The new tech frontier: Exploring Eastern European tech hubs
As talent shortages strain resources in traditional tech strongholds like the US and Western Europe, many companies are looking to outsource at least part of their software development activities. Over the years, Eastern Europe has positioned itself as a leading global hub for software engineering and tech talent.
Whether outsourcing product development projects, forming partnerships, or accelerating innovation through emerging startups, the region brings outstanding technical knowledge and value. Eastern European tech hubs combine motivated professionals, business-friendly conditions, and a proven track record supporting major multinational companies. For any organization pursuing digital transformation and growth, working with IT professionals from countries like Poland, Ukraine, Hungary, Romania, and the Baltic states opens new horizons filled with skill and potential.
In this article, we explore the largest offshore hubs across Eastern Europe and the unique advantages they offer for global businesses. We examine which countries provide the most developed tech ecosystems ripe for investment and collaboration, as well as robust engineering talent, and opportunities to tap into expertise across cutting-edge technologies.
Eastern European tech hubs: Benefits for global businesses
From agile startups to multinational corporations, forward-thinking companies across the globe are turning to Eastern Europe’s booming tech hubs for innovation and strategic growth. Despite being overlooked in the past, cities across Central and Eastern Europe (CEE) have now emerged as rich sources of world-class IT talent, expertise, and potential for long-term success.
For businesses seeking technology capabilities to gain an edge, collaborating with the region’s thriving innovation ecosystems offers new frontiers for strategic advancement. The benefits of partnering with Eastern European tech firms include:
Wealth of talent
The Eastern Europe region is home to more than one million developers. This figure stands in stark contrast to the dire talent shortage, felt acutely in traditional tech strongholds like the United States and Western Europe. In the US alone, there are over 900K unfilled software development roles, highlighting the persistent trend of demand consistently exceeding available capacity. Meanwhile, Eastern European tech hubs have cultivated an abundant supply of qualified developers that help international companies bridge the skills gap.
Several factors have contributed to the rise of CEE as a go-to IT hotspot with dense talent networks ready to take on global projects:
- Eastern European countries have a long tradition of excellence in engineering, math, and science education. This has resulted in a workforce with strong technical capabilities.
- Many multinational companies have opened offices and development centers in Eastern Europe, attracted by the highly skilled labor pool as well as lower development costs. This has created booming IT job markets across the region’s major tech hubs, including Warsaw, Bucharest, Wroclaw, Tallinn, and Kyiv.
- Graduates from Eastern European universities often opt to stay local rather than emigrate, as tech jobs and wages have risen.
Engineering smarts
Talented software developers are the biggest asset of Eastern European IT hubs. Local tech professionals are renowned for their strong technical capabilities and engineering prowess.
Eastern European programmers are prized for their expertise in complex languages like C++ and JavaScript as well as niche skills like machine learning and data science. Engineers in the region are also trained in the latest stacks and development frameworks, such as Ember, Svelte, Laravel and Spring. With this blend of educational rigor and hands-on abilities, Eastern European developers are globally recognized as being extremely capable of solving complex programming challenges.
Cost-quality balance
Global demand for skilled software engineers continues to rise, leading to high labor costs, especially for in-demand specializations. Outsourcing software development helps businesses reduce their spending, leading to significant cost optimization. While exact savings vary, offshoring to tech hubs in Europe can lower project expenses by 40-70%.
CEE provides an optimal balance of quality and cost-efficiency. The region boasts a robust tech talent pool available at competitive hourly rates of $25-$65. While this is higher than the salary range in low-cost countries, such as the Philippines, Eastern European engineers yield proven expertise, strong English skills, and cultural compatibility. The combination of these factors is well worth the reasonable price premium.
Scalability
Eastern Europe’s deep talent pool allows tech companies to quickly expand engineering teams on demand. With easy access to a large number of seasoned developers businesses can scale up their project capacity without sacrificing quality.
Outsourcing providers often have large databases of pre-screened candidates that can be tapped to spin up large teams in a matter of weeks. For example, companies can scale from 5 developers to over 30 in less than a month if needed for new product launches or specific stages of development activities.
Thanks to the government support of the STEM field and the region’s strong technical universities, CEE has a steady pipeline of skilled graduates. The growing number of tech professionals enables technology firms to quickly meet spikes in demand for particular skills or technologies, ensuring swift and efficient project execution while maintaining high standards of quality.
