These are the four most popular locations to set up a remote IT team in 2022

It is currently difficult for European companies to find good IT professionals, engineers, data specialists and other technical staff. For years, companies have been looking across borders for solutions in the form of a remote team or outsourcing. But what is the best destination for setting up such a remote team? Where can you find a large pool of highly educated people who speak English well? We take a closer look at four popular destinations: India, China, Argentina and Poland.

India has more tech talent than Silicon Valley

The Indian talent pool

According to a study by Price Waterhouse Coopers, India is not only the largest IT hub in the world, but cities such as Bangalore and Pune attract more tech talent than Sillicon Valley. India has one of the largest and most educated talent pools in the world. Around one and a half million students enter the country's technical universities every year, and they are not the least of these. In fact, six of the seven Indian universities with a QS World University Ranking are technical universities. According to research by Gild , Indian developers scored as much as 11% better than their American counterparts on maths and mathematics assessments. Indians also speak excellent English, the country's second official language. 

The Indian IT market 

India is the country with the most ISO-9000 certified software companies in the world. ISO stands for International Standard Organisation and the certificate guarantees the quality of software design, development, production and installation. In addition, over 75 per cent of the global CMMI Level 5 certified IT companies are located in India. The CMMI is a scale that indicates the level of software development of an organisation. The model distinguishes five levels, of which 1 is poorly developed and at 5 the development process runs like a well-oiled machine. With about 67% of the global market, India is the world's largest outsourcing destination for the IT industry. India's outsourcing market currently employs around 5 million developers who specialise in app development, both native and hybrid, the Python, Java, JavaScript, C/C++ and PHP programming languages and the country is rapidly developing machine learning, AI, GIS and blockchain technologies.

The advantage of outsourcing to India

By outsourcing your IT or R&D to India, you can not only make significant cost savings of 50-80%, but you can also use the 4.5 hour time difference (3.5 in summer) to your advantage. For example, by solving problems before your European employees or users are affected. For this reason, ARS Traffic & Transport Technology in The Hague, a leading player in technological traffic solutions, has had an R&D facility in India for the past twenty years. In addition to software development, the section control systems and matrix signs along Dutch motorways are monitored from the Indian ARS T&TT office. "If a system breaks down, due to the time difference, we can repair the system before the rush hour starts," CEO Jan Linssen told us. 

China invests to become a major tech destination

The Chinese talent pool

The Chinese government has been investing in improving the country's tech sector for several years now and it seems to be paying off. China is not only the birthplace of big tech companies such as Huawei, Alibaba and ByteDance, the parent company of the app TikTok, but is now also ranked 14th in the Global Innovation Index. This is an annual ranking that ranks 126 countries based on their ability to innovate. Science and maths are also major focus areas in Chinese schools and universities, resulting in some 5 million IT students graduating each year. Because technology is a relatively new focus of the Chinese government, the IT sector is still very young. About 57 percent of the Chinese developers have only one to three years of working experience. This makes them a lot less experienced than their international colleagues, where half of them have four to ten years of experience. 

The Chinese IT market

According to experts, the Chinese IT sector is highly fragmented. There are few large IT companies and the small companies all focus on the domestic market. This is partly because Chinese developers often speak little or no English. China is now mainly concerned with product development and low-end, relatively uncomplicated IT applications. Although the IT products developed in China are simpler, the price is not extremely low anymore. On average, a cost reduction of 40% can be expected. One of the biggest obstacles for foreign companies wishing to outsource to China is the lack of intellectual property protection. Although the government is already working hard to crack down on piracy and other forms of intellectual property infringement. Chinese developers generally excel at functional programming and the Python and Shell script programming languages.

Argentina is the number one outsourcing location for US companies

The Argentine talent pool

Over the past 20 years, Argentina has invested heavily in technical higher education, with some 90,000 students now leaving university each year with a technical diploma. In recent years, several Argentine universities have appeared in prestigious international rankings, including QS, the Center for World University Rankings (CWUR) and Times World University Ranking. As a result, Argentina's talent pool has grown to around 135,000 developers in a short period of time. According to the 2019 Global Skills Index by Coursera , Argentine developers are the best software engineers in the world. They also speak the best English in all of Latin America. The cost savings that outsourcing to Argentina could bring you depends on the erratic economy. At the moment, the country is relatively cheap and would be around 40 percent, but in good times it would be more like 20. 

