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Overview of the most popular outsourcing destinations

As it becomes more difficult, and takes longer, to hire IT professionals, U.S. and Western European companies are turning to outsourcing their IT needs to other countries. Companies around the world are following suit, and searching for outsourcing countries that can provide for their IT needs, save money and allow for more agile operations. The trend is toward hiring remote employees, rather than contracting for individual projects, as companies realize the benefits of standardization, multi-sourcing and developing integrated partnerships.

Choosing an outsourcing country to become a partner with your company, though, requires you to do your research on outsourcing to make the right decision. In addition to finding the right talent, finding talent that will integrate with other team members is a crucial element in your decision.

Other factors, such as proximity to the main company, visa-related travel considerations and the business climate in the outsourcing country all need to be considered. As well, social and cultural considerations of the country must be evaluated to determine if they will integrate smoothly with existing operational standards.   

India and Asian Countries

India has been a top outsourcing destination, and still represents a viable outsourcing possibility. However, India’s IT outsourcing market is becoming increasingly oversaturated, and talented employees are becoming more difficult to locate and hire. Additionally, Indian companies such as Tata and Infosys have paid multimillion dollar fines for “systemic visa fraud and abuse of immigration processes” in 2013. These factors have led some companies to look for other locations for their IT outsourcing needs. All of this has caused a 75% decline in the Indian IT industry, which has been built around outsourcing, remote employees and contracted services.

Asian countries are traditional IT outsourcing destinations. Malaysia was listed third, behind India and China in A.T. Kearney’s 2016 Global Services Location Index that tracks the best offshoring potential. Indonesia, Thailand and the Philippines were listed fifth, sixth and seventh, Vietnam was listed as the eleventh and Sri Lanka ranked fourteenth. One of the primary considerations with Asian countries is the differences in employment laws and working conditions. Rather than exposing themselves to negative media coverage, many companies have begun to emphasize “ethical outsourcing” to avoid becoming associated with outside companies that treat their employees poorly. While this is obviously not a universal condition, well publicized scandals such as a call center that was found to be mistreating employees while working on an outsourcing basis for multiple companies and charities in the United States has brought greater awareness to this issue.   

Another factor to consider when choosing among outsourcing countries is time and travel. Large differences in time zones and high travel costs determine the efficiency and profitability of IT outsourcing. These costs often erode the cost savings that companies hoped to achieve, especially when they are forced to travel to Asian nations such as China, Singapore or India. Finding partners who are closer to a company’s primary place of operation, or “nearshoring” has become popular, in part, for these reasons.

Russia and Eastern Europe

Russian IT talent exists, but political and economic difficulties pose trouble for potential outsourcing partners. Additionally, Russian regulations regarding outsourcing are not fully developed and issues with banking, taxes, and infrastructure all pose potential risk. Political concerns and economic sanctions imposed by the United States and the European Union have also discouraged many companies from utilizing Russian technology companies. While these sanctions do not directly target the technology sector, many companies are owned by large Russian energy companies, which are subject to sanction. Many companies have chosen not to attempt to discern ownership and have looked elsewhere to avoid potential hazard.   

Many top outsourcing countries in Eastern Europe, such as Poland, Romania and Belarus are gaining popularity. Notably, Ukraine is emerging as a top outsourcing destination for those who have done their market research.

Ukraine

Costs are lower than for countries that are EU members, and the high level of IT talent, business practices and cultural similarities are all reasons to choose Ukraine as an outsourcing partner. The country’s location is central to most of Europe and North America, and Ukraine has modeled its outsourcing industry on the Western business model. This has caused its software development and IT outsourcing industries to increase tenfold over the last decade.

Many foreign companies from the technology sector flocked to Ukraine to secure additional research and development personnel in 2015. They sought the competitive advantage that results from costs up to 60% lower than can be found in other counties and a skilled and dedicated talent pool to hire from. Ukraine has attracted IT outsourcing partners from the United States, Canada and European Union countries because of the high quality of its workforce and commitment to the technology industry.

Deciding on an outsourcing country is the first step in finding a partner who will reliably provide the IT expertise you seek. Outsourcing market research will help you to find the best country in which to begin your search, and Ukraine is recognized as a cost-effective alternative that provides innovative and trustworthy services.