Nearshoring to Eastern Europe - 5 Top Locations [2024]

The rise of Eastern Europe as the nearshore destination of choice

When demand for IT services began to soar, many Western companies faced a shortage of specialists.

• According to Erni, one in three companies in the EU is looking for programmers, and according to a Eurostat report, up to 50% of companies in the European Union are having difficulty recruiting IT developers due to the shortage of skilled professionals. 

• There is a shortage of as many as 124,000 IT professionals in Germany (Bitkom), 70,000 in Sweden, and 19,000 in Denmark (Emerging Europe).

• 83% of small and medium-sized businesses in Austria complain about the difficulty of finding qualified experts, and 40% cite this as a reason for declining sales (EY).

• In the UK, the shortage of specialists for technology positions is estimated at 70% and among the highest in Europe (Robert Walters). For this reason, as many as 48% of UK companies outsource software development overseas (YouGov). 

As a consequence, more and more international companies are choosing to hire developers from abroad to fill the gap. However, they do not want to outsource services to Asia or South America, where they would face the time difference, language barrier and questionable quality. Thus, nearshoring to Eastern Europe has become one of the most popular business models, developing the region at an incredible rate.

Why do companies choose Eastern Europe?

• Great pool of tech talent – nearshoring in Eastern Europe gives companies access to 1.3 million developers and 6,000 software houses, so it's a great way to solve the shortage of professionals.

• Reducing development costs - Eastern Europe nearshoring services allow Western companies to save 40% per year (and up to 70% according to other sources) per employee through lower development rates. In a period of inflation and economic recession, this direction is even more attractive than ever because of financial benefits. Some countries, such as Poland, also offer tax incentives for investing in their territory.

• Top developers in the world – companies choose software houses from Eastern Europe not only because of price, but also outstanding development quality. Eastern European specialists are winning rankings of the world's top developers - an example is one of the most reliable lists created by HackerRank, in which Poland, Hungary, Bulgaria, and the Czech Republic made the top ten. Access to top developers gives you competitive advantage.

• Similar market context – a great advantage for Western European companies when nearshoring to Eastern Europe is the similarity of the market. Similar tax laws, business models, consumer needs and behavior, and even the same companies present in Eastern and Western European markets make it much easier for partners to understand each other's expectations and put them into practice. Aspect of similar culture is also important here - less cultural differences ensure better collaboration, communication, and understanding.

• High work ethic – business etiquette in North America, Western Europe, and Eastern Europe are very similar, so it is easy for companies in these regions to work together. Regular working hours in Eastern Europe are 9 AM – 5 PM, English fluency is standard, and customer interests are protected by quality assurance and NDAs. Technology companies in the region stand out for their commitment to finding solutions and providing ongoing support and project consulting.

Nearshoring - Eastern Europe conditions

• Remote working – the home office is standard in Eastern European technology companies, so cooperation with foreign partners runs smoothly. The Kearney Global Services Location Index (GSLI), which identifies countries with the best remote working, includes 13 Eastern Europe among 23 European countries overall. The ranking takes into account 4 factors: financial attractiveness, individuals' skills and availability, business environment, and digital resonance.

• English proficiency – speaking and writing English skills are necessary for most recruitment processes for technology companies. According to EF's global English Proficiency Index, the best levels of English in Eastern Europe are respectively: Croatia, Poland, Slovakia, Romania, Hungary, and Lithuania. English proficiency also means improved communication and better mutual understanding.

• European Union – The European Union supports business cooperation between member states by offering them many programs, favorable regulations, and ease of hiring people from abroad. For this reason, EU countries will find it easier to outsource services to Poland, Croatia, Bulgaria, Romania, Czechia, Lithuania, Latvia, Estonia, Slovakia, Slovenia, or Hungary, which are also part of the European Union.

• Technologies – According to ESSA, the most in-demand programming languages are Java, Javascript, SQL, HTML, PHP, C++, C#, and Python. This is another reason to nearshore to Eastern Europe as Java (72%), JavaScript (65.3%), HTML/CSS (55%), SQL (49.3%), and Python (48%) are the most popular technologies there.

• Time zone – a great advantage of nearshoring in Eastern Europe is the small time difference allowing comfortable work and ongoing communication at regular hours. Poland, the Czech Republic, Hungary, and Slovakia are in the same time zone as Sweden, Norway, Germany, France, Italy, Belgium, or Spain.

