Nearshore in Eastern Europe/ Moldova
The IT services market is a critical one. In 2017, global IT services spending reached around 674 billion dollars. Technology services include consulting, software development, systems integration, as well as hardware deployment and support, training and education, and hosted and outsourced IT services.
A wide range of West European companies see Eastern European countries as appealing destinations for IT outsourcing. The progress of collaborative technologies is helping East European countries such as Poland, Moldova, Romania, Bulgaria to become an increasingly attractive option for UE companies looking to outsource software, as they are focused more on cost-effectiveness and proximity, rather than just low cost.
Asian countries like China, the Philippines, Singapore, Malaysia and India face increasing competition from Eastern European service providers. Even if, these countries are preferred for their inexpensive price rates and a numerous labor force, East European IT outsourcing destinations can easily compete in terms of service quality.
Source: Global Innovation Index 2017
Republic of Moldova is a South East European country, situated between Romania and Ukraine.
Moldova is one of the most popular IT outsourcing countries and one of the most attractive offshoring destinations in Eastern Europe.
Today there are over 1.100 IT companies in Moldova and more than 10.000 IT specialists. At the same time, in Moldova traditionally exists a solid educational base and the potential for further development in this domain is enormous.
Reasons that stand behind the popularity of nearshore technology companies based in Eastern Europe (Moldova) that are worth to take into account:
- Easy travelling distance for European Countries.
- Nearshoring makes it much easier to integrate activities.
- High-skilled specialists (thanks to the strong educational emphasis on engineering and science), which means that most of Moldovan software companies can engineer complex solutions rather than just provide coding services.
- Cultural similarities,
- Easier collaboration. The spoken languages in Moldova are Romanian and Russian, although most specialists are fluent in English. Most companies in Moldova provide English language courses to their employees.
- Budget effectively. The cost of Moldovan IT services is one of the lowest in the Eastern Europe. According to the World Bank Group’s data on doing business, in Central and Eastern Europe, only Ukraine and Bulgaria have lower startup costs than Moldova. For example, startup price rate in Romania and Russia are twice higher than in Moldova. (Source: World Wide Tax)
- Clients can stay focused on their core business. Nearshoring will help companies grow, save money and not get distracted by complex IT decisions.
- Time zones. Nowadays, companies use many collaboration tools such as info-sharing portals and real-time screen-sharing. (e.g. Moldova is situated in the optimal time zone (GMT+2) for collaboration with EU partners.)
- Growing labor market. Workforce market continuously growth in Moldova, which will bring more tangible benefits for clients.
- Data security. Companies can be sure that customer’s details, invoices and other confidential information are secure as East European countries has the same data protection legislation as in Western Europe.
- While being a small country, Moldovan software vendors have in their portfolio successful collaboration with renowned clients and attracted a lot of world class companies to the country.
- Finally, the Moldovan legislation makes the country an ideal place for investors. This particularly refers to the taxation regime of the employees in the informational technology sector: their taxable income is limited, which means that only around 40% of the employee salary is subject to income tax. Moreover, the country’s corporate income tax is only 12% (one the lowest in the region).
Moreover, Universities and Colleges are producing an increasing rate of math and computer science graduates in Moldova, the percentage value is well ahead of Bulgaria, Croatia, Hungary, and Slovenia. (Though these countries have increased the proportion of math and computer science graduates, they are still well below the rate in Moldova.)
Source: Eurostat, National Statistics Offices
There were many positive changes in the Moldovan IT outsourcing industry in previous years.
IT community has grown significantly, thanks to considerable improvements in education, economy evolution, political criteria and many other things that should be taken into consideration when deciding about the right “shore” where to outsource in order to benefit from a secure and mature business environment.