This document discusses test outsourcing in Eastern Europe. It provides an overview of the global outsourcing market and trends, examines the marketplace in Eastern Europe, and outlines advantages and future trends in outsourcing to the region. Specifically, it finds that (1) nearshoring to Eastern Europe offers reduced risks compared to offshoring while still providing cost savings, (2) countries like Ukraine, Poland, and Bulgaria provide skilled labor at competitive costs within the European time zones, and (3) outsourcing is shifting from a focus solely on costs to prioritizing quality and strategic partnerships.

1. Test Outsourcing in
Eastern Europe

2. Agenda
• What is outsourcing?
• The outsourcing market – facts and figures
• Marketplace of Eastern Europe (EE)
• Advantages of EE
• Future trends

3. What is Outsourcing?
“Process of contracting the company’s business process and
operations to an external company. It is expected to be done with
a better quality.”

4. The outsourcing market
Why did it start?
• Cost cuttings
• Focus on the core business
What can be outsourced?
• Everything
• It does not happen due to security risks

5. Outsourcing models
• Offshoring
• Outside the home country.
• Risks due to language barriers, cultural differences and different
time-zones.
• Usually selected because of cheaper labor costs.
• Onshoring
• Same country.
• It involves less risks but doesn’t allow saving up much.
• Nearshoring
• Outsourcing in nearby countries.
• Considered best for West Europe who prefer the East European
destinations.

6. 44%
34%
34%
28%
22%
15%
15%
9%
0% 10% 20% 30% 40% 50%
Reduce operation costs
Overcome IT talent shortage
Free up internal resources
Focus on core business functions
Accelerate company transformation
Accelerate projects
Gain access to management expertise
Reduce time to market
Reasons to Outsource

7. Risks
Top 3 reasons why projects fail
1. No process for specifying the work to be done.
2. Poor project management.
3. No metrics for measuring success.
Unless you solve the first one, then being excellent at the other
two won't make a difference.
Forrester Reports

8. Fiascos
Client What When Cost
UK Government National Program
for IT
2002-2011 12bn
pounds
U.S. Navy Manage 350,000
Navy and Marine
Corps users
2003 $4 bn
US Air force Expeditionary
Combat Support
System
2005-2012 $1.1 bn
US Government Healthcare
exchange website
2012-2014 $200 mln

9. Success stories
25 successful Startups built with outsourced development

10. Agenda
• What is outsourcing?
• The outsourcing market – facts and figures
• Marketplace of Eastern Europe (EE)
• Advantages of EE
• Future trends

11. Outsourcing 2017

12. AT Kearney: Outsourcing Market 2017

13. Tholons 2017
Top 5 offshore nations

14. Tholons 2017
Top emerging outsourcing countries in the next years

15. Agenda
• What is outsourcing?
• The outsourcing market – facts and figures
• Marketplace of Eastern Europe (EE)
• Advantages of EE
• Future trends

16. Europe Market

17. Europe Market

18. Europe Market
1. Dublin, Ireland (7)
2. Krakow, Poland (8)
3. Prague, Czech Republic (17)
4. Warsaw, Poland (23)
5. Budapest, Hungary (25)
6. Birmingham, UK (34)
7. Moscow, Russia (38)
8. Sofia, Bulgaria (43)
9. Cluj – Napoca, Romania (46)
10. Brno, Czech Republic
Tholons Report 2017

19. Europe Market
Ernst & Young Report 2017

20. Examples: Ukraine
• 24th place in the AT Kearney research and it is the first time
Ukraine appears in the research;
• 7th place in the 10 most preferred countries in CEE for
outsourcing;
• High – skilled labor;
• 90 000 + IT employees on the market;
• 402 universities and colleges;
• Proximity to Western Europe;
• 80% of Ukrainian IT professionals have a good level in English;

21. Examples: Ukraine

22. Examples: Ukraine

23. Examples: Bulgaria
• Ranked 15th in the world and second in Europe;
• EOA Award „Offshoring Destination of The Year“ for 2015;
• Growth of Outsourcing since 2005 – 500%;
• Growth of IT employees since 2010 – 330%;
• Among Top 10 countries with fastest Internet worldwide (8th);
• 3rd worldwide by the number of certified IT professionals;
• Lowest Cost in Europe – both Salaries and Taxes;

24. Agenda
• What is outsourcing?
• The outsourcing market – facts and figures
• Marketplace of Eastern Europe (EE)
• Advantages of EE
• Future trends

25. Advantages of EE
"There's a lot more to it than just where
are the cheap people?'"
Rolf Jester
Gartner Vice President

26. Advantages of EE
Why a preferred destination?
• Education based on the Western system of theory and
philosophy - Creative thinking;
• Low cost – competitive salaries and taxes; low cost of living;
• Highly technical skills;
• Languages – Not only High level of English, but German,
French, Spanish, etc.;
• Reliable, existing infrastructure;
• Companies in Eastern Europe tend to engage in the business
model of their client;

27. Advantages of EE
• Reduced time differences – almost same working hours;
• Less cultural differences and common values shared;
• No “Yes, sir” attitude;
• Less employee turnover than India;
• The growing SME demand needs flexibility;
• For the countries in EU – advantage of the VAT system and the
well known EU rules and regulations.
Other very important benefits:

28. Agenda
• What is outsourcing?
• The outsourcing market – facts and figures
• Marketplace of Eastern Europe (EE)
• Advantages of EE
• Future trends

29. Future Trends

30. Future Trends

31. Future Trends
• The shift away from “cheaper is better” - quality is again the
crucial differentiator.
• Therefore Nearshoring is gathering pace within higher cost
but with high-talent labor.
• Gartner: “This trend will result in outsourcing of IT services
overseas (India etc.) dropping by at least 15% through to
2016”.
Outsourcing moves into Strategic activities

32. Future Trends
Expansion of offshore providers in Europe
• Investing heavily in continental Europe:
• Wipro announced the addition of 500 FTEs in the Nordics alone
over the coming 3 years reaching > 4000 FTEs in Europe.
• Offshore providers are also on the acquisition trail:
• Cognizant acquired ValueSource NV in Belgium.
• Have already acquired six companies in Germany.

33. Future Trends
Freelance Outsourcing
• Physical location is irrelevant.
• SME companies now can take advantage of the talent.
• No need for cumbersome long-term agreements.
• No need of large volume requirements.
• New countries with talent but with strong operational risk are
now able to take part in the industry.
• Bigger talent pool than India, China and Mexico altogether.
• Russia and Ukraine lead by far. Romania follows.

34. Trends in Testing
Testing Budget allocation as percentage of IT spend
Statista 2018

35. Trends in Testing
World Quality Report 2016 - 2017
SMAC and IoT increase the importance of Testing

36. Trends in Testing
World is going AGILE! What about Testing?

37. Trends in Testing
World Quality Report 2014 -2015
Test Automation is the Future

38. Trends in Testing
• Contracting a single vendor to provide both development and
testing:
• can reduce supplier management costs, but
• it is unlikely to deliver the best business value.
• Using a independent provider for testing gives clear reassurance
of an independent auditor with no interest in:
• completing testing too quickly, or
• finding an encouragingly small number of defects.
Increased demand for independent testing supplier

39. Trends in Testing
• Skill level baselines must be demonstrated:
• If your skills fall behind, you become noncompetitive.
• Not acceptable in an outsourced world.
• Certifications become mandatory for outsourcing providers:
• Required in most of the tenders.
• ISTQB is closing on 500 000 Certified Testers:
• Agile Testing is out.
• Security and Test Automation in Beta.
• Working on Mobile and Usability testing.
Importance of Certifications grows

40. Questions?