Poland, in Central Europe, has emerged as a popular destination for offshoring.
It’s especially known for Information Technology (IT) and software development offshoring. This is mainly due to the country’s large, highly-skilled workforce and relatively low labor costs.
In this article, we’ll explain the benefits of IT offshoring to Poland. We’ll also mention other key industries offshoring to Poland and provide tips to help you choose the best city and team for your business.
Table of Contents
- 8 key benefits of offshoring information technology in Poland
- Comparing IT offshoring in 5 major Polish cities
- 3 other major industries offshoring to Poland
- 5 simple steps for choosing the right offshoring partner
8 key benefits of offshoring information technology in Poland
A large number of Polish IT experts work for foreign companies.
According to the Polish Investment and Trade Agency, the IT market in Poland makes up 8% of the country’s GDP.
Examples of IT services include cybersecurity, web design, and mobile app design.
Here are eight reasons why Poland is an excellent choice for IT offshoring:
1. Positive growth in the Polish IT sector
Poland has the most significant IT workforce in Central and Eastern Europe (CEE), with over 400,000 IT experts in 2021. Around two-thirds of these professionals work for outsourcing services vendors.
In comparison, there are around 200,000 Ukrainian developers and just 80,000 developers in Hungary.
According to statista.com, The country’s IT outsourcing market revenue grew throughout the pandemic from 2.2 billion USD in 2019 to 3.1 billion USD in 2021.
Additionally, many prominent international tech companies have recognized Poland’s offshore outsourcing potential, especially for research and development (R&D). Significant companies with RD centers in Poland include:
- Amazon (Gdansk).
- IBM (Wroclaw).
- Microsoft (Warsaw).
- Capgemini (Poznan).
2. Highly-educated developers
Polish people have access to free education, including university courses. This means that a high percentage of Poles opt for higher education.
Software development is a popular choice among students in Poland. Around 75,000 students study to be software developers, and about 17,000 graduates enter the workforce annually.
Additionally, 80% of Polish IT specialists have degrees, which is significantly higher than the European Union (EU) average (63%).
3. Stable economy
The Polish economy is one of the most stable in the EU. Its GDP steadily increased from 2016 until the COVID-19 pandemic in 2020.
However, its GDP only dropped by 3.5% in 2020. For context, the GDP of the EU as a whole fell by 6.1%.
Poland also recovered quickly. Its GDP was up by 10.9% by the second quarter of 2021.
According to Economics Online, such economic stability has the following positive effects that support an offshoring market:
- Reduced inflation.
- Healthier job market.
- Increased investments in technology.
4. Low labor costs
Poland is a developing country, which is why it’s more affordable to hire a Polish software developer than one in Western Europe or North America. Although the labor costs aren’t as low as in Latin America or Asia, they’re relatively low for a European country.
For example, the average salary for a software developer in the Netherlands is approximately 7,198 USD/month. But the average developer salary in Warsaw is approximately only 5,238 USD/month.
The low labor cost is also due to Poland’s relatively lower cost of living.
Here are the Cost of Living Index scores for a few countries compared to Poland. The first place on the ranking indicates the highest cost of living.
|United States of America (USA)||26th||70.13|
Check out this article to learn more about the labor cost and average salaries in Poland.
5. Business-friendly tax system
Businesses can save significant money while offshoring through the Polish tax system.
The Polish government incentivizes growth in the IT sector. It created 14 special economic zones, including Kraków and Katowice, where investors can receive tax exemptions.
Poland also provides tax relief to R&D businesses, allowing tax deductions for R&D-related costs.
Additionally, Poland has tax treaties with 85 countries, including the USA, Australia, and Canada. The treaties enable investors to avoid double taxation when investing or offshoring in Poland.
6. Association with the EU
Here are three reasons why Poland’s EU positioning is beneficial for an offshoring company:
A. Convenient time zones
Poland has a negligible time difference with European countries, making it popular for nearshoring. It also has a smaller time difference with the USA than many traditional software development outsourcing destinations in Asia.
Poland only has a six to nine-hour time difference with the USA. In comparison, the time difference between India and the USA is 9.5 to 12.5 hours, and for China, it’s 12 to 15 hours.
A smaller time difference with your offshore software development team can allow smoother communication.
B. Compliance with EU regulations
All the EU member states, Poland included, subscribe to the same IT offshoring regulations.
The General Data Protection Regulation (GDPR) is the central regulation in the EU for IT offshoring. This law is in place to protect the data security and privacy of individuals.
The GDPR ensures that Polish businesses are up to code with data security in their services.
C. Reduced language barriers
Companies in North American or Western European countries may encounter fewer cultural differences and language barriers with Poland than in places like India and China.
An estimated 90% of Polish developers speak English and many Poles speak other languages, such as German and Russian.
Poland ranked 16th in the 2021 EF English proficiency index. In comparison, China ranked 42nd for English proficiency, and India came 48th.
7. Abundant office space
Poland has an abundance of modern office real estate for companies looking to set up an offshore software development company.
According to Polish real estate company Jones Lang Laselle, demand for office space in Poland grew 70% in 2021. Many new office buildings were also constructed, including three large business parks.
In addition, the vacancy rate for office space increased from 8.5% in 2020 to 12.9% in the second quarter of 2021. This means there is more space available, potentially in new building developments.
