A shift in global business practice has made outsourcing to Asian IT resources one of the best approaches for businesses to accomplish their projects. Outsourcing is not a new practice by any means, but the COVID-19 pandemic has escalated this practice. As such, many developing countries have become the hot spot for global enterprises- small and big alike- to acquire Asian IT resources.
Countries such as Bangladesh has risen to be the outsourcing destination for global businesses. In the past, the idea of outsourcing was not widely accepted, especially in the case of Asian IT resources from developing countries. But with situation all over the world changing with time, and the rise of skilled Asian IT resources, outsourcing is now a viable option for many enterprises. In this article, we will take a deep dive into how this phenomenon came to light and what holds for it in the future.
Recent Trend of European Region for Outsourcing
In this era of digitalization, IT outsourcing is a typical service. And with economic setbacks and other issues that came with the COVID-19 pandemic, many companies in Europe are forced to take up outsourcing. One of the key factors being that developing digital solution in-house is not viable anymore for many companies with the rise of costs in Europe. And with south and eastern Asia becoming the prime software service providing regions. So, with that, the global domino effect has taken shape in the IT industry.
European Software Industry Overview
European companies are centering their efforts on achieving better economy and sustainable digital solution through outsourcing. There is a significant need for IT professionals in the European industries. Europe’s software development is a huge market with distinctive growth potential. It is expected to reach $127.4 billion in 2021. The total number of European professional software developers is 6.1 million. But the surge in IT roles, and the decreasing number of IT graduates, with rapid IT innovations have resulted in an imbalance between available skills and required skills in the European IT sector. Germany, UK and France are leading in the software industry in Europe. Though some 4,000 to 6,000 suppliers specialize in software outsourcing from Eastern Europe, there is always more demand for skills. For example, Clutch lists nearly four 4,650+ IT-outsourcing vendors. In the recent pandemic, adaptation of modern technology will provide an attempt for many European organizations reconsidering new avenues for outsourcing in the future.
In this image here we can see that countries which are from Eastern Europe (Ukraine, Poland) have higher software development companies than Northern or Western Europe countries (Belgium). So, Eastern Europe countries recently opting for Asian It resources to fill the void.
Past Years Trend of Outsourcing
With all the changes happening around the world, the global market is being transformed by outsourcing. IT outsourcing is resulting in significant changes for companies. There are some technologies which are leading the demand for outsourcing and paving the way of digital automation. Here some of the innovations and developments are listed that make digital transformation more flexible and economic and in trend from past few years toby hiring Asian IT resources.
Booming demand for mobile application development:
European demand for mobile applications has peaked and continues to grow and expand. Healthcare, entertainment, and government organizations invest greatly in the development of mobile applications.
About 75% to 80% of European citizens owned a smartphone in 2020. The Netherlands and Sweden are the highest users of mobile apps in Europe (both 86%) and lowest in Europe is Bulgaria, Greece (63%, and 62%, respectively). For most European companies, outsourcing mobile app developing is very common due to lack of skilled personnel.
AR & VR markets in Europe:
The global outsourcing market for Virtual and Augmented Reality (VR and AR) is expanding rapidly and so outsourcing from other countries. According to Whitelane Research, the investments of AR VR are rising, with 80% of European companies planning to increase their AR & VR IT outsourcing.
According to the research, the leading world manufacturers in Germany (69%), France (47%) and the UK (33%) are the main players when it comes to AI deployment in production operations. The AR & VR market is expected to reach $133.78 billion by 2025; it paves the way of more offshoring projects.
Hype around Robotic Process Automation:
This image shows the investment growth of outsourcing in a year. Banking, manufacturing, finance, healthcare & BPO will witness highest Robotic Process Automation in Europe. Thus the growing demand outsourcing for this sector is also increasing. The BPO public sector spends over 60% of total expenditure on the UK outsource market. Robotic automation demand in France is significantly increasing and so the outsourcing trend. According to Markets and Markets, Robotic Process Automation (RPA) Market is estimated to reach $2,467 million USD by 2022, at a CAGR of 30.14% between 2017 and 2022. Since the pandemic, 90% of the fintech and health sector in the UK predicts that RPA will be integrated into their daily processes by 2030. To meet that demand outsourcing is expected to be the answer.
