Portugal is a country known for a lot of things. Home to the brave sea explorers of the past, the highest waves in the world, Cristiano Ronaldo, sunny weather, great cuisine, and a world-famous relaxed lifestyle, the country is now emerging as a nearshoring rising star and a popular destination for thousands of digital nomads.
Nearshore outsourcing in Portugal is a great opportunity for European and even American companies to save on development costs while working with some of the very best IT teams conveniently based in locations that anyone would love going to every once in a while.
This article takes a deeper look at the current situation in Portugal’s IT outsourcing market and the untapped potential it has in attracting both international clients and highly qualified software engineers from all corners of the world.
Overview of the Portuguese IT landscape
Portugal has strategically built a dynamic business landscape that revolves around delivering quality customer-oriented services. Over the past decade, services invariably accounted for about two-thirds of the country’s GDP (see the illustration below), with ICT-related services contributing the equivalent of around 20 billion US dollars to it (a very hefty 10% for a relatively small nation).
One of the most notable changes of the past decade is the steady transition of Portugal’s ICT market from conventional product development and provision of IT services toward startups and the startup culture in general. According to recent research, 33% of all FDI (Foreign Direct Investment) projects in Portugal in 2021 were related to software development and computer services, followed by cleantech and renewables, as well as real estate and construction categories.
The startup scene in the country is booming. A 2021 report by International Data Corporation (IDC) counted approximately 2160 startups in Portugal that collectively made up 1% of the entire country’s GDP. Projecting these numbers to 2023, we should be thinking in the ballpark of 2500 startup companies generating even more against the backdrop of investments pouring in.
For example, in 2021 alone, Portugal’s startup pool received $1 billion in funding, a 100% increase from 2020. Between 2017 and 2021, the combined amount of VC funding invested in the country’s ecosystem grew by 15x, with most of it coming mainly in the form of late-stage financing, which grew by a whopping factor of 55x.
Developing engineering talent from the ground up
The government’s economic stimulation efforts combined with private investment programs continue to drive the ever-increasing influx of foreign money. In order to support these trends and further boost investments in the national economy, Portugal’s government has created a number of long-term initiatives, state-wide programs, and agencies. We’ll mention just a few of the most significant ones:
- Startup Portugal
- 200M Fund
- Portugal INCoDe.2030
- Indústria 4.0
- The Foundation for Science and Technology
All of these initiatives pursue the goals of fostering entrepreneurship and innovation in Portugal, providing a boost to the startup ecosystem in the country, improving Portugal’s digital competencies and digital literacy, and supporting research in science, technology, and innovation across all fields of knowledge.
As you can see, Portugal’s government really doubled down on its efforts to make the country a technology leader in the region and a top IT nearshore location for clients from both Europe and the US.
Now that we know about the country’s resolve to be at the forefront of the global digitization process, let’s take a closer look at the more practical side of things — the advantages that Portugal offers to any business looking to nearshore IT services to Portugal.
Advantages of IT nearshoring in Portugal
Portugal offers a wealth of opportunities for every company considering setting up shop there or any business leaning towards hiring a nearshore Portugal team. Let’s try to highlight the most important ones:
Location and ease of travel
Portugal and its major cities, Lisbon and Porto, are easily accessible by air from virtually anywhere in the world, as well as by train or car from a variety of European locations. Since Portugal is part of the Schengen zone, you don’t need a separate visa to enter it once you are already in the EU or if your citizenship lets you enter the country without a visa (and that’s not a short list of countries). Traveling inside the country is also easy thanks to a highly developed network of roads and railways.
Portugal is just 1 hour behind the majority of European countries and is in the same time zone as the UK. The difference with the US (EST time) is only 5 hours, which allows for a solid time overlap, especially if the remote team slightly shifts its schedule towards the end of the day. Overall, the country’s location is perfect for hiring nearshore developers in Portugal (for European clients) or hiring an offshore dedicated team that is comfortable to work with (for clients from the US and Canada).
High quality of life
Portugal is famous for its political stability, non-involvement policies, and safety. For example, the country ranked 6th in the Global Peace Index 2022 by the Institute for Economics and Peace. In terms of the overall quality of life, Portugal also ranks higher than many of its neighbors thanks to the country’s adherence to the principles of sustainable development, the cost of living, quality of infrastructure, and other parameters.
Great cultural alignment
Portugal is an integral part of old Europe, which means that if you decide to order nearshore services here, you will experience zero problems reading the cultural codes and reaching perfect alignment in terms of project management and development processes, attitude toward work, and motivation.
Solid command of the English language
Portugal ranked 9th among 111 countries in the 2022 EF English Proficiency Index and has been consistently placed in the “Very High Proficiency” category. It’s a highly important characteristic that translates into barrier-free communications, lower perception-related risks, and stronger ties between clients and their IT teams in nearshore Portugal locations.
A global talent hub
Formerly a fairly small and rural country at the edge of Europe, Portugal has evolved into a very important place on the global technology map, one that has already given birth to seven technology unicorns: Farfetch, Talkdesk, Feedzai, Remote, Sword Health, Anchorage Digital, and Outsystems — more than Spain and Italy combined.
