Central and Eastern European Outsourcing Association (CEEOA) released its annual report on the state of IT outsourcing service providers market in the region – “Central and Eastern Europe IT Outsourcing Review 2010”. In fact it’s the only report that more or less objectively describes the state of outsourced software development market in the region. As for Belarus and Ukraine, it’s nearly a single source of statistics on market volume and other important figures.
Research was conducted from February to July 2010. Respondents included more than 300 companies, counting over 30 companies from Belarus. Taking into account the traditional privacy of information in IT industry, it’s a significant number of respondents to make trustworthy market volume assessments.
“Central and Eastern Europe IT Outsourcing Review 2010” is based on respondents’ expert opinions. It provides data on 2009, as well as forecasts on the main development trends in outsourced software development in the region. One of its main objectives of the report is to provide potential clients with full and reliable information needed to make decisions about outsourcing software development to CEE region.
Let’s take a look at “Central and Eastern Europe IT Outsourcing Review 2010” key findings.
Market Volume
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Belarus was ranked 5th in the region by market volume, having retained its positions (see previous report here). Estimated Belarusian IT market volume is 384 million dollars (compared to 310 million in 2008).
Ukraine, Russia, Romania (the largest countries by population in the region) and Hungary (one of the first countries were offshore software development emerged) retain leaders’ positions.
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According to IT companies expectations, in 2010 Belarusian offshore software development market should get closer to the optimistic figure of nearly half a billion dollars.
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The explanation of this forecast is simple. The first year covered by CEEOA reports was 2007, and it estimated software development in Belarus market volume at 288 million dollars. Taking into account that 2003-2007 were the period of boosting industry growth, 7.6% outsourced software development market growth in 2008 can be considered minimal. Later on IT industry was struck by crisis and its influence was evident. However software development industry managed to recover and continued its progressive growth. In 2009 it showed 23.9% grows and in 2010 it is supposed to add up another 24.9% and make 478 million dollars in total.
Number of Companies
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According to experts estimations, last year the number of outsourced software development companies in Belarus increased by 50 and made up 560. Other markets have also shown growth in number of companies within the last years. Experts say these perturbations were caused by the economic crisis. New companies are founded; large companies are being restructured, etc.
As Belarusian IT industry experts comment, the figure of 560 can be a bit overestimated. Open database of software development companies in Belarus contains approximately 370 companies, and some of them do not even work in outsourced software development industry. All others can be small companies or sole entrepreneurs, experts assume.
Number of Specialists
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By number of specialists Belarus, with 10 400 professionals, is ranked 3rd in CEE region. Ukraine and Romania are the leaders by this indicator. Hungary is the 4th and Poland is the 5th. Meanwhile these two countries surpass Belarus by market volume, which means that they have higher rates.
Average Rates
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Average rate in Belarus is estimated at 22.95 dollars per hour. Lower rates are only in Bulgaria (22.87), Moldova (20.10) and Albania (18.00). The leaders are Slovenia (32.58), Poland (31.29) and Hungary (30.95).
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Belarusian rates by position range from 18.36 (Junior developer) to 29.14 (Project manager) dollars per hour.
Modern Trends
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Over 90% of experts forecast further Belarusian outsourced software development market growth. The majority are sure that development of quality management systems and improvements of government support will also follow.
Conclusion
According to “Central and Eastern Europe IT Outsourcing Review 2010” forecasts, Belarusian outsourced software development industry will continue its growth. The country has a serious potential, and its qualified professionals are in good demand. Despite economic crisis Belarus succeeded to retain its positions in market volume rating, giving ground only to the countries with larger population.
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The internet users are getting more and more sophisticated with the time. To attract people to your site would will most likely need to offer them multiple effects – sound, video, contextual help – to make their online experience more comfortable and much like real. And definitely more online shoppers convert to buyers and casual users turn into permanent visitors if they their experience with the web-service goes smooth – no “error” or “your browser does not support this feature” notifications on the way.
While it’s still difficult to build a web-application that would work correctly on every screen, with rich internet applications (RIA) it’s no longer a problem. RIA products are usually delivered over the web but at the same time have some characteristics of desktop applications. They exploit new media types and combine classical data screens with multimedia and a high-end look and feel. Compared to HTML/XHTML pages , RIAs possess the functionality that allows to interact with data not purely visualize or present it.
RIAs boost margins, offer greater interactivity, and allow delivering variety of features to the users. To cut it short, RIAs are aimed to make a user’s life better. What about the life of a software development company?
Fortunately, the developers don’t need to sacrifice their time, nerves and excess efforts to offer RIA to the users. From the developer’s point of view it is as good as from the user’s.
