Hungary is a software development outsourcing destination in Eastern Europe

6 reasons for outsourcing software development to Hungary in 2021

When you search for the best software development outsourcing destinations, Hungary is one of the countries that is often mentioned, and rightly so. The country is home to thousands of expert developers and many software development companies, and the IT sector, in general, is a booming industry in Hungary.

But outsourcing software development to any country is not a simple decision, and you need to perform an in-depth analysis of many aspects of the country. That’s why we have analyzed various factors in Hungary and compiled them together in a clear and concise list. Here are six reasons that make Hungary an excellent outsourcing destination for software development.

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Hungarian tech talent pool

The number one factor you need to consider when outsourcing to any country is the quality of tech freelancers. And Hungary has a good record in terms of the country’s talent pool.

There is a constant influx of fresh Hungarian developers in the country as about 3,000 IT students graduate annually on average in Hungary, according to statistic reports from Eurostat. About 70 institutions offer IT and computing programs in Hungary, and six of their universities have been listed in the QS World University Rankings. It’s safe to say that they have a reliable education system that produces thousands of potential developers every year.

As per the 2018 State of European Tech report, Hungary had a little over 80,000 professional developers among its population of over 9.5 million people. And it’s not just about the numbers; they are equally impressive in terms of quality and talent. Comparison and ranking of IT skills conducted by various portals put Hungary in third place with a score index of 92.86%, which indicates that most developers in the country are incredibly skilled at their profession.

In terms of the most popular programming languages and technologies, Hungary follows world trends. The major part of Hungarian developers are skilled in JavaScript, HTML/CSS, Python, Java, PHP, SQL, and React. Most of the outsourcing companies will suggest web and mobile app development (on Android or iOS).

So the talent pool of IT specialists and software developers in Hungary maintains impressive standards in terms of quality and quantity. They produce sufficient IT graduates every year and already have a decent population of skilled and talented engineers active in their workforce freelancing or being involved in outsourcing development services.

Infrastructure of IT and software development industry of Hungary

Hungary has seen growth and progress in its IT and software development industry in the past few years. Revenue generated by the export of IT services in Hungary reached €1.95 billion in 2017, contributing to 8.2% of total revenue from the export of all services in the country. Budapest, the capital of Hungary, is the primary IT hub of the country where most of the developers and companies are situated. Debrecen, Pécs, Szeged, and Miscols are some other cities that also serve as important IT hubs after Budapest.

There are many well-established software development companies in Hungary, that work with such a well-known companies as Borta, Agemni, GSK, Ericsson, Philip Morris, T-Mobile, Kodak Alaris, Microsoft, Avon, McDonalds, T-Mobile and moany others.

These are just clients of a few of the top web development software developing companies, and there are many other companies, too, with teams of expert developers with years of experience and impressive portfolios. Hungary also has a favorable environment for IT startups, so new, energetic, and potential companies also regularly enter the industry.

Such a progressive system and infrastructure of the IT industry in Hungary is also backed equally by their government. There are tax relief schemes and plans for the R&D sector in Hungary, and the government even doubled the financial aid for the 2016-2020 session in the R&D sector.

Suitable time zone of Hungarian development companies

When outsourcing any services to offshore locations, it’s essential to coordinate the workflow, and that is where time zones play an important role. Considerable differences in time zones make it difficult to coordinate with the outsourcing companies. So for the workflow optimization,  it’s always preferable to select a destination where time zones are close enough.

Hungary is appropriately situated in the GMT+2 time zone, so it’s just a few hours of difference from Central and Eastern European (CEE) countries. Even the USA and Canada are only 6 hours behind Hungary, which is an acceptable difference. There will even be instances where you might need to visit the software company to personally monitor the work. In such cases, the flight time from CEE countries to Hungary is about 2 hours and around 4 hours from Western European countries. Flight time between the USA/Canada and Hungary ranges from 12 to 14 hours, which is also a manageable journey.

Thus, Hungary is perfectly located in a time zone that is easy to coordinate with most European countries. Those in the US will not face difficulty coordinating with software development companies in Hungary. This is a big factor that improves project management and regular communication between both parties when you outsource to Hungary.

Low staff attrition rates in Hungarian software outsourcing companies

When you’re outsourcing services, another crucial element to look upon is the attrition rate of companies. Low attrition rates indicate that employees tend to stick around longer in one company, while a high attrition rate means that staff is often leaving and being replaced. It’s a no brainer that outsourcing to companies with low attrition rates is always preferable. Even a single staff member resigning during an ongoing project can create many problems and disrupt the workflow.

Keeping that in mind, why it comes across as good news that the major IT hubs in Hungary have significantly lower employee attrition rates. A survey conducted by HIPA in 2019 regarding business services in Hungary shows that the voluntary employee attrition rate in the country was 18%. It indicates that most Hungary application development companies tend to retain their workforce, and employees find satisfaction working for many years in the same organization.

Ecommerce software development projects are usually long-term. It can take anywhere from 5 or 6 months to more than a year to complete the development of good quality software for different types of applications. With a lower attrition rate, it’s highly unlikely for the project to be disrupted by the sudden departure of one or more people involved. Developers in Hungary are mostly satisfied with the companies they work for so you can rely on them to see the project till the end smoothly.

