Finnish companies like to nearshore software projects to Europe for many reasons. One of the main benefits is cost savings. For example, a Finnish company can get an outsourced developer in Eastern Europe for one-third of the price that they would have to pay if it were done domestically, which saves them money and gives them more freedom with their budget.
Furthermore, software engineers are usually cheaper in developing economies than they are in Finland because of the lack of competition, emphasis on education there, and simply because there are fewer IT specialists in Finland. As far as quality goes, while some people say that outsourcing leads to lower quality work due to language barriers or cultural differences between countries, this doesn’t hold true when you hire someone who speaks English or your native tongue well.
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The state of the IT market in Finland
In this small Nordic country, the IT sector has a significant impact on the workforce. In 2017, ICT accounted for 6.8% of the working population. Among EU countries, Finland had the highest percentage of workers in this sector. Software was the major contributor to turnover in that industry, with companies generating $14 billion in revenue last year.
The gaming industry is also an important part of the sector and has been growing rapidly as more people play online games with higher quality graphics, which drives demand for better equipment from manufacturers globally.
The Finnish government offers incentives for foreign investors to provide capital for Finnish IT companies by providing grants from state-owned funds at 15-25% of the investment, depending on the region.
The Finnish IT market is one of the most significant markets of information and communications technology in the world, mainly because of Finnish born inventions such as SMS, 5G, and the Linux Operating System. These are all inventions that have been used all over the world.
As far as the Finnish IT market is rather concerned, something that makes Finland very appealing to foreign outsourcing companies is the fact that it has a highly skilled workforce. This is because 2.2% of all graduates under 30 in Finland hold degrees in science, technology, engineering or mathematics / maths-associated subjects.
Denmark, for example, has a population of 5.5 million people and just 1.9% of those residents are IT professionals; while Germany, with a population of 80 million people and only 1.6% being IT specialists, demonstrates the significance of this little nation’s technology capacity and its gravity in terms of the global economy.
In terms of Internet companies, Sweden has 6 times as many ICT firms as Finland. This makes it all the more incredible when you consider that Finnish businesses in ICT generated almost twice the Gross Domestic Product (nearly 10%) of Swedish enterprises (about 6%).
Current IT outsourcing situation in Finland
The outsourcing situation in Finland is remarkable and has made Finland stand out from the other Nordic countries. Data from Whitelane’s study tells us that almost half of the companies in Finland, 43%, are currently outsourcing their cyber security services and 60% of respondents declared themselves satisfied or very satisfied with their managed (cyber) security service providers. Manufacturing and chemicals sector is ahead by a significant margin.
Due to the uncertainty surrounding COVID-19, Northern European countries are not willing to change up their outsourcing efforts. Among Nordic countries, 71% of respondents confirm that they will outsource at the same rate or more.
Nordic companies are outsourcing for three main reasons: the first is the cost of labor, secondly, they are outsourcing to get more scalability with their business needs, and lastly, they want better access to talent.
According to the Finnish Information Processing Association, by 2020 Finland will be short 15,000 IT engineers, which is all the more reason for outsourcing. Hiring a new employee is tough in first-world countries mainly due to a shortage of talent.
Why nearshoring is the best solution for Finnish companies
Nearshoring is the best solution for Finnish companies since they get to enjoy the same great outsourcing benefits of lower costs and more flexibility, but with improved communication.
There are many alternatives to nearshoring in terms of services provided by foreign service providers, including infrastructure management, cloud computing, software and web development, software testing, or product development.
There are many reasons why outsourcing is beneficial for Finnish business, such as: flexible prices due to competition, access to expertise and experience in different regions and countries, the hassle of hiring new employees, and improved communication and cooperation between clients and service providers.
However, foreign service providers aren’t always able to provide the same level of quality services as domestic ones can. All this while not far from Finland we find Eastern Europe – a region with an abundance of highly skilled IT workers looking for work opportunities
Eastern European countries like Poland for example offer competitive remote labour pricing combined with access to local talent among other things. Typically, a software development company from Eastern Europe has been established a decade ago, which constitutes their experience. This makes them an ideal nearshore outsourcing center for Finnish companies who are looking to hire competent developers at competitive rates to ensure product quality.