Business advisory
Over the years Eastern European vendors have accumulated expertise across all major business verticals, developing complex end-to-end solutions for e-commerce, fintech, healthcare, and manufacturing. While a decade ago, developers from CEE countries were merely supplementing in-house teams, today they become first-class experts who play a vital role in driving business results.
Eastern European providers offer invaluable on-the-ground support in navigating regional challenges, regulations, and opportunities. They understand how to optimize software design for your target customers and markets. With both top-tier technical skills and unparalleled business advisory capabilities, Eastern Europe’s digital leaders are instrumental partners for unlocking success both globally and locally.
Best IT outsourcing countries in Eastern Europe
CEE is often featured on various rankings of the best software engineers. For example, according to HackerRank, Poland, Hungary, Czech republic, Ukraine and Romania secured their spot in the top 20 countries in the world in terms of tech skills, surpassing the traditional coding giants – India and the US.
The latest SkillValue ranking placed Moldova, Ukraine, Romania, and Poland in the top 10 countries with the best developers in the world. It also names Chisinau, Kyiv, Bucharest, and Iasi as the best cities for tech in Europe. These Eastern European hotspots have become magnets for tech companies seeking gateways to innovation ecosystems and expertise in cutting-edge technologies, like Big Data, cloud computing, robotics, and generative AI.
In addition to a solid tech background, Eastern European specialists also demonstrate remarkable learning agility. The new Coursera Global Skills Report shows that users from CEE have strong business skills with learners in half of the countries earning competitive or cutting-edge proficiency scores, including Slovakia, Ukraine, Poland, and the Czech republic. Eastern European talent also shows one of the best results globally in technology and data science domains. For technology, high-scoring learners are found in Slovakia (90%), Ukraine (94%), and Poland (91%).
On top of a solid tech background, Eastern Europe benefits from widespread English fluency – a key advantage for global collaboration. According to the EF English Proficiency Index, several Eastern European countries rank among the top 35 worldwide for English literacy. This proficiency facilitates effective communication and cross-border partnerships.
The world-class engineering talent, combined with great business proficiency, and widespread English fluency, makes powerful fundamentals for the CEE region to compete on the global technology scene. Given today’s globalized digital landscape, this comprehensible skill set enables the seamless integration of Eastern European talent into teams around the world, facilitating effective collaboration across time zones.
Let’s dive deeper into the peculiarities of CEE as an attractive destination for software outsourcing and explore the key countries driving digital innovation in the region.
Poland
Poland is considered the best place in Eastern Europe to start a business. It is ranked #1 on the IT competitiveness index in terms of employment, business climate, and IT industry exports.
There are also more than 400 R&D centers operating in the country, many of which were established by Google, IBM, Motorola, Delphi, Fujitsu, Capgemini, ShellAnother, and other foreign companies. While Poland boasts the largest tech talent pool in Eastern Europe – over 400K skilled tech professionals – the competition for tech talent is still fierce. The reason is that almost 80% of local engineers are working for the above-mentioned R&D centers, and only 20% – for outsourcing service companies.
Lithuania
Over the past decade, Lithuania has experienced a rapid transformation of the IT sector. It managed to build a successful startup ecosystem that counts more than 1K companies – the largest number in the Baltic region. Lithuania is also home to two renowned unicorns: Vinted, an online marketplace for buying, selling and exchanging new or secondhand items, and Nord Security, one of the world’s leading providers of digital security and privacy solutions.
The country has achieved inspiring milestones considering it has a relatively low population. The national ICT exports have more than doubled over the last ten years, from $674K to $1.4 million. Lithuania aims to further strengthen its technology sector through ongoing initiatives like offering start-up visas, simplifying bureaucratic processes, and expanding the country’s tech capabilities and infrastructure.
Czech Republic
The Czech republic’s extensive history in manufacturing and production has laid the foundations for the flourishing tech ecosystem. Thanks to the contribution of the automotive and lens development sectors, and their impact on establishing a lasting culture of innovation and research, the nation has gained vast technical expertise which is now leveraged within the IT industry.
On top of that, government-backed initiatives have played a pivotal role in catalyzing the growth of the tech sector. Strategic investment in R&D projects, supportive policies, and collaborations between academia and industry have propelled the Czech republic’s tech ecosystem into a dynamic space, attracting both homegrown startups and multinational tech giants.
