An Overview of the Estonian IT Industry

With the skyrocketing global demand for software development services, more and more companies are looking for good outsourcing destinations. In the last couple of years, many multinational businesses started to turn their attention to various parts of Europe for outsourcing. Statista indicates the European IT outsourcing market is currently worth $126 billion, which means a massive chunk of the global outsourcing market is available there. The Estonian IT industry presents itself as a place with high-quality software services for reasonable prices. Keeping that in mind, it is important to investigate what makes the Estonian outsourcing market so appealing while focusing on such aspects as business climate, talent pool, and availability of software development companies in Estonia for cooperation. 

Estonian outsourcing market: General insights

The Estonian IT industry represents a part of the Baltic market, which also includes other nations like Latvia and Lithuania. It means that with Estonian outsourcing, companies looking to develop their product for a good price have an opportunity to appeal to IT outsourcing in Latvia and IT outsourcing in Lithuania as well. However, when it comes to the fastest-growing IT industry in the Baltic region, Estonia is ahead of the pack. The data offered by the Estonian Founder Society suggests that software development companies in Estonia generate about $1 billion in revenue annually. Strikingly, the Estonian IT industry generates 30% of added value to the entire nation’s economy. 

Estonia is a nation with a 1.3 million population. Yet, it managed to represent itself as a key outsourcing destination in comparison to countries with greater access to IT professionals. Besides, the nation proved to be a hub of world-renowned startups. In 2020, they managed to raise about $450 million in domestic and foreign investments. According to the Digital Strategy proposed by the Estonian government, the nation’s IT industry will soon be the leading economic sector. Two major tech hubs are making the biggest contribution to the Estonian IT industry – Tallinn with its 67% total input and Tartu with 12%, respectively. With its urge for innovation and development, Estonia is a great illustration of why some of the best software development companies originate from that part of the world. 

A favorable business climate

There are about 2,000 businesses in Estonia, with an annual business growth of about 3.2%. At the same time, it is one of the most politically stable nations in Central and Eastern Europe. Additionally, Estonia is a member of the Eurozone, the World Trade Organization (WTO), and the Organization for Economic Co-operation and Development (WTO). Membership in such organizations grants the country access to foreign investment and allows a stable and healthy economy. In other words, outsourcing to the Estonian IT industry is unlikely to result in some surprises due to turbulent market conditions. 

Overall, Estonia has a favorable business climate. Interestingly, it is considered the birthplace of such massive companies as Skype, Pipedrive, and Fortumo. The emergence of these successful businesses is the best fact vouching for the stability of the Estonian IT industry and business environment. The same can also be said about other Baltic states, such as Latvia and Lithuania, making an entire region a favorable outsourcing destination. 

The impact of technological growth

Modern economies stand on the ability to generate jobs. For Estonia, it cannot be more true. There are studies suggesting that employment in the Estonian IT industry positively impacts about five jobs in the vicinity. In other words, with every new developer, five new employees work in law firms, restaurants, and manufacturing. Besides, with the Estonian IT industry bringing revenues to the state budget, one can expect higher wages for various professions directly dependent on the budget, for instance, medical professionals and educators. 

In addition, by attracting new investment and delivering outsourcing services the Estonian IT industry manages to bring innovation to various national sectors. It positively impacts the economy, science, and information society. The IT industry fuels Estonian research and development, keeping Estonian citizens’ best interests in mind. At this point, opting for the Estonian IT industry is a way to receive high-quality services for a reasonable price and contribute to the nation’s development.

Access to the talent pool

Estonian state census suggests that a bit more than 1,000 individuals receive a computer science degree on an annual basis. In addition, the nation expects to get an additional 7,000 IT professionals before 2027. The talent pool of Information and Communications Technology (ICT) experts is about 30,000. They are high-skilled and trained experts working with various programming languages and technologies. The portrait of an average Estonian developer corresponds to a seasoned professional with an innovative way of thinking. 

Software development companies in Estonia

Access to various software development companies in Estonia is a major factor when looking for outsourcing vendors. About 6,000 companies are operating in the Estonian ICT segment. And it’s considered one of the most rapidly growing countries in terms of the number of emerging startups. The majority of software development companies in Estonia are small, with only 50 having about 250 staff on average. The same rule applies to Latvian software companies and software companies in Lithuania. It means that the average software development company in Estonia is not the one seeking scalability by all means. 

Conclusion

The Estonian IT industry is one of the best in the Baltics and Eastern Europe. Despite the nation being small in terms of population and budget, it has managed to accelerate the growth of the IT industry. The Estonian IT industry is a great outsourcing destination, and companies all over the globe should know this fact when looking for high-quality offshoring for a reasonable price. 

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