Top 5 Eastern Europe nearshoring software development locations

Poland - one of the top nearshoring destinations

In Eastern Europe, the Polish market is the largest in the software development sector. Poland has more than 400,000 programmers and nearly 60,000 IT companies. The IT industry market share in Poland is 8% of the GDP. The most popular technologies are Java, JavaScript, SQL, Python, and PHP, but many companies also offer cloud solutions, AI, and IoT services. The average hourly rate is about $45-70. 

Polish programmers are considered among the best in the world. According to HackerRank, Poland ranks 3rd in terms of the best global programmers and 1st in terms of Java programmers.

Regarding ease of doing business, Poland ranks 40th globally, and according to The World Bank, 'Poland's well-diversified economy has proven to be one of the most resilient economies in the EU.' Moreover, Poland is the country with the lowest percentage of corruption in Central and Eastern Europe.

Poland ranks 13th in the world and 11th in Europe on the EF English Proficiency Index, while almost 100% of professionals in the IT market speak English (Statista, 2022). There are more than 400 universities in the country, and the current number of students is 1.2 million, including more than 30,000 Information Technology students.

The above factors make Poland the number one choice when nearshoring to Eastern Europe.

<span class="colorbox1" fs-test-element="box1"><p>Explore top custom software development companies from these locations.</p></span>

Czechia

150,000 highly-skilled software developers and 7,700 software companies make the Czech Republic the next big talent pool in Eastern Europe. According to the State of European Tech, Czechia has the largest share of freelance developers in Europe, so that's a big plus if one prefers this form of collaboration. The dominant technical stack includes Python, C#, SQL, JavaScript, HTML, and CSS, and the average rate is $50-70 per hour. In HackerRank's ranking of the world's best programmers, the Czech Republic ranks 9th.

The Czech Republic boasts one of the lowest turnover rates in Europe (18%) (ICON). What's more, the notice period before leaving a project is at least 2 months, which greatly improves workflow. 

The level of English proficiency in the Czech Republic is high - the country is ranked 23rd in the EF English Proficiency Index. The Czech Republic has 70 universities, and more than 16,000 computer science professionals graduate yearly.

‍Economically, the Czech Republic is in a stable position and ranks 41st in The World Bank's index assessing ease of doing business.

Ukraine

Ukraine is the second largest technology market in Eastern Europe with more than 200,000 programmers and 5,600 custom software development companies. Ukraine offers almost the most attractive rates in the region ($30-60 per hour). However, coupled with the low price is the extremely high quality of development - according to HackeRank, Ukrainian programmers are ranked 11th in the world. The most popular programming languages are Java, JavaScript, C#, Ruby, and Python. 

Ukraine ranks 35th globally in English proficiency, with nearly 800 higher education facilities training up to 20,000 software specialists per year.

In the ease of doing business ranking, Ukraine ranks 64th. Despite the ongoing war, Ukraine's IT market continues to grow, with 96% of contracts staying secured and maintained (IT Ukraine Association, 2022). 

Attractive rates and a huge talent hub make Ukraine of enduring interest as a great nearshore software development destination in Eastern Europe.

Hungary

There are over 80,000 developers skilled in JavaScript, HTML, Python, Java, PHP, SQL, and React. The market is much smaller than in Poland or Ukraine, and technology companies are mainly concentrated in Budapest, the country's only major city. The average hourly wage is $40-65, and Hungarian programmers are ranked as the 5th best developers in the world. 

Turnover in technology companies is very low (18%), and by adapting to remote work, Hungarian companies can reduce recruitment time by hiring specialists from all over the country. In The World Bank's ranking regarding ease of doing business, Hungary ranks 52nd in the world.

‍Hungary is characterized by high English language skills among Eastern European countries, ranking 18th globally. The country has 65 universities, with 12,000 technical graduates joining the pool of professionals each year.

Romania

Romania is growing rapidly in the Eastern European technology scene. Its 120,000 programmers and more than 360 custom software development companies make it the fourth-largest technology market in the region. The most popular technologies in the country are SQL, Java, JavaScript, and Python. 

The hourly rate in Romania is the lowest in Eastern Europe – $25-50, so if your priority is saving money, then this is a good direction. A side effect of the low price, however, is the inferior quality of services in general – Romania lags behind its competitors in the region, ranking only 20th on the list of the best programmers in the world. 

