This document discusses test outsourcing trends in Eastern Europe. It begins by defining outsourcing and describing the key reasons companies outsource, including reducing costs and focusing on core business functions. It then provides statistics on the large outsourcing market and growth in Eastern Europe. Several Eastern European countries like Poland, Bulgaria, and the Czech Republic are highlighted as top outsourcing destinations in the region due to advantages like lower costs, technical skills, and language abilities. The document concludes by predicting that nearshoring will increase and that testing will become more strategic and automated in the future.

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

4. 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.”

5. 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

6. 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.

7. 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

8. 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

9. 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

10. Success stories
25 successful Startups built with outsourced development

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

12. Outsourcing 2015
World Quality Report 2014 - 2015

13. AT Kearney: Outsourcing Market 2015

14. AT Kearney: Outsourcing Market 2015

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

16. Europe Market
Ernst & Young Report 2014

17. Europe Market
1. Krakow, Poland
2. Dublin, Ireland
3. Prague, Czech Republic
4. Budapest, Hungary
5. Brno, Czech Republic
6. Warsaw, Poland
7. St. Petersburg, Russia
8. Bucharest, Romania
9. Belfast, UK
10. Bratislava, Slovakia
Tholons Report Dec 2014

18. Examples: Poland
• Has Risen from 38th in 2009 to 11th now;
• Krakow in Top 10 Locations and #1 in Europe;
• More than 500 institutions of high education;
• IT business doubled in the last 5 years;
• Multilingual;
• Proximity to Western Europe;
• Still cost-competitive by several magnitudes;
• Considered with potential to become Global player;

19. Examples: Bulgaria
• Ranked 9th in the world and best 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;

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

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

22. 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;

23. 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:

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

25. Future Trends
“It is expected that by the end 2015 top six EU markets
alone will need 250 000 extra employees with IT skills,
and this doesn’t cover the rapidly and instantly
expanding US job market.”
Source: computerweekly.com

26. 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

27. 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.

28. Future Trends
Expansion of nearshore providers in Europe
• Investing in Eastern Europe:
• Luxoft opened a new site in Bulgaria in 2015. Ambition to hire
up to 1000 FTEs.
• Already have labs in other EE countries like Romania.
• SoftServe also opened a R&D site in Bulgaria.
• EPAM has an office both in Romania and Bulgaria.
• Massive Marketing and Sales representation in Europe.

29. 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.

30. Trends in Testing
Testing Budget allocation as percentage of IT spend
World Quality Report 2015 - 2016

31. Trends in Testing
World Quality Report 2014 - 2015
SMAC and IoT increase the importance of Testing

32. Trends in Testing
World Quality Report 2014 - 2015
World is going AGILE! What about Testing?

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

34. 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

35. 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

36. Questions?