In today’s dynamic business environment, software development offshoring has become a frequent and strategic practice. Offering numerous benefits, including Reduced costs, increased productivity, and access to a larger talent pool, 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 by 2023, representing a significant 5.5% increase over the previous year. In particular, the software segment is experiencing notable growth, with a projected 12.3% double-digit increase this year, amounting to a substantial $891.386 million, according to Gartner.
Given these trends and statistics, IT outsourcing will continue on its upward trajectory for years to come. 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 in recent years. Specifically, Vietnam’s IT outsourcing sector has experienced a remarkable annual growth rate of 13.31% and is projected to reach $881.90 million by 2027. Recognized as one of the top 6 places for IT outsourcing in Kearny Global Service Location IndexVietnam boasts a favorable business environment, strong technology ecosystems, and highly-skilled IT specialists, all while maintaining profitability.
The country also demonstrated significant progress in its technology infrastructure, as evidenced by its rise of 7 positions in the government’s AI readiness index by 2023, securing the 6th position 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 advances.
Another reason for such strong growth in the offshore software development sector is the highly-skilled technology talent. Thanks to early STEM education that cultivates strong coding skills, Vietnam ranks an impressive 22nd globally in the Global Skills Index 2020, with a workforce of 480,000 IT engineers. With their proficiency in English, adaptability, and eagerness to learn, Vietnam’s tech talent presents an excellent fit for companies looking 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 $8.81 billion, according to Statista.
What sets India apart is the abundance of IT professionals, with an estimated 12.25 million accounts in the GitHub only on the platform in 2022. This impressive number reflects the thriving and vibrant IT technology community in the country, highlighting the vast pool of talent available to companies looking to outsource their software development projects.
Another main factor that makes India attractive for outsourcing is its cost advantage. Labor costs in the country are relatively lower compared to many Western countries, allowing companies 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 ISO 2000 certified software companies, surpassing all other nations in the world.
According to the Outsourcing Journal, The Philippines has been considered the BPO capital of the world, holding 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 their workforce. Approximately two-thirds of the country’s population is fluent in English, making it one of the largest English-speaking nations in the world. This command of English facilitates fluid communication between companies and Filipino workers, making collaborations very efficient.
Since IT outsourcing plays a vital role in boosting the country’s economy, the government actively supports the industry by offering tax breaks and incentives as strategic efforts to accelerate the growth of IT outsourcing services.
With an impressive count of 89,931 software developers and a revenue of $10 billion in 2021, Poland has secured Seventh position among the most successful IT sectors in Europe, contributing 8% of Polish GDP.
Being a member of the European Union, Poland maintains strict 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 respected and often demand higher service payments than their peers in Asian countries. While Poland’s time zone aligns perfectly with Western Europe, businesses in the United States may face small challenges due to time zone differences.
Ranked second among Latin American regional leaders in business, technology, and data science skills domain by Coursera, Brazil is ideal for outsourcing software development for companies in or near the LATAM region. It has a large-scale candidate pool of more than 500,000 professionals involved 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 become a highly desirable outsourcing destination. As a result, many 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 difficult to navigate, especially for foreign companies operating in the country. Dealing with this tax system may require hiring an expert, which would increase the cost of outsourcing.
Technology vendor evaluation process
Once you’ve identified your preferred country that aligns with your geographic, time zone, and cultural requirements, the next crucial step is to evaluate the software providers available in that country. Here are some essential factors to consider during this evaluation:
- Expertise– Look for a foreign partner who has the knowledge and experience in the specific technologies and domains relevant to your project. Their knowledge must match your requirements and contribute to the successful execution of the project.
- Language proficiency: Effective communication is crucial to project success and collaboration. Make sure your provider has a high level of English proficiency beyond senior management level to avoid language barriers.
- Security measures: Offshore development involves sharing sensitive data and proprietary information. Verify that the foreign partner has strict security protocols in place, including confidentiality agreements, to protect your data and intellectual property.
- Recorded audio: Assess the offshore partner’s track record in related industries. Review their portfolio of high-quality work and case studies demonstrating successful project delivery to ensure they can deliver on their promises.
Consult our complete supplier evaluation checklist to confidently assess potential vendors to ensure they meet your exact requirements for experience, reliability, and technological prowess.
In general, Vietnam, India, the Philippines, Poland, and Brazil are great countries for companies to outsource software development, as they have a large pool of tech talent, affordable rates, stable socio-economics, and English proficiency. If you think Vietnam is the right destination for your outsourced IT project, KMS could be a great candidate technology partner.
With over 14 years of industry experience and access to a vast pool of tech talent across Vietnam, we have the experience and resources to help you develop innovative and cost-effective digital solutions. Contact us today and let us help you maximize your success.