“This is a software-powered world,” claimed Satya Nadella, the current CEO of Microsoft, in February 2014. In 2022, he is still right. In the era of global digitalization, software has turned into the backbone of a business’ success. In a fiercely competitive entrepreneurial landscape, streamlining a business’ activities and processes using software solutions can become a centerpiece for growth. But what happens when in-house software development is out of hand? In this case, outsourcing software development and other business processes might be the best way forward. In today’s article, we will take a look at the main reasons why Asia – and more specifically Kazakhstan, Uzbekistan, and Georgia – has become a noteworthy software development talent pool.
IT Outsourcing in Asia: Market overview
Digital transformation across all sectors is a striking reality that has caused IT outsourcing to grow steadily over the past years. The reasons vary, ranging from the necessity to streamline business processes to enhancing customer experience, ensuring data security, or reducing the costs associated with in-house development. All these factors act as a catalyst for the continuous growth of the industry.
Globally, in 2021, the business process outsourcing market was evaluated at $245.9 billion and is expected to keep growing at a CAGR of 9.1% by 2030. According to Gran View Research, the IT & telecommunication segment accounted for no less than 34.0% of the overall market:
Global business process outsourcing market
In 2022, the revenue in the IT Outsourcing Asian segment is expected to reach US$86.86bn and grow at a CAGR of 9.40% between 2022 and 2027, reaching US$136.10bn by 2027.
IT outsourcing market revenues in Asia
Source: https://www.statista.com/outlook/tmo/it-services/it-outsourcing/asia
Businesses opt for software development outsourcing for a wide variety of reasons. However, as Intersog points out, cost reduction is – by far – the main reason:
Outsourcing objectives
There are many factors that influence software development rates: location, talent pool, business environment, local regulations, etc. Accelerance breaks down rates depending on region and skills:
Software development rates
It becomes obvious that, when it comes to outsourcing, South Asia and Southeast Asia are noteworthy competitors. But where does Central Asia stand?
Kazakhstan’s IT industry: overview and perspectives
In 2018, in an attempt to support local tech firms and create a competitive tech hub, Kazakhstan launched the Digital Kazakhstan program. With this initiative, the government aimed not only to support the local needs but also to help Kazakh IT companies reach new markets such as the U.S., Europe, the Baltic states, or Southeast Asia. The creation of the Astana Hub, an international technology park meant to attract global IT talent and drive forward the creation of competitive and innovative IT start-ups, was a major boost for the local IT industry. Currently, over 900 companies are part of the hub, operating locally and internationally and benefiting from special visa and tax incentives.
According to Zhandos Kerimkulov, founder of EGISTIC, a start-up that uses innovative technologies such as ML for spectral analysis to help farmers manage crops digitally, said for ComputerWeekly: “Also, in Kazakhstan, it is relatively cheap to create an IT product. Salary requirements of our programmers are not so high because they work more on enthusiasm and to gain practical experience.”
At the Digital Bridge Forum held on September 28th 2022, president Kassym-Jomart Tokayev highlighted the necessity to invest in human talent to meet the increasing global demand for IT specialists. By 2025, Kazakhstan intends to train over 100,000 highly qualified IT specialists. To reach this goal, the country not only reinforced its technical universities but also opened 12 private IT schools and placed its bets on grant training.
According to Qubit Labs, these are the average salaries of Kazakh software engineers by technology:
The average salaries of Kazakh software engineers by technology
Even though the Kazakh IT entrepreneurial ecosystem is not globally known yet, the country is worth keeping an eye on.
Uzbekistan’s IT industry: overview and perspectives
Is Statista telling a success story following the creation of the IT Park in Tashkent in 2019? Considering the stats, it certainly looks so. In 2022, the Uzbek IT outsourcing segment is expected to reach US$188.20m and will continue to grow at a CAGR of 12.96% between 2022 and 2027. With the most revenue expected to be generated in the U.S. (keep reading to understand why), by 2027, the market volume is projected to reach $346.20m.
Uzbekistan’s IT industry
Similar to Kazakhstan, Uzbekistan invested in an international IT Park in Tashkent. Functioning as a free economic zone for IT start-ups, the IT Park boasts over 680 IT companies, 205 IT Centers, 34 university incubation centers, and customers such as Amazon, Volvo, or DHL. In an interview for Intellinews, Farhod Ibragimov, CEO of the Uzbek IT Park, pointed out:
“When we started the park in 2017, it was almost nothing. It was only the tax benefits. There have been huge changes over the last three or four years in Uzbekistan’s IT sphere. 58 universities now have IT specialized courses, 20 of them are wholly focused on IT. We already have over 20,000 high qualified specialists right now, and that is going to increase by at least 10,000 annually.’’
What’s more, in July 2022, Sherzod Shermatov, the Minister of ICT, embarked on a trade tour across the U.S. with a clear goal in mind: increase his country’s visibility as a cost-effective, high-quality destination for IT outsourcing. His targets? No less than PayPal, Coursera, Google, Apple, and Meta. With the U.S. already as the country’s biggest export market and so much at stake in terms of ambitions, there is no wonder that, in November 2019, Uzbekistan launched the English Speaking Nation program. Supported by the U.S. Embassy in Tashkent, the program provides training to over 30,000 English language teachers.
Georgia’s IT industry: overview and perspectives
Over the past two decades, Georgia has been investing heavily in technological advancements, technical education, and creating a favorable business environment meant to attract foreign investors such as EPAM Systems, Netex, Evolution Gaming, or Flat Rock Technology. As a matter of fact, according to the World Bank, Georgia ranks third-lowest total tax rate and 7th in Ease of Doing Business. The Outsourcing Destination Guide Georgia displays the country’s progress over the past 20 years:
Georgia’s IT industry
As far as technical education is concerned, the Business and Technology University in Tbilisi offers students the possibility to specialize in Digital Marketing, DevOps, or Information Technologies. The Kutaisi International University can host up to 60,000 students, offering undergraduate, graduate, and post-graduate programs in science and technology. GITA (Innovation and Technology Agency) has set up a training program for 3000 IT specialists.
Given their global growth ambitions, English is mandatory not only in all high schools but also in universities. Most Georgians also speak Russian and German, while Turkish, Italian, French, or Spanish are not uncommon either.
According to Qubit Labs, these are the average salaries of Georgian software developers by technology:
The average salaries of Georgian software developers by technology
Considering these growth trends, it would be interesting to take a glance in the future and see how the European and Asian outsourcing markets are expected to evolve. In 2021, the European IT-outsourcing market reached $103.9 billion:
Revenue of the IT outsourcing market in Europe from 2020 to 2029
Source: Statista
The same year, the IT outsourcing market in Asia-Pacific reached $214 billion. According to Straits Research, by 2030, Asia-Pacific is expected to hold the largest market share, reaching $349 billion and growing at a CAGR of 6%. By 2027, the European IT outsourcing market is expected to grow at a CAGR of 8.06%, reaching a market volume of $186.40bn.
Wrap up
To succeed in a fiercely competitive, digitalized entrepreneurial ecosystem, businesses MUST invest in software development. There is no way around this. Countries from Central Asia – such as Georgia, Uzbekistan, and Kazakhstan – are placing a substantial part of their economic bets on IT outsourcing. With a steadily growing talent pool, a favorable business environment, substantial governmental support, competitive prices, and an outstanding desire to thrive, Central Asian countries will certainly have a word to say in the IT outsourcing segment. With offices in Georgia, Uzbekistan, and Kazakhstan, Elinext can connect you to an extensive IT talent pool.
