The outsourcing of IT services to countries that are cheaper is not a new trend. It has been going on for decades. The nearshoring practice, however, is relatively new and can be defined as the movement of certain aspects of an organisation’s business process to another country that falls within the same economic zone or cultural compatibility.
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Lithuania is one such country where this type of service delivery model has taken root in recent years. With IT nearshoring there are benefits for both the customer and the supplier company involved with potential costs savings of up to 50%.
The following article will look into Lithuania’s IT market, how it can impact the utilisation of their service providers, as well as explore the advantages and downsides of software development services nearshoring to Lithuania.
State of the IT industry in Lithuania
In the year 2019, ICT generated about 5.3% of GDP which is a significant number considering its impact on various industries across Lithuania. In recent years, the ICT sector of Lithuania has matured, and this can be observed by their growth rates in terms of government incentives for private investment as well as export figures that have been going up.
Lithuania, being a part of the European Union, enjoys doing business with other major European countries and global companies due to business-friendly legislation.
The IT industry of Lithuania has also developed a competent workforce with high skills and knowledge which is evident from their ability to win contracts from both local as well as foreign companies. This workforce is also constantly growing and currently, the number of resident highly skilled tech-related personnel stands at over 29,000, with 2773 ICT-related enterprises, with Vilnius being the tech capital city.
Lithuania is much keener on exporting their ICT know-how abroad than developing homegrown products. The exports of such services in Lithuania reached a total value of 952 million euros in the year 2020. This is 41% more than the exports that were reported in 2019 which amounted to just 655 million euros. The growth rates of exports in terms of value for this sector between 2016 and 2020 has been averaging around 34%. A large part of the total exports is constituted by computer services which amounted to 88% in 2020.
The IT sector in Lithuania is thriving. Companies from all over the world are starting to invest in this area because of the robust ICT infrastructure, skilled population, and business-friendly mindset. One of the reasons why a lot of these companies have chosen Lithuania as a destination is because of the excellent internet connections available there.
Lithuania ranks third in terms of STEM graduates per capita, which is quite impressive. Still, being a country with only 3 million inhabitants, it’s still lacking if we take the global talent shortage into account. Even though Lithuania is home to 13 of the 20 largest Baltic state IT companies, the talent pool is still fairly small compared to countries like Poland.
Developers from this Baltic region specialise in mobile app development, software engineering, web development, data analytics, data security, and artificial intelligence.
The Lithuanian government also offers plenty of incentives for companies looking to grow and develop there. The largest of these incentives is the ‘eight to 15 per cent of salary cost for the first two years in service projects’ that companies are able to use. The authorities also cover up to 50% of employee training costs and even reimburse up to $820 per month for hiring unemployed workers.
As far as Lithuanian tech specialist skills and the state of the IT industry go, the little Baltic country looks like a great destination for nearshoring software services. Still, there might be some disadvantages, especially when compared with other Eastern European countries. Let’s take a deeper dive into the advantages and downsides utilising Lithuanian ICT.
Pros and cons of nearshoring to Lithuania
Lithuania’s software services are not only affordable, but they are also high quality. This is because the country has a rather large talent pool for these types of jobs (at least per capita), which means that you would not need to invest much in training the workforce. This also means that your employees would be up to date on all the latest trends and versions.
Lithuania has excellent internet connections. Lithuanian authorities have been working hard to improve their infrastructure in order to make it more appealing for foreign companies to invest there. One of the things that Lithuania has done over the years is to provide subsidies for fast fibre-optic connections across the country at an affordable price.
The geographical and cultural proximity makes communication between Lithuanian staff and enterprises’ headquarters in the west a lot easier to handle.
Still, as with most countries, the problem remains with talent availability. The talent pool of Lithuanian developers is quite shallow at the moment, so this may limit your options in terms of finding new recruits. Lithuanian IT pros are leaving abroad in search of better employment possibilities.
That is not the case with Poland, which enjoys 300,000 skilled IT specialists in hundreds of software development companies ready to work, one of the largest talent pools in Eastern Europe. And not just any specialists. Polish professionals are recognised for their excellent skills and proven experience. Another advantage Poland has is that Lithuanian software developer salary is quite a bit higher.
Poland is the best choice for IT nearshoring because it has more skilled, experienced resources available. Don’t hesitate to contact us if you’d like to discuss hiring a Polish software development company!