When you think of the top spots for outsourcing in the world, renowned pioneers like India (IT market size of $235 billion), China ($1.2 trillion), Mexico ($2.4 billion), and Eastern European countries may first come to your mind.
However, if you are looking for fresh business perspectives, talented resources, and close-to-perfect English skills, outsourcing to Portugal might become choice #1 for you.
We, at Ascendix, have already dipped our toes in Portuguese soil and are ready to share our insights. We asked our CTO and managing partner, Todd Terry, to share his firsthand experience and thoughts on why American companies should consider delegating tasks to Portugal tech hubs based on the Ascendix journey.
We are Ascendix – a US-based custom development company empowering businesses with our top-notch services, including cloud migration, cross-platform app development, and system integration.
10 years ago, we started looking for offshoring / nearshoring possibilities and finally landed in Poland to leverage Eastern European tech talent potential and reasonable costs.
Soon after that, our outsourcing journey took us to sunny Portugal where we successfully launched our second offshore office. You can’t call Portugal a popular outsourcing destination, especially for American companies, so Ascendix was one of the US-based pioneers who’d anchored to the shores of Portugal tech hubs.
“ We don’t really view this as outsourcing, we view it as an expansion of our company. We had already seen some business drivers that we needed some presence in Europe, and especially the EU – something further in the West. ”
First and foremost, there were economic and business conditions behind outsourcing to Portugal. Our sales and marketing strategies really started to target companies in the EU, so we needed some presence in Western Europe. Among other countries that are legally in the EU (Estonia, Bulgaria, Romania, and others) Portugal comes to the top very quickly if you just start the research because of the same reasons why companies choose Poland.
I’d never set foot in a lot of these countries in Europe that we were considering, but according to my preliminary research, Portugal had everything we needed. And thereafter, the benefits American companies can get from outsourcing to Portugal manifested themselves in the Ascendix journey.
Portugal is becoming a popular nearshore destination for leading European companies driving the overall Portugal outsourcing market value to $781 M in 2021. Multinationals like Nokia, Siemens, Microsoft, Google, SAP, and Accenture already successfully operate their nearshore offices in Portugal.
The major factor driving Europe to expand to Portugal is the convenient time zone – Portugal is in the same time zone as the UK and Ireland.
At the same time, Portugal is still a dark horse in terms of attractiveness for American companies who opt for outsourcing closer to home (like Mexico) rather than overseas.
However, with the unprecedented growth of foreign investment in technological space in recent years, the country is beginning to be recognized in the international sphere. According to Trading Economics, Foreign Direct Investment in Portugal reached over €2,100 M in November of 2021, contributing to the consolidation of Portugal tech hubs.
Speaking geographically, 57% of the tech initiatives are in Lisbon and 29% in the Porto region, with other areas witnessing robust growth as an alternative or expansion to the two leading metropolitan regions.
Based on the latest edition of the EY Attractiveness Survey Portugal 2020, Portugal saw a record number of FDI projects in 2019, more than double the previous year. Among all the multiple sectors mentioned in the report, the Digital area tripled the number of projects.
According to recent investments tracked by AICEP (Portuguese Trade & Investment Agency), the core factor when choosing a location for tech-driven initiatives has been the availability and quality of talent in Portugal. Among more than 80 000 higher education graduates each year, about 30% are in the fields of Science, Technology, Engineering, and Mathematics.
According to the OECD (Organization for Economic Co-operation and Development), Engineering stands out among these areas with the 2nd highest ratio of engineering graduates at the European level.
| Outsourcing to Portugal: Market Overview | |||
|---|---|---|---|
| Language skills | Education | Graduates in science | Skilled labor |
| #7 | #14 | #15 | #23 |
Other factors contributing to the attractiveness of Portugal as a smart nearshore / offshore initiative are:
Basically, these are the things that we kept in mind before actually dipping our toes into Portuguese soil. We were quite excited to explore what Portugal held for us, so here is what we learned by visiting the country.
As a technology advisor, we partner with small firms and global enterprises helping them bring automation to their operational processes.
Let’s start with the obvious things, shall we? You would choose Portugal for outsourcing for the same reason why you’d want to go for a vacation there. It is a nice place with over 290 days of sunshine yearly.
Another factor contributing to the friendly environment for living and doing business in Portugal is that the country is in the top 4 of the Global Peace Index 2021 by Statista. Portugal ranked higher than its neighbors Spain and France and is only beaten by New Zealand, Iceland, and Denmark.
Beyond these great aspects of life, Portugal presents some incredible opportunities for American companies in terms of their offshore initiatives.
First and foremost, we were looking for a convenient business time overlap. And we found it.
“ The convenient time zone was a big plus of Portugal because it is 2 hours closer to the US than Eastern European countries. And two hours makes a big difference. ”
Chicago is 6 hours behind Lisbon. In Portugal, they have the same or similar working scheme that we have in Poland, where people get started around 10 or 11 in the morning and they work until 6:00 or 7:00 PM. Well, if you take that same type of time zone and move it over, you will have 2 more hours overlap with the US until up to 3:00 PM. There’s only a couple of working hours left.
