The State of IT Outsourcing In Poland

from the
State of CEE IT Outsourcing and Offshoring in 2021 Report

Poland as a software development outsourcing destination - highlights

+400,000

of IT professionals available on the market

$12.4 billion

the estimated worth of the IT market in 2021

66%

of tech talent being employed by foreign capital

+130

Venture Capital companies operating on the market

IT Outsourcing and Offshoring in Poland

 

Poland — Key Facts

Size: 312,685 sq km, ranked 69th in the world by area (comparable to New Mexico)

Population: 38.28 million, ranked 37th in the world by population

Time zone: (GMT+2)

Government: parliamentary republic

Official languages: Polish

GDP per capita, PPP: $34,217 (2019 est.) 

Human Development Index: 0.872 (ranked 32nd | very high)

Currency: Polish złoty (PLN)

Economy: mixed economy, one of the fastest-growing economy in Europe

Main industries: agriculture, iron and steel, coal mining, automotive, shipbuilding, metallurgy, food production and processing, tourism 

Major urban areas (over 500K people): Warsaw, Krakow, Lodz, Wroclaw, Poznan

Ease of doing business: ranked 40th, DB score - 76.4

Digital competitiveness index: #33 out of 63 | #33 Knowledge #37 Technology #33 Future readiness

Corruption perception index: 41/198 (up by 5 positions since 2018)

The WE Forum Global Competitiveness Report: #37, with a year to ear improvement in score

A.T. Kearney Global Services Location Index: 24th

Universities: 500 universities, sixteen listed by QS World University Rankings® 2020 (two ranked 338 and 349, the rest >500)  

The largest IT companies: Asseco, Comarch, Integrated Solutions, NTT System, Ericpol, CD Projekt, Sygnity, Transition Technologies, J-Labs 

IT industry market share: 8% of GDP, 2.7% share in employment, 60,000 IT companies, ca. 430,000 IT specialists - incl. 250,000 programmers

EF English Proficiency Index: 63.76 *(above average)

International Olympiad in Informatics: 116 medals, 40 gold, 44 silver, 32 bronze

 

IT outsourcing in Poland at a glance

 

Poland's central location on the European map makes it a strategic gateway between East and West, always within easy reach. The country serves as a role model for successful transformation, evolving from a communist state into one of Europe's largest economies in the span of merely three decades. Since joining the EU in 2004, it has experienced unprecedented economic growth, becoming the first former Soviet bloc country to reach a developed market.

The Polish software development services market is also thriving, representing about 8% of the country’s GDP. Poland has the largest IT specialists pool in the entire CEE region. Its broad ecosystem of innovative startups, entrepreneurs, and enterprises, combined with robust digital infrastructure, encouraged numerous global corporations to move their operations to Warsaw, Crakow, Katowice, Wroclaw, and other outsourcing hubs.

The Polish IT sector orientates strongly towards international projects. 34% of half a million IT experts work for companies with the Polish capital, while foreign organizations employ the remaining 66%. IT services account for one-third of all Polish services exports to the USA

These numbers shouldn't be surprising considering the high profitability of foreign investments. According to a joint report by KPMG and the American Chamber of Commerce, "every dollar invested in Poland by American companies creates 50% more value than other foreign investments."

The interest of multinational tech corporations in the Polish IT market is evident. And it is easy to account for. Poland consistently ranks as one of the top three countries with the world's best programmers. Polish software developers top the charts in Java development and score second to fifth in Python, Ruby, Shell, and algorithms (source: HackerRank).

If we look at the 2017 Digital Evolution Index (the latest available), we can see Poland among digital innovation leaders. In 2018, the analysts estimated the Polish IT market's turnover to be $11.5 billion. The IT market is expected to amount to approximately $12.4 billion by 2021. The category includes the segments of IT equipment, software, and IT services.

The most sought after software languages on the Polish market include Javascript (28%), Java (20%), Python (16%), TypeScript (8%), PHP (8%), and C# (7%), followed by Kotlin, Swift, Scala, and Ruby (Statista).

Digital Evolution Index

Labor cost is likely the main concern for companies considering hiring offshore software developers from Poland. With quality comes the price. And obtaining services in a country that offers the largest and most diverse talent pool, the most reliable infrastructure, adherence to EU standards in IP protection and data security, and the greatest ease and transparency of doing business, cannot be cheap.

