The pros and cons of outsourcing to Romania

4K

Outsourcing to Romania, a country located in Central Europe, is popular for several reasons like a stable economy, high-quality services, convenience, etc.

It was ranked 28th among the total 50 countries in a list of credible outsourcing locations by the 2019 Global Services Location Index. 

But before outsourcing to Romania, you need to study it well to ensure business success.

In this article, we’ll cover five main benefits and three disadvantages of outsourcing to Romania. We’ll also discuss the three popular outsourcing industries in the country and talk about the potential of its four booming cities.

Finally, we’ll compare Romania with other European countries as outsourcing destinations.

Let’s get started.

Table of Contents

• 5 main benefits of outsourcing to Romania
• 3 key disadvantages of outsourcing to Romania
• 3 popular industries to outsource to Romania in 2022
• 4 major cities to outsource to in Romania
• Comparing Romania with other European countries

5 main benefits of outsourcing to Romania

Let’s take an in-depth look at the benefits of outsourcing to Romania:

1. Fast-growing economy

Romania has been an upper-middle-income economy and a member of the European Union (EU) since 2007. It has a high GDP when compared to other Eastern European countries. 

For example, Romania had a GDP of 5.9% in 2021, while other outsourcing destinations like Slovakia and Armenia had only 3% and 5.7%, respectively. 

The retail and IT&C sectors are the main drivers of digital transformation and economic growth in Romania. According to the National Institute of Statistics, these two industries together make up around 50% of the country’s GDP growth. 

Moreover, the IT sector alone grew by 14.3% in 2019 and accounted for more than EUR 5 billion (approximately USD 5.5 billion). 

2. Highly skilled employees

Romania has 41 technical universities, including the seven best computer science institutes in the world. As a result, the country offered 10,000+ young and skilled IT specialists in 2020, as per a Zinnov study. 

Additionally, Romania was ranked 20th by HackerRank for having the best programmers in 2020. 

The country outranked the United States (78.0), the United Kingdom (77.7), and India (76.0) by a considerable margin. It also ranked higher than a few leading countries in Latin America, with renowned software developers like Brazil (73.4) and Argentina (72.1). 

Further, Romania houses the 16th largest IT hub (in Bucharest) in Europe. Its software developers are specialized in web development and are adept in various programming languages like Python, Java, PHP, and JavaScript. 

As a result, a Romanian software developer will be skilled at programming and can ensure superior quality for your outsourcing services. 

3. Easily accessible to European and American countries

Romania is located in the south-eastern part of Central Europe and is bordered by Ukraine and Hungary. 

As a result, you can visit an offshore software development company in Timisoara (a Romanian city) if you travel for 2 hours from Munich. You can also reach the location in less than 3 hours from London or Barcelona.

Since the country is a part of the EU, anyone with a Schengen visa can visit it without a separate visa.

Additionally, Romania’s strategic location makes it an ideal outsourcing destination for Europe. 

Romania is situated in the GMT+3 time zone and other European countries are in GMT+0, GMT+1, and GMT+2 time zones. Since the time difference isn’t huge, a company based in Europe can work with its Romanian service providers smoothly. 

On the other hand, Romania is 10 hours ahead of West Coast US cities like Los Angeles and 7 hours from East Coast cities like New York. A company from North America can leverage this difference – the employees from the Romanian outsourcing company can have a code ready by the time the American employees start their work hours.

When it comes to culture, Romania usually is warm, open, and hospitable. This helps Romanian companies smoothly manage partnerships from any part of the world.

4. Multilingual services

Speaking a common language can help your in-house team communicate effectively with the Romanian offshore team. 

Although Romanian is the official language in Romania, parts of its population are proficient in English, German, French, and Italian. This, coupled with proficient soft skills, can help Romanian teams with better cooperation, good business etiquette, etc.

It can also aid in the customer service industry when customers from different countries call to address queries or issues. Your multilingual Romanian agent can talk to the customer in a language they’re most comfortable with and improve customer satisfaction.

