By Amita Goyal, Partner, Zinnov; Ankit Mishra, Project Lead, Zinnov; Aadhar Agrawal, Project Lead, Zinnov; Shreya Ghose, Marketing, Zinnov
Last updated on June 22, 2022
Strategy is about choice. The quality of thinking that goes into making a choice is the key driver of a company’s success. Therefore, it’s important to be informed about the latest industry developments to ensure hitting the bullseye.
Sustainable strategy-making has become vital to reach higher success and overcome unpredictable situations. To achieve antifragility, industry leaders are increasing their Engineering Research and Development (ER&D) spend to accelerate innovation and enhance product development solutions. One of the top decision-making areas of leaders across verticals is the exploration of offshore locations with large available digitally skilled talent pools, strong technology infrastructure, and business-friendly laws. These locations are potential global talent hotspots that can be leveraged to amplify capabilities in next-gen technology adoptions, create proofs of concepts (POCs), and improve customer experience, to name a few.
Zinnov’s latest Global Center of Excellence (COE) Hotspots report identifies Poland as an up and coming technology innovation hub that has received FDI worth a massive USD 27 Bn. The country already houses large MNCs like IBM, Samsung, Intel, etc., that are leveraging the vibrant ecosystem that this country has to offer.
Since the onset of 2020, and particularly in Q4, there was a 66% growth in investments towards the country. However, the numbers bolstered in 2021, with a 30% increase, reaching USD 3.97 Bn. A great case in point is Microsoft allocating USD 1 Bn for the “Polish Digital Valley.” Furthermore, in terms of talent retention, the attrition levels were observed to shoot up to 20% with ~80% employees preferring remote or hybrid working options.
Why is Poland considered a software engineering hub?
Poland is the 7th largest country in Europe, with a technology talent pool of 170K+, with Warsaw and Krakow boasting 55% of the IT talent pool. Amongst Eastern European countries, Poland has the largest talent pool both in terms of installed talent as well as expatriate talent (talent coming in for jobs and higher education), especially from countries like Ukraine which have been experiencing soaring geopolitical unrest in recent years.
This niche skilled talent is spread across Software Development, Database Management, Cloud Computing, Big Data Analytics/Business Intelligence, Cybersecurity, Artificial Intelligence (AI), Machine Learning (ML), Data Science, Internet of Things (IoT), and Blockchain domains. Also, the presence of 600 COEs in Poland that provide software development and IT support services to companies across the globe, underscores Poland’s IT prowess. Additionally, out of them, 35% of centers handle processes in more than five languages. Therefore, the talent here is well-educated, highly skilled, and multilingual, with an overall presence across Software & Internet, Banking, Financial Services, and Insurance (BFSI), Telecom, Automotive, and Healthcare verticals. The average annual salary is affordable as well, with software engineers earning USD 48K, while it ranges from USD 37K for technical writer positions to ~USD 60K for product managers.
Interestingly, due to the massive demand for talent and tough competition in Poland, the average attrition rate in the country is at a high of ~20%. However, this attrition rate can vary from 10-30%, with a satisfactory 10% attrition rate in companies that are focused on developing product offerings or those that have a strong talent management strategy, and a steep 30% in companies focused on services and maintenance or those that lack a strong employee engagement and development strategy.
2. Ecosystem Maturity
Poland is a top destination for education in Europe and has close to 428 higher education institutions. In fact, the country accounts for 50% (94,000) of STEM graduates across Central and Eastern Europe every year. Students from Ukraine and Belarus are prominent foreign students at Polish universities, with Indians and Spaniards rounding out the 3rd and 4th positions.
Of the 428 higher education institutions, 25 Polish colleges rank in the top 350 EECA (Eastern Europe and Central Asia) universities, with the Jagiellonian University and the University of Warsaw, holding the 6th and 7th positions, respectively. These two and other large tech institutions have developed their research centers to emerge stronger in fields such as AI, Software Engineering, ML, Bioinformatics, Computational Complexity, etc. Additionally, there are multiple visiting student programs such as the Erasmus Program, in collaboration with other European Universities, to upskill young minds further.
b. Start-up Ecosystem
Poland is home to 800+ technology start-ups, — a 2x growth since 2020, with Warsaw, Krakow, Wroclaw, Gdansk, and Poznan being the most developed hubs. These cities have a high focus on Enterprise SAAS, Healthcare, e-Commerce & Retail, Big Data, IOT, FinTech, and EdTech, among other modern technologies.
