Where to Locate a Software Development Hub, R&D, or IT Center for Your Business?
Where to Locate a Software Development Hub, R&D, or IT Center for Your Business?
We all are aware that the IT industry is in a constant struggle to find talented software developers, especially in highly competitive US and EU labor markets. The lack of available developers locally is exacerbated by the fact that there are not enough computer engineering graduates to cover the growing demand for software engineers. This is why companies are turning attention towards new ways to acquire IT skills and expertise, often outside their home countries. In this article, we will try to analyze the best location for IT nearshoring of the potential software development hub.
The main outsourcing locations
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 – 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 and Mexico – 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.
- We must indicate 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 power of CEE region
It’s surprising that the CEE countries’ potential for software development and IT outsourcing is so often underestimated. The total number of software developers in the region is estimated to reach 2 mln in 2020, and this is what positions it as a much more attractive IT outsourcing destination for Western European and US companies.
Furthermore, CEE countries are focused on developing new financing schemes to encourage investment in R&D, including innovative technology companies; promoting their economies as favorable locations with skilled IT professionals; providing incentives such as tax deductions; and developing technologies that lower business costs, including R&D outsourcing.
A closer look at Poland
Poland is the largest country in the Central European region with 38 mln inhabitants, an impressive education system with over 47 universities, and a modern, vibrant economy. As an EU member state since 2004, Poland has been steadily developing its infrastructure and business environment. The country’s stable situation, dynamic export, and large population of young people have been the main driver of innovation for years. The GDP per capita of around $34,800 in 2020 is placing Poland very close to developed countries.
Polands’ IT market overview
Poland is ranked ninth in Tholons’ Top 100 Outsourcing Destinations. The 2019 A.T. Kearney Global Services Location Index ranks this country as the twenty-fourth most attractive outsourcing location, with both BPO and ITO sectors being strong. The country’s IT services exports are estimated to grow from $2.1 billion in 2018 to $3.5 billion by 2025, according to a study by the Boston Consulting Group (BCG).
The Polish government has supported the technology sector since the 1990s, offering tax deductions for software development centers that invest more than $1.5 million in information technology infrastructure over three years. The software sector is also supported by low labor costs and its proximity to Western Europe’s key markets.Incentives are available for all investors who establish or expand their operations in Poland.
When it comes to technology, Polish outsourcing market is especially strong in software development, with the country’s developers specializing in a wide range of technologies. Polish developers are sought after for their skills in .NET, Java, PHP, Python, and Ruby on Rails.
The Polish outsourcing market is expected to grow significantly in the coming years, thanks to the country’s large population of developers, its strong IT infrastructure, and its attractive business environment. The prestigious CEO Magazine ranked Poland in the top 3 the world’s best countries to invest in and to do business in for 2020. (table below)
The software developers’ talent pool in Poland
In the nearshore software development sector, Poland has the tenth-largest talent pool in the world. The country is home to 584,000 software developers, of which nearly 60% are working in the IT services industry.
Poland’s software development sector is growing rapidly; the number of software developers in the country increased by 16% between 2017 and 2019. This growth is expected to continue, with the number of software developers reaching 663,000 by 2021.
The technical skills and experience of software developers
How do you select an outsourcing location if you’re a business owner? Apart from a large supply of IT talent, it’s critical to ensure that experts have the necessary technical skills, knowledge, and experience to deal with complicated projects. Poland’s software development industry is well-known outside of the country and even throughout Europe. Polish developers are often praised for their skills, with many of them possessing a range of technical expertise. In fact many are leading in prestigous skills ranks (eg. Google). Aside the major technologies like .NET, Java, PHP, Python, and Ruby on Rails, they are also progressing in newer ones such as blockchain, big data, and artificial intelligence (AI).
Work ethics, standards and other reasons
- There are many reasons why businesses should consider outsourcing to Poland. Polish developers are known for their strong work ethic and for being able to handle more complex projects. They are also fluent in English, which makes communication with clients easier. Let’s summarize some additional benefits of Poland:
– Proven track record in software development
– A business-friendly environment - – Ability to build and scale the team fast
- – IP standards safety
ICT education in Poland
There are more than 50 colleges in Poland that specialize in information and communication technologies, and their students and graduates are respected for their high academic standards. On top of that, there are also a large number of software development boot camps in Poland, which helps to ensure a continuous supply of skilled developers.
