Why are there so many tech and software development companies in the Netherlands?

The Netherlands has been successfully becoming Europe’s favourite tech hot spot, not only for the biggest corporations. There are several reasons behind the country’s success.

More than 90% of Dutch speak English. Since 2011 the Netherlands has always been in the top three positions in the EF English Proficiency Index. In 2020, the Netherlands was named number one out of 100 countries with very high proficiency in English.

Amsterdam Airport Schiphol handled 71.7 million passengers in 2019 (20.9 million in 2020 despite Covid-19 situation!) and continues to be one of the best-connected airports in Europe with 332 different destinations. What’s more, multiple ports, high-speed rails and a central position within the European continent make it easier for IT professionals to reach the Netherlands not only for work but also for networking during tech conferences.

The Dutch government embraces the digital innovations and supports the growing tech community not only financially (tax benefits for starting companies) but also by creating laws supporting the open culture and environment suitable for research & development activities. It’s quite easy to start the company and the bureaucracy is limited to a bare minimum. No wonder that Hubspot named Amsterdam “the best city to work in tech in Europe”. What’s more, the OECD Better Life Index, places the Netherlands amongst the happiest countries in the world, leading in the “Work-Life Balance” category.

With huge and secure data centre clusters, widespread access to the internet, digital infrastructure and openness to innovation, The Netherlands was named one of the top 3 most technology-ready countries in the world by The Technological Readiness Ranking, prepared by The Economist Intelligence Unit. 

According to the EIU report creators, The Netherlands did especially well in the e-commerce category:

For vendors, e-commerce offers an opportunity to reach a truly global audience and deliver goods and services at a considerably lower cost. For consumers, benefits include greater choice, improved price visibility and easier access to niche products. Countries with a strong e-commerce offering are increasingly finding themselves well placed to attract investment.

Competitive Dutch IT market

According to Dealroom, in Amsterdam alone there are over 2100 tech companies, generating 77 thousand jobs, making up 14% of the local workforce. With 11K new jobs added since 2016, Amsterdam tech companies annually add more jobs than any individual sector. 

As far as the international companies and their custom software development teams are concerned, it would be easier to list international enterprises that DON’T have an office here. Just think of a company, and I bet they will have an on-site presence in the Netherlands. 

In my opinion, there could be even more business for custom software development companies operating on the Dutch market after the UK’s exit from the European Union. We’re still on uncertain ground legally, and some organisations would rather avoid further complications. This way, the Netherlands can take over some of London’s tech scene for app development in the foreseeable future.

As far as the tech scene is concerned, the Netherlands are full of local and international tech initiatives for software developers, tech managers, CTOs and investors alike. From startup accelerators and incubators (Rockstart, Startupbootcamp), tech communities (check out the Amsterdam initiatives here) networking organisations (Holland FinTech) and coworking spaces to massive tech events like The Next Web attended by everybody who’s somebody in tech.

A software developer – the Netherlands’ most precious resource

ICT Arbeidsmarktrapportage 2019 noticed that small organisations publish most job offers in software development. A skilled software developer in the Netherlands can pick and choose between a multitude of tech companies. So why should they go for a new, unknown tech startup or small custom software company, when Booking.com or Uber offer higher wages, variety of benefits, cool-looking offices with (in)famous ball pits and arcade games, and most importantly, association with a world-famous name?

It’s really hard to compete with what a well-established tech company offers for their developers, hence why CTOs struggle to attract, hire and keep experienced staff. The effects are clearly visible. Sectorprognose ABN Amro 2020/2021 found out that 55% of the companies are hampered in their growth by the lack of skilled IT staff. It means that for some organisations finding a software developer is a matter of “to be or not to be”.

Covid-19 made the shortage of developers even worse

Putting the world on hold resulted in some industries hardly coping (e.g. travel), and others thriving beyond belief (e.g. food delivery). Since everybody moved/is moving as much of their operations online as possible, any tech company needs even more staff to keep up with constant demand and delays. It could be mobile app development for small restaurants and shops that switched to a takeaway model. Or it could be custom software for virtual film festivals taking place online. Everybody needs custom software development but the only element missing is the people who create tech solutions!

