IT Outsourcing to Eastern Europe: Major Trends & Insights

As the global demand for developers skyrockets, IT outsourcing to Eastern Europe is gaining traction. ManPowerGroup reports that 56.2% of tech employers face hiring challenges, with the overall talent shortage in tech today reaching 76%. So, is it really worth the candle to outsource to Eastern Europe?  

I’m Dmytro Ovcharenko, CEO at Alcor—a new-generation software R&D accelerator that helps US and Western European tech companies expand to Eastern Europe and Latin America. With our all-in-one solution, our clients get full EOR support, Silicon Valley-grade tech recruitment, and vital operational assistance for building development teams ranging from 10 to 100 coders in a year. 

In this article, you’ll get key insights into software development outsourcing in Eastern Europe, including its tech landscape, talent pool, average developer rates, and taxes—as well as learn why India and China are falling far behind. You’ll also discover several principal IT hubs in the region and their standout features.  

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Key Takeaways  

1. With the growing popularity of outsourcing, new trends are emerging in the tech industry: India and China are gradually losing their positions, while nearshoring to the EE region is on the rise, with BPO services outsourcing as an optimal and cost-effective model.  

2. Known for its 1.75 million talent pool, high-tech expertise, salaries that are 40% lower, and favorable business environment, Eastern Europe is becoming the top choice for American companies. 

3. Eastern Europe boasts high English proficiency, while LATAM benefits from geographic proximity and minimal time zone differences with the US. Compared to Asia, Eastern Europe ensures smoother collaboration with better communication, a stronger work ethic, and fewer time zone challenges, leading to higher-quality development. 

4. The digital transformation and rapid GDP growth of Eastern European countries are fueling the region’s attractiveness as a tech outsourcing destination. 

5. Among the leading tech hubs in Eastern Europe, Poland, Romania, Ukraine, and Bulgaria rank among the top 5 countries in terms of the number of tech specialists and the quality of software development.  

3 Latest Worldwide Trends in IT Outsourcing

1. India is losing its ground as a leading IT outsourcing destination

India was considered one of the top tech outsourcing destinations for over a decade. While some countries were taking their the first steps in their long outsourcing journey, India could already provide foreign tech companies with a large and cheap tech workforce. 

But as we know, low prices often come with their own costs, and in the case of India, it’s the quality of the code. So, what are the prerequisites for that?  

Problem #1: Ineffective college education. According to the National Employability Report, only 4.6% of Indian engineering graduates possess good coding skills. Yet, it is only with the help of AI coding tools that 81% of Indian developers noticed any improvement in code quality. 

Problem #2: Work attitude. Since most Indian programmers are paid low wages, they often undertake multiple projects simultaneously. That’s why it’s common for them to show low motivation, dedication, and accountability. As a result, there’s a risk that performance will not meet the client’s expectations. 

Problem #3: Cultural mentality. Today, this remains one of the main stumbling blocks to effective cooperation between American tech companies and Indian developers. India is a high–context culture where communication is generally more indirect than in most Western countries. That’s why what is said may have multiple interpretations depending on the context of the interaction, which can lead to misunderstandings and challenges at work. 

Result: When it comes to price-to-quality ratio, India falters in comparison with other locations, such as Eastern Europe or Latin America. 

2. China’s IT outsourcing pitfalls scare away more and more companies

Known for its enormous tech talent pool, China has been luring foreign tech companies to leverage the benefits of software outsourcing by getting diverse expertise and technology. However, with the rapid expansion of the outsourcing market, the drawbacks of tech development delegation to China have become more vivid. According to the report by the American Chamber of Commerce in China, approximately 30% of US companies operating in China are considering exiting, with 41% of R&D companies expressing a desire to leave. And here’s why: 

Problem #1: Copyright issues. As it is known, Intellectual Property Rights (IPR) protection is of great importance when it comes to outsourcing. Since vendors gain access to sensitive data, they could put the exclusivity of the client’s end product at risk. Not all service providers in China comply with international IPR rules, which sometimes results in data breaches. Today, this poses a major concern, as the global average cost of data leakage in 2024 has reached $4.88 million. The same principle applies to quality control, as Chinese standards differ from those in the US and Europe.  