The universities that have ICT graduates are Warsaw University of Technology, Jagiellonian University and AGH University of Science in Krakow, and the Wroclaw University of Technology. The total number of IT graduates in Poland is expected to reach 150,000 by 2021. This will create a large pool of talented software developers who will be available to businesses. This promising trend would make it much easier to open a potential IT software development hub for any company.
It is also worth mentioning that the Polish government is also investing in the country’s ICT education sector. In 2018, the government announced a five-year plan worth 1.5 billion złoty (approximately $390 million) to support country’s ICT industry.
Google and other big tech companies are already here
- TA number of software development companies have already set up shop in Poland. These include Google, which announced it was opening a software engineering center in Warsaw earlier this year. The company said it will hire 500 software engineers for the new office within the next two years. Other companies that have established software development centers in Poland are Oracle, IBM, Element AI, and Wargaming.
All in all, it’s evident that Poland is quickly becoming one of the leading software development hubs in Europe (Build Operate Transfer model). The country’s large pool of skilled developers, combined with its favorable business environment and strong track record, make it a prime destination for businesses looking to outsource software development projects.
Software developers salaries in Poland
The average salary is about €830 per month, whereas software developers’ salaries can be 3 to 7 times more. As a result, the number of people interested in software development is increasing, swelling the overall pool of technology talent. In addition to that, the developers in smaller cities, such as Katowice or Poznań, earn 5 to 15% less money than those working in major IT hubs. In general, software development in Poland is 55-60% cheaper than in the United States and 45-50% less expensive than in Western Europe or the United Kingdom when measured by labor expenses. The difference in remuneration rates may not appear to be significant on its own. However, if you include reduced competition for technological talent and shorter hiring periods,
The cost of office space in Poland
- Office space is another important factor here. The cost of commercial office space in Poland is much cheaper than in Western Europe or the United States. For example, it will cost you an average of €225 per month to rent a desk in Warsaw compared to €700 for London or $1,300 in San Francisco. The rates can vary by city, but in most cases, the cost of office space is much lower in Poland than in other developed countries.
Commercial space in major agglomerations in Poland is growing rapidly, and this is likely to continue in the coming years. In 2020 the market experienced an increase of 5.5% in the number of square meters in most Polish cities, according to reports by Colliers International Poland. This growth is expected to occur also in 2021, making Poland a definite leader in the area.
IT outsourcing vendors in Poland
- Currently, there are over 800 software outsourcing companies in Poland to cooperate with. More than 300 software development companies are located in the capital city, Warsaw. About 260 software outsourcing companies are registered in Kraków (known as Poland software hub), and over 20 software companies are based in Wrocław.
- Other software outsourcing hubs are located in Poznań, Rzeszów, Lódź, Gdansk and Gdynia. Poznań software outsourcing hub is known for software development services in ecommerce sector.
Is Poland a good location for R&D software development hub?
For many years outsourcing has been labaled as the best solution to cut costs of operations. Nowadays. companies compete with each other with innovative products rather than simply price. This trend is even stronger when it comes to software development industry – where innovativeness matters the most. Outsourcing is rather a chance to find additional, faster growth.
In total, there are more than 500 R&D facilities and companies in Poland, including global players such as Google, Samsung, and IBM. The entrance of such technology giants as Akamai, Cisco, as well as Capita, one of the biggest UK tech providers, has significantly enhanced the development of the industry as well.
Also, Polish R&D activities are often financed by the private sector, thus fostering interest among global market players. For instance, companies like ABB, Google, Siemens, Motorola, Delphi Automotive, Intel, and McKinsey opened their R&D centers in Poland. Some Polish vendors offer very advanced software hub development services based on the Build Operate Transfer model.
What are the best locations for opening a software development hub in Poland?
Software development hubs are opening in different regions of Poland. According to data presented by Krakow Software City, software outsourcing companies have received over €740 million in R&D funds from various European Union programs between 2007 and 2015. Currently, there are about 260 IT service providers registered in Krakow – one of the biggest software development hubs in Poland. It’s an important information technology center with over 80 multinational R&D centers located there; therefore it is also called Polish Silicon Valley (ssp valley). As another software hub, Wroclaw has 20 software outsourcing companies that provide services for foreign customers.
