Differentiation And Cooperation

Evolution of economic zones is typically driven by division of labor. Sooner or later, every single segment of society has to face the fact: a group of individuals with different, highly specific skills will be more productive than a crowd of ‘broad-range’ specialist – given that cooperation is good in both cases. There is nothing wrong about having many different skills. The real problem is that it is physically impossible to be a guru in many areas. The broader the range is, the less knowledge one has in each case.

This is true for organizations as well; and generally this principle could be applied to even bigger units, including countries. The division of labor between geographic regions is actually what the software outsourcing industry is based upon. While some places have better conditions for starting a business and developing a product idea, others can provide more workforce to do the job faster and cheaper. Utilizing these differences can lead to some cost-saving business schemas.

Now, as we have agreed that different locations have different conditions, let us investigate some certain places. It is all clear about the ‘idea development’ category: North America, Northern & Western Europe, and ANZ are well-known for making the most of demand in the global outsourcing market segment. But what about outsourcing destinations? We will discuss two macroregions: Southeastern Asia and Eastern Europe. The first one (China and India mostly) was initially the main source of IT workforce hired remotely; while the latter is steadily gaining more influence in this segment during the last decade.

Dragons And Tigers: The Powerful Alliance

The biggest advantage of China and India is their huge human resource base which provides conditions for lots of outsourcing companies to emerge. Doubtlessly it is nice to have more choices; and the resulting competition between different outsourcing service providers helps the local IT industry to evolve. And its value is widely acknowledged. The big involvement of Indian programmers into the life of American software industry is a well-known fact.

Historical ways of China and India in the previous century were different yet by its end both of them achieved similar levels of integration with the Western economy. And this was exactly the time when the software industry reached a new height, becoming a key part of the global market. Thus a new outsourcing macroregion was shaped; and it influenced the whole industry in a great deal. It would not be a big exaggeration to say that an average American manager when hearing the word ‘outsourcing’ would think about India or China first.

Still the question of prices matters no less. Despite the strengths of their economies, China and India still are far behind the developed countries by the quality-of-life factor. Consequently local developers’ rates are dramatically low compared to those in USA or UK.

Eastern Europe: Similarities And Peculiarities

Eastern European countries appeared in the global outsourcing market a bit later than China and India. This meant they had yet to prove their ability to compete in this segment. Today their role in offshoring (and particularly nearshoring – a newer term better describing their relationship with Western and Northern neighbours) is high enough.

What unifies most of these states is the history of their close relationships with the former USSR. Were they the members of the Union (as Russia and Ukraine) or merely the participants of the Warsaw Pact (as Poland or Romania) – the Soviet collapse had a deep impact on their economy. For any of them, the 1990s were a period of difficult (and sometimes painful) transformation. The old economic model was broken and competition with the rest of the world in the field of ‘traditional’ industries was a difficult task. Eastern Europe needed some new, developing economic niche to enter. Naturally, software outsourcing was a good option.

A nice bonus possessed by this macroregion is its close proximity to the powerful software development clusters in Western Europe, particularly in Germany and UK. Close cultural and economic relations between these neighbours are centuries old. So when the Western Europe got its strong positions in the global IT market, the need for cost-saving solutions made it looking for collaboration in the nearby locations. After the aforementioned transformation of 1990s, there were no political limitations for that; and the difference in pricing was quite encouraging.

Though overall local workforce resources are much less than those of India & China, Eastern European countries own good technological and educational infrastructure. This helps a lot to secure general quality of local software developer community and makes this macroregion a mature and promising player.

We at Intercomputer with our offices in Germany and development offices in Ukraine successfully build such remote teams for more than 13 years and pride ourselves to deliver best brains in the region for businesses of our clients. Speak to us to know more.