Problem #2: The language barrier. China’s #91 ranking may lead to inefficient communication and production and increase the chances of getting a poor-quality software product. 

Problem #3: The 12-13-hour time difference. Such a large gap with the main development centers in the US may cause difficulties in scheduling online meetings and providing real-time feedback, which can result in delays in your product development. And this, keep in mind, is arguably the most critical factor in today’s highly competitive market. 

Result: Many tech companies are turning to EE and LATAM to establish their tech operations. Keep reading to discover the key differences between software outsourcing in Eastern Europe and Asia. 

3. BPO services outsourcing is booming

Amidst the rise of the gig economy and the persistent challenge of finding skilled talent, technology companies are increasingly turning to outsourcing in Eastern Europe and other offshoring regions to fuel their growth. In fact, Business Process Outsourcing (BPO) stands out as a dominant force in the global outsourcing market, with forecasts predicting its market size to reach $603.4 billion by 2032, growing at a 9.1% CAGR.  

Workforce managers can leverage BPO services to efficiently manage a full spectrum of operational tasks:

• Front-office functions: marketing, customer support, and tech assistance 

• Back-office operations: payroll, HR, compliance, office logistics, and hardware procurement 

For tech companies looking to scale, back-office BPO services are a smart add-on to their offshore development centers. This setup not only cuts costs and boosts flexibility but also keeps teams focused on core priorities—all while reducing the risks often tied to traditional tech outsourcing. 

As we can see, building development teams in Eastern Europe and offshoring tech operations to this region is becoming a new trend. So, the question is: how can you do it efficiently without wasting time, energy, or money? Well, here’s your ready-made answer… 

Software Development Outsourcing to Eastern Europe Can be Easier with Alcor

To make a good pick before starting IT offshoring/IT nearshoring to Poland, Romania, Bulgaria, Ukraine, or other EE countries, you can partner with the local R&D center services provider like Alcor, who knows all the specifics of these Eastern European locations and offers services like:  

• Comprehensive EOR: A comprehensive service package that covers 100% legal and compliance support, developer onboarding and offboarding, payroll processing, and tax and employee benefits management — all without the need to establish your own legal entity.  

Real-life case: For Franki, a US-based experience app that was entering a new market for the first time, Alcor provided a legal entity along with deep expertise and knowledge of local employment laws, benefits, bonus salaries, and PTO. Additionally, we assisted with onboarding new iOS and Android engineers and took over tax and payroll management—eliminating the need to build an internal team of accounting specialists and helping them avoid unnecessary expenses. 

• Silicon Valley-grade recruitment: 253,000+ highly skilled, pre-vetted candidates, the first 5 hires within the first month of cooperation, and team expansion to 30 people over the following 3 months. 

Real-life case: During our cooperation with the world’s largest consignment company, ThredUp, we scaled their Eastern European team to 47 skilled developers and hired a Senior Full Stack Engineer in just 2 weeks—an expert with exceptional proficiency in C++, C#, .NET, and TCP/IP, and one of the few specialists of this kind in the Eastern European market. 

• 360-degree operational support: Assistance with office search and leasing, hardware procurement, and providing comprehensive tech services with 24/7 in-country support, ensuring smooth operations from day one. 

Real-life case: One of the businesses that benefited from our R&D solution in Eastern Europe is Sift. Not only did they set up an offshore center in Europe—they also got 30 top-tier engineers in the first year and ultimately reached a total of 51 throughout our partnership. On top of that, we provided our Employer of Record in Eastern Europe package, including  full compliance with EU and US regulations, tax support for offshore developers, labor and contract matters, and a strong employer branding, which increased their offer acceptance rate by 15%. We also handled equipment procurement and management for Sift’s team. 

Reasons to Outsource IT to Eastern Europe

Large tech talent pool 

Eastern Europe boasts 1.75 million software developers, with Poland, Romania, and Ukraine leading the pack. This pool broadens year by year as local higher educational institutions bring up about 80,000 STEM specialists annually. In fact, 133 of these universities are featured in the QS World University Rankings 2025, indicating that Eastern European programmers receive the best tech qualifications. 

