Maltese companies choosing other EU states over India for IT outsourcing

Maltese companies are increasingly opting to outsource information technology (IT) functions to other EU Member States rather than traditional offshore destinations such as India, according to new data published by the National Statistics Office (NSO).

The findings form part of the NSO’s latest study on Global Value Chains and International Sourcing, which examines outsourcing trends among enterprises employing 50 people or more between 2021 and 2023. The data show that while IT remains the most commonly outsourced business function, the geographical focus of that outsourcing has shifted markedly within the EU.

During the previous survey cycle covering 2018 to 2020, India was a key destination for Maltese companies relocating IT operations. However, in the most recent period under review, enterprises reported that the majority of IT and technical functions were instead sourced from other EU Member States, with India accounting for only a marginal share of new IT relocations.

The NSO notes that 5 per cent of large Maltese enterprises moved at least one business function abroad between 2021 and 2023, up from 3.5 per cent in the previous period, reflecting a broader trend of growing internationalisation across the EU. Information Technology led all other functions, followed by engineering and related technical services

Unlike wider EU trends, where labour cost reduction is typically the primary motivation for outsourcing, Maltese companies cited access to specialised knowledge and technology as the main reason for relocating business functions abroad. Labour cost savings ranked second.

This shift in motivation may help explain the move towards EU-based sourcing. Businesses may be prioritising regulatory alignment, data protection standards, ease of collaboration and proximity to clients over pure wage differentials, particularly in knowledge-intensive functions such as IT.

The survey also highlights that tax compliance requirements and differences in tax regimes were among the main barriers companies considered before relocating functions overseas, followed by legal and administrative obligations. These factors may further favour sourcing within the EU single market, where regulatory frameworks are more harmonised.

International sourcing between 2021 and 2023 resulted in 277 jobs being relocated abroad, with IT roles accounting for a significant share. Engineering and technical services saw the largest number of jobs transferred, followed by IT and other services. More than 60 per cent of the jobs relocated were held by women.

The NSO stresses that international sourcing does not necessarily imply downsizing, as some employees previously occupying outsourced roles were retained within their organisations in different capacities.

Overall, the data suggest that Maltese firms are becoming more selective in how and where they outsource, with EU Member States emerging as preferred partners for IT and technical services as companies seek skills, stability and regulatory certainty rather than purely lower costs.