8. Promising location for startups
Poland has become an offshoring hub for startups in recent years.
The tech environment is fast-paced and can be challenging for a new startup. That’s why many startups have begun offshoring some of their activities to tech companies in Poland.
Some of the key metrics that encourage businesses and startups to choose Poland as an offshoring destination include:
- The 3000+ startups in Poland indicate high levels of skill and innovation in the tech field.
- Poland achieved 30th place in the 2021 Global Startup Ecosystem Index, ahead of Norway and Croatia.
- Poland ranked 40th in the 2020 Trading Economics Ease of Doing Business Index, ahead of the Czech Republic and Ukraine.
- Poland is a low cybersecurity risk country and ranked 22nd in the 2020 Global Cybersecurity Exposure Index, ahead of China and Russia.
- Poland ranked 42nd out of 180 in the 2021 Transparency International Corruption Perception Index, ahead of several Eastern European countries like Belarus and Romania.
- Poland ranked 14th in the 2021 Kearney Global Services Location Index (GSLI). For digital resonance, it placed 27th, ahead of Ukraine, and South Africa.
Next, let’s compare the benefits of major Polish cities for offshore software development.
Comparing IT offshoring in 5 major Polish cities
Here’s a breakdown of the offshoring potential of five major cities in Poland.
Warsaw is the capital of Poland and home to over 65,000 software developers. This city also has the most outsourcing, offshoring, and R&D centers in Poland.
This means that the tech talent pool is large, and the job market is competitive in Warsaw.
Kraków has even more software experts than Warsaw, approximately 70,000. Additionally, the number of offshoring businesses in Kraków is lower, meaning it’s easier to hire in Kraków.
Kraków also ranked 20th in the 2021 Tholons Top 100 Super Cities. The criteria for this index include factors such as talent quality, cost, quality of life, and digital innovation.
There are approximately 47,000 IT professionals working in Wroclaw. This city may be a good option for offshoring due to office space availability. In 2021, Wroclaw had the third-largest amount of vacant office space in Poland (14.9%).
Around 24,000 software developers work in Katowice, and around 1,400 new graduates join the workforce annually. Katowice also saw the most corporate building developments in Poland in 2021.
The Tri-City metropolitan area is made up of Gdansk, Gdynia, and Sopot. They have a combined total of over 25,000 software professionals.
This region has the fourth-largest amount of office space and the sixth-highest amount of vacancies (10.7%).
Aside from IT and software outsourcing, let’s now look at three other offshoring sectors in Poland.
3 other major industries offshoring to Poland
Here are three other key offshoring industries in Poland:
1. BPO and SSC
Business Process Outsourcing (BPO) and Shared Service Centers (SSC) are forms of outsourcing that involve transferring specific business processes such as financial services, customer service, and sales to a third party. SSC is slightly different from BPO in that the outsourcing company provides services to multiple business units within the same company.
Poland has a flourishing BPO and SSC offshoring sector. Approximately 51% of Polish IT professionals work in the BPO and SSC sectors in around 650 business service centers.
2. Wind energy factories
Wind energy offshoring involves contracting foreign companies to construct offshore wind farms. This process can help an energy company access renewable energy from the offshore source.
In 2022, Poland signed two contracts with Spanish companies to construct offshore wind farms in the Baltic Sea. The investments are worth over 107 million USD and 86 million USD, respectively.
There are also some potential wind energy sector deals on the horizon. For example, the oil company Orlen has applied to build seven new wind farms in the region.
Poland manufactures products like vehicles, furniture, textiles, and food. This sector is the second largest in Poland, behind the services industry, in terms of improving Poland’s international competitiveness.
Next, let’s explore how to establish a partnership with a suitable Polish company.
5 simple steps for choosing the right offshoring partner
Here is a five-step process you can follow to choose the right offshoring company.
Step 1: Decide on a city
Firstly, you may want to research different cities in Poland and assess things like the availability and qualifications of their professionals and the affordability of office space. This should help you choose which city you want to base your offshore operations in.
Step 2: Create a longlist based on company size
You can create a longlist of offshoring vendors within your city of choice. You can narrow this list down according to the size of the companies. You’ll likely need an offshoring partner with enough resources and capacity to meet your needs.
Step 3: Look for industry experience
Next, you can investigate the expertise of the vendors on your shortlist. You may get the best results from companies that have done similar work to yours in the past.
You may also want to check their customer reviews. This way, you can look for any potential red or green flags indicating whether or not you should consider them.
Step 4: Ensure compliance with offshoring regulations
This step may be easiest if you have researched the laws and regulations surrounding offshoring to the EU and Poland. You can then investigate whether vendors are aware of and compliant with them. You may even hire intermediaries that specialize in such compliance.
Step 5: Start small
Finally, once you have decided which vendor to work with, starting with a smaller project may be wise. This way, you can test the waters for how the company operates and whether they’ll be able to meet your needs.
Poland is a popular offshoring and outsourcing destination. This is true for IT especially, as well as other sectors like BPO and manufacturing.
Poland has competitive labor costs compared to Europe and North America and also plenty of high-quality talent.
If you’re considering offshoring to Poland, you can use this guide to help you understand the benefits and how to decide on a city and choose a team.
Want to read more about offshoring? Head over to the Time Doctor blog!
Andy is a technology & marketing leader who has delivered award-winning and world-first experiences.