As far as accessibility of the IT talent in the Netherlands is concerned, unfortunately, the global pandemic only made things worse. The Dutch developers have always been supported by expats living and working in the country. Now, a lot of people moved back to their native countries to be closer to their families. Some will probably continue to work remotely, others will get software development jobs locally and become lost to the Dutch talent pool forever.

Covid changed the meaning of remote work. What’s the difference if you’re a bike trip away from the headquarters, or live on the other side of the world. We are not able to meet in the office anyhow.

The best software development company for your businesses might not be from the Netherlands

One of our clients wanted to extend their web application. The business is booming and most of their customers and end-users are located in the USA. They had real troubles in finding developers in the Netherlands because they operated on WordPress (which is a bit old-fashioned for trendy people of tech) and they had no employer branding, so the developers didn’t even know what to expect. Eventually, they consulted us on how to create not only a stable platform but also establish processes for a future in-house team that will eventually take over. This way, they saved time, got honest expertise from specialists, and in the meantime, they were able to hire people who will be the core of their own team.

I began with this story because if your business is located in the Netherlands and you’re desperately looking for devs to hire, you might avert your attention to custom software development abroad.

Let’s see what benefits are there for you:

• Nearshoring to countries like Poland, Russia or Ukraine guarantees you highly qualified staff due to great education in maths, science, IT and foreign languages.
• You can keep the right tech partner for years. Western companies are getting overcrowded due to demand, so finding a long-term tech partner might not be possible right now.
• Networking possibilities in the Netherlands allow you to find a great software company much faster. Recently I was asked by a CTO of a scaleup for recommendation: a company specialising in .NET. It’s not our forte, but I know others that love to work in this technology. The CTO was grateful and surprised, asking why I put so much time into advising him as we won’t get any business from it. Maybe not now, but honest cooperation can bear fruit in the future when we are recommended by somebody else.
• You can scale your development team up and down according to your needs. More people for initial work, less for maintenance.
• Developers from software houses are experienced in working remotely, they have all the processes in place, know how to communicate in different time zones and business cultures. In other words, they’ve done it many times before, so you’ll be in good hands from day one. Installing those processes in-house takes a lot of time, patience and organisational work, and the outsourced team can help you with that too.
• If anything happens to your team member, the software company will immediately find the replacement amongst their own resources. So there’s no danger for your business continuity. If your in-house developer quits, you experience the horrors of recruitment once again.
• In the Netherlands, hiring a local developer from a software development company is expensive. A freelancer will probably be 10-25% cheaper but still relatively expensive and with no benefits of scalability. A Nearshoring company can be 50% cheaper per hour. You do the maths.

Of course, outsourcing software development from the Netherlands is not without its dangers:

• If you’re a startup or a scaleup, the investors sometimes prefer to keep all people involved in the project on the payroll. Also, startups hiring people in the country get tax breaks and reductions.
• Your company won’t be recognised by the local talent straight away so it will be harder for you to hire anyone. Developing a successful employer branding takes a lot of effort. If you need a development team as soon as possible, I guarantee that you won’t have the time to work on your branding.
• Your in-house staff and outsourced software team don’t work as one. You should get a partner that will ease the in-house team without making them feel threatened about their jobs. Otherwise, your on-site employees might feel less motivated or even hostile towards “the new people”. You can read more on how to prepare your in-house software team here.
• Watercooler effect. People meet by the “watercooler” not only for refreshments but also to have a friendly chat. You don’t have that with remote teams, so the natural communication is not happening and people might feel neglected. Informal chats are important to integrate the team and make people trust and simply like each other. Make sure to save some time for regular chats too.

I have always said that the most important factors in software development are people, processes and technology – in that order. Interpersonal communication became so crucial that now it becomes a dominant factor, no matter where in the world we are. Software development outsourcing may no longer be the solution to solely cut costs, but an only chance for some organisations to have any software at all.