Eastern Europe also braces for outsourcing demand

While India has earned for itself a reputation worldwide as the leading outsourcing destination, Eastern Europe is also creating some buzz in the industry.

Russian software services company EPAM Systems recently acquired Hungary-based software company Fathom, a move which now makes EPAM the largest software engineering services provider in Central and Eastern Europe.

EPAM will utilize Fathom as a development center in providing services to technology firms such as SAP, Hyperion, BEA Systems, Microsoft and Sun Microsystems.

Officials of both parties make no secret about their goals to compete with Tier 1 providers from India, which has been traditionally strong in software development. To compete with India, they said rival companies must have the size and the financial strength.

Fathom, which has about 150 people in Budapest, should benefit from the alliance since EPAM has presence in the US, where most of the outsourcing demand come from.

According to a report which appeared on CNET, Eastern Europe is already a popular destination for both outsourcers in the US and Western Europe, a lower-cost alternative, in fact, to India.

Chipmaker AMD, for one, has its eye on Russia, Hungary, Poland and Czech Republic because of the abundance of engineering talent in the region.

The report also mentioned Romania as a popular choice by Western Europe outsourcers from the UK, Netherlands, France and Germany. The cost of employing a recently qualified graduate from an approved specialist university is approximately $6,500 a year.

While UK companies used to outsource to India largely because of historical and cultural links, Eastern Europe is nonetheless a tempting alternative because of lower costs.

The growth of the outsourcing industry may mean the Indians can now bargain for a higher price tag for their services.

If that's the case, Eastern Europe has a big chance as long as companies there up the ante in marketing their services.