As more and more legal systems open up to foreign trade, companies can gain access to a large pool of resources abroad. They can build relationships with foreign partners and move their production abroad or simply export their products to new markets. IT and software development companies are also trying to profit from relocating production to foreign jurisdictions.
In general, the main advantage of relocating software development abroad is the lower costs compared to the home country. For example, the cost of developing the exact same software in India is 50% less than in the US. The savings generally result from lower labor costs, but moving IT and software production abroad can also give the company access to a wider pool of workers with higher skills and knowledge. This could explain why 50% of America’s Fortune 500 companies use offshore IT and software development. Let’s look at some of the jurisdictions where opening a software development business might be more beneficial compared to others and discuss why.
India
India has long been one of the preferred software development outsourcing destinations for leading multinational companies around the world. This means that one of the biggest advantages of choosing India for your IT and software development business would be a multinational demand for outsourced software development services. In the meantime, the company would enjoy relatively lower labor costs, a large pool of skilled workers, and a business-friendly environment with the government promoting startups and small businesses. Additionally, due to favorable political and economic initiatives from the Indian government, the IT industry is expected to grow in the early to middle teens in the next few years.
United Kingdom
London was recently described as the city with the most business opportunity and ranked number one in terms of technology readiness. While low labor costs are not one of the perks of starting a software development company in London, there are several other perks that could offset relatively higher wages. Numerous hubs and incubators provide a start-up and small business environment with all the features and support they need for less than £ 300 per month. The government is also keen to support the software development and technology sector with organizations like Tech City UK and Innovate UK to help accelerate the growth of IT companies. There are now various tax breaks available to IT and software development companies in London. Other benefits to consider include a skilled workforce and high-speed internet access.
Poland
Eastern Europe is becoming more and more attractive for IT and software development companies, with Poland ranking number one as the Eastern European country. Poland may not offer as low labor costs as India, but it has other advantages such as proximity to Western Europe and the ability to find common working hours with the rest of the world. Poland also shares a cultural affinity with the western world as well as other eastern countries. It is also believed to provide better product quality and a better business environment when compared to lower cost destinations for software development companies.
On every continent there are other jurisdictions that should be considered for registering an IT company – each with their own advantages and characteristics:
America: Brazil, Argentina and Chile;
Asia / Pacific: China;
Europe: Romania, Belarus and Ukraine.
The above countries have populations large enough to have a large workforce and good education systems to produce skilled software developers. The business risks in these countries are manageable and the costs are reasonable compared to the USA, Canada and Western Europe.
It is important to remember that while a particular jurisdiction may be considered the best place for one entrepreneur to start an IT business, it may not be suitable for another. Take into account the needs that your business is most interested in. This can be a language, a geographic location, the regulation of certain activities, skilled labor or costs.