There are different options of RIA frameworks, but all of them allow to promptly create, develop and modify applications. It’s a cross-platform technology, easily adapted to all popular technologies and protocols. All these factors combined allow making smooth integration with the existing applications. Once you develop a rich Internet application it will work on PCs, Touch Screens’, CATs, InfoKiosks, PDAs – all kinds of devices. No more troubles with customization to mobile devices, no routine work with endless testing it in Opera, Firefox, Internet Explorer. RIAs reduce time-to-market and saves your personal time. And you hopefully have a better idea of how to spend an evening instead of fighting with bugs, don’t you?
As a rule developers do not deal with design and simply tune interfaces produced by creative team to the applications. However, Flex framework with its Flex Builder makes it possible for a developer to work with graphics and make it interactive. Flex’s ActionScript syntaxes is much alike Java – clear and familiar for developers. And MXML, that can be compared to HTML, makes it easy to convert graphic files to RIA.
Well, regardless of the framework and development scenario chosen, the final product should combine a high quality user interface and immaculate background software part. It’s a kind of a challenging task that requires a great synergy between design and development, as well as close collaboration with the customer. Effective communication and finely tuned processes are the keys to success in RIA development.
Two more vital points in RIA lifecycle are the possibility to provide extendibility and implement new changes in RIA within a really short period of time. Working online means being ready to react to the situation immediately. Keeping RIA up-to-date and making sure that it complies with user expectations are the tasks that require regular attention. For this reason many companies choose to outsource RIA projects to professional developers, highly experienced in technologies as well as SaaS and complex solutions. What are the advantages of this approach? Learn more in Software Outsourcing in the Times of Economic Downturn article.
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Remember starting up your business and looking for an office? Thinking how to get a car on a business trip abroad? Browsing the Internet for a villa at the seaside for a holiday? In all these cases the solution how to reach the goal without excessive expenses was probably simple – just rent it. Why to save and buy what you need in the years if you can start using it right now?
It’s the save with software. For decades software development was associated with enormous costs. Corporations first earned millions and hired their 1000th employee and only then dared to think about decent software. Things have changed with time.
The concept of SaaS (software-as-a-service) evolved in 1999, and the interest to these products has recently shown accelerated growth, especially in the times of economic downturn.
So, what is software-as-a-service, and why is it popular? Generally speaking, it’s an application developed and hosted by SaaS vendor. The customers can access it remotely via the Internet. As distinct from packaged or custom software applications, customers don’t buy or build software, but simply rent it, usually on a monthly fee basis. It’s easy, it has lower barriers for entry, as well as doesn’t take much time. And, well, these are not the only benefits of SaaS. Here go more.
Benefit 1. The first thing you would probably say about SaaS is “Cool, we don’t have to pay for licenses or development!”. It’s true. But there are much more items to save on. No new service hardware and infrastructure purchases. No extra IT specialists to hire for this application support. Implementation and consulting costs are not totally excluded but are reasonably limited.
Benefit 2. Software as a service accumulates large scale collective intelligence. As these applications are addressed to various businesses, they normally include wide functionality and implement multiple ideas generated by experts.
Benefit 3. Well, most software contains some bugs. And it takes some time for a traditional software vendor to provide response to bugs, at least for the reason that he doesn’t host the application. SaaS provider has direct access to the software and can easily tell how well it is working and promptly fix the bugs.
Benefit 4. Traditional software updates can be painful for clients. SaaS applications are easily updated with no extra effort from your side, and normally go smooth as the software is not customized.
Benefit 5. Your business can be seasonal or it can be subject to changes. Once you temporarily don’t need the application, you can just put it on hold, with no fees charged for this period.
All these benefits combined make SaaS a good option for companies looking for faster return on investment.
But let’s also note that SaaS solutions are not panacea for all businesses. Generally, they work best for non-mission-critical processes and functions. The companies willing to differentiate from competitors through their customer services, or looking for ERP and business intelligence should stick to traditional software. But SaaS certainly has its place in most companies’ application portfolio.
If you are looking for HRM, CRM, sales force automation, warehouse, travel management tools or any other applications that are not highly dependent on or integrated with other business functions, SaaS can be a good a choice to make.
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Until recently a motivation to outsource was primarily connected with cost savings. But as the global outsourcing market is growing bigger and wider, and offering various options, companies become more sophisticated in their business relations. Nowadays not only money has vital importance. Efficiency also does matter. And the choice of an outsourcing location becomes the issue requiring a well-thought and balanced approach.