With both historical industrial prowess and contemporary digital innovation, the Czech republic is positioning itself as an up-and-coming destination for IT capabilities. ICT exports already comprise 2% of the Czech GDP. And the startup ecosystem is rapidly expanding, with over 900 new tech ventures launched – one of the highest numbers among Eastern European nations.
Slovakia
With high-quality infrastructure, hefty government incentives, and favorable geographic position right in the heart of Europe, Slovakia has all the key ingredients to succeed as an outsourcing hub. Sharing borders with Austria, the Czech republic, and Poland allows Slovakian tech companies to tap into several lucrative IT markets.
Slovakia boasts a growing startup scene brimming with digital innovation and investment potential. The ecosystem centers around vibrant communities of young entrepreneurs in Bratislava and other regional hubs, like Zilina and Kosice. Incubators, accelerators, and coworking spaces provide launch pads for new ventures, especially those focused on research and development. Key sectors gaining traction also include healthcare, climate tech, fintech, creative industries, and mobility.
Romania
Since 2000, Romania has managed to ensure 15% annual growth of the IT sector. The emphasis on STEM education enabled the nation to produce a great number of high-quality tech professionals.
The combination of skilled talent and business-friendly policies made Romania an attractive destination for international tech firms seeking to expand in Europe. Several multinational corporations, including HP, IBM, Microsoft, Amazon, and Oracle, have already invested in Romanian tech hubs by opening their R&D centers around the country.
Moldova
Moldova’s IT industry is export-oriented, with 80% of the sector’s capacity dedicated to outsourcing services. The free economic zones established by the government across the country helped to attract a lot of new tech companies to the market. These zones provide tax incentives, simplified regulations, and other benefits that enable Moldova to pave its way to being a competitive player in software development services.
With affordable rates and strong talent pool, and technical capabilities, particularly in languages like Java, .NET, and Ruby, Moldova has laid the foundations to become a greater force in the international software development field.
Ukraine
Despite the Russian invasion, Ukraine is still a flourishing tech hub and one of the most promising software development locations in Eastern Europe. Ukrainian tech clusters unite over 3K tech companies specializing in e-commerce, fintech, education, health and telecom domains. The country is also home to several world-known unicorns, including GitLab, Grammarly, People.ai, and Genesis.
Many global tech giants, like Samsung, Oracle, Microsoft, and recently Google, opened their R&D offices in various cities around the country to leverage the potential of an impressive talent pool of 285K engineers. This heavy investment from major international firms demonstrates Ukraine’s capabilities and cements its status as a leading destination for outsourced IT services and a breeding ground for technological innovations.
Estonia
Estonia is a hotbed for start-ups, often dubbed as “Silicon Valley of Europe”. The number of innovative companies in the country is six times higher than the European average. It’s home to over 400 start-ups such as Wise, Bolt, Veriff, Estateguru, and others.
This vibrant scene is driven by a combination of grassroots entrepreneurial energy and supportive government initiatives. Ease of business registration, competitive tax rates, and initiatives like e-Residency further establish an attractive tech ecosystem.
Despite quite high average salaries (around €2.5K), Estonia is a well-sought outsourcing country providing high-end services.
Hungary
Hungary offers attractive operational conditions including geographic proximity to Western Europe, competitive wage rates, and government incentives like tax credits for shared service centers. Though still emerging onto the global stage, the country possesses key elements, like language skills, infrastructure, and cost efficiencies that facilitate its continued growth as an appealing outsourcing hub.
The tech industry accounts for a 10% share of Hungary’s GDP. Approximately 63% of the IT revenue comes from the R&D sector. Multinational companies like Morgan Stanley, British Telecom, and IBM have opened dedicated service centers in Hungarian cities to leverage the country’s technical expertise in data management and engineering, infrastructure and operations, framework development and production.
Latvia
Business-friendly legislation, low cost of living, tech-driven universities, and thriving startup scene – all these factors have brought about significant growth in the Latvian IT industry. Over the last decade, the number of tech companies operating in the country has increased by almost 50%. On top of that, exports from the IT services sector now reach around €850 million annually – twice as much as just five years ago.
With its combination of supportive business conditions, skilled developers, and burgeoning entrepreneurship, Latvia has laid the groundwork for further IT advancement. It is expected that software development, computer programming, and cloud computing will see continued foreign investment and job growth in the coming years.
