In the globalised world, it is not uncommon to outsource a company’s production to a country with lower labour costs. One such example of this is IT nearshoring where companies in Austria can have their software development done cheaper and more efficiently by outsourcing that works overseas.
This practice can save Austrian companies money and resources because they don’t need as many employees or equipment domestically for these services which are being provided by nearshore vendors. For instance, instead of hiring employees in-house and paying all of the expenses connected with that, Austrian businesses can nearshore their projects to nearby countries.
Let’s take a deep dive into what the current Austrian landscape looks like, what the software development outsourcing situation is, and why nearshoring can be the best solution for Austrian businesses.
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State of the IT industry in Austria
Austria is a small country with a relatively little IT industry, as the value-added to GDP ratio is lower than those of the Innovation Leaders’ ICT sectors. The ICT exports are also well below those of the Innovation Leaders in the European Union.
Closer analysis shows that the weakness in exports is mainly attributed to ICT services and not to ICT producers (although due to their low number, they do not play an important role).
The Austrian IT business produces moderately complex products that it can export, and its patenting performance is comparable to that of the Innovation Leaders.
Austrian businesses in digitally intensive industries get their competitive edge from the technological content of their products, the skilled workforce, product quality, and product customisation. The key problems hindering further digitalisation are unpredictable market fluctuations and operational aspects regarding the adoption of digital solutions.
One way to leverage these benefits is by utilising IT nearshoring strategies that will allow for more agile business processes along with reduced costs. Nearshoring solutions can provide additional resources that both help businesses grow and help get them off the ground in a new country or sector they are venturing into.
The practice aims to increase foreign direct investment in Austria by serving as a springboard for Austrian companies’ international expansion.
As for digital skills, the Austrian population is below the OECD average of digital problem-solving skills, and that is a large concern for businesses looking to nearshore their projects. Austria has a low proficiency in digital problem-solving, which may be a result of lack of investment in ICT education by companies.
Current outsourcing situation in Austria
Austria ranks the first in Europe in terms of companies utilising IT talent in their departments, with 87% of larger companies having an IT department. With the current skill shortage, Austrian businesses are keen on outsourcing. That lack of specialists is a considerable obstacle for both the Austrian government and Austrian businesses looking to accelerate their digital transformation. Still, the situation is looking to be improving as, education-wise, Austria can produce lots of STEM graduates from top-level universities.
Based on interviews with company experts, the shortage of tech talent is the main motivator for outsourcing and the primary hindrance in terms of further growth and scalability. Companies are typically outsourcing their projects to nearby countries, as they consider this approach to be more reliable talent-wise.
Why nearshoring software development is the best solution for Austrian businesses
Nearshoring for Austrian businesses presents an opportunity to leverage the country’s technological know-how, efficiency and cost-effectiveness. In the current Austrian landscape, these benefits are being realised by applying nearshore strategies as a way to grow and expand international business partnerships.
The practice of nearshore software outsourcing utilises the advantages of sending IT work overseas in order to save Austrian companies money and resources which they can instead invest in different areas of their company. Austria’s economy is lagging behind those of other countries in Europe, especially those countries leading innovation in the ICT sector – Innovation Leaders. The main reason for this is a lack of skilled workers who have not been properly invested in by companies which could lead to the solution of outsourcing the work abroad, especially to Eastern European countries.
One of the most popular destinations for that is Poland. Poland has emerged as a popular destination for companies looking to outsource their IT projects. They have an abundance of skilled workers who are educated in STEM fields with high levels of proficiency in English and German languages.
Nearshore outsourcing can also lower costs by taking advantage of existing technological infrastructure, maximising productivity rates, creating inexpensive labour pools with engineers who are familiar with the standards desired by the clients, and lowering operational costs.
Compared to offshore outsourcing locations like India, nearshoring offers all of the same benefits except with better quality, no cultural differences, and guaranteed peace of mind about the end product. This allows the many companies that undertake that venture to focus on their core business.
Boasting 300,000 software developers and hundreds of software companies, Poland is a big player in Europe when it comes to outsourcing IT sector projects. With its low labour costs, Poland has become home to many Western European businesses that are looking for nearshore IT project development to a local outsourcing partner. If you’d like to hire a software development company in Poland, don’t hesitate to reach out!
Source: Digitalisation in Austria – State of play and reform needs (2019)