Comparison of 8 Best Countries to Outsource Software Development in 2024

What is the best country to outsource software development? Which country should businesses choose to optimize software costs and quality? This article will compare the top 8 countries to outsource software development in 2024, helping you make smarter and more effective decisions.

History and Growth of Software Outsourcing

Software outsourcing began in the 1960s when businesses in developed countries like the US and Europe outsourced basic services like data processing and payroll to save on operating costs. However, the concept of software outsourcing really took off in the 1990s, when the internet and communications technology boomed, allowing businesses to easily link up with overseas service providers.

During this period, India emerged as a leading software outsourcing hub thanks to its skilled workforce and low costs. The rapid growth of the IT industry accelerated the outsourcing process, as large technology companies began to outsource many complex software projects to other countries. Along with that, countries like China, Vietnam, and the Philippines also gradually became attractive destinations for software outsourcing.

Since 2000, software outsourcing has expanded beyond basic services to areas such as custom software development, security, software testing, and systems management. The development of advanced technologies such as cloud computing, artificial intelligence, and blockchain has further fueled the growth of the software outsourcing market, making it an integral part of the global business strategy of many enterprises.

Understanding Outsourcing Software Development Pros and Cons helps businesses make informed decisions.

Top Countries to Outsource Software Development in 2024

Vietnam

Vietnam has rapidly emerged as one of the leading destinations for software outsourcing, featuring competitive costs and high-quality human resources. With strong support from the government and a growing economy, Vietnam’s IT industry is increasingly attracting foreign businesses, especially in the field of software development. 

Vietnam's Macroeconomic Growth

Vietnam has made remarkable economic progress in recent years, especially in the IT industry. 

According to Vietnam Investment Review, in 2023, the total revenue of the information and communications industry is estimated to reach 158 billion USD, up 1.49% compared to 2022. Of which, the IT sector contributed about 4.19 billion USD to the state budget. 

This is a positive sign showing the development of the industry, creating favorable conditions for Vietnam to become a software outsourcing center in the region and globally.

Cost-effective Destination

One of Vietnam’s biggest advantages in software outsourcing is its lower development costs compared to many other countries. Vietnam is considered one of the countries with the cheapest software outsourcing costs, only about 50% compared to India and China. The combination of low labor costs and high technical capacity helps foreign companies minimize costs while still ensuring product quality.

For example, businesses in the US or Europe when choosing Vietnam for software development outsourcing can save from 30% to 40% of costs compared to implementing projects domestically. This makes Vietnam an attractive destination for businesses looking for cost-effective software development solutions.

Vietnam is recognized for its thriving IT sector and Offshore Software Development Companies in Vietnam offering competitive services.

Young and abundant human resources in the IT field

Vietnam stands out for its low development costs, being among the most cost-effective countries for software outsourcing. The country also boasts an abundant and highly skilled workforce, with more than 300 universities and educational centers specializing in IT, producing around 57,000 IT graduates annually. 

In addition, large cities such as Hanoi and Ho Chi Minh City are becoming centers for training and developing technology human resources with the participation of many large corporations such as FPT and VNG. These companies have been training many generations of highly skilled software engineers, ready to meet the needs of the international market.

In recent years, many universities and businesses have focused on improving the English proficiency of students and employees. This is demonstrated by the fact that many companies have provided specialized English courses and invited foreign teachers to teach to improve the communication skills of employees. For example, FPT Software, one of the largest software outsourcing companies in Vietnam, has established a continuous English training program for employees to help them improve their ability to communicate with international customers.

Additionally, the time zone compatibility with many Asian countries is a great advantage, helping Vietnam easily connect and work effectively with partners in the region.

Vietnam's Key Technology Sectors and Expertise

Vietnam is currently thriving in many key technology sectors, including software development, mobile app development, web development, artificial intelligence (AI), blockchain, fintech, and cloud computing. Thanks to continuous investment in technology and human resources, Vietnam is not only an attractive software outsourcing destination but also a center of innovation in the technology sector.

However, Vietnam also faces some potential challenges. The English proficiency of a part of the workforce is still limited, which can cause difficulties in communicating and understanding the requirements of international customers. Additionally, the information technology infrastructure in Vietnam needs to be improved to meet international standards, ensuring smooth and effective working processes.