For example, a German customer can converse conveniently in their native language with a Romanian customer service agent fluent in German. This can help resolve the issue quickly and increase customer satisfaction.

5. Friendly government policies for foreign investors

The Romanian government aims to attract foreign investment to the country and has introduced several incentives for that cause.

Here are some of the fiscal incentives that they offer investors:

• Citizens of the United States, Canada, Australia, New Zealand, and most European countries don’t require a Visa to stay in the country for less than 90 days.
• Companies reinvesting profits in new technological equipment don’t have to pay profit tax.
• Companies making direct investments can avail full deduction of the advertising expenses.

Also, a software developer and employee working in R&D (Research and Development) labs doesn’t have to pay income tax.

Additionally, Romania has nearly 100 industrial parks distributed across the country, of which about two-thirds are fully operational. These hubs don’t require foreign investors to pay taxes for land, building, urban planning, and changing land destinations.

Outsourcing software development, customer support, and other tasks to Romania can be beneficial. However, there are a few cons of outsourcing to Romania. 

3 key disadvantages of outsourcing to Romania

Here are the three drawbacks of outsourcing services to Romania.

1. Shortage of talents

Although Romania has many tech specialists and other skilled professionals, the country is facing an acute talent shortage. 

A survey conducted by the Manpower Group revealed that Romania is facing difficulty in finding qualified employees due to: 

• Massive immigration of Romanian nationals to Western Europe.
• Aging of the working population.
• Inadequate educational programs.

According to a study published in 2020, 52% of Romanian entrepreneurs reported that a lack of talent generated a monetary loss, estimated to be EUR 7.1 billion (USD 7.8 billion).  

2. Relatively high expenditure

The cost of employing a Romanian IT specialist is USD 1,802 per month. In contrast to this, the average monthly salary of an IT engineer in Poland is PLN 7,590 (Polish złoty) or USD 1772. 

Similarly, an IT specialist in Ukraine (a popular European outsourcing destination) has an average salary of UAH 23,100 (Ukrainian hryvnia) or USD 778, which is almost two times lower than Romania’s. 

This means that you may be able to operate your business in a more cost-effective manner if you outsource to Ukraine, Poland, or other lower-cost countries. 

3. Lack of oversight

You may find it difficult to track projects that your Romanian team is working on as they aren’t always under your control. This could reduce transparency and negatively impact the trust between you and your outsourcing team. 

To avoid that, you can use Time Doctor, a time tracking and employee productivity management tool that can help you view the task your outsourced team is working on in real-time. 

The tool lets you record the time an employee spends on a particular task or project using an interactive or silent tracker. Based on this, you can analyze your outsourced team’s productivity and generate different types of productivity reports. 

Additionally, you can generate accurate payroll for your outsourced team based on the total time they have worked. 

Check out Time Doctor’s other interesting features.

Since the pros of outsourcing to Romania outweighs its cons, the country is a potential outsourcing destination. Now, let’s look at the popular outsourcing industries in the country.

3 popular industries to outsource to Romania in 2022

Here are the industries you can outsource to Romania:

1. Software development outsourcing

Romania is a great software outsourcing destination due to the availability of skilled IT professionals and the IT services provided by tech hubs. The country has three IT hubs – Bucharest, Cluj-Napoca, and Iasi.

Other small and growing IT outsourcing hubs are Sibiu, Targu Mures, Brasov, and Constanta.

A software development company can access a large talent pool with over 100,000 software engineers in Romania. The country also has a 4.9 million working population, including more than 10,000 certified IT specialists (STEM graduates).

As a result, a Romanian software outsourcing company can offer custom software development and give products fitting specific requirements.

2. Business Process Outsourcing (BPO)

According to the FRD Center, the BPO sector in Romania involves 280 companies with around  131,000 employees. The revenue generated by this industry was EUR 4.5 billion (USD 4.98 billion) in 2020 and the business services industry contributed about 2-2.5% to the GDP.

This advancement in the sector is due to:

• Strong IT infrastructure and increasing automation.
• Availability of qualified services.
• Language proficiency in English, German, etc.