Unparalleled tech expertise

The second key driver behind the growing demand to outsource IT to Eastern Europe is that it has some of the most well-versed tech experts in the world. Taking leading positions in renowned skill rankings, such as SkillVue, TopCoder, and HackerRank, they demonstrate exceptional excellence in JavaScript, Python, C++, TypeScript, PHP, and HTML. In fact, the Coursera Global Skills Report 2024 placed Polish software developers, along with specialists from Bulgaria and Ukraine, among the top 30 countries globally for technology skills.  

Slashed labor expenses

Another reason for software development outsourcing to Eastern Europe is its cost-effectiveness. The table below shows that the annual salaries of programmers in popular Eastern European tech hubs are about 1.5 times lower than in the US. For instance, the average salary for a senior specialist in the US reaches $129,000, whereas for an Eastern European coder, you would pay $79,000. That’s about 40% of saved labor costs, can you imagine? 

In addition, outsourcing Eastern European developers can save you on taxes. In general, taxes in this region are much lower than in the United States and even in some Western European countries. For instance, Bulgaria, Romania, and Hungary offer the lowest CIT among the EE countries, ranging from 9% to 16%, while in the US, it can reach 33%. 

Moreover, programmers from this region can be employed on B2B terms, which will liberate you as an employer from costly social contributions and taxes. For example, Polish software developers acting as independent contractors pay a lump sum tax of only 8,5-12%, while social contributions range from $900 to $2,600 per annum, depending on annual revenue. 

Senior Developer Gross Annual Income, USD
Positions	USA	Poland	Romania	Ukraine	Bulgaria
PHP Developer	102,000	75,600	72,000	60,000	66,000
Java Developer	114,000	84,000	81,600	72,000	78,000
AI Engineer	132,000	80,400	78,000	75,600	72,000
Mobile Developer	114,000	84,000	81,600	72,000	78,000
DevOps  Developer	138,000	87,600	81,600	72,000	78,000
Blockchain Developer	132,000	78,000	81,600	60,000	74,400
Data Science  Engineer	126,000	66,000	54,000	42,000	54,000
Cloud Engineer	174,000	72,000	84,000	50,400	57,600

Additionally, you can save on employment and benefits costs: 

• Employment cost: In Eastern Europe, it typically ranges from 15% to 25%, depending on the position and tech stack. In the US, the fee is slightly higher—around 25% to 35% of the developer’s annual salary. 

• Basic benefits package: In the US, the cost of a basic benefits package is approximately $15,400 per year per developer. Meanwhile, in Eastern Europe, the budget for a basic benefits package is more than twice as low—about $6,350 per year per tech professional. 

Favorable taxation 

Did you know that outsourcing Eastern European developers can save you on taxes? Generally, taxes in this region are significantly lower than in the United States and many Western European countries. For instance, Bulgaria and Romania offer the lowest corporate income tax (CIT) among the EE countries, ranging from 9% to 16%, while in the US, it can reach 33%.  

	USA	Poland	Romania	Ukraine	Bulgaria
Corporate Income Tax	21-33% (including both federal and state taxes)	19%	16%	18%	10%
Personal Income Tax	10-50.3% (including both federal and state taxes)	12-32%	10%	18%	10%

Moreover, programmers from this region can be employed on B2B terms, which will liberate you as an employer from costly social contributions and taxes.  

Business-friendly environment

Governments in the tech hubs in Eastern Europe pay special attention to enhancing their tech infrastructure and business climate. Poland, Bulgaria, and Romania are included in the top 30 of the 2023 Kearney Global Services Location Index, having high financial attractiveness, business environment, and availability of talent, which lures more foreign tech companies to outsource to Eastern Europe. 

Speaking more specifically about the conditions for software development in Eastern Europe, the majority of these locations offer attractive incentives for tech companies engaged in R&D activities. For instance,  

• Poland allows businesses that conduct R&D the deduction of 200% of R&D costs,  

• Romania offers 0% income tax for R&D companies for 10 years. 