On top of that, starting in 2016, Portugal has been hosting the Web Summit, one of the most popular international technology conferences on the planet. This massive annual event takes place in Lisbon, lasts for three days, and features speakers from all corners of the world, including technology leaders, CEOs of blue-chip companies, internationally recognized experts, opinion leaders, high-ranking politicians, and celebrities.
Special visa programs
Portugal has made it easy for ICT professionals and all kinds of freelancers from non-EU states to enter the country and legally work from there by applying for a digital nomad visa. The visa comes in two different flavors: a temporary stay or a residency permit. Both allow foreigners to stay in Portugal for a limited period of time, work, and travel to other countries in the Schengen zone. The only requirement is proof of sufficiently high income, a valid work contract, or a certificate of self-employment.
EU standards of IP/data protection
Being an EU member state, Portugal strictly complies with all major laws and regulations pertaining to the protection of intellectual property, users’ personal data, and other aspects that are typically very relevant to the operation of any business. When it comes to IT, the ability to nearshore in Portugal is a safe option that will reliably protect you from unexpected legal issues of any sort.
Business-friendly environment and access to the vast European market
As good as it is on its own, Portugal also serves as a gateway to the huge European market of a highly qualified, top-skill workforce, numerous development partners, and multiple opportunities on both the supply and demand sides. And with Portugal’s government being so open to pan-European collaboration and focused on laying a solid framework for the steady development of the ICT sector, it’s no surprise that many companies are looking at the country as their next destination.
Quality professional technical education
Modern IT is all about the availability of resources and talent. In a growing market, the influx of “fresh blood” is vital for the development of the industry — and Portugal is very well-positioned to satisfy this need. Portugal has a very high proportion of STEM graduates and engineering talent at a competitive cost. According to Portugal News quoting Eurostat, the country has the second highest rate of engineering graduates in the EU (20%), with around 90,000 students graduating each year with a STEM degree. On top of that, Portugal has the second-highest percentage of Master’s degrees in STEM subjects in the EU, surpassed only by Germany.
Share of Master’s degrees in STEM subjects across the EU
Source: Statistisches Bundesamt
Optimal quality-to-cost ratio
As a European country, Portugal cannot offer the lowest outstaffing/team augmentation rates like those typically found in developing countries. That said, companies in IT nearshore to Portugal for other reasons — and specifically because of the optimal quality/cost ratio. A rare combination of a vast pool of engineering resources, a highly developed infrastructure, cultural similarity, the absence of a language barrier, political stability, and ease of travel are the key factors contributing to the growth of Portugal’s popularity as a nearshore destination.
High-speed communication networks
Portugal ranks fairly high on the 2022 Digital Economy and Society Index (DESI) in terms of connectivity, human capital, integration of technology, and availability of digital public services. Although it is slightly below the EU average, it is still ahead of a number of countries that have been traditionally considered outstanding outsourcing destinations. One of the impressive facts about Portugal is that 88% percent of households in the country are connected to the Internet, primarily via a broadband connection.
The Digital Economy and Society Index (DESI) 2022
Source: European Commission
What global companies choose to nearshore IT services to Portugal
A number of major US and international businesses have opened offices and development centers in Portugal, including Microsoft, Google, SAP, Accenture, Oracle, IBM, Siemens, CISCO, Volkswagen, Mercedes-Benz, and IKEA, and their number is steadily growing. The key drivers of this process are the abundance of tech talent with the necessary expertise, lucrative tax conditions for multinationals, and the lowest cost of doing business in Europe.
Why nearshore IT services to Portugal with Intellias
Intellias Portugal, which has been recognized as the premier company to work for in Portugal according to the Teamlyzer platform, now stands as a comprehensive multinational engineering hub specializing in advanced IT solutions, new products, and cutting-edge technologies.
The Intellias professionals in Portugal are engaged in projects for customers from the automotive industry building and integrating application software for navigation, ADAS, and connectivity solutions together with eMobility and EV infrastructure projects. Also, Intellias Portugal is collaborating with finTech customers facilitating them with growing their product offer, becoming a part of the digital financial ecosystem through custom solutions as well as securing much-needed support.
Additionally, the company continues expanding its cooperation with the telecom, retail, agriculture, and healthcare clients. Our software engineering teams are working with innovative technologies including those related to IoT, artificial intelligence, data science, the cloud, DevOps, and big data.
If you are considering a nearshore outsourcing option for your upcoming project or need a permanent dedicated team of engineers in a convenient European location, we will make sure your unique objectives are mapped to an actionable software development strategy and your technology investment will return consistently high value.
Portugal is one of the world’s most attractive destinations for making digital business work backed up by professional quality software engineering services. Rapidly developing, safe, easy to reach, and affordable, this country is home to thousands of talented minds that you can hire for your next big thing.
Also, did we mention that Portugal gets over 300 days of sunshine per year?