If you were to consider the top destinations for tech outsourcing, India and the Philippines would certainly be top of mind. India—having first-mover advantage and a deep skill base—has been touted as the leader in outsourcing. Meanwhile, the Philippines, while initially a contact center hub, has expanded its capabilities into other areas, including outsourced IT, virtual assistance, payroll and accounting, and data entry, among others. Other countries like Mexico, Poland, Ukraine, and Argentina are also in the top 10 outsourcing destinations.
Unbeknown to many, in the last five years, Portugal has been slowly building its capabilities as a tech hub, becoming a destination for Silicon Valley companies like Google and Amazon. It has also turned into a nearshoring or outsourcing option for its European neighbors. In fact, one of the earliest to set up a tech hub in Portugal’s capital city of Lisbon was German car company Mercedez-Benz, with Volkswagen soon to follow, with the intent of building a software development center that would focus on cloud-based software solutions. Could Portugal be the dark horse of tech outsourcing? What makes Portugal an attractive destination for tech companies?
Strong tech industry, strong government support
Portugal has a strong and dynamic information and communications technology (ICT) industry that contributes 10 percent to the country’s GDP, with revenues at almost USD 20 billion. The industry employs more than 80,000 people, with the country’s top universities adding 90,000 graduates every year, many of whom are focused on STEM. In addition, the Portuguese are strongly proficient in English, which is part of the school curriculum.
Portugal’s quality of life, particularly in key cities, is also a big draw for many migrating tech professionals from other countries, adding to the growing tech talent pool. Real estate prices are much lower in Portugal than the rest of Europe—particularly cosmopolitan cities like Berlin, London, Stockholm or Zurich—and so is the cost of living (of course, the beaches and surfing spots are also a big come-on). Many Portuguese who had previously immigrated to other countries after the financial crisis of 2008 also found their way back home, applying skills they learned abroad.
The government, through the Ministry of Economy and Digital Transition, has also been unwavering in its support of the tech industry, rolling out policies that aim to promote digital competencies. As part of the second phase of the Indústria 4.0 national strategy for the digitization of the economy, more than EUR 600 million of funding was released over two years, and two relevant strategies on artificial intelligence (AI) and advanced computing were launched. In late 2021, Portugal Tech, the government’s investment program, was expanded to fund local startups with an additional EUR 250 million.
Depending on the industry and amount of investment, companies looking to set up shop in Portugal also get tax credits of 10 to 20 percent, with those investing up to EUR 5 million getting a 20 percent tax deduction, which brings corporate tax to as low as 5.5 percent.
With strong government support and a deep talent pool, Portugal has allowed many startups to flourish. In fact, in the list of European unicorns, seven are Portuguese—Farfetch, OutSystems, Talkdesk, Feedzai, Remote, Sword Health, and Anchorage Digital. And this number will certainly grow. Between 2016 and 2020, the number of incubators grew by 40 percent thanks to the Natural Network of Incubators, created as part of the Startup Portugal Strategy to improve products and services made available to companies and entrepreneurs.
With all these going for Portugal, it’s no wonder that this small country of 10 million is emerging as a tech hub—a “tiger,” as some say—that will give bigger and highly advanced countries a run for their money.
If you are looking to set up a tech outsourcing hub in Portugal, Wingspan can help you find and hire top-quality talent. And with our solid experience in business and BPO consulting, we can help you get your operations up and running while ironing out the complexities of setting up a company in Portugal—so you can focus on what you do best. Email solution@wingspan-consulting.com to understand how we can help.