Learn more about Eastern European technology recruitment! 

Cultural affinity

Another key element in opting for Eastern European software outsourcing is a Western-like mindset and business ethics. Programmers from this region:  

• Stand out for their adaptability, flexibility, and dedication, with strong traits in problem-solving, self-development, and creativity, 

• Are able to act independently and don’t hesitate to offer best practices to improve the quality of your product, 

• Demonstrate excellent communication and teamwork skills,  

• Have outstanding command of English as Eastern European software developers rank in the top 30 in the English Proficiency Index.  

2 Major Insights About the Eastern European IT Market

Digital Transformation

Central and Eastern Europe has enthusiastically embraced digital transformation driven by the pandemic’s impact. According to PwC’s Global Survey, 52% of CEOs in CEE region believe that without transforming their businesses, their companies will not be economically viable in a decade.  

To bolster the region’s attractiveness for foreign investment and ensure business sustainability, CEE entrepreneurs have prioritized investments in automation and talent upskilling. Moreover, the adoption of modern technologies, such as AI, IoT, blockchain, 5G, and cloud computing, across diverse sectors, including finance, healthcare, manufacturing, and transportation–has fueled innovation and enhanced competitiveness on a global scale.  

These efforts yield significant results. For instance, Poland’s digital economy is projected to surge to $148.6 billion by 2030, already topping the ranking of the largest digital markets in the CEE.  

IT Outsourcing & Outstaffing

The Eastern European tech industry has been growing by leaps and bounds, transforming into a mature market. Its revenue is projected to show an annual growth rate (CAGR 2023-2027) of 4.5%, resulting in a market volume of $17.9bn by 2029. 

The most prominent sector of the EE tech industry is tech outsourcing, which is expected to reach nearly $5.3 billion in 2024, according to Statista. About 4,800 Eastern European IT outsourcing and outstaffing companies specialize in a wide variety of services, including custom software development, web development, cloud consulting, app development, tech-managed services, tech staff augmentation, and cybersecurity.  

Clearly, the region is thriving. Still, for many companies, one burning question remains… 

Is it Safe to Outsource Software Development to Eastern Europe?

Despite the geopolitical instability facing the world today, Central and Eastern European countries remain safe havens for global investors, offering a resilient and stable economic environment strengthened by their membership in NATO and the EU. 

• GDP growth: In 2024, CEE capitals demonstrated remarkable GDP growth of 3.7%, compared to the EU average of just 1.4%. Lithuania, Poland, and Croatia led the way. Attracted by the high potential, appealing cost-effectiveness, abundant talent availability, and strategic location, many international enterprises and companies continue to outsource software development to Central and Eastern Europe.  

• “Friendshoring”: The phenomenon that today significantly contributes to the resilience of the CEE market. At the beginning of 2022, about 17% of Ukrainian businesses had relocated abroad, with EU countries such as Poland (63%) and Germany (25%) being favored destinations, along with Belgium, Bulgaria, and Estonia. Moreover, about 10% of Ukrainian developers have migrated abroad due to the war, with Poland, Spain, Germany, and Portugal being the primary destinations, as reported by the Ukrainian IT community, DOU. 

• What about Ukraine? The situation concerning the market landscape for tech offshoring or IT nearshoring to Ukraine, while facing challenges, shows promise. In 2024, the country’s tech industry generated over $6.4 billion in export revenue. Around 90% of all startups anticipate strong growth in the future, and despite the ongoing war, 46% of them still believe the ecosystem is functioning at an average level. 

Eastern Europe vs LATAM vs Asia

Latin America

• Tech talent: The Latin American tech market boasts almost the same number of software developers as Eastern Europe, 2 million tech professionals. Mexico leads the pack with over 800,000 tech experts, followed by Colombia with 165,000 programmers and Argentina with 150,000 coders. 

• Technical prowess: Latin American developers are on par with their Eastern European counterparts, with many countries ranking in the top 30 in the Coursera Global Skills Report 2024. Developers from Mexico, Brazil, Chile, and Argentina shine in data science skills, scoring over 80 points in the ranking. The skill stack of LATAM software engineers typically includes .Net, Java, Ruby, Python, C++, C#, React, and Node.js.  

