We continue sharing results of our market research on global software development IT outsourcing with you. The first part of the research talks about software development costs in North America, Scandinavia, and countries in the European region. In this blog post, we will provide you insightful analysis of the software development costs as it relates to the IT sector in post-soviet states.
The growth and development of the IT sector in the majority of post-soviet countries have some historical and socio-economic preconditions. After the dissolution of the Soviet Union, countries increased their independence from Russian influence and boosted their IT sectors’ development.
While continuing to fight corruption in areas where the participation of government bodies was most obvious, their technology sectors were developed by adopting the Western experience, in order to become the most stable field of the countries’ economy by attracting investments from abroad. This growth along with the production of homegrown start-ups like Grammarly in Ukraine or Bolt in Estonia also led to the export of IT services to these countries in huge amounts.
As indicated in the first part of our research we have chosen PayScale and Glassdoor as data sources for our survey and have considered the hourly rates for software developers in every region as a base measurement. To provide a more detailed overview of IT outsourcing in the post-soviet area we initiated research related to regional web portals such as dou.ua habr.com, and dev.by.
The information provided is related to both freelancers and software developers that work for companies. Software development costs can vary depending on the specificity of technologies and programming languages, as well as the level of work experience which also should be taken into consideration as a factor. As most of these platforms provide information on developer salaries in national currency, we are using the current dollar exchange rate to compile this information. This provides an economic picture of the IT sector from a purely competitive view in terms of investment and development.
The technology sector is one of the fastest-growing sectors of the Armenian economy. According to the “Armenian ICT Sector report” by Enterprise Incubator Foundation, it reached $922.3m in 2018, that 20.5% higher than 2017. The report also refers to the fact that the revenue of the IT sector represents 7.4% of Armenia’s GDP. Currently, it's represented by approximately 15, 000 IT professionals. Hourly rates in Armenia vary from 18$ for the cheapest development services to 55$. The average software development costs there are 20-30$ per hour.
According to a report represented by Strategeast this country saw exports of related services in 2017 exceed $1 billion after almost 12 years of operating with a legal framework dedicated to bolstering IT. In 2017 president Lukashenko signed a ‘Development of Digital Economy’ decree that provides specific rules for the cryptocurrency sector in order to make Belarus more attractive to IT companies. Hourly rates in Belarus vary from 20$-60$, with the average cost of software development around $25-35.
In recent years Estonia has become one of the most developed IT nations among the former post-soviet states, with advanced technologies accounting for 6.8% of its GDP; 60% of the whole labor market is employed by the tech companies. The cost of software development is one of the highest among former post-soviet states and varies from 25-80$+ per hour, 10% of all rates are 40-55$ per hour, and approximately 10% - are more than 80$.
The primary focus of the technology sector in Georgia is on attracting international donors and investors. The cost of software development in Georgia currently varies from 20 to 65$+ per hour, 10% of all rates are 20-35$ per hour, and approximately 10% - is more than 60$ an hour.
Latvia and Lithuania have been growing steadily as startup companies, producing jobs with comparatively high wages within IT and attracting foreign specialists. The ICT sector in Latvia is the third-largest exporter in their economy, following timber and FMCG sectors. Hourly rates here vary from 23$ to 75$ per hour, on average the cost for IT services in Latvia is around $30-45.
The Lithuanian technology sector currently employs approximately 27,400 IT professionals. In recent years, IT companies in Lithuania have attracted substantial investment which has significantly boosted the growth of the ICT sector. The situation with the average software development costs here is the same as in Latvia.
In continuation of this general trend, the tech sector has been identified by the Moldovan government as a priority sector for economic development. From 2017 to 2019 the volume of ICT exports has increased from €142m to €193m while over the past three years the turnover in the ICT sector has increased from €437m to €615m. Hourly rates In Moldova vary from 18$ to 60$ per hour, the average cost for IT services is currently hovering around $20-40.
Ukraine is the leader in IT service exports among former post-soviet countries. More than 100 Fortune 500 companies use Ukrainian IT services, and 13 local companies rank among the top 100 world-class IT developers.
It has been ranked as number one for outsourcing markets in Eastern Europe by Outsourcing Journal. Ukraine has consistently featured in Gartner’s top 30 offshoring and outsourcing destinations for the last 7 years. The hourly rate for software development in Ukraine currently varies from $20 to $70, with the average cost of IT service falling somewhere between $25-50.
Based on market analysis and economic data the most inexpensive destinations for outsourcing software development among post-soviet countries are Armenia and Moldova, where average hourly rates start from 18$ per hour. Belarus and Georgia are next with hourly rates that vary from 20$ to 60$ and 65$ accordingly. Estonia ranks as the most expensive country for outsourcing, the hourly rate starts at 25$. Latvia, Lithuania, and Ukraine occupy a middle position, as hourly rates in these countries start from 23$ per hour, with maximum prices hovering around 70-75$ per hour mark.