A key factor in successful outsourcing is Managing Outsourced Development Teams efficiently to ensure productivity and collaboration. 

India

India is considered one of the leading countries in software outsourcing thanks to its advanced education system and high-quality human resources. The Indian software industry has made its mark globally over the years, becoming a favorite destination for international companies in the IT outsourcing field.

Pros

• Early start: India started developing its software outsourcing industry in the 1990s, helping the country accumulate a lot of experience in implementing large-scale software projects. With a long-standing foundation, service prices in India, although higher than in some emerging markets, are still considered competitive compared to Western countries.
• Good English skills: Technical staff in India stand out for their fluent English, however, their local accents are sometimes not common, which can cause minor obstacles in communication. However, it is acceptable in IT cooperation.
• Abundant human resources: With over 2.6 million STEM graduates every year, India has a large pool of high-quality software engineers. This has helped the country become a large-scale software outsourcing hub.
• High expertise: India has extensive experience in areas such as application development and maintenance, business process outsourcing (BPO), and IT consulting. Indian software companies such as TCS, Infosys, and Wipro have made a name for themselves in large international projects, delivering optimal value to their clients. India is also a premier in automotive technology.
• Low labor costs: An average software developer in India charges approximately $6 per hour, significantly lower than the rates in Western countries. The Indian software engineering team is highly skilled and suitable for custom software development projects, and they have good English skills.

Cons

• Over-promise and delivery discrepancies: One of the biggest challenges in the Indian software outsourcing industry is fierce competition. To win contracts, companies sometimes commit to overly ambitious project timelines or scopes. This can lead to delays or reduced quality if expectations are not properly managed.
• Religious complexity: India is one of the most religiously diverse countries in the world. Religion is not only a part of culture and history but also influences politics and social life. This can create management and operational challenges, especially when implementing projects involving many different cultures.

India also faces some potential challenges, including time zone differences with Western countries and fierce competition among companies.

Ukraine

Ukraine stands out for its high-quality human resources and competitive costs, making it an ideal destination for European businesses looking for leading countries in software development services. Ukraine has over 15,000 registered software outsourcing companies, most of which are well-integrated into the Western business world. 

Ukraine is home to over 200,000 IT professionals and more than 1,000 software companies, making it the leading country in Eastern Europe, with Poland, Romania, and Bulgaria following. 

Pros

• Proficient in English and understanding of Western business culture: IT staff in Ukraine have good English skills and a good understanding of the working style and business culture of European and Western countries. This enhances the ability to cooperate and communicate effectively in international projects.
• Time zone close to Europe: Ukraine is located in a time zone close to European countries, making coordination and working with partners easier and more effective, especially in projects that require frequent communication.
• High expertise: Ukraine has strengths in areas such as web development, software engineering, artificial intelligence (AI), and machine learning. These are areas where Ukraine has built a reputation, becoming a trusted partner for businesses around the world.
• Affordable software development services: Development costs in Ukraine are lower than in Western Europe and North America, helping businesses save costs while still ensuring quality. However, compared to Asian countries, costs in Ukraine are still slightly higher.

Cons

• Political instability: Ukraine is facing geopolitical tensions and internal conflicts, which can pose safety risks when visiting suppliers or meeting the development team directly. Businesses need to carefully consider this factor when choosing a partner.
• Political and Economic System Reform: The Ukrainian government is in the process of reforming its political and economic system, which may cause short-term instability, affecting the business and regulatory environment.
• Infrastructure Risks: Due to the conflict, infrastructure in Ukraine may be exposed to risks such as power outages, internet disruptions, or regional instability. This may affect the progress and quality of software development projects.

Poland

Poland is emerging as a major IT hub in Europe, with a growing number of global technology companies setting up research and development (R&D) centers and development offices here. The country also actively invests in local startups, creating a favorable environment for the development of the IT industry. Poland has a well-developed education system and a highly skilled workforce, making it a top choice for the best countries for nearshore software development in Europe. 

Sharing a single market with Europe, Poland provides access to 446.8 million potential clients. Poland’s IT industry accounts for about 8% of the GDP and employs over 430,000 people.

