Software markets during disruptive times: India vs. non-EU Europe vs. Romania
During the last 18 months, virtually every industry and market has gone through major disruptions. Of course, software development could not stay untouched. Digitalisation of legacy businesses has been a huge topic, as everyone “turned it up to 11”. Nowadays, no new businesses start without “digital first”. And the software development force that was supposed to drive them all is just being reshuffled.
At Berg Software, we have seen increased hot demand for software development since spring 2020, and it doesn’t seem to slow down. When looking into “why?”, (besides of us doing a great job) we see that EU-based clients are moving their software projects to partners that (A) are more resilient, (B) deliver high quality results, and (C) can accommodate EU’s strict data protection regulations. All this, at a moment when traditionally high-volume markets can’t deliver at full capacity.
So, let’s look at some specific cases, shall we?
On the software development market, India is the big elephant in the room that can carry huge volumes with skilled personnel. With its IT services sector valued at $ 99 billion/year and software development at $ 9.2 billion/year (both figures according to FT.com), even the smallest incapacity would send ripples across the global software ecosystem.
Already back in April 2020, IDC was sending worrying signals: “IT software and services vendors are facing a situation in which they need to continue servicing their clients while taking care of their employees and communities. […] Keeping the employee morale high is key.”
As of 2021, the concerns legitimately turned into worrying and caring for the employees and their families. Quoted by FT.com, Arvind Krishna, chief executive of IBM, says that “I’m more worried about the long-term impact on some of the families.” While Vinod AJ, general secretary of Forum for IT Employees, sees that “Many companies are looking for 24 hours support for [clients in] the US and other parts of the world. They’re not able to give that much support.” The effect is that the pandemics have “dented that confidence in the resilience [client companies] thought India delivers” – according to DD Mishra, a senior analyst at Gartner.
Back in Europe, the biggest issue is capacity – there is no local market that can compete with India when it comes to software development volumes. However, relative to other European countries, Ukraine comes pretty close.
April 2020 was a bad moment for Ukrainian software development companies, too. “Job vacancies plummeted” (source: Forbes), while the country’s  “GDP contracted by 4.4 percent and exports fell by 4.6 percent” (source: BBC). But then, by the end of summer, Ukrainian companies started to recover, eventually seeing a 20% yearly increase of the local IT market.
A lot of this growth is driven by US-based clients, sometimes via Ukrainian expats. If skills, volume and prices are your software outsourcing criteria, then non-EU Eastern Europe (Ukraine, Russia, but also Serbia) might be the place(s) to look for.
However, for EU-based clients, subject to stricter EU regulations, this might be good-but-not-enough.
One of the most defining digital regulations in the EU is the famous GDPR/General Data Protection Regulation 2016/679. It addresses data protection and privacy within EU, and the transfer of personal data outside it. As of its implementation in 2018, it caused non-GDPR companies user leakages of up to 20%.
Therefore, when looking for high quality software development and EU-regulatory compliance, it is more convenient for EU-based companies to source their software development with EU-based providers – at least for projects that have anything to do with users’ personal data. (And nowadays almost every software has at least a login interface and database that can be subject to GDPR.)
For Berg Software (and other Romanian software development companies) the overheated digitalisation trends, superimposed on the strict privacy regulations, resulted in 18 months of double-than-regular demand. By caring for our employees well-being; switching to remote work-modes early on; and focusing on deliverables, we were able to successfully take on all the challenges that came our way.
While we are aware that there are other software markets that we didn’t cover (e.g., South-Americas), those are markets that we don’t regularly cross paths with. However, for our contact markets, we think that this map correctly describes the current competitive landscape:
|Capacity during regular times||Capacity during “these” times||Full compliance w/ EU regulations||Cost level|
Regardless of where you source your software development, please just consider that the industry is being repositioned, and that some of the humans behind it need your compassion and understanding before they return to normal.
Until then: stay safe and healthy!