IT Nearshoring in Latvia

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In the increasingly globalised world, many companies have been looking for ways to reduce costs and be more competitive. One of the most popular options has been IT nearshoring in Latvia. Latvia is a pretty good option for IT nearshoring with its workforce of skilled engineers, affordable costs and technologically advanced infrastructure.

There are several reasons why more companies are opting for this option. Here’s what you should know before you begin your journey to the Baltic state.

State of the IT industry in Latvia

Latvia’s IT industry is thriving, with many different IT companies operating in the country. There are over 28,000 employees in software development companies that are located in Latvia. The computer science graduates from local universities are also fuelling the growth of the industry. This is because more people are needed to fill the high-skilled positions.

The ICT sector has become the third biggest exporter of services for Latvia, right after food and timber products. Making use of the outsourcing industry in Latvia has become a reliable option for many businesses because of allocated labour costs, modern infrastructure and skilled workforce.

Still, even though Latvia is a small country, there’s a shortage of IT workers. There’s a constant influx of IT professionals from the nearby Russia and Ukraine.

The Latvian IT market has evolved in recent years. One of the outcomes of the evolution is the emergence of large IT service providers in Latvia, such as Accenture Latvia, Lattelecom Technology, and Tieto. On top of that, international companies like IBM and Siemens have opened their local centres in Latvia.

Custom software development companies in Latvia are known to play an essential role in the growth of the country. The total turnover of the ICT industry in 2018 was recorded at €34 billion. About 4.3% of the GDP is contributed by this industry and software development companies in Latvia are growing rapidly in the IT sector. Latvian IT market has been one of the fastest-expanding markets and can be attributed to both high economic growth rates, as well as changes in IT policies that have been introduced by the state government.

Apart from thriving internally, the Latvian ICT sector is doing quite well in terms of outsourcing services. It’s home to 6,500 ICT businesses, which is relatively a lot if you take Latvia’s size and population into account.

Riga, being the capital, is one of the largest Latvian cities and it also happens to be home to many international companies. A lot of people believe that Riga is a tech hub for Latvia and they’re not wrong, as it’s the biggest city and has a lot of high-skilled workers, where software developers’ salaries are far higher than in other cities.

Pros and cons of nearshoring to Latvia

Nearshoring to Latvia has a lot of benefits. Technically, it will help reduce labour costs as well as infrastructure prices for your business. Latvian IT specialists are also known to have lower rates when compared to other countries in Europe. The level of language proficiency is also higher when compared to Russia or Ukraine, which will save you the trouble of having to conduct translation services

Furthermore, Latvian people are known for their high levels of English proficiency and this will definitely come in handy when carrying out communications with potential clients. There is also an emerging start-up culture in Latvia, which is certainly encouraging. If you want to base your business operations outside of the major European hubs but still target the same markets, then you should consider nearshoring to Latvia.

Still, seeing that Latvia is still a developing country that’s quite far behind the West, there come some drawbacks.

Latvia is still behind the European countries when it comes to the ICT market, so there are many risks in nearshoring there if you take the country’s economic situation into consideration. Latvia isn’t known for innovation or creativity, which means that your company will be at risk of not staying up to date with emerging tech trends. According to Deloitte, Latvian businesses only spend less than 1% of their budgets on R&D, which is worrying.

Another drawback is that the country lacks the ability to offer high-quality services, especially not at par with international standards due to the fact that employers are not that keen on training them. On top of that, since Latvia is a small country, having your business located there might be difficult if you’re targeting larger markets.

There’s also a considerable skill shortage because present legislations hinder the immigration process for high-quality employees. Even looking at digital illiteracy one can make some conclusions. Over half of the population is digitally incapable. There doesn’t seem to be much digital transformation culture existing in Latvia among its residents, which is a red flag in and of itself.

Investing in Poland’s highly skilled reasonably-cost environment for nearshoring is be the right decision.

The Polish labour market is one of the most competitive along with being relatively cheap and its close proximity to Western Europe. As a result, it’s ideal for outsourcing staff positions or engaging in offshoring. Poland has an established IT industry that utilises programming languages like .NET and Java. Furthermore, international retailers have started outsourcing their operations to Poland which provides a view into how capable the country can be when tasking after overseas clients. Contact us if you’d like to hire a dedicated development team!