• Possible challenge: When it comes to English proficiency, Latin American tech experts generally lag behind their Eastern European counterparts, with Argentina being the notable exception, ranking high in the English proficiency index, while other countries are positioned somewhat lower. However, it’s essential to note that developers typically possess strong foreign language skills, and LATAM developers bring over 20 years of experience working with US tech companies. 

 

• Distinctive feature: What makes software outsourcing to Latin America more attractive than outsourcing to Eastern Europe is its geographical proximity to the US. Most of these countries have no or little time difference with most American states. For instance, Mexico shares the same time zone (UTC-5) with California. At the same time, Colombia has time alignment with New York and Washington, D.C., which minimizes delays, facilitates real-time communication, and enhances the overall efficiency of product development. 

Asia

• Tech talent: Today, Asia boasts a talent pool four times larger than that of Eastern Europe and Latin America combined, with approximately 13 million tech experts. Most of these specialists are concentrated in China, with 7 million developers, and India, with around 5.8 million programmers. Renowned for their cost-effective outsourcing services, these destinations offer potential savings on software development projects. Thanks to good higher education, most developers in this region have decent tech and data science skills, with Japan, Indonesia, and Singapore topping the list. 

• Technical prowess: Despite supposedly high-tech competence in Python, Java, JavaScript, C/C++, and TypeScript, the quality of the tech outsourcing services in Asia is less clear-cut than in Eastern Europe.  

• Possible challenges: For instance, low English proficiency in leading locations such as India (ranked 60th) and China (ranked 82nd), significant time differences with the US (ranging from 10 to 15 hours), and differences in work ethic and mentality that can significantly disrupt the development process. To avoid potential miscommunications, production delays, and the delivery of poor-quality products, some tech companies prefer IT outsourcing to Eastern Europe or Latin America. 

Top 8 IT Outsourcing Destinations in Eastern Europe

Poland 

Tech talent pool: 650,000+ 

ICT graduates: 20,000 

Tech businesses: 60,000+ 

Tech hubs: Warsaw, Krakow, Wroclaw, Poznan, Lodz, and Tri-city (Gdansk, Gdynia, Sopot) 

Tech industry ranking in Europe: 9th with $32.8bl in revenue 

Technology skills: JavaScript, Java, Python, Ruby, Shell, TypeScript, PHP, C# 

Coursera Global Skills Report 2024: #1 in EE 

Global English proficiency ranking: 15th out of 116 

 

Romania 

Tech talent pool: 250,000+ 

ICT graduates: 10,000 

Tech businesses: 7,290 

Tech hubs: Bucharest, Cluj-Napoca, Iasi 

Tech industry ranking in Europe: 17th with $14.7bl in revenue 

Technology skills: JavaScript, Java, PHP, C#, Python, React, Angular, HTML, and CSS 

Coursera Global Skills Report 2024: #12 in EE 

Global English proficiency ranking: 12th out of 116 

Discover how an IT recruitment agency in Romania can accelerate your team expansion! 

 

Ukraine 

Tech talent pool: 302,000+ 

ICT graduates: 27,000 

Tech businesses: 7,977 

Tech hubs: Kyiv, Lviv, Odesa, Dnipro, Kharkiv 

Tech services exports: reached $6.4bl in 2024 

Technology skills: JavaScript, Java, Python, C#, C++, PHP 

Coursera Global Skills Report 2024: #4 in EE 

Global English proficiency ranking: 40th out of 116 

 

Bulgaria  

Tech talent pool: 116,000+ 

ICT graduates: 6,100 

Tech businesses: 10,000 

Tech hubs: Sofia, Burgas, Plovdiv 

Tech industry ranking in Europe: 30th with $4.1bl in revenue 

Technology skills: C#, JavaScript, Java, Python, SQL, PHP, .NET 

Coursera Global Skills Report 2024: #3 in EE 

Global English proficiency ranking: 16th out of 116