Main Trends for Software Development Outsourcing in Hungary

Main Trends for Software Development Outsourcing in Hungary

Hungary became one of the most popular options for web application development outsourcing in the last decade. Poland and Ukraine are still more attractive due to a variety of factors, but Hungary is ahead of most of the European countries in terms of the IT infrastructure and the number of qualified workforce. In this post, you will learn about all the main trends in the Hungarian outsourcing market. 

Cost-effectiveness

Without a doubt, the main reason for looking at offshore outsourcing options in the first place is significantly lower costs. The average coder’s salary in Eastern European countries is traditionally three times lower than their colleagues from the USA with the same experience and qualifications. Hungary is no exception due to lower costs of life and the difference in the exchange rate between the American dollar and the Hungarian national currency called forint. Due to the high inflation rate in Hungary and no definite date for announced earlier switching to Euro, IT professionals’ salaries will likely continue to be extremely budget-friendly. 

Support by government

The Hungarian economy is service-based. That means that most of the money in the country’s budget comes from different services that its citizens provide and not from manufacturing or selling natural resources. So, no surprise that the local government is really supportive of the whole IT industry. Several years ago Hungary even doubled its budget for this sector of the economy and for creating new workplaces in tech. Many Hungarian universities have software engineering programs, there are a lot of initiatives for encouraging the creation of startups, and working conditions for tech professionals are better than in most countries in the region. All of that guarantees that more and more young Hungarians will choose IT as their future career. 

Friendly laws

As a result of the overwhelming governmental support of tech companies, laws in Hungary are designed to help grow the market for professional IT services. First of all, business taxes are relatively low with no hidden fees or indirect taxation. For example, the personal income tax in Hungary is 16%, which is higher than in Ukraine but still lower than in most European countries. The government also offers a lot of opportunities for getting a refund or cash subsidies. Consulting with your legal team or counsel from an agency will help you to decide on the best way to receive some kind of financial benefit from working with the Hungarian government. Setting up a permanent office is easy and all necessary paperwork can be ready in a matter of weeks. 

The growing number of specialists

Hungary has an advanced higher-education system and several of the country’s universities every year make the top 200 lists by European research agencies and even overseas. For example, Times’ Higher Education list in 2020 featured eight Hungarian universities. Five of them have a software development program. Besides higher education, there are numerous boot camps or courses provided by development companies. Now Hungary has about 80 thousand qualified IT professionals and every year universities only provide between six to seven more. The Czech Republic and Romania had more just several years ago but now Hungary charged ahead. It is still considerably less than Ukraine and Poland have but the number of tech talent is extremely large. Of course, due to lower salaries in Hungary, most local specialists prefer to work for foreign companies through freelance sites and outsourcing agencies. 

Political stability

Hungary is a democratic country and a European Union member. These factors guarantee a good investment climate and make the country attractive to foreign businesses. Two years ago the World Bank assessed Hungary 75 out of 100 for political stability which is a really good number. It indicates that in the near future there are extremely low chances for politically-related violence and other catastrophic events. In favor of this is the fact that a great number of international companies continue to open new offices in Hungary. Among them are Nokia, Microsoft, and Siemens. Of course, instability in Eastern Europe is a matter of concern to people around the world, but we can say with great confidence that now the Hungarian IT sector is safe. 

English proficiency

In Hungary, there is currently about one percent of an illiterate adult population. This speaks to a strong system of school education. Due to English being the main foreign language in the majority of schools, Hungarian developers rarely have any problem with communication. International research shows that Hungary ranked among 30 countries in terms of the best English proficiency. It shows that local tech specialists have no problem communicating with clients all over the world. Anyone who ever hired freelancers with poor English skills knows how important it is. 

Limitations

Of course, the Hungarian outsourcing market has its limitations. Independent research shows that even with the number of IT specialists growing every year, it is unlikely for Hungary to catch up to its neighbors Poland and Ukraine. Experts think that the country reached its limit and considerable growth is unlikely due to demographic and other factors. Another thing that sometimes can drive potential clients off is European Union membership. Doing business according to all organization’s guidelines and regulations from overseas can be really difficult, but for clients from Western Europe, it is more of an advantage. Drastically different time zones with the US is the big con too. Communicating with the development team can be almost impossible and traveling to Hungary for some face-to-face takes about 12 hours. Those limitations have a negative impact on the growth of the IT outsourcing sector in Hungary. 

Conclusion

Eastern Europe has been a go-to destination for app development outsourcing for a long time now and Hungary managed to become one of the most exciting countries in the region in terms of reasonable salaries, skilled specialists, and business-friendly laws. The latest trends show that overall growth will likely continue in the near future, so forming a strong partnership with the Hungarian development team will be an investment in the future. Despite some local market limitations, the IT industry’s future is bright. 

Albert Howard