The Argentine IT market

Despite Argentina's faltering economy, the country's IT sector has been showing strong growth of around 3 to 5 per cent per year for a decade. This is partly because the Argentine government made the growth of this sector a priority back in 2004 by introducing the Ley de promoción de la industria del software. This law made the sector completely free of restrictions on foreign investment, making software development the most important source of foreign investment, up to 58 per cent, in Argentina. Argentina's IT sector comprises about 3,800 companies, including big names such as IBM, Intel, Motorola, Microsoft, Oracle, Siemens, and Gameloft. It is the number one outsourcing destination for companies from the United States due to the zero time difference. The difference with Europe is quite significant, with the Netherlands running four hours ahead. Outsourcing companies in Argentina specialise in app development, open source projects, cloud computing, Magento, PhP and DevOps. 60 percent of the IT companies are ISO9001 certified.

Poland is the Finech location of the European Union

The Polish talent pool

The best universities in Poland are four technical universities, and some 140 000 technical students graduate there every year. IT courses in the country are very popular not only among Polish but also among international students due to their high level and low cost. The IT industry in Poland has about 300,000 developers, but 80 per cent of them work in the R&D offices of tech giants such as Motorola, IBM and Shell. Poland is in fact known as the R&D hub of Europe. Only 20 percent of Polish developers are therefore available for outsourcing projects. Poland has no time difference and no major cultural differences with most Western European countries, so the prices are at a European level. The cost savings from outsourcing IT or R&D will be around 20-30 percent.

The Polish IT market

The Polish IT market is growing at a steady pace. In 2019, the sector grew by about 2.9 per cent and revenues increased by 4.6 per cent. This makes the IT industry account for about 8 percent of Poland's GDP. In addition to the many large multinationals that have established their R&D in Poland, the country is also known as a good location for FinTech projects. Developing such projects requires experience to make them bug-free and, more importantly, safe for users. Polish developers are experts in this field. Poland is the largest FinTech market in the European Union with an estimated value of €856 million. Because Poland is a member of the EU, it follows European privacy and intellectual property laws. This can give European companies a huge advantage when they want to start a web development project. Front-end and back-end development is therefore a much sought-after service by European companies. Polish developers are also known for their specialisation in PHP, Java and .NET. 

This is the time to outsource

All four locations have their advantages and disadvantages, but one thing is clear. Since the outbreak of the pandemic, we have faced a major challenge worldwide. Companies have suffered a severe financial blow, but at the same time the need for digital solutions for customers and employees has increased. Cutting your IT budget is impossible in today's digital world, which is why outsourcing internal IT is a solution that can save a lot of money. Wondering how outsourcing to India will benefit your business? 

Without its Indian joint venture partner, the Swiss global company Ammann would never have become the market leader

The Swiss family-owned company Ammann is the world leader in construction and road building machinery. "In almost all of the 100 countries in which we operate, we have started and become successful entirely on our own," explains Rolf Jenny, Ammann's managing director in India. "Except in India. There we quickly came to the conclusion that without local knowledge and support we would never make it."

Rolf Jenny and Apollo's managing director, Asit Patel, open the joint venture's first factory

"Ammann's first steps in Asia were made in China. At the end of the 1990s, the Chinese government was extremely interested in our technology because they wanted to improve their entire road network in a short space of time. We were therefore given a warm welcome with attractive tax rates and special support programmes," says Jenny. "We didn't have to make many changes to our product in China to be successful, just a small reduction in price. That was easily solved with a local production site and we had the market in no time."

With this smooth experience in his back pocket, Ammann then set off in good spirits for the other big market in Asia: India. "There we were suddenly at a loss for words. The Indians were not interested in our advanced products and certainly not at the price we were offering them," says the managing director. "What worked great in China did not work at all in India. In India, we couldn't get away with just minor adjustments to our products, so we said to each other: 'We're not going to manage this ourselves, we need a partner who understands the Indian way of thinking'."