Today companies from Western Europe and North America tend to choose partners from Eastern Europe, sacrificing their contracts with Indian and Chinese outsourcing providers. The answer to the question “why” seems to be simple – they’re closer both in location and in culture. But that is not all. Companies that make a deeper analysis and comparison of popular outsourcing locations normally base their research on various key points. And many of them, taking an option to outsource to Eastern Europe, decide on Belarus, a country widely known for quality of software services. Let’s take 9 most typical criteria, have a look at each and try to find out the reasons of Belarus’ success on the global market and it’s competitive advantages over neighbor countries.
Language
Definitely, no one is willing to be “lost in translation”. Especially when it mostly about business (no Scarlet Johansson included). And in a relationship with a software provider it’s crucially important to find a common language - both in the primary and figurative sense. Most commonly it’s English. With Belarus it’s pretty easy. According to traditions of local education English is normally taught to children starting from primary school. As a result, development team members – not only managers, but software engineers as well – are most likely to speak English at a sufficient level.
Government Support
In Belarus the government and ministries realize the benefits of IT export and support the industry. They establish agencies, hi-tech parks that develop better opportunities for software providers, introduce special dues and taxes regimes to boost the competitive power of national IT-industry. This interest from the government side ensures favorable conditions for outsourcing providers, and guarantees possibilities of long-term cooperation with them.
Labor Pool
Both quality and quantity of Belarusian labor pool is widely known the world over. Country’s work conditions, career opportunities for IT professionals and modernity of facilities make software development sphere an attractive option for talented people.
Infrastructure
This includes quality and stability of country’s telecommunications, satellites, power, as well as transportation facilities: roads, rail service, air transport. In the recent years Belarus has had a technological boost – modern internet access technologies are available to the majority, and the costs are getting reasonable. Modern travel infrastructure and geographic proximity make the country a good destination to visit. No extra time loss. And, as we know, time is money.
Educational System
Since the Soviet times this region was recognized for its strong educational traditions. The results of today’s world-wide IT students’ competitions prove that these traditions are being constantly improved and enriched. Belarusian State University and Belarusian State University of Informatics and Radioelectronics are constantly among the winners.
Cost
Well, let’s say it open – labor rates are not so low in Belarus, as they are in China. But they reasonably low, that makes Belarusian offer “costs + effectiveness” probably one of the best in the world. The prices for real estate, infrastructure and telecommunications are also affordable here that minimizes all possible extra costs.
Political Environment
Belarus is politically stable and has no outside enemies that excludes the risks of force majeure circumstances.
Cultural Compatibility
Belarusian work ethics and culture are very similar to that of the United States and Western Europe. No “culture shock”, no surprises – business relations are predictable here, that makes communication, planning and goals achievement effective with a software provider from this country.
Global and Legal Maturity
As we’ve already mentioned, Belarusian government encourages export-oriented software development and creates favorable conditions for cooperation between IT companies and foreign business. This normally includes legal support and multiple privileges for companies involved in outsourcing process.
Not sure yet? Well, it takes only two hours by plane from Frankfurt to Belarus. Just come and see. You’ll definitely be impressed by professionalism of people involved in IT and hospitality of everyone there.
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It has been decades ago that Central and Eastern European (CEE) region became a renowned player on the global IT outsourcing market. Companies from the North America and Western Europe are getting more interested in partnering with software providers from this part of the world as cultural and business traditions here are more compatible to their own. These and many other advantages of CEE region over India and China provoked boost of interest to the concept of “nearshoring”.
In 2008 IT services export of Russia, Ukraine and Belarus combined counted in 2,2 billion dollars - 1,5 times more than that of China.
There are over a dozen of countries in CEE region that can be called relatively active players of IT outsourcing services market. And while research companies provide evidences of the rapid development of the market in general, let’s have a precise look at positions of Belarus on outsourcing arena.
Market Volume
The research “Central and Eastern Europe IT Outsourcing Review 2008”, conducted by the Central and Eastern European Outsourcing Association (CEEOA) during January to July 2009, ranks Belarus the 5th in the region by market value. This indicator was based on the scope of final IT products released in the country. At the moment the estimated Belarusian IT industry volume is 310 million dollars, 22 million over the 2007 rate.
The 8 per cent growth may seem not so impressive compared to the 30-40 per cent progress demonstrated in the recent years. However in the times of economic recession it’s a decent result that allowed Belarus to improve its positions in the CEE rating.
Market Volume 2007
Market Volume 2008
By the way, according to the Forbes Magazine, per capita income from of IT-services export in Belarus equals that of India and outscores other popular outsourcing locations from CEE. “The volume of offshore programming services in Belarus in per-capita equivalent exceeds twofold that of Russia and threefold that of Ukraine”, - the competent business edition says.