The country ranks 4th across Europe in terms of being start-up friendly and leads in the Venture Capital (VC) funding (in both Central and Eastern Europe), with a total of USD 722 Mn invested since 2013.
c. IT Service Providers (SPs)
IT services (implementation, integration, technical service, consultancy, and outsourcing) account for 29% of IT sector sales in Poland, with approximately 25% of the IT workforce employed in SP companies. This is reflected in the presence of top SP companies like EPAM, GlobalLogic, IBM, and Hewlett Packard, among others, in Poland, making it an Information Technology Outsourcing (ITO) hub.
Additionally, there is a large presence of global companies operating across verticals. For instance, Microsoft, Intel, Motorola, Proctor & Gamble, etc., have their ER&D centers here, and can potentially leverage the talent in the region.
3. Ease of Doing Business Index
Located near Central Europe, Poland is part of the Schengen area, where 26 European countries abolished their internal borders for the unrestricted movement of people. This has helped prospects move in for work from adjoining countries like Latvia, Lithuania, and Denmark.
b. Data & IP privacy
Being part of the European Union, Poland is an integral part of GDPR Compliance that ensures stringent data and IP privacy provisions. Companies can leverage GDPR to get data security and protection while building their digital infrastructure in the country.
The top languages spoken in Poland are Polish, German, and English, which help stakeholders to communicate effectively, without language barriers.
d. Gender Diversity
There is a 32% gender diversity observed in software engineering companies, demonstrating a diverse and inclusive workplace ecosystem.
The New Investment Support Act introduced in 2018, helps companies with income tax exemption – 19% in corporate tax and 17 to 32% in personal tax, based on the fulfillment of certain location-dependent conditions.
f. Employee Laws
EU citizens do not require any work permit to be hired locally. They can apply for a temporary residence permit (can be arranged from Voivodeship Office) which lasts for 3 years, where they also receive health and social security coverage. However, prospects from non-EU countries usually need an official employment offer from a Polish company to qualify for a work permit. SP companies such as Accenture, IBM, HP, etc., are primarily the ones who sponsor these work permits.
30% of the IT workforce is engaged through the B2B model, which is essentially a direct business relationship formed between the specialist and the company, with an agreed notice period of a month usually. This results in a higher in-hand salary for engineers. Under this model, the CTC (Cost to company) is an agreed-upon monthly amount based on invoicing, VAT (23%), income tax (19%), and social security. The notice period is divided into 3 categories:
- 2 weeks if the time of employment < 6 months
- 1 month if the time of employment > 6 months and < 3 years
- 3 months if the time of employment > 3 years
Polish laws are moderately employee-centric. Severance pay depends on the duration of employment with the employer, ranging anywhere from a month to three months of pay. Also, in case of termination, the employers in Poland need to inform the trade union regarding the intention behind terminating an employee and provide substantial reasons for dismissal.
Poland: A Sought-after Technology Talent Hotspot
Poland’s exceptional remote work culture and the availability of talent that showcases tech versatility, problem-solving abilities, and software skills have attracted companies across geographies to set up their centers here. Additionally, due to its geographical proximity with other resource-rich countries across Europe, it has become a top global offshore hotspot that enterprises, SMBs, and SPs alike can leverage to access a diverse, tech talent pool.
The developers in Poland are known to be highly enthusiastic and committed. In fact, HackerRank has ranked Polish developers 3rd in the world for their tech skills, underscoring the potential that Poland’s talent offers global technology companies.
However, despite having a huge local and expatriate talent pool supplemented by a mature ecosystem, government initiatives like tax exemptions, focus on gender diversity, easy connectivity, etc., the country faces scalability issues due to its smaller workforce. Companies that plan to establish their centers in Poland need to be cognizant of this fact as they look to leverage this budding Eastern European tech talent hub.
Poland, with its X factors holds the pole position as a technology talent hotspot with a lot of potential. Know how you can set up your COE in this Eastern European talent hotspot, by speaking to our consultants at email@example.com
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