Know well what you have to offer an Indian partner

Ammann starts a big market research in the hope of finding a company they want to buy, but instead comes across the Indian company Apollo. At the time, Apollo was the leading producer of road building materials in India. "And that was exactly why they were interested in our technologies, but immediately said no to the idea of a possible partnership," says Jenny. "They said that they had been operating at the top end of the Indian market for 50 years and so there was no advantage in entering into a joint venture with an inexperienced European company. With this harsh rejection, they wiped out our possibility of a successful start-up in India in one fell swoop."

But the Swiss company was lucky: two years later, Apollo sought contact again and this time the Indian manufacturer was open to a joint venture. "That was the start of tough negotiations, because we didn't immediately agree on the terms of our partnership," says Swiss top executive. "Ammann is normally always a 100 per cent shareholder in the companies we set up abroad, so for us it was unmentionable to own less than 70 per cent of the joint venture. Apollo, on the other hand, wanted the shareholding to be split 50-50. We also wanted the joint venture to focus only on India, while Apollo wanted to start exporting to neighbouring countries. Once again, we were facing quite a challenge in India."

Bridging differences

In order to bridge the differences during negotiations, Jenny initially focused on the similarities between the two parties. "We are both family businesses, which immediately created a bond. We decided to invite Apollo to Switzerland to get to know our company even better and gain more insight into how we could complement each other," explains the managing director. "We are the world leader in high-tech products, Apollo in low-tech, low-cost versions. So together we could deliver a good quality product at a mid-price. By building up trust and proving that we really saw them as an equal partner, we were able to convince them of the benefits that the joint venture with us would bring them. Without compromising on our own terms."

According to Jenny, a successful joint venture rests on a number of basic principles. "You have to be able to trust each other completely and treat each other as equal partners, even in our case where we owned 70 per cent of the company. All decisions within the joint venture were always made by mutual agreement. From the very beginning, we also had it agreed what would happen if one of us wanted to leave the joint venture. A joint venture should always be equally beneficial to both parties. That is why it is so important to think not only about what a happy marriage will look like, but also about a friendly divorce if one of the two wants to go on alone."

Ending the joint venture 

After eight years of running a successful joint venture together, Ammann and Apollo decided to call it a day last year. "We have learned a lot from each other over the years and have always worked well together without any disagreements. But Apollo was ready to stand on her own two feet again," says Jenny. "The 70-30 ratio meant they were more like investors than the entrepreneurs behind the business and something was starting to itch again - they wanted to get back to work." Apollo sold the remaining 30 per cent for almost 27 million to Ammann. "Not only did they get a very good deal with this sale, but they also benefited from the boom that the company has experienced in recent years. Together, we have not only increased the value of the company enormously, but also tripled its turnover. The joint venture has always been a success for both parties, despite the separation. We are therefore parting as friends and will continue to have a good relationship."

Jenny therefore recommends an Indian partner to every European company that wants to start up in India. "You can only be successful in India if you understand the wishes of the customer and if you adapt your product and price to these wishes. To do that, you have to manufacture in India, the product has to breathe India. If you are confident that you can do that on your own, then go for the adventure. In our case, we knew our products didn't fit the market, but we needed the local knowledge to understand how to improve that. If you go it alone, you have to be in it for the long haul and expect it to be a process of trial and error. We wanted a quick market entry without too many setbacks and we couldn't have done it without our great partner. So do your research and strategise accordingly, but be aware that local help makes a lot easier in India."

Opportunities in infrastructure and construction

Ammann is looking forward to the future in India. "Construction and infrastructure are two sectors that will grow significantly in India in the coming years. Indeed, more infrastructure is needed in the country if it is to maintain the same high economic growth rate in the long term," says the Ammann foreman. "But even though these sectors will offer interesting opportunities, it is important that foreign companies realise that India is not a quick fix. I have seen many international companies come and go, hoping to get a slice of the investment in the road network. But if your product doesn't fit India's needs and Indians don't trust you, you have a choice: either invest for the long term or pack up."

