25 Jul

The Rise of Central and Eastern Europe Nearshoring

More than 10 years ago, the Economist foresaw the rise of outsourcing in Central and Eastern Europe, but the report mainly concentrated on just a couple of countries, such as Russia and the Czech Republic. The fact is, nobody could predict how attractive Central and Eastern Europe would become to German and UK companies in the next couple of years. As more and more IT outsourcing locations start to emerge on the map, it looks like that nearshoring can gradually replace the widely used “offshore-onshore” outsourcing model.

The Benefits of CEE Nearshoring

While the primary factor for nearshoring decisions remains the potential for cost-savings, several other factors play a large role in evaluating which country to outsource to. For example, skills shortage remains a problem in most of the Western Europe, especially in the UK. On the other hand, Romania was found to be the country with the highest growth of IT specialists increasing by 12% since the year before, and Ukraine followed with nearly 10% growth. Additionally, let’s look at some more benefits CEE nearshoring has to offer.

Nearshoring

A Big Pool of Talent

One of the biggest advantages of Eastern Europe can be found in an educated and skilled workforce, with multilingual capabilities. According to a study from the Central and Eastern Europe Outsourcing Association, the legacy of the former Soviet Union’s engineering-based education system has driven a rapid increase in the number of organizations providing software development services and IT outsourcing in the region. Furthermore, Belarusian developers are considered to be some of the best computer specialists in the world, and according to Valery Tsepkalo, director of High-Tech Park, the export of IT services two years ago, amounted to nearly $700 million.

Collaboration in Real Time

Time is still one of the most valuable things for any company, and nearshoring is a pretty good way to save it, thanks to the proximity of an outsource company and the overlapping of work schedules. Moreover, companies from Germany and the UK are working more than ever with Eastern European businesses, because there is almost no time zone difference and it’s easy to find suitable time slots during the day to discuss work issues. For example, the NSM Engineering nearshoring company has offices located in Switzerland and Serbia, and there is only an hour difference between them and Great Britain. This allows for as many face-time hours between a project manager and the nearshoring team as needed.

Cultural Affinity

Some companies think that Eastern Europe has a distinct advantage over places such as India, Mexico and even Central Europe when it comes to outsourcing. The explanation is pretty simple – employees tend to take a more collaborative and a less process-driven approach to projects. Similar cultural values allow both vendor’s and outsourcing company’s employees to work in an atmosphere of complete mutual understanding. The cultural similarities decrease the chances of miscommunication and misunderstanding that may pop up during cooperation and actually shorten the time to market, because troubleshooting time is reduced and the development is streamlined.

In Conclusion

While for most US companies, outsourcing is still an “Indian business”, numerous Western European mid-size companies that are turning to outsourcing are feeling more comfortable to work with nearshore providers. What is more, Daniel Marovitz head of the Deutsche Bank agrees that there are unique skill sets in the CEE region. In an interview for the Computer Weekly, Marovitz explained that while outsourced workers in India are cost-efficient and get things done quickly, Eastern Europe is a better destination for more challenging and experimental tasks.

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