Which software outsourcing countries in Asia are best for you?

Software outsourcing has become prevalent for businesses looking to leverage cost-effective and skilled labor. The Asian region, in particular, has emerged as a hub for software outsourcing due to its abundant talent pool, competitive pricing, and favorable business environment. The revenue from the business process outsourcing industry in Asia is projected to exceed $106.9 billion by 2027, showcasing the potential of software outsourcing industry growth. However, there are some considerations you need to take into account before contracting with an outsourcing vendor in Asia. Let’s explore the top countries for software outsourcing in Asia and how to make the best decision.

What makes an ideal outsourcing country

When selecting an outsourcing destination, businesses should consider their specific requirements, budget, and legal considerations. Conducting thorough research, evaluating past client reviews, and engaging in direct communication with potential outsourcing vendors are essential steps in selecting the right destination. Additionally, visiting the country and meeting the outsourcing team in person can provide valuable insights into their capabilities and work culture. Here are specific and detailed elements that contribute to the attractiveness of a country for outsourcing.

• Cost efficiency: A suitable outsourcing country offers a significant advantage in terms of labor costs compared to the home country of the client. Countries with low living costs and favorable exchange rates often provide cost-effective outsourcing solutions.
• Skilled workforce: Countries that have a large pool of qualified individuals with the necessary skills for outsourced tasks may be attractive. This includes proficiency in technical areas, language skills, and domain expertise. Access to a diverse talent pool enables businesses to find the right skills required for their specific needs.
• Language proficiency: A significant number of individuals proficient in the language(s) required by the outsourcing company is more favorable. Language proficiency ensures smooth collaboration, reduces language barriers and enhances overall efficiency in the outsourcing process. Especially, English proficiency is often a critical factor, as it is widely used in global business communication.
• Infrastructure and technology: An ideal outsourcing country possesses modern infrastructure, including robust telecommunications networks, internet connectivity, and power supply. Advanced technologies and IT infrastructure enable seamless communication, data security, and efficient workflow management.
• Political and economic stability: This is crucial for long-term outsourcing partnerships. If the vendor’s country has a stable climate, supportive government policies, and business-friendly regulations, it will contribute to a conducive outsourcing environment. The working process will be eased, encouraging foreign companies to work with local software outsourcing vendors.

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Why Asian countries shine in outsourcing

Asian countries have gained a strong reputation in the software outsourcing industry due to several key advantages:

• Large and educated workforce: Asian countries often boast a large labor pool with diverse skills and educational backgrounds. Many Asian nations have invested heavily in education and skill development, resulting in a well-educated workforce. This abundance of talent enables companies to find specialized skills and expertise required for their outsourcing needs. Moreover, they have embraced emerging technologies, such as AI, automation, and cloud computing, which are integral to many outsourcing services. Access to state-of-the-art technology makes Asian countries offer innovative solutions and stay competitive in the global outsourcing market.
• Language skills: English proficiency is a significant advantage for Asian countries in the outsourcing industry. Many Asian nations prioritize English language education, resulting in a high level of proficiency among their workforce. According to EF, 3 Asian countries are ranking highest in the region in English proficiency, namely the Philippines, China and Vietnam. This language advantage allows for effective communication with clients from English-speaking countries, making Asian countries attractive outsourcing destinations.
• Cost advantage: Outsourcing in Asia offers cost advantages in terms of labor costs compared to Western countries. The lower cost of living and wages in Asian nations allows companies to access skilled labor at a more affordable rate. This cost advantage particularly appeals to businesses looking to reduce operational expenses while maintaining high-quality work. The average hourly rate in Asia ranges from $20-$50 while North America and Western Europe can reach up to $250 per hour.

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• Government support and infrastructure: Asian governments have recognized the potential of the outsourcing industry and have actively supported its growth. They have invested in infrastructure development, including robust telecommunications networks, reliable power supply, and modern office spaces. This supportive infrastructure enables smooth outsourcing operations and facilitates effective communication.
• Time zone advantage: Outsourcing vendors in Asia often have significant time zone advantages, particularly when working with clients in North America or Europe. This allows for round-the-clock operations and provides extended working hours for customer support and other time-sensitive tasks.
• Cultural compatibility: Many Asian nations have experience working with clients from different cultural backgrounds, allowing them to understand and adapt to diverse business practices and communication styles. This cultural compatibility fosters strong working relationships and smooth collaboration.
• Proven track record: Many leading global companies have established long-term outsourcing relationships with Asian service providers, further enhancing their reputation and credibility in the industry. This track record attracts new clients and encourages companies to choose Asian countries for their outsourcing needs.

