million, respectively. In total, Asia Pacific accounts for more than 30% of the world’s entire software developer population at over 8.6 million developers.
The total number of software developer jobs in South America and Central and Eastern Europe (CEE) combined is estimated at more than 5.1 million — close to the total size of the workforce in North America.
Today, the question is no longer, is there a shortage of software developers in the world, but how to deal with the talent deficit in parallel with booming demand. In December 2021, the shortage of software developers in United States only reached its all-time high (1 million) and experts predict this number will increase up to 2.2 million by 2030.
What’s more, global companies are likely to lose up to $8.4 trillion in revenues, due to the growing shortage of quality software developers. Tech advancements in recent years have also increased the demand for software engineers. The growing demand also requires more specialization in programming languages, automation, and emerging technologies such as AI and neural networks, machine learning, big data, augmented reality, DevOps. and IoT.
All of this has left companies that need to fill jobs fighting for a smaller talent pool that may not have all of the skill sets they need. This might cause a structural risk for many of them as for the whole countries when it comes to economic growth, innovativeness, and business security reasons.
The problem of software development skills gap is more severe in the developed countires like US, Canada, UK, Germany and Japan The figures below show how many new software developer positions they will need by 2025 (estimation): USA – 1 780 000; EU (total EU member countries): 1 420 000 Germany: 410 000 United Kingdom: 390 000 Japan – 380 000 France: 250 000 Canada: 190 000 Nordics (Denmark, Sweden, Norway): 160 000 Switzerland – 120 000
The estimated demand is very hard to fill by using only the local supply through education and training. Although many of the countries from this list have been practicing supportive immigration solutions, the huge gap still remains.
To make things worse, the most severe shortage of senior software developers is observed among the most experienced experts. There are more than 150 000 job openings on LinkedIn for IT project managers, software architects, or tech lead roles in the US only.
Along with the demand for software developers, we can observe the rising interest nearshore and offshore software development services sector. Offshore development outsourcing is used by corporations and small businesses to lower costs and access highly skilled resources while maintaining control of their technology solutions.
Despite significant issues surrounding quality, communication, time zones, local legal context, etc., many business leaders are willing to take on this challenge if it means they can continue focusing on what’s most important for them – growing the company.
This offshore software development trend has been rapidly increasing since 2010 when the offshore software development market began developing very rapidly. In the last 30 years, the outsourcing market has evolved from hiring individual offshore software developers (as a development team extension) to creating fully operational offshore software development teams. But there is more to come…
Globalization trends and the continuous skills gap have persuaded many companies to move their entire IT departments to countries with larger talent pools and reasonable nearshore / offshore software development rates.
These structures are usually called IT Hubs, R&D Clusters, or Offshore Development Center (ODC).
The ODC’s can be created directly as a subsidiary or by with help of specialized offshore software development companies (local IT partners sharing know-how and business connections). The advantages of this second solution include lower overheads and access to larger teams of experienced developers who can quickly get up to speed with business processes or new technologies without the need for long lead times.
Historically, the main location for outsourcing was Asia with its market leaders like India, China, and the Philippines. By now software development has been dispersed all over the world with software developers working in more than 65 countries worldwide. The new regions that have gained more importance are:
Central & Eastern Europe (CEE) – a region that stands out defined by a high concentration of software labs and R&D centers along the west coast of the Black Sea from Romania through Bulgaria, an amazingly good education system providing good education at reasonable prices combined with low cost of living. As it turns out, Poland is also one of the most significant locations with nearly 800 outsourcing companies operating with global clients
South America – a region with large metropolises and software development hubs is not a surprise since they certainly can provide software developers fast and at quite competitive rates.
Africa – an interesting region to consider as an offshore software development location. Although IT education and training has still some way to go before it can reach the ideal level, African outsourcing can offer lower rates for software development or nearshore / offshore software services.
Central America (Mexico) – a combination of a skilled workforce, geographical location with the US and Canada, and low cost of living is setting Mexico up as a quite good nearshore software development choice.
We must indicate here, that there are significant differences between the various locations in Asia, South America, and Eastern European countries. Some of them offer more consistent delivery times and software quality, some of them are focusing more on lower rates. The final goal of this game is to find the best quality for the best price.
Offshore software development rates can range from as low as $20 / hour (for simple support and maintenance tasks) to $200+ / hour for custom-built applications. These figures depend on several factors such as the experience of the software developers, type and size of projects, time zone differences, local living costs and so on. According to the latest reports, almost 60% of global companies hire offshore programmers to optimize software development costs and fill the critical vacancies. While offshore developer rates vary from country to country, you may still save 40% to 70% of overall expenses. For example, the typical hourly rate for a senior developer in Eastern Europe, costs between $30 and $65; offshore developer rates in Asia and Africa are generally between $20 and $45 each hour. In Latin America, software development costs range from $35 to $70 an hour. The qualified software developer rate in the US is $65–$130 per hour, whereas it’s only $30–$60 in Poland, Romania or Ukraine (Top 10 countries by skills and education).