Top Eastern European hubs for startups
The best startup tech hubs in the world are the USA, UK, Israel, and Canada. These countries have established mature ecosystems that attract international investments, and provide access to talent, resources, and infrastructure prompting the budding tech companies to grow and develop.
However, in recent years Eastern Europe has also started paving its way toward becoming a decent player in the startup world. The region demonstrates a relentless drive in terms of technology and innovation. Coupled with increased government funding, a skilled tech workforce, and rising entrepreneurial activity, the CEE has now cultivated an environment where new ventures can thrive and expand globally.
Estonia’s video calling app Skype and money transfer service TransferWise, Hungary’s online presentation app Prezi, the Czech republic’s cyber-security tool Avast, Slovakia’s ESET, and Ukraine’s Grammarly – all of these are world-renowned startups born in Eastern Europe.
Eastern Europe has taken active steps to accelerate the development of its startup ecosystem by opening incubators and accelerators to support new businesses. As a result, the geography of the region’s entrepreneurship scene is becoming increasingly decentralized – new tech ventures are being opened not just in major capital cities, but spreading throughout the territories of each Eastern European country.
For example, in Poland tech companies are launching in cities like Warsaw, Kraków, Wrocław, Poznań, and Gdańsk. Romania has seen a wave of tech entrepreneurship in hubs like Bucharest, Cluj-Napoca, Iasi, and Timișoara. Budapest has long been Hungary’s IT capital, but new funding is also flowing into ventures in Debrecen, Szeged, and Pécs.
Meanwhile, Estonia’s startup landscape has moved beyond just Tallinn to include Tartu, Pärnu, and Narva. While Kyiv, Ukraine’s capital, is ranked #3 in the up-and-coming tech cities in Eastern Europe, it’s not the only software development hotspot. The country’s tech ecosystem also includes Lviv, Dnipro, Kharkiv, and Odesa.
Tech startup ecosystem in CEE
|
Country |
Tech hubs |
Famous startups |
|
Estonia |
Tallinn, Tartu, Pärnu, Viljandi |
Skype, TransferWise, Veriff |
|
Lithuania |
Vilnius, Kaunas, Klaipeda |
Vinted, Eneba, Nord Security |
|
Czech republic |
Prague, Brno, Ostrava |
Avast, Kiwi.com, Rohlik |
|
Poland |
Warsaw, Kraków, Łódź, Wrocław, Poznań |
Brainly, DocPlanner, Allegro |
|
Ukraine |
Kyiv, Lviv, Dnipro, Odesa, Kharkiv |
Grammarly, GitLab, MacPaw, PetCube |
|
Latvia |
Riga |
F3, Mintos, Sonarworks |
|
Hungary |
Budapest, Debrecen, Pécs, Szeged |
Prezi, LogMeIn, Tresorit |
|
Romania |
Bucharest, Cluj-Napoca, Brasov, Timișoara, Iasi, |
Ui Path, Elrond, Kinderpedia |
|
Moldova |
Chisinau |
XOR, Teleportravel |
|
Slovakia |
Bratislava, Košice, Trnava |
ESET, Aeromobil, FUERGY |
Wrap up
Fueled by a combination of robust governmental support, educational rigor, and a burgeoning entrepreneurial spirit, CEE nations have cultivated vibrant tech hubs that span various domains. On top of that, a blend of deep STEM foundations and hands-on abilities has created a workforce of nimble innovators, while decades of global IT outsourcing helped them hone their problem-solving skills.
Looking ahead, CEE is poised to continue its rapid ascent as a global technology powerhouse. The region has proven its capabilities and is now a premier destination for companies seeking to leverage IT expertise.
Grid Dynamics has long recognized the engineering potential of the region, its innovation ecosystems, and its cultural compatibility with Western business norms. Our company has opened several offices across Poland, Ukraine, Romania, Moldova, and Serbia. We believe that these countries have the fundamental ingredients to enable fruitful global partnerships.
Our engineering centers in CEE provide us with extra resources to cater to the needs of organizations of any size – be it established enterprises, commercial companies or budding startups – no matter where they are located. Our clients have the option of choosing the engagement model which best suits their requirements, including team extension, dedicated teams, pod teams, and remote development offices.
Reach out to us to explore how tapping into Eastern European talent can accelerate your digital initiatives. Our experts are ready to discuss your needs and craft custom solutions leveraging the region’s capabilities.