According to annual compensation research by NoFluffJobs, Polish Junior Software Developers earn between $1,000-$1,800 per month, depending on their skills, location, and type of contract. Mid-level experts get between $2,400-$3,700 per month, while seasoned experts earn from $4,200-$5,300. The fields of expertise that offer the best-paid jobs include BI and Big Data Analytics, while those with the lowest pay are UX and Support.

When we compare these rates to the ones in Ukraine or Belarus, it becomes obvious that Polish IT companies compete in outsourcing on expert skills, impeccable work ethic, service reliability, and ease of communication, rather than extremely low prices.

 

Investing in the Polish IT market

 

Broadly recognized for modern IT infrastructure, high economic potential, and a well-educated, highly-qualified workforce, Poland is currently the European leader in terms of the size of foreign direct investment, with the IT and tech market largely contributing to its success.

The subsequent years indicate an apparent shift away from outsourcing basic, low-skill installation and support IT tasks to the Polish workforce in favor of delegating entire projects and services to Poland-based outsourced teams. This trend also shows in some of the most recent (and noteworthy) examples of global IT and tech investments.

Major foreign investors

The largest international IT companies operating in the country (by revenue) include Dell EMC, HP Inc, Lenovo, Microsoft, and IBM Polska, followed by other prominent names such as Intel, Apple, Cisco, Oracle, Xerox, Sabre, or Google.

TECH GIANTS PRESENCE IN POLAND

Incentives to invest

Before 2018, Special Economic Zones (SEZ) were operating in Poland, offering various tax exemptions to attract foreign investors. The 2018 amendment to the fiscal law replaced SEZs, turning the entire country into a special economic zone and making tax incentives available across Poland's territory on publicly and privately owned land.

The new regulations mean that the availability of tax reliefs no longer depends on the location, but it's calculated based on a variety of factors that include:

  • The costs of the investment.
  • The size of the enterprise.
  • The permissible level of the state aid per region.

The period of tax exemption varies from 10-15 years across regions.

Additionally, the Polish regulations provide tax deductions for R&D activities, the scope of which is contingent on the company size and the type of eligible costs. These may fall into one of six categories, including employees' wages and social contributions, expertise, research and insights from scientific units, the costs of obtaining IP protection, etc.

Apart from these incentives, in 2019, the Polish government established the Innovation Box scheme. It applies a preferential, 5% tax rate applicable to income derived from IP rights (i.e., among others, author's rights to a computer program or a patent).

→ More details about Poland's broad range of investment incentives can be found on the Polish Investment & Trade Agency's website and in PWC's Worldwide Tax Summaries.

 

Higher education in Poland

 

Poland boasts over 400 higher education institutions, including over 40 state-owned universities and nearly 20 public Institutes of Technology (Politechnika).  

  • The number of students exceeds 1.2 million, i.e., every 30th Pole is currently studying.
  • Just as in Belarus's case, the literacy rate in Poland is among the world's highest.
  • Similarly, public higher education is free, with a range of university scholarships and grants available.
  • The first study cycle comprises three or four years, and upon its completion, the graduate is conferred the Bachelor's Degree (either in Arts or Science). A Master's degree program typically lasts 1.5 to 2 years. Certain fields of studies such as Law, Medicine, Psychology, Acting, or Canon law, offer long-cycle programs, lasting up to 6 years.
  • Information technology has been consistently the most popular field of study in the last few years (over 33,000 applicants in 2020), followed by psychology, medicine, and management.
  • The history of higher education institutions in the country goes back to the Middle Ages. The Jagiellonian University in Krakow, the first Polish HE institution, was set up as early as 1364, earlier than the University of Vienna, University of Glasgow, or Munich. The oldest technical HE institution in continuous operation is The Warsaw University of Technology, established in 1826.  
  • Sixteen Polish HE institutions are included on the QS World University Rankings® 2020 list, with the Jagiellonian University occupying the highest position (#338 in the world).
  • Poland has become one of the most popular higher education destinations for international students in Europe in recent years. In 2020, over 85,000 foreigners were studying in Poland, and the number is steadily growing.
  • The tuition fees for international students are higher than in other countries in the CEE region, ranging from $2,200 up to $6,700 per year, depending on the institution, faculty, and study program. However, EU/EEA students are not required to pay tuition fees for the courses taught in Polish.
  • The majority of leading institutions offer courses in English. 