It’s surprising that the CEE countries’ potential for software development and IT outsourcing is so often underestimated. This part of the world hasn’t been active in the global economy untll early 90’s and actually missed the attention of investors in the next years after. The total number of software developers in the region is estimated to reach 2 mln in 2025, and this is what might make it more attractive software development outsourcing destination for Western European and US companies.
As we can see the average offshore development rates in CEE, Soth America and Asia regions are much lower when it comes to almost all positions. However when we consider additional factors like:
– business environment (infrastructure, law)
– working time zones
– standardized work culture
we should have a clear winner in this competition. Contries like Poland, Chechia, Slovakia, Romania, Bulgaria or Ukraine have already become an IT power houses for the US and EU companies.
1) Poland – the software development and IT industry capital in Central and Eastern Europe. This country is a perfect location for nearshore software development with a skilled workforce, economic stability and a significant level of local IT expertise. The hourly software developers’ rates here are much lower when compared to Western European ones – from $35 to $70 an hour.
2) Czech Republic – the second largest outsourcing software development country in the region, with more than 40 known IT companies. The coding costs for this country are estimated to be $40–$90 an hour.
3) Slovakia – although it has no major outsourcing players yet, its skilled workforce is becoming very competitive on the European market. Software developer rates here vary from $35 to $70 an hour.
4) Romania – is known as a promising destination for nearshore software development and many companies already got know it and use it as their outsourcing location (Cisco, EMC, HP or IBM). The costs of offshore programming here are estimated to be $30–$65 an hour.
5) Bulgaria – recently attracted some attention of the US companies like Amazon or Microsoft. Once considered too expensive (programming costs are estimated to be $30–$60 an hour), Bulgaria is quickly becoming one of the most popular outsourcing locations in Eastern Europe.
6) Ukraine – this country has already confirmed its status as one of the top 10 offshore software development countries in the world. With the highly developed telecom, finance, and education sectors, it became a very interesting destination for global outsourcing companies. The software developer rates are estimated to be $25–$60 an hour here.
The table below is presenting some basic information regarding the potential of CEE countries:
**Software development hourly rates: Data collected from various sources like: Statista.com, Eurostat, local National Statistics Offices, Doing Business Rank 2020
Now, when we know the basic characteristic of an ODC we can go deeper into the necessary steps to take to mitigate major risks of a future software development project:
This is something every successful Project Manager does. Without this step, you’ll waste a lot of time. The document should contain: goals, time frame, budget, other, resources, expected effects, return on investment. Based on that you’ll be able to estimate the offshore software development costs and filter offers received from different vendors.
The first step here is to analyze the average software developer hourly rates from the outsourcing market. Choose max 10 locations and compare everything in an excel file. If several of them meet your budget criteria you can go and analyze locations based on several factors: location proximity (the closer the better) software developers poll size country educational system country business infrastructure and safety the development of a local outsourcing market cultural matters In this article, we talk a little bit more about this matter. There are some great locations in trend right now like Mexico, Brazil, and CEE Region. We would kindly recommend taking a closer look at Poland, one of the largest IT talent pools worldwide.
There are cases of large companies that decided to establish the local entity and the whole business process by themselves. The only help they needed was during the recruitment process. However this strategy requires resources and time, and as we know in IT time is the most valuable resource. This is why we recommend finding an experienced and dedicated IT Partner that will help you handle operations, mitigate risks, and generally start the project faster. At NxTide for example we start building a dedicated team (including the Project Manager) for the project the same day we sign the agreement.
Screen the best vendors:
– look at their experience and specialization (HR agency is not a technological partner)
– analyze Management background (look for IT skills, experience)
– analyze current customers and request some testimonials from them analyze the company financial records (make sure that your partner will handle the effort of the large project)
– conduct interviews and discuss KPI’s with the Management of every IT partner (make sure that they will follow the plan)
Over our 7-year company activity we have helped many US and EU companies to successfully build Software Development Teams and Software Development Centers in a variety of locations in Poland.
Interested? – Let’s discuss your case on a call.
Marcin Dziedzic, CEO of Pragmatic Coders and NxTide.
NxTide is a specialized company focusing on building local, remote Software Development Teams or larger Software Development Centers in major cities in Poland. We take care of all recruitment and quality control processes making it faster and more cost-effective for you. Here is some more information about our expertise: – Over 7 years experience in creating a variety of software development teams – Over 60 teams and 300 engineers successfully hired and deployed – Several dedicated HR and IT Project Management Teams acting on your behalf
Please take a closer look at a dedicated and flexible offer we have prepared based on market needs:
1) Software Development Teams: dedicated to clients looking to expand their software development teams or create small remote teams from scratch.
2) Nearshore / Offshore Development Center: dedicated to larger and permanent projects. We’ve implemented the innovative Build Operate Transfer model to make the whole process faster, more efficient, and transparent.
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