Joint venture in India: how to do it

Starting with a partner can be smart in a country like India. Despite the fact that the rapidly growing Indian economy offers opportunities for companies in every sector and industryIndia is also a country where you need to have good connections and really understand the market in order to succeed. As a newcomer to the Indian market, starting a joint venture brings a lot of advantages. You can rely on the market knowledge and extensive network of your Indian partner and you share the risks. But there are also examples of joint ventures in India that failed due to cultural differences and a lack of leadership, such as McDonalds happened to McDonalds.

Memorandum of Understanding

A joint venture almost always involves the creation of a new company owned by two or more partners. A joint venture is often set up for a special project and is usually not intended to be a long-term business connection. The partners contribute their assets (people, machinery, capital and knowledge) for a specific purpose and for a limited time, but remain completely separate companies while the joint venture forms a new company.

Before setting up a new entity as a foreign company with an Indian partner, it is highly recommended that due diligence be performed, just like any other business transaction. In addition, drafting a memorandum of understanding (MOU) is very common in India. Such an MOU ensures that all parties fully understand and agree on the purpose, responsibilities and risks of the joint venture. It is a short document without much legal jargon, which states the roles of both parties and establishes a roadmap for the future on the parties' intentions, management structure and cost allocation.

Articles of Association

Most joint ventures in India are structured in the form of private limited companies, the equivalent of the Dutch BV. It is mandatory for a private limited to have at least two directors and at least one director who is resident in India, that is, someone who has resided in India for a period of at least 182 days in the previous calendar year. So this does not necessarily have to be an Indian. In a private limited, the Articles of Association (AoA) are a very important document. The AoA are a requirement while incorporating a private limited in India and contain regulations for the internal management of the company.

The Companies Act 2013 gives companies the freedom to determine the content of the AoA. For example, the AoA contains a clause on the steps to be taken in the event of conflict or termination of a joint venture in the event of an impasse. It is therefore advisable to devote time and attention when drafting the AoA and not depend on a standard off-the-shelf concept. The Companies Act, 2013 requires every company to have an MOU and AoA. The MOU and AoA are the charter documents of the company. As such, both must be filed with the Registrar of Companies (the Indian Chamber of Commerce) of the province in which the foreign company wishes to establish itself.

Joint Venture Agreement

Once the MOU and the AoA have been drafted, the foundation for the joint venture has been laid and the Joint Venture Agreement (JV Agreement) can be drafted. This is a working document that explicitly focuses on what decisions the partners can and may make about the shares, management structure, withdrawal rights, competition issues, dispute resolution, intellectual property rights and any guarantees. The JV Agreement is not a binding document and is drafted purely to define the cooperation between and responsibilities of the partners. Indian law provides sufficient flexibility for the parties to set out their own arrangements in a final agreement.

The JV Agreement or other agreements related to the joint venture necessarily require skill in drafting the documents without room for ambiguity. Complicated and vague documentation can be fatal to the joint venture and impede the interest of the parties. One of the things that requires expertise is the exit strategy. The JV Agreement establishing a joint venture should also include a planned exit strategy so that all parties are protected once the partnership has reached its goal. 

Most joint ventures are dissolved through a partner buyout. It is advisable to include clear terms for terminating a JV in the agreement. Once the parties have determined the key points for the JV Agreement, it is wise to turn the matter over to a lawyer in India. Taking into account Indian laws and regulations, he or she can convert the key points into the official Joint Venture Agreement document.

Local support in setting up joint venture

So setting up a joint venture offers you, as an international company and newcomer to the Indian market, interesting advantages. No long start-up time in which you have to build a network, find the right distributor and acquire customers. For all this you can rely on your Indian partner. But the responsibility of setting up the joint venture itself does rest on your shoulders, of course. Local knowledge and support is no luxury in that process. Do you want to do all the preparatory work for the joint venture in a sound manner and start off with the right documents in your pocket? We have a team of local experts ready to make your start as smooth as possible.