Pros:

• High-quality human resources: Poland has a highly qualified IT workforce with strong technical skills, especially in the fields of software development, cybersecurity, cloud computing, artificial intelligence (AI) and data science.
• Cultural and business compatibility: Poland has a good understanding of Western business practices and working cultures, especially in Europe and North America, making it easier to cooperate with international partners.
• Time zone close to the EU: Poland's favorable geographical location with a time zone close to Europe also helps optimize communication and coordination between parties.
• Stable political and economic environment: Poland has a relatively stable political and economic environment, creating favorable conditions for businesses to operate.
• High English proficiency: Workers in Poland have good English proficiency, which enhances communication skills and reduces language barriers in international projects.

Cons

• Higher costs compared to other outsourcing destinations: Compared to countries like India, Vietnam or Ukraine, development costs in Poland are generally higher, which can influence businesses’ decisions when choosing an outsourcing location.
• Compliance with EU data protection regulations: This can complicate some projects or add administrative burdens for companies.
• Talent shortage: Although Poland has around 500,000 to 600,000 IT professionals, only around 80,000 IT graduates are born each year. Given the country’s focus on innovation and technological development, the human resources for outsourcing are still limited, leading to fierce competition.
• High prices due to high living costs: Rising living costs combined with high demand and social benefits from local companies also increase the price of services in Poland.
• IT industry developed later than India: Like Ukraine, Poland's IT industry started developing later than India's, leading to some disadvantages in gaining experience and building a brand.

Philippines

The Philippines stands out for its good English proficiency and low labor costs, attracting many American businesses to outsource software development. The country has seen significant growth in the software outsourcing industry, with an annual growth rate of about 40%.

Pros:

• Strong IT-BPO industry: The Philippines specializes in information technology (IT) support and cloud services, providing high-quality services to businesses.
• High English proficiency: Workers in the Philippines have good English skills, helping to minimize language barriers in international projects. The country is known for its high-quality software development services, thanks to its English proficiency and reasonable costs, making it one of the most affordable countries for software outsourcing.
• Competitive prices: The Philippines offers very competitive IT service prices compared to other regions such as North America or Western Europe, although still higher than Vietnam.

According to estimates, the country produces over 40,000 IT and engineering graduates annually. Software development outsourcing to the Philippines is growing at a rate of 40% annually.

• Time zone compatibility with the US is also a major strength, helping to increase work efficiency. 

Cons:

• Limited skills in emerging technologies: While the Philippines excels in software development and IT support, it is still in the process of building expertise in emerging technologies such as artificial intelligence (AI), machine learning, data science, and blockchain, compared to more developed outsourcing hubs such as India, Vietnam, or Eastern Europe.
• Infrastructure issues: The Philippines still faces infrastructure issues, such as power outages and internet connectivity issues, which can impact work performance.
• Cultural differences: While the Philippines is culturally compatible with Western markets, there are some differences in work styles, communication, and expectations that need to be carefully managed.

Brazil

Brazil is a country with a rapidly growing software industry, with a diverse workforce and competitive costs. Outsourcing development to Brazil offers several advantages, particularly for US-based companies but it is still more expensive than in Asia and Eastern Europe. 

In 2023, Brazil had more than 9,000 companies in the software development and production industry. Notably, the IT services sector had the largest number of companies, with almost 15,000 enterprises recorded.

While not all of these IT professionals are available for outsourced work, a significant portion are. A software developer in the US earns an average monthly salary of $8,460.

However, outsourcing software to Brazil comes with several challenges, including limited English proficiency, an unstable economy, and political instability. Most Brazilians speak Portuguese, so communication can require additional effort if developers are not fluent in English. Brazil has experienced periods of currency devaluation and high inflation, notably during the hyperinflation years of the 1980s and 1990s, the recession from 2014 to 2016, and the economic shocks caused by the COVID-19 pandemic. Currently, Brazil is also facing headwinds from global economic growth.

China

China is a country with a strong software industry, an advanced education system, and high-quality human resources. 

As of 2022, the information technology (IT) service industry in China employed 3.8 million people. In total, over seven million individuals were working in Chinese software and IT companies. 

By 2024, the global developer population is projected to reach 28.7 million, with China contributing significantly to this increase. The number of developers in China is growing at a rate of 6% to 8% annually.

Nevertheless, China also faces many challenges, including limited English proficiency and limited intellectual property protection, which can affect the reliability and safety of software development projects.

Mexico

Mexico is an ideal destination for US businesses due to its geographical proximity and reasonable labor costs. 