Poland's startup ecosystem

 

In the last few years, Poland has joined the most startup-friendly countries in Europe and beyond. The Polish startup ecosystem ranks 27th in the Global Startup Ecosystem Report 2020 (a fall by seven spots compared to the previous year; still much higher than Romania – 45th, Belarus – 63rd, and above Ukraine – 29th). Several Polish cities such as Warsaw, Krakow, and Wroclaw boast a remarkable concentration of coworking spaces, accelerators, and incubators. 

In 2019, the VC funding for Polish startups increased by 800% compared to the previous year, a clear sign of the industry's vigorous growth dynamics. However, several challenges pose a serious threat to this positive trend, which shows the country's notable fall out of the top 20 global startup ecosystems list. 

One culprit may be over-involvement in the public sector – bringing about red tape increases and thwarting innovation. Another issue stems from the relative immaturity of the Polish startup scene and its contributors, who often lack entrepreneurial skills and experience and focus solely on technology.

Key startup cities

Warsaw, Wroclaw, Krakow, Gdansk, Poznan

Startup ecosystem in numbers

  •  +3,000 startups
  •  +130 VC firms (with Smok Ventures, Market One Capital, Innovation NEST, Giza Polish Ventures, Innovation Nest, and Next Road Ventures leading the way)
  •  +100 incubators and accelerators
  •  +100 coworking places in Warsaw alone
  • + 255,000 software developers

Focus industries

Fintech, food tech, AI and RPA, data analytics, SaaS platforms

Success stories

  • DocPlanner – the leading healthcare booking platform, founded in 2011 in Warsaw. After accumulating $140.5 million in seven funding rounds, today, it's valued between $300-500 million.
  • Brainly – another massively popular software platform from Poland, Brainly, is the world's largest peer-to-peer learning community. Set up in Krakow in 2009, and valued at $100-200 million, it is now available in nearly 40 countries.

  • Booksy – now based in San Francisco, Booksy is a Poland-based booking application for the beauty business. It secured $92.2 million of funding across seven rounds from several international investors. Currently, the platform processes over 3.5 million bookings per month, and it's valued at $100-200 million.
  • Kontakt.io – this Polish startup set up in Krakow is a leading vendor of smart beacons, gateways, and other IoT devices. The volume of VC funding obtained in five rounds is much more modest than in other top Polish startups ($8.3 million). Still, the company delivers some of the most innovative solutions in the indoor navigation space.
  • Synerise – another startup from Krakow, Synerise, was set up in 2013 to provide clients with data analytics and AI solutions. Since its foundation, the company has raised $19.2 million over nine rounds, achieving the valuation of $85 million and tripling its customer portfolio in 2018.
  • SALESmanago – this Krakow-based company offers an AI-based marketing automation platform, competing in over 40 countries with HubSpot, Marketo, or GetResponse. The startup collected $7.7 million over four funding rounds.

Challenges

  • Still a low share of foreign investors (ca. 4%)
  • The gap in leadership and business management experience
  • Inward-oriented market with deficient global connections

Pros of software development outsourcing in Poland

  • Over 400,000 IT professionals available on the market
  • Easy access to a versatile set of skills matching specific sectors or projects
  • Robust AI and data science ecosystem to support state-of-the-art technologies 
  • IT services are one of the pillars of the robust Polish economy
  • A shared legislative and regulatory framework (EU membership)
  • The highest English proficiency competencies out of all CEE countries
  • Ranked among the world’s top 5 countries for software skills
  • Considerable foreign investment, especially in the IT/tech sector
  • Ranks high on the ease of doing business and competitiveness
  • Maintains the lowest level of corruption in business among CEE countries
  • Ease of travel: central location; Ryanair hub, Schengen zone

Cons of software development outsourcing in Poland

  • Fierce competition may lead to high turnover in projects
  • Potentially higher salaries as compared to other CEE countries
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The State of CEE IT Outsourcing and Offshoring 2021
Belarus • Poland • Romania • Ukraine

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IT outsourcing... reinvented!
Why work with Polish developers?

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Best devs in the world

CEE countries are world-renowned for their software developers who are said to be one of the best on the globe.

Huge talent pool

There are over 1 million software developers in the CEE region, skilled in various technologies and experienced in every industry.

Competitive rates

Software developers' hiring rates in the CEE region can be 2-3x lower when compared to the US and Western Europe.

Cultural proximity

Great English skills and vast experience in working on international projects. CEE devs have been supporting startups worldwide for years now.

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