Kraków
Over 0,8M population, 19% of total IT Engineers supply
Warsaw
Over 1,8M population, 18% of total IT Engineers supply
Wrocław
Over 0,7M population, 11% of total IT Engineers supply
Katowice
Over 1,8M population, 7% of total IT Engineers supply
Software development hub in Kraków
Kraków is the country’s second-largest city and home to the largest concentration of software developers in Poland. By 2020, there were more than 95,000 software engineers in the country. Krakow has a greater number of IT firms (compared to Warsaw) , resulting in greater competition for tech talent than in Warsaw. According to ABSL, Krakow came first in terms of available skilled workers. Furthermore, Krakow is home to more than 200 businesses, including Brainly, Callpage, Elmodis, kontakt.io, Estimote. Krakow has also been recognized as one of the top 60 European city for launching and scaling startups .
Software development hub in Warsaw
With a population of 1.7 million people, Warsaw is the country’s capital and home to 70,200 Polish software developers. In 2019, there was a significant flow-out of software professionals from Warsaw to other parts of Poland. As one of the best IT outsourcing firms and numerous R&D centers in the nation, the demand for talent is fierce. The Capital of Poland is situated in the center of the country, and it’s also one of its main transit routes. It has two major airports (one international), excellent train connections, as well as a substantial number of available offices. Every year, over 3,000 ICT professionals graduate from Warsaw University.
Software development hub in Wrocław
Wroclaw is notable not just because it has one of the world’s most significant talent pools, with 52,500 professional developers. This city is also well-known for its efforts to establish a healthy business environment through coordination with local officials. This metropolis is also recognized for its cooperation with local schools and universities and the availability of offices all over town. IT companies in Wroclaw typically work with clients from the USA, Poland, and Nordic countries but also partner with companies from Switzerland, France, and the UK..
Software development hub in Katowice
Despite being recognized only for its transportation value, Katowice also congregates a rather impressive number of Polish developers. As of 2021, the number of tech experts here reached almost 27,500. This IT hub also has 1,400 ICT grads every year. IT companies in Katowice work mainly with companies from Poland, France, and the UK.
Poznań
Over 0,7M population, 6% of total IT Engineers supply
Łódź
Over 0,7M population, 6% of total IT Engineers supply
Gdańsk
Over 0,6M population, 5% of total IT Engineers supply
Bydgoszcz
Over 0,5M population, 3% of total IT Engineers supply
Software development hub in Poznań
Poznań has the greatest proportion of IT firms that work with foreign customers (16%) and one of the highest proportions of German IT outsourcing (21.9 percent of clients) [3]. It’s the tiniest metropolis on our list, with 19,100 professional developers. With a little over 50 IT companies in Poznan, this location would be a perfect choice for small startups and companies that do not need big dedicated teams.
Software development hub in Tri-City
Gdansk, Gdynia, and Sopot have formed a technological talent pool of 30,200 software developers in the region. In recent years, this area’s development has exploded. This area offers excellent public transportation and is home to the greatest number of offices throughout the country. Along with Warsaw, this region works with clients from the US (37.9%), Poland (16%), and the UK (6.8%) [3]. This region is an excellent nearshoring choice for Nordic companies due to geographic proximity.
Software development hub in Łódź
Contrary to other Polish cities, the greatest share of clients among the IT companies in Lodz comes from Asian countries. Local experts have also worked with customers from Nordic countries. In the IT world, Lodz is well-known for software outsourcing and software design software development. There are about 32,500 software developers in Lodz working with clients from Poland (35%), Asia (32%), and other non-EU European countries (25%). ABSL’s 2021 report recognizes Lodz for both base and higher-level salaries, as well as collaboration with local institutions.
Finding the best IT outsourcing provider in Poland
Now that you’ve read up on software development hubs in Poland, you might be wondering how to find the best software outsourcing provider. You can start by taking a look at NxTide’s IT outsourcing and nearshoring capabilities in Poland.
Please take a closer look at a dedicated and flexible offer we have prepared based on market needs:
1) Software Developments Teams: dedicated to clients looking to expand their software development teams or create small remote teams from scratch.
2) Nearshore / Offshore Development Centers: 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.
NxTide is a specialized company focusing on building local Software Teams or larger Software Development Hubs 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 read more about us here: https://nxtide.com/about-us/
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