Romania has close to 100 higher education institutions of learning, and nearly 7% of all students (about 25,000) apply to computer sciences each year. Romania ranks 17th in the world on the English Proficiency index and 55th in ease of doing business. It's a very promising market and a great choice for those whose priority in nearshoring in Europe is cost reduction and geographic proximity.

European outsourcing trends and predictions

Revenue in the IT outsourcing segment in Europe is projected to reach $138.20 billion in 2023, up 12 billion from the previous year (Statista, 2022).

The shortage of skilled professionals in the technology segment will grow. Korn Ferry - a management consulting firm predicts that by 2030 there will be a shortage of 85 million tech workers worldwide.

Despite staffing shortages, due to the recession, more and more companies will choose to cut full-time positions in favor of outsourcing services (Institutional Investor, 2022). 

While companies will look for savings, they don't want to do it at the expense of quality. Especially since, as we know, poor development does not pay off in the long run. Nearly 90% of Global Sourcing Association members believe that both buyers and providers will be signing outsourcing contracts focussed on outcomes and value. 

Nearshoring in Europe – potential risks to consider

• Long project lead time – because outsourcing in Europe is so popular, the best software companies in the region work for many clients at the same time, and this can result in longer software project lead time.

• Deficit of the most cutting-edge technologies – Eastern Europe is a huge hub of talent in the most popular and needed technologies, but this market is much smaller than in Asia. As a result, it may be harder for companies to find specialists working in more unusual, advanced technologies while nearshoring to Eastern Europe.

• Complex taxation – many highly-skilled professionals in Eastern Europe are employed by companies as private entrepreneurs – so they pay lower taxes than people on employment contracts. This process is legal but generates more complicated tax procedures.

• High turnover – changing people in a project team is always an issue, which affects workflow and can result in a longer lead time. Since companies in Eastern Europe are investing heavily in developing technology companies, the market is very competitive, leading to high turnover in software houses.

Differences between Eastern and Western Europe

In terms of quality of service and access to technology, there are virtually no differences between Eastern and Western Europe. So how do the two regions differ? The answer should be sought foremost in politics and the economy. 

• Political context – the most important factor differentiating Eastern Europe from Western Europe is political. Eastern countries became part of the Soviet bloc after World War I and World War II, and thus were cut off for decades from the possibility of free economic development. As a result, after the collapse of the Soviet Union, they were backwards compared to Western countries. Democracy and national identity in the region thus had less time to establish themselves. Fortunately, initiatives such as NATO and the European Union are helping to bridge the gap between the East and West of Europe. 

• Standard of living – Eastern European countries are poorer than Western Europe, which translates into lower wages and fewer social benefits. People who are not among the highest-earning professional groups face many economic hardships. On the other hand, for businesses, the lower cost of living in Eastern European countries means lower rates for services and attractive investment opportunities.

• Hierarchical structure in organizations – Unlike Western countries, where a flat structure prevails in the workplace, Eastern Europe continues to face the challenges of a hierarchical structure. Micromanagement, decision-making bottlenecks, and a directive management style can be baffling to entrepreneurs in Western countries. Fortunately, many modern companies are investing in improving work styles and fostering ownership and self-reliance among their employees. 

How to choose the best Eastern European nearshoring destination?

In this table, you will find a summary of key information about the best nearshore outsourcing destinations in Eastern Europe.

Top European companies

1. Brainhub
2. 10Clouds
3. N-iX
4. Miquido
5. iTechArt
6. Future Processing
7. CSHARK
8. TSH

Explore details about top software development companies in Europe.

Start to nearshore software development to Europe!

As you can see, nearshoring to Eastern Europe is an excellent opportunity to

• solve the professional shortage problem, 
• Collaborate with the best developers in the world,
• Reduce custom software development costs,
• Hire a remote, professional, educated, English-fluent team with no time-zone differences.

Wondering which nearshoring country should you choose? 

• First, consider what your priorities are. If you care about a large market with many tech hubs to choose from and need a more unusual technology or enterprise-class vendor, Poland, and Ukraine are the region's largest software providers.
• If you care most about software quality, Poland and Hungary have the best programmers not only in the Eastern European region but also in the world, ranking 3rd and 5th globally. 
• Want to optimize your budget and save money? Ukraine and Romania offer the lowest rates for custom software development in the region!