The landscape of the IT outsourcing industry is evolving. While spend optimization (through reduced labor costs) was once the primary driver of outsourcing decisions, this has shifted. The 2024 Global Outsourcing Survey by Deloitte revealed that the primary driver for outsourcing today is improved access to talent (42%), followed by increasing customer demands (35%). Spend optimization ranks third (34%).
“The growing adoption of outcome-based delivery models is redefining the value proposition for outsourced services — from sourcing low-cost talent to sourcing value-added capabilities,” states the report.
Nearshoring is at the heart of this shift, enabling companies to broaden their talent pools while maintaining close collaboration across borders. And as this new era unfolds, Eastern Europe continues to cement its role as a powerhouse in the industry. Several factors make the region well-positioned to attract even more investment: a skilled IT workforce, high proficiency in English, cost-effectiveness, time zone alignment, and cultural and geographic proximity to Western Europe.
However, Eastern Europe is far from uniform. In fact, the very term Eastern Europe is ambiguous: broader definitions may include the Baltic countries and almost everything west of Germany, while narrower definitions may even exclude the Balkans altogether.
Similarly, the conditions in each country within the region can vary significantly. For example, in May this year, the Financial Times reported a decline in foreign direct investment from Germany to its eastern neighbors. This decrease can be attributed to several reasons, such as sharp annual wage increases of 10% in Hungary and Slovakia due to tight labor markets — for comparison, Germany has experienced only a 2% annual wage increase. In Czechia, it was the koruna’s rise against the euro that eroded competitiveness.
A closer look at Eastern Europe’s attractiveness
While some countries in the region have noticed a decline in competitiveness, others stand out. Take Bulgaria, for instance. Its appeal stems not only from its sustained cost-effectiveness but from an optimal combination of world-class developers, high English proficiency, EU membership, a higher-than-average proportion of women in tech, and a vibrant tech community. The country’s main tech hubs are located in Sofia, Plovdiv, Varna, Veliko Tarnovo, and Stara Zagora.
“The outsourcing landscape has shifted fundamentally over the last decade,” says Tsveta Dimitrova, COO and co-founder of Comstream, a recruitment and nearshoring company specializing in IT, with offices in Bulgaria and Sweden. “In the past, outsourcing was 100% about cutting costs. Today, companies are no longer simply trying to find the cheapest option; instead, they want to secure the right competence at a reasonable price level.” She notes that, although rates in Eastern Europe may be higher than those in some Asian destinations, the value lies in a balanced offering: “The value comes from quality, cultural alignment, proximity, and long-term reliability. That’s where Eastern Europe, especially Bulgaria, really shines.”
Below are the key factors driving the region’s outsourcing expansion, with country-specific details.
Skilled IT workers
In 2016, the coding platform HackerRank ranked developers by country, based on the average score across all its challenges. Several Eastern European countries ranked among the top 20 nations: Poland (3rd), Hungary (5th), the Czech Republic (9th), Ukraine (11th), Bulgaria (12th), and Romania (20th). (Russia, a transcontinental country partly located in Eastern Europe, ranked second.)
These rankings matter because companies are struggling to find such talent domestically. A 2021 report revealed that 94% of tech employers in the UK believe that there is an industry-wide skills shortage. Additionally, a recent survey found that employers in Europe are increasingly turning to cross-border hiring to expand their talent pool.
High English proficiency
According to the EF English Proficiency Index 2024 — a ranking of 116 countries by English skills — several Eastern European countries rank among those with the highest proficiency: Croatia (5th), Romania (12th), Poland (15th), Bulgaria (16th), Hungary (17th), Slovakia (18th), Estonia (20th), Lithuania (23rd), Serbia (24th), and Czechia (25th).
Time zone alignment
Bulgaria and Romania are just one hour ahead of Germany, and two hours ahead of the UK. Poland and Serbia share the same time zone as Germany, meaning they are just one hour ahead of the UK. This minimal time difference ensures substantial overlapping working hours and enables seamless, real-time collaboration.
Cost-effectiveness
The lower cost of living in Eastern Europe, compared to Western Europe and North America, allows developers to offer competitive hourly rates, thus reducing costs for clients. In 2024, Bulgaria had the lowest price level for consumer goods and services among EU countries, at 40% below the average, according to Eurostat.
In Bulgaria, the average hourly rate of a software engineer in 2025 is €17.75. This is 60.84% lower than the average hourly rate in Germany (€45.33), and 54.90% lower than in the UK (€39.36). While actual wages will vary based on seniority, these figures provide a useful reference.
Again, it’s important to note that this difference in pricing is due to a lower cost of living, not to lower quality. This is why many companies from Western Europe and North America opt to hire freelance developers in countries like Bulgaria.
Legislative alignment and unrestricted movement
Bulgaria and Romania have been EU Member States since 2007, and Poland since 2004. Their EU membership ensures shared regulations, including the GDPR, facilitating cross-border business operations.
Furthermore, all three countries are part of the Schengen Area, which ensures unrestricted movement during business travel.
In contrast, Ukraine — though a popular outsourcing destination — is neither part of the European Union nor the Schengen Area. This can pose logistical and regulatory challenges, further compounded by the ongoing war, which complicates business activities in the country.
Gender diversity in tech
Among all EU countries, three Eastern European nations have the highest proportion of women in information and communication technology (ICT): Estonia (27.6%), Romania (27.3%), and Bulgaria (27%). In contrast, the European average is only 19.5%. For instance, in Germany, only 19.2% of tech specialists are women.
Incentives
Many Eastern European countries look to attract foreign tech businesses by offering tax breaks and incentives.
For example, Bulgaria has one of the lowest corporate tax rates in the European Union at just 10%, which has created a favorable environment for tech startups and IT companies. Additionally, the personal income tax rate is also very low at 10%, which is increasingly attracting skilled professionals from all over the world to relocate to Bulgaria.
Vibrant tech communities
Many Eastern European countries have established science parks and innovation districts, often gathering researchers, entrepreneurs, and the government. The region has several members of the International Association of Science Parks and Areas of Innovation (IASP). For instance, there is the Lviv IT Cluster in Lviv (Ukraine), the Măgurele Science Park in Măgurele (Romania), the Cluj IT Cluster, in Cluj-Napoca (also Romania), the Kraków Technology Park, in Kraków (Poland), the Sofia Tech Park, in Sofia (Bulgaria), and many others.
Innovation and global impact
Eastern Europe is much more than just a hub for outsourcing. The region is home to successful, innovative tech companies. Think Grammarly: it was founded in Ukraine, and is now headquartered in San Francisco with additional offices in Kyiv, New York, and Vancouver.
Shelly Group, a global leader in home automation technologies, is a Bulgarian company, now headquartered in both Sofia and Las Vegas, with an additional office in Munich.
Other examples of the region’s commitment to innovation include successful companies like Bolt (Estonia) and UiPath (Romania).
Wrapping up
The global IT outsourcing landscape is evolving, and Eastern Europe is one of its most dynamic engines of growth.
And as global companies look beyond cost and toward long-term strategic partnerships, Bulgaria is one of the countries redefining what outsourcing means: not just as a source of affordable talent, but as a source of high-value innovation and expertise on a European scale.
The country offers a unique combination of diverse talent, cost-effectiveness, cultural compatibility with Western Europe, and seamless legislative alignment with European standards — making it one of Europe’s premier destinations for IT services. Some renowned outsourcing companies in Bulgaria are Accedia, the aforementioned Comstream, Dreamix, and Scalefocus.
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