Number of Professionals
By the number of professionals Belarus is ranked 3rd in the CEE region – 10 000 people in the country work in IT sector. This figure covers only specialists involved in software outsourcing, not administrative personnel. Taking into account that population of Belarus is less than 10 million and having made simple calculations it’s easy to notice that every 1000-th country inhabitant is an IT professional. In the times of the former Soviet Union Belarus was country’s innovation, technology and engineering hub. And till now it retains and reinforces its positions being world famous for the quality of education in software engineering.
Number of Professionals
Number of companies
The Central and Eastern European Outsourcing Association has ranked Belarus 3rd by the number of companies, reporting the number 510. According to an earlier research conducted by the Russian Software Developers Association (RUSSOFT) and Belarus Hi-Tech Park, this number is 650. However some independent experts assume that this figure is exaggerated. At least no one has ever seen half of a thousand software providers in the country, not even in business catalogs listing. Anyway, companies looking to outsource to Belarus have a wide choice of highly professional end experienced teams. And quality here is definitely of a greater importance than quantity.
Number of Companies
Perspectives
“Central and Eastern Europe IT Outsourcing Review 2008″ has proved that despite of recession and instability, Belarusian IT market manages to grow, progress and improve its positions in the region.
And “Gartner’s 30 Leading Locations for Offshore Services” research gives optimistic forecast for Belarus positions on global outsourcing market. Not yet included in TOP-30, Belarus was named among the fast growing countries that have all chances to join the leaders in the foreseen future.
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When it comes to software outsourcing the most common argument in favor of this choice is development cost reduction. Well, it definitely is a right idea. However, as it often happens with the truth, it has different shades and needs to be thoughtfully examined.
“Added Value” of Outsourcing
Once you decide to entrust your IT-project to a partner with development center in a popular outsourcing location you’ll probably be able to tighten your IT budget. It’s a pleasure to see the reduced expenses in your calculations, especially at the moment when financial question is so sensitive, isn’t it? The good thing is that it’s far not the only plus of outsourcing. What’s more?
First, you get access to skills of technology professionals. You don’t have to hire people, don’t have to take risks before you make sure they’re qualified enough, don’t have to manage them and solve all types of problems inevitable in any team. You simply get skills that can be applied in the favor of your business. Everything else was done for you before.
Second, skills commonly go in tandem with experience. Being focused on your business and having your own idea of how it should work, you can leave some good ideas out of eyeshot. It’s most likely that IT-specialists with wider experience and knowledge of the cutting-edge technologies will give you a valuable advice. So, leveraging from outsourcing company human capital does not only mean that they know how to do. They also know what to do to make your project a success.
Most of outsourcing companies that keep up with the times base their processes on RUP, Agile/Scrum, Waterflow and other methodologies that ensure flexibility and prompt adjustments to your business model. No excessive efforts are required from your side. A good outsourcing provider’s business process covers both technological and communication issues: they do their job right and provide effective feedback.
And, well, people do make mistakes – let’s just admit it. Partnering with an experienced company you can be almost sure that they’ve done them before. And looking backward on prior experience they’ll be able to foresee the situation and avoid possible ineffective steps within your project.
Finally, relying on outsourcing and delegating certain non-core obligations and responsibilities to independent contractors you can focus on your core business, invent new strategies of innovation, modernization or even transformation. Meanwhile your outsourcing partner will independently drive your IT project/operation.
Hidden Dangers of Excessive Cost Reduction
Looks optimistic, doesn’t it? Well, but there still exist some drawbacks of undue cost reduction. Gartner analysts warn that solely pursuing a cost-focused approach can be dangerous. According to Gartner forecasts, through 2012 “inflexibility caused by an excessive cost reduction focus results in business disruption in 30 per cent of outsourcing deals, including the inability of the buyer to compete effectively”.
The analysts warn that some inexperienced companies driven by idea of rapid cost optimization can make too hasteful and sudden decisions. Making a choice of an outsourcing provider on a pure price basis can lead to a failure and signing contracts that have little chance to deliver real business advantage.
Common fears associated with outsourcing – breaking deadlines, hidden costs, data insecurity, cultural mismatch, lack of transparency and poor communication – can become a disconsolate reality for those who fail to analyze potential outsourcing partners’ reputation before making final decision.
Gartner reminds of an analogous situation that happened during 2001-2002 economic downturn, and advices companies planning to outsource to avoid these risks.
“A cheapskate pays twice”, people say. In the terms today’s business climate and economic situation this might sound – planning to outsource, think well of a right balance between optimized costs and improved performance.
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