IT Nearshoring & Team augmentation guide - How to nearshore and hire top software developers while managing the costs
Historically, large corporations used to keep core technology teams at their headquarters while leaving non-core and less demanding tasks to outsourcing companies in India or elsewhere in Asia. Over the last years, the costs of onshore technology teams have increased significantly due to the fast growing demand for programming services and a limited pool of software developers available on the market. Companies have started to realize that in order to grow sustainably they need to start opening new offices for technology teams not only for cost reasons but also in order to find top talent. Due to the high requirements of the jobs, the demand for highly skilled developers, as well as the need for efficient integration into current operations, corporations started to look into countries that have a large talent pool of software developers, that are close, with population of similar culture, and that can additionally offer lower cost of operations versus current team. One of the leading countries in Europe for building technology teams is Poland which is 1.5 - 2.5 hours away from most capital cities in Europe.
With the popularization of remote work and development of tools enabling it, creation of developers’ teams in other locations has become attractive not only for large organizations but also for smaller companies and startups. In the era when skills transfer is just one click away, hiring even one top developer in another location can be worth it - both money and talent wise.
Creating technology offices in other countries has been especially popular in Europe thanks to the EU and proximity of other countries - convenient flights connections, similar time zones and cultures. Some of the countries that look for tech talent in CEE are UK, DACH countries - especially Switzerland, Germany; Scandinavian countries (Sweden, Norway, Denmark) and Netherlands.
Let’s have a look in more details into:
- How to start thinking about nearshore hiring
- Nearshoring in CEE - how the countries compare and why Poland is the leading country for software development teams
- Countries for which it makes most sense to nearshore in CEE and the reasons for it - detailed comparison of costs
We have discussed in more details the reasons for nearshoring and team augmentation in our other article.
How to start nearshoring - nearshoring strategy
When thinking about hiring software developers in remote locations, you first need to understand the needs of your current IT team - what kind of developers you need, how many of them, and what your budget is. It is often not easy to know your needs especially with more complicated products that are developed. Our consultants will be happy to assist you for free with an assessment of your team and how to best structure it. Afterwards you need to decide what functions and roles you can hire remotely. In reality, there are no limitations and some companies hire full remote teams with senior managers in the new location.
In principle there are following options:
- Team members: CTO and product manager, senior developers, mid to junior developers
Having an entire IT team along with CTO and senior managers in a remote location gives you the highest financial benefits, but the distance to your key employees, especially to your CTO might have some negative effect on your operations as most of your decisions will have to be taken through video conferences and you will lose the possibility to simply talk to yourself whenever needed.
- Part-time consultants vs full-time employees
Whenever there is a short term need for developers it is good to have an IT partner that can quickly fill in your gap of software development capacity. Long-term it is more beneficial to opt for full-time employees as they are more knowledgeable about the product and more motivated to contribute and stay longer, which adds to your development continuity. Finally, part-time consultants are much more expensive compared to full-time employees.
- Functions: backend, frontend
- Product components development: core, non-core
After you have chosen the right team structure and the strategy for setting up an office in another country such as Poland, you can then start the hiring process. Reach out to us and we will walk you through the end-to-end recruitment process.
Nearshoring locations - nearshoring in CEE - Poland as key market in Europe
Poland is a top location for nearshoring in CEE. Other major countries are Romania and Ukraine. Let’s look into the reasons what makes Poland stand out.
- Highest availability of top developers in Poland
Poland has almost 300,000 software developers with more than 10,000 - 15,000 graduates coming to the market per year. In comparison, Ukraine has c. 180,000 programmers and Romania 116,000.
Additionally, Polish developers are ranked among the top developers in the world with #3 position in HackerRank after China and Russia. Hungary is on the 5th position, whereas Ukraine #11 and Romania #20.
Similarly, looking at International Olympiad in Informatics statistics over time Poland again has a #3 position, whereas Romania #4. Looking at ACM International Collegiate Programming Contest on 2019 results, University of Warsaw has reached #4 in the world and University of Wroclaw #6.
- Most attractive country in Europe for outsourcing
According to A.T. Kearney Global Services Location Index ranking the offshoring landscape, Poland has ranked as the top country for outsourcing in Europe. Bulgaria, Romania and Ukraine have ranked higher than Poland in financial attractiveness though are lagging behind in other key metrics - people skills and availability, as well as business environment.
- Level of English
Employees’ Level of English is key for international companies. It is difficult and sometimes impossible to operate without proper communication and the same applies to software development. In the the EF English Proficiency Index, Poland ranks as #11 out of 100 countries, whereas Romania is #16, Bulgaria #24 and Ukraine #49.
- Being part of EU
Poland, Bulgaria and Romania are all in the EU which makes the regulatory aspect less troublesome than in Ukraine. Setting up a subsidiary as well as travelling are easier for employees within the same company.
- Global companies that choose Poland for their operations centres
A number of top global companies have decided to create their operation centers in Poland. Those include Google, which has created its Google Campus in Warsaw - one of 7 in the world and the only one in Central and Easter Europe. We also have JP Morgan, Goldman Sachs and Accenture in Warsaw. IBM has its offices in Kraków, Wrocław and Katowice.
Countries which nearshore and hire developers in Poland
Key benefits of hiring software developers in Poland for startups, fintech companies and international corporations
Poland is an attractive country in which to look for software developers. There are countries for which it is particularly beneficial. Those countries include UK, DACH countries - especially Switzerland, Germany; Scandinavian countries (Sweden, Norway, Denmark) and the Netherlands, but also the US. Let’s look into more reasons why startups, fintech companies and large organizations from those countries are hiring software developers from Poland.
For comparison of different countries, we have looked at the median annual salary in EUR from Payscale.com, and took Java Developers as a basis. The results show that salaries for software developers in Poland are significantly lower than salaries in other countries. The salary is lower by almost 50% - when compared to the UK with lowest salary, but as much as 74%, when compared to Switzerland. In this comparison we have also added the median annual salary for Java Developers in the US - salary in Poland is 66% lower! Regardless of the actual difference, it is significant for all discussed countries.
The difference can be even higher when it comes to short-term employees who charge by an hour.
- Social charges and other employment costs
Salaries are only part of the story. Employers need to pay additional costs including social charges, which include health benefits, unemployment benefits, pension benefits, and others. The employment cost can vary significantly between countries. They are rather high in Scandinavia, especially in Sweden as well as Germany. Employment costs in Poland can be quite high in case of an employment contract - up to 21%. However, one should remember that in Poland most software developers and programmers are hired on a B2B agreement as they are running sole proprietorships, which is more financially beneficial both for the employer and the programmer. The social charges amount to… 0%! They are fully covered by the employee.
- Rental costs
Besides direct costs associated with hiring a software developer, rental costs are another important factor. Looking at rental prices in major cities in the mentioned countries, Warsaw is much cheaper than other locations which brings additional savings to companies opening their offices in Poland.
- Corporate taxes
Moving on in P&L, another factor that can make it attractive to hire developers in Poland could be the lower corporate tax. This factor could be more interesting to companies which pay higher corporate tax at their headquarters. In many cases larger companies are tax optimised and end up paying taxes at the most beneficial location such as Ireland or Malta, hence this particular benefit would mostly apply to smaller organisations, i.e. startups.
Final notes to the nearshoring guide
To summarize all above, startups, fintech companies and large organizations from developed countries are looking into nearshore locations as the tech gap increases while the need for quality stays constant. Poland is standing out as the prime location for software development centers for European countries and the US, which can benefit from significant financial savings and access a large talent pool of highly skilled developers. We at CodePole are happy to help companies making their first steps in the IT world in CEE.