Why Portugal is the best destination for IT Nearshoring?
As you might have already heard, nearshoring is a form of outsourcing, a common business practice in which a company delegates tasks to another company, in this case Software Development. On Nearshoring, this delegation of work usually occurs between companies from nearby countries, in opposition to Offshoring.
Portugal has become one of the most desired countries in Europe for this practice. The main reason behind this I can tell you is not the lower wages compared to other OECD countries because you can find cheaper countries, but a growing economy, political stability, education and tech environment supported by the government on a sustainable basis … And that’s what you will not find in some other countries.
Over the last 5 years, after passing through a difficult financial crisis, the portuguese economy has been growing and the investment in high-tech and Industry 4.0 is a reality. Start-ups flourishing, Web Summit and other important tech events being held in portuguese cities, tech visas and legislation to attract foreign investment are some of the measures adopted in order to make Portugal the new tech hub in Europe, competing with Netherlands, Germany and some nordic countries.
Farfetch, Talkdesk, Unbabel, Cloudflare, Volkswagen Digital Solutions, Mercedes-Benz.io, Outsystems and Google are some of the portuguese unicorns and foreign tech companies with operation in Portugal in the IT field.
Portuguese Economy and Competitiveness
Better than just telling you my opinion, let’s check some facts.
Last year the portuguese GDP growth was 2,2% and 2,4% in 2018, which is not awesome but significantly good when compared to the averages of Eurozone and European Union 28, 1,2% and 1,5%.
One of the most important indicators is the ease of doing business, and Portugal occupies the 39th position, much above some of the other destinations chosen for IT Outsourcing: Poland (40th), Belarus (49th), Romania (55th), Bulgaria (61st) or Ukraine (64th).
Regarding competitiveness, especially in the digital area, we can use the IMD World Digital Competitiveness Ranking to compare the position held by Portugal (34th) with the more common destinations like Romania (46th) and Ukraine (60th), with a total of 64 countries in this list.
Here are the positions Portugal helds in some specific categories in this competitiveness ranking:
Talent: #26
Training & Education: #39
Scientific concentration: #32
Digital/ Technological skills: #13
Graduates in Sciences: #11
Immigration Laws: #5
Communications technology: #11
Internet users: #12
Education
Over the last decade the amount of talent flowing out of portuguese universities has increased significantly, making undeniable their quality. This is reflected by the amount of portuguese, and educated in Portugal, people reaching positions of high responsibility in renowned companies.
Portuguese universities are recognized and well classified in the Times Higher Education World University Rankings 2020, namely Universidade de Aveiro, Universidade do Porto, Nova University of Lisbon, Universidade do Minho or Universidade de Coimbra, ranking between the 400th and 800th places, among 1500 universities.
One of the most important aspects to choose an IT Outsourcing destination, and I decided to include on Education, is the English language proficiency. Portuguese people are considered to be on the high level of English Proficiency by the EF English Proficiency Index, helding the 12th position in a ranking with 100 countries, being as much as proficiencient as in countries like Germany, Denmark, Sweden, Norway and in front of Spain, France and Eastern European countries.
Tech Market Demographics & Outsourcing rates in Portugal for Software Development
The portuguese tech sector is made up of 120.000 ICT professionals, corresponding to 2,7% of the total workforce, more than Poland (2,6%) and Romania (1,6%).
According to the Landing.jobs report “Hiring in Portugal” released last year, 61% of the market is composed of Developers, of which 33% are Senior, 37% Junior and 30% Intermediate, most are Fullstack, then Backend and, on last, Frontend developers. After developers, the most common profiles are Project Managers, QA Engineers, UI/UX Designers, Tech Leads and DevOps. The less common profiles are related to Computer & Network Security an BI.
The annual gross wages, and consequently the outsourcing rates, vary according to the profiles, years of experience and location in Portugal, with Lisbon and Porto being more expensive than Aveiro, Braga or Coimbra. For a developer the rates can be between 200€/ day for a Junior profile and 450€/ day for a senior one, also depending on the technologies the client is looking for. Some profiles with certain technologies are not so common or have a high demand, making them more expensive like Ruby on Rails, Vue.js or Xamarin. Then, QA Engineers and Testers profiles can vary between 200€/ day and 350€/ day, according to experience and whether they are functional or automatic.
But why not Eastern Europe Countries?
Some may advocate that Eastern European countries like Ukraine, Poland, Romania might be as good or better for IT outsourcing, mainly because they offer as much as Portugal does and are cheaper. This was true some years ago but the average rates have been increasing in those countries, which is a natural path having in mind their economic development.
Portugal is now a reality, a truly tech hub in Europe responsible for producing knowledge. The IT consultants and Software Developers are exposed to interesting and international projects, allowing their skills development, what does not happen in some other countries not so open on this international cooperation.
Furthermore, Portugal is more politically stable, has a temperate climate (2.800 hours of sun yearly, making people happier :D), people are less likely to change projects just for a slight wage raise and are more proactive on solving problems and presenting solutions on what they are working on. Where does this info come from? Well, probably not from scientific studies on sociology but from those same companies that have been choosing Portugal as their IT destination and the feedback they give publicly.
