In recent years, many companies have been choosing to outsource IT services to countries with lower labour costs. One of the most attractive destinations is Slovakia, which has emerged as a global IT outsourcing services location.
Situated in Central and Eastern Europe, the country’s relative geographic location, competitive wages, high-tech infrastructure and attractive business environment are among the key factors that have led to this phenomenon. Discover what you should know about IT nearshoring in Slovakia.
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The article will explore how aspects such as geography and low cost can make nearshoring to Slovakia an enticing option for some organisations, as well as look at the present state of this little country’s IT sector.
State of the IT industry in Slovakia
The IT sector in Slovakia accounts for 4.6% of GDP and 2.9% of total employment in the country while growing by 47% between 2008 and 2017. The country has also become one of the safest places in the world when looking at cyber security, with 3rd place in terms of reported online security problems.
Slovakia is an attractive destination for establishing ICT companies due to its educated and adaptable workforce, well-developed ICT institutional network, high labour productivity and favourable tax environment. It also boasts a strategic geographical location with important time zone options for European clients.
Tax incentives increase the appeal of Slovakia’s IT sector. In accordance with legislation, up to 100% of the R&D expenses incurred in Slovakia by a company can be deducted from its taxable revenues each year.
Foreign investors regard the Slovak workforce as educated, adaptable to culturally different management styles, and with excellent multilingual skills and a positive attitude to employment. 80% of the population speak a language other than Slovak. Among the young generation, multilingualism is highly valued. Primary school children are already learning at least one foreign language and continue to study these subjects in higher grades.
Slovakia economy boosted. Today its rapidly growing ICT sector provides solutions for companies of all sizes in various fields – from finance to manufacturing or telecommunications to IT outsourcing. Slovaks are well-educated in ICT competencies with a 79% digital literacy rate (EU average: 56%), 85% actively using the internet (EU average: 70%) and 91% households with internet access (EU average: 91%).
IT education is also at a high level, with 6 universities and 7 faculties, producing 3,000 graduates from software-related studies. Slovakia is also one of the first countries to implement dual education. As a pioneer in this area, T-Systems has been offering ICT dual education since the academic year 2013/2014, when it introduced the initiative. This means that, apart from theoretical knowledge, students can amass practical skills in real, work-like environments. Currently, there are about 40,000 tech professionals, exporting $2.5 billion.
Still, only 32% work for software development providers, which means that most of the Slovakian developers are not for hire.
Researchers at SkillValue stated in their 2019 report that Slovakia has the most skilled developers in the world, with Mexico and Poland taking second and third place respectively. Some of the most valued fields of IT in Slovakia are software engineering, digital marketing, mobile application development, enterprise app modernisation, managed, financial, and consulting services, as well as cloud computing and web development.
Pros and cons of nearshoring custom software development services in Slovakia
One of the major advantages of nearshoring to Slovakia is the country has very skilled developers. The Slovakian workforce is educated, adaptable to culturally different management styles, and with excellent multilingual skills and a positive attitude to employment.
Slovakia also has good infrastructure too with an accessible location, relatively affordable labour costs, high productivity, low unemployment rates and a stable economy.
It’s also close in proximity to many European markets which provides an opportunity for businesses in Slovakia to communicate better with their clients.
There are also disadvantages of nearshore outsourcing to Slovakia, such as the country has a small talent pool and low output of graduates. Slovakia is also limited in its number of IT hubs compared to countries like Poland and Ukraine.
While Slovakia seems like a great choice, Poland is even better. There is a number of advantages to nearshore outsourcing to Poland. The country has a well-educated workforce, competitive labour costs and a strategic location in Europe.
In addition, companies who use Polish companies for their IT needs can often save on logistics costs because so many European countries are nearby. Lastly, the Polish government offers tax incentives for companies that use dedicated teams for their software development. These include exemption from taxes and greater deductions from corporate taxes.
Still, the main benefit of hiring a Polish software development team is their skill. Poland has a strong talent pool of software developers which makes it attractive to many companies looking for nearshore development services. There are also many universities in Poland that teach programming skills, which means there are more graduates with deep knowledge of software development process.