Mexico is the third-largest exporter of IT services globally, with $21 billion in exports. Major companies such as Amazon, Intel, and Facebook are expanding their operations in Mexico. 

The country’s IT market features over 300 outsourcing vendors and shows significant growth potential. With a strong emphasis on technology education, Mexico consistently produces a steady supply of qualified specialists, totaling over 700,000 IT professionals. Additionally, there are more than 400 companies in the IT sector in Mexico.

Nonetheless, Mexico faces many challenges, including limited English proficiency and limited technical skills, which can affect the quality and efficiency of software development projects.

Comparing the Top Software Outsourcing Destinations

Cost Comparison

Software development costs are an important factor when choosing a country to outsource to. Vietnam and India stand out with the lowest development costs in the list of best software outsourcing destinations. Vietnam, with its competitive costs, is one of the most affordable countries for software outsourcing and is attracting many businesses looking for cost-effective solutions. India is known for its low costs and ability to provide software development services on a budget.

In contrast, Poland and Ukraine, despite their higher costs, are among the top software outsourcing countries for startups and the best nations for nearshore software development due to their high quality of services and expertise.

Skillset and Expertise

In terms of expertise, India and Ukraine stand out for their highly skilled workforce, and are considered the best countries for software development talent. India, with its strong engineering education system, provides highly skilled software engineers with the ability to solve complex problems. Ukraine, with its quality education and investment in the technology industry, is one of the top countries with skilled software developers.

Meanwhile, Vietnam and the Philippines are also among the best countries for custom software development, featuring young, dynamic, and fast-learning workforces.

Language and Communication

Communication skills are an essential factor in choosing an outsourcing country. The Philippines and India are two countries with the best English proficiency, making communication and collaboration easier. The Philippines, with its high percentage of English speakers, is considered one of the best countries for tech outsourcing, especially for projects that require constant and effective communication.

India, with its large number of English-speaking software engineers, is also one of the best software outsourcing destinations for global businesses. The English proficiency of both countries helps minimize communication risks and increase collaboration efficiency.

Time Zone and Cultural Compatibility

In terms of time zone and cultural compatibility, Mexico and Brazil have a big advantage. Mexico, geographically and time zone-wise close to US businesses, is one of the best countries for offshore software development. This improves response times and project management, making Mexico an ideal destination for US companies.

Brazil also has the advantage of time zone compatibility with the US and is one of the best nations for agile software development, thanks to its flexibility and good cultural compatibility. Meanwhile, Poland and Ukraine are more suitable for European businesses, thanks to time zone and cultural similarities. These countries are considered the best countries for software development services in Europe, providing high-quality software development services and easy cooperation with European partners.

Choosing between Onsite vs. Offsite IT Developers can significantly impact your outsourcing success.

Criteria for Choosing the Best Country for Software Outsourcing

In short, when choosing an outsourcing destination, you should consider factors such as political stability, economic growth, language proficiency, cultural compatibility, and maturity level. If your partner is under an unstable and complex institution, it's risky to meet them in person or sometimes difficult to lose online connections with them. economic growth will reflect on the comparative price of services, and predict the movement of the economy in the next several years. language proficiency or cultural compatibility will directly relate to project productivity. you also may pilot with small contracts with several vendors before deciding your destination

It’s also advisable to start with small contracts across multiple vendors to evaluate their capabilities before deciding on your outsourcing partner.

Technical expertise is crucial, with countries like Vietnam, India, and the Philippines offering skilled talent at competitive costs. Time zone compatibility plays a role in efficient project management, as seen with Mexico and Brazil for US businesses. Language proficiency, especially in English, is another key factor, with India and the Philippines leading in this regard. Cultural compatibility and strong legal and IP protection systems, as found in Poland and Ukraine, also enhance successful collaboration. Starting with small contracts to assess vendors is often recommended.

For businesses looking to innovate and improve efficiency, Custom Software Development Outsourcing is a proven strategy.

Conclusion

Software outsourcing has gone beyond just a cost-cutting measure and has become a strategic partnership model that allows companies to access highly specialized skills globally. India and Vietnam are currently leading the world in software outsourcing services, while other countries such as Ukraine, Poland and Mexico are also gaining recognition for their talent pool and superior technical capabilities. The global demand for software development and emerging technologies will continue to drive the software outsourcing industry in these countries in the future.