Today, I have read in Herald Tribune one of the best articles on the outsourcing boom to Eastern Europe, intitled “Bigger EU a boon to East Europe tech firms”(article here). In a concise manner, with short stories from various Eastern European countries, O’Brien describes how the expansion of European Union influences the IT software industry of Eastern European countries. Western companies typically save 50 percent sending their software development to Eastern Europe, a place that becomes recently like India but on a smaller scale.
According to the article many companies, especially German firms looking for ways to cut costs amid the country’s prolonged economic downturn. One of the oldest centered opened in Eastern Europe, is Alcatel, the French telecommunications equipment maker, which set up a software research and development center in Timisoara, Romania, in 1991. “Alcatel went to Romania because it had the available expertise to do the job,” Wulf said. The level of cost savings there are also significant. So significant, Wulf said, that programming costs in Romania are now less than in China, where Alcatel employs about 3,000 programmers.
In 2003, a Swiss online electronics retailer, Netto24, turned to All4Web, a software developer based in Bucharest, to create its Swiss Internet retail Web site. Since then, the one-and-a-half-year-old Romanian company has won contracts from businesses in Germany, Britain and the United States, said Aurel Botinant, a former Romanian high school programming champion who founded All4Web in January 2003. “Lots of companies in Eastern Europe are working on a subcontract basis,” Botinant said. “Since the EU’;s recent expansion, western companies I think are willing to trust us more. I think we’re getting more credibility.” Many are also winning big-name clients. “Right now, we’re just trying to keep up with all of the business” said Botinant, 26.
However, according to the article some Eastern European software companies, because of their small home markets, might not be able to hire enough programmers to deliver large, complex projects. “They don’t have large technical universities that are pumping huge numbers of people into the marketplace,” Peterson said. “So you could execute a strategy predicated on that and find out it wouldn’t scale.”
A good read, definetly deserves reading it.
