Software development has much grown in demand, which means a significant need for IT specialists and boosts unprecedented salaries increase. Experts call this situation ‘market overheating’, and this is what exactly is happening with the software services industry in Eastern Europe. This brief review is dedicated to the Eastern Europe IT market overheating situation and its reasons.
The East European IT sector is on the verge of an economic boom. According to experts, the average salary of a software engineer in this region in 2018 was $80,000 – $150,000, which is up to 1.5 times more than in the US or Western Europe. In the last few years, the number of developers in Eastern Europe has increased by two thirds. The employment rate in this area is also growing, reaching about 50% of all IT specialists.
The main overheating factors
It was not a single trigger to cause market inflation and demand rising. Above all, there are two significant reasons for it: an urgency for digital transformation and the high liquidity of the low-interest market.
One of the major factors also includes the Covid-19 pandemics, which forced businesses to opt for remote management. Pretty obviously, IT solutions became the primary way to keep workflows organized. Thus, business owners had no choice but to leverage new technologies as the only option to survive or maintain market-leading positions. As a result, most offline businesses went online and digital companies that existed on the Internet before the pandemics felt a sky-high demand pressure that they could hardly manage.
The second factor is related to the fact that the low-interest rate environment created a positive attitude toward investing in the financial market. People were willing to borrow money from banks at extremely low rates. This meant that even small-scale investments made by private individuals were extremely profitable. In other words, people became eager to invest in anything, including real estate, stocks, and commodities. How do we get there? In order to understand what happened to the crypto markets, we need to take a look at the two factors that triggered it.
The pandemics also demand advanced solutions and new business models like online meetings and events, digital schools and cinemas, virtual restaurants, and more. The demand in services like these urged businesses to apply custom software development solutions to build new systems or completely re-engineer the existing models.
When the urge for digital transformation became unprecedentedly enormous, the governments of the Eastern European countries became the primary financial source for businesses. Governments started investing large amounts into their economies to diminish financial losses and avoid crises caused by the Covid-19 pandemics issues. The most significant part of governmental funds was aimed at the most profitable businesses and technologies that are supposed to show the most meaningful return on investment. The IT industry turned out to be highly liquid and gained the largest share of the overall investments, so the businesses got access to cheap capital.
At the same time, central banks willingly provide low-interest loans to finance software development and other IT needs of businesses. Combined with the constant money flow from the government, it maintains the market is overheating.
It is not only the developers who gain from this situation but also everyone involved in the software development industry. The number of startups, IT companies, and start-ups is growing and the business environment is becoming more friendly. However, even though the business environment is improving, the overall technology landscape is not as positive. The industry has been plagued with poor quality projects and bad practices that do not represent the best of the technology world. This is the reason why many developers are struggling to find a job in a field where the demand is growing and the competition is fierce. It is even harder to get a job as a developer when the job market is flooded with inexperienced programmers who are still learning how to code.
The current situation may not last long. Today the IT market is receiving large and, at the same time, cheap investments while experiencing high demand for qualified specialists. Still, it’s hardly possible that we can expect the same scenario in future without any significant changes.
We can see this when analyzing the past trends of the IT market. The current increase in the number of companies in this area is not only due to the fact that they are growing, but also because the quality of their products and services has improved. This means that if a company doesn’t improve its product or service in the future, it will be quickly overtaken by competitors.