Eastern Europe Under Pressure
For many German mid-sized companies, the obvious answer to the skills crisis is nearshoring to Poland, Czechia, or Romania. The logic makes sense: EU membership, same time zone, growing talent pools. But the equation that worked ten years ago no longer adds up.
Cost Convergence
In its 2026 study Nearshoring on the CEO Agenda, Strategy& (PwC's strategy arm) examined production relocations by German industrial companies. The key finding: German firms increased their off- and nearshoring activities by 153 percent between 2018 and 2025, with 70 percent of relocated capacity going to Central and Eastern Europe.
But Strategy& warns: many of these initiatives did not deliver the expected savings. Rising labour and energy costs are eroding the region's advantage. The study focuses on production, not engineering services — but the dynamic is the same, because the same rising labour costs hit factory workers and engineers alike.
Manufacturing labour costs, indexed to Germany, tell the story. Germany sits at 100 percent. Czechia and Poland are each at 56 percent, Hungary at 45 percent. The trend is upward. And it is not only German engineering firms competing for this talent — the automotive industry, the chip sector, and international tech companies are too. Czechia ranks as the world's leading nearshoring destination on the Savills Index, which only intensifies the competition.
The Underestimated Factor
Beyond rising costs, Strategy& flags a second problem. Many nearshoring initiatives consume management capacity without creating a differentiating competitive advantage. The study describes a cycle of margin pressure, fragmented location decisions, and overstretched leadership.
This is the real bottleneck. It is not talent — it is leadership. Most distributed engineering teams fail not because of the quality of the engineers at the remote site, but because of insufficient management capacity on the German side. Those who throw work packages over the fence and wait for results will be disappointed. Those who assign a technical lead who runs the remote team like an internal one — with regular syncs, design reviews, and quality gates — get comparable results. The unspoken prerequisite for any distributed team model is an engineering manager willing to lead across locations.
Location Comparison
Four location options typically evaluated by German mid-sized companies in mechanical engineering and automation. The assessment draws on public sources and our own market experience. These are ranges, not point estimates — regional differences within each country can be significant.
| Criterion | Germany | Eastern Europe (PL/CZ/RO) | India | Tunisia |
|---|---|---|---|---|
| Time zone | CET | CET to CET+1 | +3.5 to 4.5h | CET |
| Monthly all-in cost (mid-level) | 7,500–9,000 EUR | 3,500–5,500 EUR | 1,500–3,000 EUR | 2,000–3,500 EUR |
| Savings vs. Germany | Baseline | 35–55% | 60–80% | 60–75% |
| Cost trend | Rising | Sharply rising (convergence) | Rising (IT inflation) | Stable |
| STEM graduates | ~33% | 25–30% | ~34% | ~40% |
| Talent competition | Extremely high | High, rising | High (IT services) | Moderate |
| German language skills | Native | Rare | Very rare | Rare |
| English level | Good | Good (PL/CZ) | Very good | Good |
| EU data protection | GDPR | GDPR (EU) | No adequacy decision | National law, SCCs for transfers |
| Travel time (from Frankfurt) | On site | 1–2h flight | 8–10h flight | 2.5h flight (direct) |
| Cultural proximity | Baseline | Medium to high | Low | Medium |
| Industrial automation | Low (shortage) | Medium (competition) | IT strong, OT weak | Automotive strong, automation growing |
| Risk profile | Regulatory, demographic | Cost convergence, talent competition | IP, time zone, attrition | Low awareness |
The pattern is clear. Eastern Europe still offers advantages in time zone and proximity, but the cost gap is shrinking and the fight for talent is heating up. Tunisia leads on cost and STEM ratio, sits in the same time zone, and is a comparable flight away. Its biggest disadvantage is low awareness — and for early movers, that is precisely the advantage.
Back to the report overview.
Next chapter: Dedicated Teams, Not Outsourcing.