As we were looking to grow our consulting division, another factor we focused on was the high level of English proficiency of Portuguese talent. We were pleased to find that our customer-facing people like project managers, business analysts, and consultants had amazing English-speaking skills, and what is more important, they had two hours more to interact with our US customers.
This was something we kept in mind when deciding on our outsourcing strategy toward Portugal.
“ Portugal checked all the boxes regarding the relocation of talented IT people, especially if they're already being brought there by a company, so they set foot on the ground already with the job and ready to pay taxes to contribute to the country’s economy. ”
I thought If we had an office in Portugal, we would probably have opportunities for our team members from both the USA and Poland to come there for meetings. Unlike the US, they have a friendly visa obtaining process and offer numerous relocation opportunities like the Tech Visa program for tech-minded talents living outside the European Union.
In that regard, Portugal had something more interesting to think about than just Romania or Bulgaria, for example.
Ascendix Portuguese Team
What I actually saw when Wes and I arrived was a really dynamic environment. We visited a couple of coworking sites to explore the IT space in Portugal firsthand and found a thriving multicultural community of tech-minded talents.
The major contributor to the country’s multinational and multilingual nature must be The Web Summit held in Lisbon since 2016. The renowned event attracts technological, entrepreneurial, and financial enthusiasts to Portugal tech hubs and is the arena for numerous investment initiatives.
What we learned over the years of attempts to find the right outsourcing partner is that you never should underrate cultural compatibility. In this regard, Portugal was a perfect match for 2 reasons.
First, American companies are likely to find Portugal very familiar because of the Latin influence that we also have back in Texas.
Second, despite the huge difference in culture and language, the Polish and Portuguese mentalities are shockingly similar when it comes to business. This includes assertiveness, the ability to question requirements, and openness to new challenges.
This cultural proximity complementary helps Ascendix to bridge the geographical gap between our four offices – in the US, Poland, Luxembourg, and Portugal.
Ascendix Portuguese Team
How expensive would it be to run a business, not just in terms of taxes, but rent? There’s a wide range.
Of course, if we wanted a Class A space in the center of Lisbon, we were going to be paying quite a bit. But you can always find a compromise in some other regions in Portugal.
For example, we looked at Porto and Braga, where rates for setting up an office are pretty much the same as in Poland. There’s a little variance, but salaries are almost the same, so rent is very similar, too. So, we didn’t even have to change our rates.
Basically, there are three key outsourcing destinations in Portugal – Lisbon, Porto, and Braga.
The main destination city for foreign offshoring / nearshoring activities has been Lisbon. It is the home of numerous technology companies with a long presence in the city that have recently announced expansion or diversification projects in new activities.
Examples include Capgemini Engineering (formerly Altran), Microsoft with the Language Algorithm Development Centre, Nokia with a new Global Business Service Centre and Siemens (i-Experience Center 4.0). However, we didn’t focus on Lisbon as our main outsourcing location in Portugal from the very onset of our research.
The Metropolitan Area of Porto appears as the second most popular destination, having attracted about 30 new foreign tech companies over the last 4 years. Examples are eDreams Odigeo, Emergn, Zühlke and Zumtobel.
Braga is an emerging tech spot on the national technological landscape, having attracted Accenture with the Technology Centre, Bosch Car Multimedia (Research Centre), Checkmarx, Fiducial, and Fujitsu (Global Delivery Centre).
Those basically are the main things you can find on the Internet about these tech hubs. So soon after that, we set on a journey to explore the main Portuguese tech hubs in a more tangible way.
“ When I went to Portugal, I expected we would land in Braga – after everything I read that was my first choice. But after visiting both places, there was something about Porto that made me feel “this is where our office should be“. ”
We went to Portugal to search for the right tech hub to establish our office right after the COVID lockdown restrictions had been released, so we didn’t see the tourist side of Porto. Instead, we were visiting some of the restaurants, and coworking spaces and just seeing the people in the streets.
I talked to one of the locals who had been involved in the IT market and I asked him to share his thoughts on which tech hub we should have opted for. Here is what we learned:
Salaries are a little bit lower in Braga – €16,000 compared to €18,432 paid to Software Engineers in Porto yearly, according to Glassdoor.
If you have your office in Porto, you can still hire people from Braga. They don’t mind commuting to Porto. But if you build your office in Braga, people in Porto are not going to do this as they have too many other companies they can choose from.
The latter was a determining factor in why we finally set up our office in Porto.
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It is a known fact that it’s getting increasingly more difficult to hire quality development teams in the US due to a number of reasons like the lack of qualified resources with expert knowledge in a certain niche technology, growing competition on the market, and, finally, rampant costs per labor.
This stimulates American companies to look for alternative ways to allocate their resources properly. In this regard, finding a trustworthy outsourcing partner is of foremost importance.
Ascendix is a top US-based software company with 26 years of experience in the tech space. With 4 offices across the US and Europe, we can offer:
We will make sure your products are downright ready for success. Contact us and let’s make your business stand out with a feature-rich product!
Alina is a proptech technology expert and a storyteller at Ascendix, investigating the real estate market and sharing her insights and tips with up-and-coming proptech startups, established real estate agencies, and industry stakeholders. She talks about real estate technology, business automation, and industry news.
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