Professional service delivery from Hungarian outsourcing partners

Technical expertise is not the only decisive factor when outsourcing software development. The project management skills and work ethics of companies is also an important factor which determines how capable they are to deliver the work professionally and fully meet the client’s expectations.

Full-stack software development companies in Hungary hold high standards when it comes to delivering professional services. You can find here small teams of up to 1o employees that work worked with big names like Microsoft and Avon. At the same time, there are plenty of big companies with more than 250 developers on board that work with top clients like GSK.

It shows the proficiency of software companies in Hungary to deliver professional services as per the client’s demands regardless of their workforce. The team of freelance developers is equipped with not just technical expertise but the experience and management skills required to take on projects for some of the biggest clients and still deliver top quality services.

Cost of outsourcing software development to Hungary

Lastly, it’s time to discuss the cost of outsourcing in Hungary and how cheap or expensive it can be to outsource software development projects. Hourly rates for PHP and Android software developers in Hungary ranges from $40 to $60. These are average figures, and experienced senior developers, DevOps, teamleads, architects may charge more than $60/hour, or you may find some new and emerging developers occasionally willing to work below $40/hour.

In Western Europe and North America, high-quality backend and frontend software development rates start at $50/hour, even at a basic level. They can go as high as a few hundred dollars if you look for experienced developers.

According to PayScale, an average developer in Hungary earns about $20,5K a year, when in the US this number can reach almost $72K per year, and in the UK it’s more than $42K per year.

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Comparatively, Hungary is a cheaper destination while still maintaining a similar level of technical skills. One of the main reasons for it is that cost of living in Hungary isn’t too expensive. So it proves to be an excellent outsourcing destination for software development where the rates and project costs will be cheaper than countries in the Western part of Europe or the USA.

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Some things to watch out for when outsourcing development to Hungary

Despite all the benefits of outsourcing machine learning software development to Hungary, there are several things to watch out for, such as:

Financial and tax regulations

Hungary is a part of the EU, so if you’re based in an EU country as well, the financial and tax laws may not be a big deal. But if you’re based out of the EU, it’s essential to be acquainted with the tax rules applicable in Hungary, as it will also influence the cost of outsourcing your web applications project.

Be wary of low-quality developers

Hungary indeed has an impressive talent pool of developers, and its IT sector is also growing successfully every year. However, you still can’t rule out the possibility of coming across below average developers and agencies occasionally that might tempt you with lower rates and high hopes. It’s unlikely to happen but not wholly impossible, so perform a thorough background check on any software development agency before deciding to outsource to them.

Small vs. big agencies

When you decide to outsource to Hungary, you’re bound to face confusion – whether to hire a small team of developers or a bigger development team from a company with over 100 programmers. The benefit of outsourcing to a smaller team of developers is that you can easily coordinate with them and get their full attention to your project. On the other hand, larger companies bring a lot more experience and project management skills to the table. Still, you won’t be getting their undivided attention as they probably take on multiple projects.

If deadlines are tight for you and the project needs to be done within a shorter timeframe, an agency with a bigger team may be the right fit. On the other hand, smaller agencies are suitable for projects where you desire complete attention from developers, and you can afford to bend the deadlines as long as the project comes out top-notch.

Disadvantages of outsourcing to Hungary

There’s no denying that Hungary is a superb outsourcing destination for software development, but realistically speaking, there are some disadvantages as well, which must be openly discussed before hiring software engineers.

English communication skills

The population of Hungary is generally comfortable with the English language, so the communication skills of developers will not be a huge disadvantage. However, they certainly aren’t the most fluent and well-versed non-native English speakers either, so there is a possibility that slight communication problems may arise.

Lack of options for IT hubs

When you’re outsourcing to Hungary, the best location is clearly going to be Budapest. Apart from that, you have 2 or 3 other cities worth consideration. The majority of Hungary’s IT talent is concentrated on their capital, so you have few options to explore in terms of location.

Less number of developers

Hungary is one of the less populated countries, and though they have thousands of talented developers, the total numbers are not as big compared to neighboring Eastern European countries. So if you were to compare with countries like Ukraine, Poland or Romania, the overall quantity of developers is lesser in Hungary.

Summary and key takeaways

So to sum things up, here’s a recap of all the things that makes Hungary an excellent outsourcing destination for software development:

  • They have thousands of talented developers with a high level of technical skills. Their education system also produces many promising IT graduates annually.
  • The IT industry in Hungary is growing rapidly. Budapest and a few other cities in Hungary are home to many exceptional software development agencies.
  • Time zone differences between Hungary and other European countries and the North America region are relatively small, making it easier to coordinate outsourced projects.
  • Hungary has very low staff attrition rates, so there are fewer projects getting disrupted by the departure of employees and team members.
  • Software agencies in Hungary maintain very high standards of professional services and are highly capable of delivering the needs of clients.
  • The cost of outsourcing and average hourly rates of developers is comparatively less in Hungary.

Of course, along with these benefits, there are a few downsides of outsourcing to Hungary. There might be minor issues with English communication skills, and there are very few IT hub locations in the country as well as a smaller pool of developers compared to other Eastern European destinations. However, the pros mostly outweigh the cons, so it’s definitely an excellent decision to consider outsourcing software development to Hungary.

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Written by
Svetlana Shevchuk

Digital Marketing Specialist at YouTeam, a Y Combinator-backed marketplace for building remote dev teams.

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