Learn more about BPO from our comprehensive guide and latest trends.

3. Knowledge Process Outsourcing (KPO)

KPO is the outsourcing of knowledge-based tasks involving gathering, managing, analyzing, and delivering information. Handling vast amounts of data may require a large workforce and it could be expensive if conducted in some countries like the USA or Switzerland. 

Since a Romanian company can offer relatively low average salaries, you can access KPO services at lesser costs.

This service is popular in:

• Financial and Investment research.
• Data Analysis and Interpretation.
• Research and Development.

But where in Romania can you outsource to?

Let’s explore the best outsourcing cities in the country.

4 major cities to outsource to in Romania

Here are the popular outsourcing destinations in Romania:

1. Bucharest

Bucharest, the capital of Romania, is the largest tech hub in the country, with IT companies like Oracle and Microsoft. Being the 6th fastest growing city in Europe, it’s home to several talented Romanian IT professionals. 

The city is one of the seven cities selected to host the European Cybersecurity Industrial, a hub to distribute the EU and national funds for cybersecurity projects. Moreover, the city has full coverage for 5G, ensuring a seamless outsourcing experience. 

2. Cluj-Napoca

Cluj-Napoca, the Silicon Valley of Eastern Europe, is another leading city in the country in terms of quality of life, employment access, and outsourcing partnerships. More than 27,000 companies and 350 I&CT start-ups are built in the city every year.

Moreover, the city has been allocated EUR 475,891,989 (USD 526,298,468) for SUD (Sustainable Urban Development) during 2021-2029 by the government. This implies that the city will be of more outsourcing value in the coming years.

3. Iasi

Iasi is the cultural capital of Romania and has a highly competitive talent pool and outsourcing market. 

Here are the most crucial outsourcing services in Iasi:

• IT (Information Technology).
• Project management.
• Finance and accounting.
• HR (Human Resources).
• Procurement and customer operations.

This outsourcing destination also has several large companies (like Amazon and HCL) and startups (like Digitalya OPS and Dolfn).

4. Timișoara

This Romanian city is home to offices of prominent MNCs from the IT industry – Atos, IBM, and Wipro.

In addition to these, it also houses:

• Accenture (Consulting company).
• Nokia (Telecommunication services).
• Intel Corporation (Computer hardware and software).
• Robert Bosch (Computer hardware and software) and many more.

Now, let’s pitch Romania against other European countries to get a better picture of outsourcing.

Comparing Romania with other European countries

The main reasons a company would consider outsourcing are to reduce expenditure and avail skilled talents. Since Romania offers both, it’s a potential outsourcing destination and attracts companies from neighboring and faraway countries.

However, there are other European countries suitable for offshore and nearshore outsourcing (outsourcing to a neighboring country). 

For example, Poland (a European country) was ranked the 30th best outsourcing destination with a total score of 6.515 (Startup Ecosystem Report 2021). It was followed by Ukraine in the 34th position with a total score of 5.705. Romania got the 41st rank and was given a total score of 4.26.

But according to DAXX, outsourcing to Poland isn’t cost-effective. Poland has a higher average wage of USD 40-56 per hour when compared to Romania (USD 26-45). 

Similarly, outsourcing to Ukraine can be ineffective as the country has lower English proficiency when compared to Romania. According to EF’s English Language Proficiency Index, Romania ranks 15th and Ukraine holds the 40th position among 112 countries.

Additionally, Romania helps foreign companies (managed from another country) earn USD 657,425 per year. The country houses 1000 active startups and hosts over 40 startups conferences.

All these reasons make Romania an excellent outsourcing country for businesses of all sizes.

Wrapping up

Romania has a booming outsourcing sector due to its strategic location, efficient skill set, and more. However, it also has a few disadvantages like talent shortage and high costs, because of which outsourcing could be difficult.

Go through this article to understand outsourcing to Romania and decide whether it’s profitable. For a better understanding, we also compare Romania with other European countries from an outsourcing perspective.