Fintech, healthcare industries are significantly digitized by blockchain services:
In terms of blockchain spending, Western Europe is the second-largest region in the world. block chain technology has expanded from the financial sector towards supply chains, production and healthcare and others.
The figure shows the growth of the blockchain market with compound annual growth rate of 56.9%. Blockchain market in Europe will gain more popularity than any other continent. Since the demand for blockchain solutions and investment is growing, there is also a growing demand for skilled, experienced blockchain service developers.
Demand for artificial intelligence and machine services outsourcing:
The use of artificial intelligence and machine learning services is becoming more common in many industries. European enterprises and governmental organizations frequently outsource the development of their ML and AI projects.
The leading world manufacturers in Germany (69%), France (47%) and the UK (33%) are the main players when it comes to AI deployment in production operations.
Health providers are at the leading edge of AI in Europe in northern and the Netherlands. In general, there is certainly an increase in demand for AI tools, especially in Switzerland and Spain. Outsourcing the solutions is economical in such cases.
Internet of Things on the rise:
There has been a growing European Internet of Things (IoT) market. The European IoT market grows by double numbers every year, that causes outsourcing this tech. in combination with the increasing IoT market and the lack of skills, there is additional space for outsourcing.
So, these are the most outsourced services among all European software industries.
A few years back European companies preferred to outsource services to providers within the European continent, nearshore to Central and Eastern European (CEE) countries. However, prices in near shore countries are rising so many enterprises are already seeking and working with software services vendor in the Asian continent. Some of the offshoring popular destinations with the strongest potential in Asian continents are Bangladesh, India, Vietnam. A growing number of businesses of all sizes intend to use IT outsourcing more frequently.
For most Western enterprises, hiring Asian IT resources is common practice. Asian IT vendors are on the rise to provide high-quality services with well-trained teams and reasonable prices.
Why Europe is Choosing Asian Countries for Outsourcing
South Asia’s attraction as an outsourcing market derives from its vast talent pool, covering a wide range of industries. As industries are changing through digital development, cost effectiveness is not the solo reason to pick Asia as an outsourcing destination. There are some of the primary causes which led European clients choose Asia –
- Expertise in latest technology
- Excellent quality
- Advancement in IT
- Cost Effective
Software development services are in high demand throughout Europe. This surge is boosted by the present pandemic, which combines a large scarcity of competent software engineers with a rising desire for digital transformation and automation- increasing the demand for Asian IT resources.
1.Insufficient skills
In various IT fields, an increasing number of European countries are experiencing a scarcity of ICT specialists. A report of the CIO Survey 2020 by Harvey Nash/KPMG shows that the demand for people, skills and sourcing in 84 countries lies in the areas of big data, technical architecture, security, enterprise architecture, business analysis, project management and development.
2.Cost reduction
Offshore outsourcing is primarily motivated by cost savings. Software engineers in developing countries are typically less expensive per hour than those in Europe. Companies who are affected by the COVID-19 issue have tighter budgets than before, hence, offshore services of Asian IT resources in demand.
3.Software developer shortage
IT skill demand in Western markets is predicted to increase by more than 10% by 2025.This need is reinforced by the increased necessity for digital transformation and automation because of recent pandemic situation.
4.Focus on key areas of a business
Most European end-user organizations lack the expertise, skills, and security provisions required for software development. Outsourcing helps them to concentrate on their core business while also allowing them to hire expert developers as needed.
South Asian IT resources will become more viable. Against all odds, 2020 has been a record year of investments in the tech aspects in Asian countries. According to a report by Atomico, $41 billion was invested into Asian tech. For example, A significant raise of investments in tech increased by $4 million in Bangladesh.
Benefits of Choosing Asian Countries
A survey from GSA UK gives an idea that a model outsourcing market must have more to offer besides an economical workforce. Value added services are expected by the consumers; also, cultural compatibilities, advancement of regular digital service are somethings that consumers look for in their offshore partners.
- Costing and Quality: Reasonable price and work quality are the first priority of buyers. In most cases, software developers in developing countries charge less per hour than software developers in developed ones. In this instance, offshore service providers in Bangladesh are good option as Bangladesh have great talent pool and experience in offshore industry with expertise in latest technology with reasonable cost.
