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Outsourcing to Europe: Technology and IT Outsourcing in Bulgaria

Outsourcing a business unit or a whole business from west to east is not a new occurrence. Many companies try to find the best location to setup their production in terms of resources and cost efficiency. The obvious outsourcing location has been Asia, which offers both of these important factors. A number of companies have outsourced to India, Pakistan, Malaysia and Taiwan. While this may be very beneficial for a certain type of businesses, like manufacture of goods, the service business sometimes suffers from the distance, language and culture barriers and time differences.

Recently, a vast majority of companies and especially companies from the IT and technological sphere try to do the so called nearshoring. Now, it is popular to outsource near home, in Europe, especially Eastern Europe. The benefits of nearshoring are not to be underestimated, although the cost advantages could be lower if the outsourcing location had been positioned further east. However, many businesses now realize that cheaper services may be at the expense of their clients’ experience.

That could be one of the reasons for the newly emerged trend of outsourcing in Eastern Europe and target countries are Bulgaria, Romania, Slovakia and the Czech Republic. They offer cost efficiencies compared to the United States or Western Europe but at the same time are closer in culture, have high adult literacy levels, traditions in software and hardware development and up to 3 hours distance inside the European Union.

Out of these countries particularly attractive for business is Bulgaria. Time for setting up a business is approximately 18 days at maximum and the corporate tax is as low as 10%. It is politically stable, offers competitive pricing and has highly educated and extremely well qualified work force.

The country has roots in technology education and mathematics as well as a long history of world significant achievements in software and hardware development. Due to the emphasis on education, the World Bank and the Economist rank it fifth for sciences and eleventh in mathematics.

According to SourcingLine the Bulgarian IT specialists are especially good at the areas of CAD/CAM/CAE systems, operation systems, custom software, service and support of computer equipment, text processing text editors, telecommunication services and system integration databases.

For 2010 Bulgaria is ranked fourth in terms of best outsourcing locations in the world (the first three are Asian countries). The ranking takes into account cost competitiveness, resources and skills and business and economic environment. That effectively means that the best places place for technology and IT outsourcing in Europe is namely Bulgaria.

Many big names in the IT industry have already opened offices in Bulgaria, i.e. HP and SAP. They have created and continue to develop opportunities for the IT outsourcing sector in Bulgaria and although the salaries in the industry are one of the highest for the Bulgarian labour market as a whole, compared to the Western countries they are significantly lower and namely around 520 Euro according to 2010 research. Some specialists with 3+ years’ experience may earn to up to 1000 Euro net per month and very few reach the level of more than 1500 Euro per month net.

It has to be taken into consideration that the IT sphere is one of the best job sectors in Bulgaria and the salaries are higher than the average for most other positions. However, companies are cutting on expenses from other departments such as administration and support.

A number of studies suggest that this is just the beginning for nearshore outsourcing as the interest from western companies is growing. We will follow the trends for you and keep you posted.

Flat Rock Technology realized the potential Bulgaria has and opened an office in Varna, Bulgaria, which is now successfully expanding and offering an array of software and web solutions provided by highly qualified professionals. If you are interested in more information about the IT outsourcing services from Flat Rock Bulgarian office feel free to contact us.

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