Top Asian countries for software outsourcing

Software outsourcing has become increasingly popular, and several Asian countries have emerged as top destinations for this type of outsourcing. Here are some of the top Asian countries for software outsourcing:

1. India

India is widely recognized as a global IT outsourcing destination. The country boasts a large pool of skilled IT professionals, competitive pricing, and a favorable legal and business environment. India’s software outsourcing industry has flourished over the years, catering to diverse needs across various domains. According to Statista, India’s revenue in the IT outsourcing market is expected to show an annual growth rate (CAGR 2023-2028) of 17.92%, resulting in a market volume of US$20.09 billion by 2028. Additionally, English is one of the official languages of India so Indian IT specialists have a high level of English proficiency.

2. China

China’s emergence, as a center for IT and other service industries, is the result of a combination of government focus, investment and demographics. With its large population and growing pool of talented engineers, China offers competitive advantages. KPMG said that 18% of U.S.-based organizations sent their R&D work offshore to China. The country has a strong focus on emerging technologies such as AI and blockchain, extending its outsourcing capabilities beyond software development and including hardware manufacturing and IT infrastructure services. The Chinese government pushed long-term development of a robust domestic outsourcing business, containing favorable tax policies and other financial support and subsidies have been created to foster the growth of IT outsourcing.

3. Vietnam

Vietnam has gained recognition as a rising destination for software outsourcing. The country has a young and dynamic workforce with a strong focus on technology and innovation. It ranked 6th among the top countries for software outsourcing services. Moreover, Vietnamese developer skills ranked 2nd in Southeast Asia and 22nd worldwide, proving an impressive movement in IT expertise. Therefore, Vietnam’s software outsourcing capabilities span various domains, including web development, mobile applications, and software testing.  The nation offers cost-effective solutions at a $20-$40 hourly rate, saving up to 50%-70% compared to the US, Europe, India and China, while ensuring quality delivery with a large pool of skilled talents. The Vietnamese government has especially embarked on developing the IT industry by applying tax incentives to tech-related businesses. Vietnam expects to be among the top 30 in the Digital Infrastructure Development Index by 2030, focusing on 5G, data center, cloud computing and digital technology.

📌Read more: Why choose Vietnam for software outsourcing?

4. The Philippines

The Philippines is known for its proficiency in English and has developed a strong reputation in the software outsourcing industry. It is placed 2nd in Asia and 20th worldwide for English level, making collaboration and communication smoother with foreign clients given that North America, consisting of the U.S. and Canada, remains the Philippines’ biggest outsourcing customer by geography. The outsourcing workforce in the Philippines also provides 24/7 services. BPO centers have staff working multiple shifts so multiple time zones are covered, improving overall working productivity with clients.

5. Malaysia

Malaysia has been actively promoting itself as a software outsourcing destination. The country falls behind the Philippines when it comes to English language proficiency in Southeast Asia. Besides, it has stronger IP laws and copyright protections than almost every Asia-Pacific IT offshoring destination excluding Japan and South Korea. This can guarantee the confidentiality of work materials and avoid any leakages or hackers.

6. Indonesia

Indonesia’s IT industry has witnessed significant growth, positioning it as a potential destination for software outsourcing. It is one of the fastest-growing economies in the world and a G20 member, opening up a wealth of business opportunities. As a result of the government’s focus on digital literacy and the development of technology-based education, the number of skilled professionals in the IT and software development sector has increased significantly. Foreign companies are increasingly looking to outsource IT and software development to Indonesia to take advantage of the country’s expanding tech talent pool and low cost of doing business.

Conclusion

Asian countries have become prime destinations for software outsourcing. By carefully evaluating the specific requirements and considering the key factors discussed in this article, businesses can select the right outsourcing destination that aligns with their goals and objectives.

In the end, you still need to prepare a table of criteria to choose the most suitable talent for your company. If you need an offshore or nearshore team to work with you, don’t hesitate to consult with Ekotek, our team is based in Vietnam offering competitive pricing with over 180 tech specialists. We are eager to help you find the hiring models that work best for your project.