- Outcome Driven Organization: Competent and agile organizations are important for businesses who are opting for outsourcing. In terms of this, South Asian IT resource providers are flexible and can easily integrate with their clients, which made their presence greater in IT outsourcing industry.
- Cultural Compatibilities: An outsourcer’s and supplier’s cultural incompatibilities are a cause for trouble. Bangladesh with its existing pool of IT software developers, has seen a huge increase in market opportunities as the vast majority of the population is in tune with the contemporary culture; making it easier for the software service vendors to cooperate with their clients.
- Innovative and Inquisitive Workplace: Modern, value-added outsourcing relationships include creative feedback and inquisitive workplace. To find these, buyers check which countries emphasize investments in the tech sector. According to The Daily Star, Bangladesh has already become the second-largest supplier of online professionals, proven by Oxford Internet Institute (OII). In case of startup funding Bangladesh is at an inflection point with an excess of $200 million USD in international investments from giant corporate investors, investing in industries like fintech, logistics and many more. These indicate growing tech marketplaces that thrive on innovation and are a best pick for providing IT and software development support.
A Quick Look at South Asian Countries in the Outsourcing Industry:
Bangladesh is an emerging hotspot for IT outsourcing in the region, specialized in an extensive range of coding languages and technologies. They are generally strong in the Microsoft tech stack (ASP.Net, Sharepoint, SQL, etc.), jQuery, react, Spring, Angular, React, Python, Java, JavaScript, PHP, Oracle technologies, and more. IOT, Blockchain, general e commerce and more are also popular among software developers in Bangladesh.
According to many sources, around 60% of Bangladeshi software developers are currently employed in software development outsourcing and out staffing companies. General partner rates for outsourcing in Bangladesh is between $26 and $37 per hour. That is striking for those who are comparing these to other global rates for software development.
Key Elements of Bangladesh in this area:
- The country was named Offshoring Destination of the year by GSA .
- Bangladesh offers over 1,100 tech companies and more than 80,000 IT professional.
- There are more than 100 companies in Bangladesh are providing IT outsourcing to over 30 countries and 1600 + IT service providers.
- The number of software projects offshored here has nearly doubled every year over the last five years. Over 20,000 people are now working in this industry.
Asian IT resources also including Philippine, India, China and Vietnam, which is often chosen for low labor cost, talent pool and quality. Some of the trending outsourcing markets in these countries include call centers, SEO, IT services, internet marketing, and virtual staffing solutions. Besides, Taiwan, Malaysia and Indonesia are becoming prominent names in this industry.
Trend Analysis and Report for Asian IT Resource Augmentation
This clipart shows that European countries are struggling to fill the gap of IT vacancies. This leads them to add resources from continents where skilled professionals are attainable. Countries like Germany and Netherlands who has strong IT base are also seeking skilled IT resources for growing demands.
- Research from 2016-2019 showed employers were only able to hire 6 for every 10 open tech positions. As said earlier, in 2019 European IT population was estimated to be around 6.1 million. This accounted for a 7% year on year growth. However, demand was expected to grow by more than 10% resulting a huge gap.
- Mobile app development, AR& VR, blockchain and other services are expected to become at the peak of their popularity among developed and developing countries. Developed economies, such as the US and Canada, in the meanwhile are willing to cut the labor costs by outsourcing to Eastern European and Asian. The growing number of companies of different sizes plans to increase their use of Asian IT resources. Many of those who have never outsourced, plan to do it for the first time in order to have access to the Asian IT resources.
This image shows, global IT Outsourcing market value in 2020 and the prediction for 2026 with compound annual growth of 4.5%. According to prediction, in 6 years market value will be increased more than $100 billion.
According to The Print, about 500,000 active freelancers are working regularly, out of 650,000 registered freelancers in the country, generating $100 million USD annually, according to the ICT Division of Bangladesh. Additionally, Bangladesh has been very active in outsourcing industry, which makes it experienced in meeting international standard in delivering projects. These are becoming possible because European clients are choosing Asian IT resources to augment frequently.
