In 2021, the global fintech investments topped US $210 billion, which is the second highest annual total ever. The trend is clear — innovative banks, fintech startups and incumbent financial institutions are looking to harness the power of technological advancements to succeed in the highly competitive financial industry.
But companies are facing the biggest challenge — the tech shortage. For example, almost half of US employers admitted that finding tech talent is their primary concern. By 2026, the scarcity of IT engineers in the US will reach 1.2 million. And this problem is global as many developed countries are now grappling with the major tech talent gap. In Canada, the number of new IT jobs (12,000 in Quebec alone each year) by far outpaces the number of IT graduates (3,000 in Quebec). In Germany, the lack of IT talent could cost €8.5 billion over the next four years
Thus, it comes as no surprise that many fintech companies now rely on software development outsourcing to bridge the talent gap and accelerate their pace of innovation. And Central Europe appears to be a hot outsourcing market.
Why is Central Europe the next great IT outsourcing hubspot?
When companies are looking to outsource their development projects, the main things they take into consideration are lower development costs, a highly developed IT market, low-risk business environment, and overall high quality of IT services. And the countries of Central Europe can offer all that.
Estonia
Home to Veriff, Zego, and Wise, Estonia emerges as a frontrunner in the Baltic region when it comes to leveraging innovative IT solutions and technology. To describe the nation’s successful movement towards digitization and creation of a modern information society, e-Estonia has become the go-to tag for the country.
Back in 2005, Estonian IT export was only 0.9% of its GDP but by 2019 it reached over 3.2%. Today, the nation’s ICT sector is booming and is expected to grow tenfold in the next ten years. Top three markets that export Estonian ICT services are Finland, Germany, and the USA, according to an international survey. And this is not surprising — in 2020 ICT specialists accounted for 6.5% of the employed population, which is above the EU average of 4.3%. In addition, Estonia is planning to train another 7,000 ICT professionals by 2027.
In addition, Estonia is one of the most politically stable countries in Central and Eastern Europe as the country is a part of many international organizations like WTO, NATO, OECD, and Eurozone.
Latvia
Latvia appears to be another competitive location for IT outsourcing in the Baltic region. With over 37,000 tech specialists, Latvia is one of the largest IT service exporters among the Baltic countries. This is no small part due to a high level of STEM education — in fact, Latvia is #1 European country in terms of the number of ICT students per 1 million of population. Moreover, Latvia is in the 26th place in the world by English skills, meaning that there are practically no communication barriers for English-speaking clients.
From a legal perspective, Latvia has reasonable taxes and recent legislative changes to the stock option policy turned Latvia into the most startup-friendly country in Europe. The government is planning to further reduce administrative burdens and work on attracting foreign investments and increasing business competitiveness.
Lithuania
Lithuania is a country where global companies can rapidly scale their development initiatives and test innovative ideas. Just look at Google, Uber, IBM, AIG and other tech giants that are all opening their R&D centers in Lithuania.
And there are a number of reasons for that. The first one is a strong talent pool that consists of 30,500 ICT professionals with 1,500 tech specialists graduating each year. Although there are three main universities that provide technical education — Kaunas University of Technology, Vilnius Gediminas Technical University, Klaipeda State University of Applied Sciences — their diplomas are valid in all European countries.
The government is also trying to improve the business environment and make its economy attractive for foreign investments. An interesting fact about Lithuania is its free economic zones near Klaipeda and Kaunas. If you start a company in these areas and employ at least 20 Lithuanians or permanent residents, you will be exempt from paying taxes for 6 years.
Lithuania is also home to many high-profile tech events like Silicon Valley Comes to Baltics event, International Open Data Hackathon, Software Development Conference, and more.
Chech Republic
The Czech Republic has one of the most mature IT markets in the region experiencing a 10% increase in IT outsourcing services year on year. This growth is attributed to a number of factors, including skilled workforce, friendly government policies, and mature ICT infrastructure.
Today, the Czech Republic has more than 150,000 highly skilled IT specialists — according to HackerRank, Czech developers are ranked 9th in the world. Corporate giants like Microsoft, IBM, Google and Oracle have already set up research centers in Czech IT hubs to tap into the large talent pool.
In addition, the country has a long-standing tradition of high-quality education and academic excellence dating back to 1348 when the first university in Central Europe was established. Every year, around 7,000 new tech specialists graduate from recognized IT universities, including Prague Czech Technical University, Masaryk University, and Brno University of Technology.
As for the taxes, last year the Czech Republic returned to progressive taxation with a 15% personal income tax for gross income up to CZK 1,867,728, and 235 if gross income exceeds this threshold.
Poland
On the IT outsourcing map, Poland has made its name as a reliable exporter of high-quality IT services that has won numerous recognitions worldwide. Tholons, a leading strategic advisory firm, has included three polish cities — Warsaw, Krakow, and Gdansk — into its Top 100 Outsourcing Destinations Rankings.
At present, there are over 250,000 IT sphttps://blog.aspiresys.pl/technology/tholons-top-100-outsourcing/ecialists in the country, accounting for 25% of the entire developer community in Central and Eastern Europe. That’s not surprising given that Poland offers access to high-quality education in STEM and related disciplines, which results in 15,000 IT graduates entering the market each year.
Poland has seven major IT hubs, the largest being in Warsaw (capital), Krakow, and Wroclaw. In addition to a talent pool of over 70,000 IT specialists, Warsaw is recognized for its strategic location, academic excellence, developed infrastructure and transportation system. Samsung, Microsoft, P7G, Citi and others have chosen Warsaw to set up their R&D centers.
IT hubs in Poland
Source: N-iX
This concentration of tech talent coupled with lower rates, the overlapping time zone, English proficiency and continuous investments in infrastructure development turn Poland into a place where global companies can find a trustworthy technology partner.
Elinext is a fintech software development company with delivery centers in Poland and representative offices across the globe. Backed by 25 years of experience, we help fintech startups and incumbent financial institutions improve operational efficiencies and deliver customer-centered solutions and services. To eliminate communication barriers and ensure high-quality services to our clients, all our teams are fluent in English.
Wrapping up
In this article, we have provided a concise overview of Central European countries from the fintech development outsourcing perspective. After all, choosing the right country is the first step towards finding a technology partner for your fintech endeavor. And while all Baltic countries have fast-growing ICT markets, the Czeck Republic and Poland can offer a much larger talent pool of skilled professionals. That said, Poland boasts a dynamically developing IT landscape with 7 tech hubs scattered across the country. Throw into the mix lower development rates, and Poland is quickly becoming the outsourcing destination of choice.