Technologies That are Trending to be Outsourced from Asia
With Industry 4.0 booming – smart manufacturing and digital technology are on the verge of a breakthrough. The IoT, cloud computing, improved computers, artificial intelligence, robotics, and industry professionals are propelling the rise of automation and data solutions. In terms of connectivity between continents and how it is transforming our world economy, it has a global influence.
By 2022 the banking sector is expected to amount to more than €100 billion in the global AI market. According to the IT outsourcing statistics by Technavio, the value of the IT outsourcing market is expected to reach $486.16 billion USD by 2025 growing at 5% during 2020-2025. Manufacturing will a have a high adoption rate (robotic process automation) of 45-48% in European continent. These insights show how industry 4.0 is going to take over the global economy.
Example:
Mobile App technology: The European market has opted to digitize their business into mobile app platforms. Industries like automobile, mobile banking, heath industries, travel industries are more prone to serve and handle queries through the mobile app. Thus, recently, they are hiring offshore help from remote regions.
AI and ML services: Machine Learning and Artificial Intelligence solutions give European companies a competitive advantage. An interesting fact is due to the pandemic, there are new data inputs (social distancing, change of habit) which show changes in human behavior. As machine learning depends on past pattern and behavior, models built before pandemic might not be useful. So, there is a huge scope of innovations and outsourcing projects based on that.
Uses of AR and VR: Virtual Reality (VR) and Augmented Reality (AR) have become popular in many organizations, with uses ranging from games to healthcare simulations. AR and VR market is expected to grow rapidly in the near future. Many of the European companies that use VR and AR technology lack the essential competence to create their own system. This is a chance for the Asian IT resources to get projects from European Vendors in this regard.
Cloud and Cyber security: Companies will look to outsourcing for effective cloud platforms as the amount of data that needs to be stored is ever growing. Thus, the need for security services is higher, so companies tend to outsource. Cyber security is an important issue, as almost all industries are getting digitized the number of companies seeking cyber security service from offshore partners are on the rise.
Blockchain services: Blockchain services demand is increasing now a days, so the companies are in need of professionals. This whole technology needs a secure system, transparency and advancement in money raising solutions. Because of the shortage of capable and experienced specialists, companies are anticipated to hire offshore professionals in this context.
Asian software companies regularly supply AI, ML, IOT, Blockchain, ASP.NET services and so on. For example, Bangladesh offers services like mobile app development, ecommerce solution, fintech solution, AR and VR, AI and ML, business intelligence, cloud and cyber security. The quality of services is increasing day by day while developers are adapting new technologies to stay in trends.
An Insight of Cases from Brain Station 23
At Brain Station 23 we have successfully demonstrated outsourcing services to other regions.
One of the most notable aspects of our work in Europe is our expertise in regulated markets. With the help of our German sister company, Brain Station 51, we have been serving two globally leading pharmaceutical companies in their enterprise portal development using Adobe Experience Manager (AEM). These portals are designed for giving an intuitive experience to healthcare professionals and attract prospecting customers with individually catered content. The best part about for these companies on why they prefer working with us is that we have the development and quality of a big software company but have the agility and work process of a startup- hence we can meet their change requests and updates quickly and effectively.
Another notable endeavor of ours is with DKV, a German transport and logistics company that operates throughout whole of Europe. We developed an innovative toll management solution using SharePoint and Contentful. This toll management solution is an online application that is live in 4 different languages. This solution is for managing and selling online tolls throughout Europe, helping transport and logistic businesses, as well as travelling individuals, across Europe.
Fight Athlete is a mobile app and website developed using .NET for a Dutch company. Features included like real time Application in iOS and Android, workout videos for fitness, exercise based on workout and many others.
And there are many more stories of ours on how we helped different European businesses with digital solutions. Visit our website to see more!
So, with all this information present, we can conclude that Bangladesh, as well as Asia, is delivering excellent software and IT solutions with their enriched teams of developers for quite a long time. Because of industry 4.0 revolution, Asian IT resources are on peak demand. COVID-19 indicates more supplies of offshoring projects in this situation. Our competent and experienced developers are here to meet any business challenges.
Editorial Contribution
- Saikee Siddique
- Maria Sultana
- Md. Mahmudul Hasan