Beyond India and China: Why Friend-Shoring Is Pushing ASEAN Tech Talent Into the Spotlight

For nearly two decades, the global outsourcing playbook had a simple geographic logic: India for scale, China for manufacturing, Eastern Europe for premium engineering. That playbook is being rewritten in 2026.

Trade restrictions between the United States and China, new data sovereignty regulations across Asia and Europe, and the painful lessons of supply chain concentration are driving a fundamental shift in how companies think about offshore talent. The emerging winner in this recalibration? ASEAN and particularly Indonesia, the bloc largest economy and its most overlooked technology talent market.

The End of the Single-Source Era

The period from 2024 to 2025 taught technology leaders a harsh lesson: outsourcing concentration is a risk, not a virtue. When geopolitical tensions disrupted talent pipelines in major outsourcing destinations, companies with single-country exposure found themselves scrambling for alternatives.

Several forces are converging to accelerate this diversification:

• US-China technology decoupling - Export controls on advanced semiconductors and AI-related technologies have created uncertainty around long-term access to Chinese engineering talent for Western companies.
• Data sovereignty regulations - GDPR in Europe, Indonesia PDP Law (UU PDP), and similar frameworks across Asia now impose strict requirements on where and how data can be processed. Companies need talent in jurisdictions with aligned regulatory frameworks.
• Supply chain resilience thinking - Post-2024, the "single vendor, single geography" model is seen as negligent by procurement teams. Diversification is now a governance requirement, not an option.
• Cost inflation in traditional hubs - Developer salaries in Indias top tech cities (Bangalore, Hyderabad, Pune) have risen 30-40 percent since 2022, narrowing the cost gap with emerging markets.

For companies exploring alternatives, IT outsourcing services from diversified geographies are becoming the new standard in vendor evaluation frameworks.

ASEAN by the Numbers

The Association of Southeast Asian Nations is not a monolithic bloc, but its aggregate demographics tell a compelling story. With 650 million people, ASEAN has a population larger than the European Union and nearly double that of the United States. More importantly, its demographics are skewed young. The median age in Indonesia is 30 years compared to 38 in the United States and 44 in Japan.

The regions technology ecosystem has matured rapidly. Homegrown unicorns GoTo (Indonesia), Grab (Singapore), Shopee parent Sea Limited (Singapore), and Traveloka (Indonesia) have built products serving hundreds of millions of users. The engineering talent that built these platforms now forms a diaspora of experienced developers available for outsourcing engagements.

English proficiency across the region is improving, driven by mandatory English education and a workforce that consumes global technical content in English. The Philippines ranks second in Asia for English proficiency, while Indonesia, Malaysia, and Vietnam are climbing the EF EPI rankings year over year.

Indonesia: The Least Tapped Major Economy

Among ASEAN economies, Indonesia is the most intriguing opportunity for international outsourcing. As Southeast Asia largest economy and a member of the G20, Indonesia has the scale, infrastructure, and talent pipeline to be a major outsourcing destination, yet it remains almost entirely untapped by Western companies.

Why? Historical factors. India and the Philippines built outsourcing industries over three decades, creating ecosystems of agencies, recruiters, and infrastructure. Indonesia never had that export-services moment. Its developers have primarily worked for domestic companies building products for the Indonesian market.

But that domestic focus is precisely what makes the talent so valuable. Indonesian developers who built Gojek, Tokopedia, Traveloka, and Bukalapak solved problems at a scale most markets never face serving 280 million people across 17,000 islands with inconsistent infrastructure. They learned to build robust, mobile-first, offline-tolerant systems under real constraints.

The talent pipeline is equally impressive. Indonesia produces over 100,000 computer science and IT graduates annually from more than 3,000 universities, polytechnics, and vocational schools. A thriving bootcamp ecosystem (Dicoding, Hacktiv8, Binar Academy) adds thousands of job-ready developers each year, many trained specifically in modern JavaScript, Python, and Go stacks.

When you hire an Indonesian developer, you are getting someone trained on the same tools as a Silicon Valley engineer but with experience building for resource-constrained environments. That combination is increasingly rare and increasingly valuable in the AI era where efficiency matters more than raw compute.

Time Zone as a Structural Advantage

Geography works in ASEAN favor. The regions time zones span GMT+7 to GMT+8, offering overlapping working hours with both Asia-Pacific clients (Australia, Japan, South Korea, China) and, during early mornings, European teams. For Australian companies, the overlap is near-perfect Sydney is just 2-3 hours ahead of Jakarta and Bandung.

This time zone alignment means synchronous collaboration standups, sprint planning, pair programming, and real-time problem solving are straightforward. Unlike teams in the Americas or Europe where offshore partners in India or the Philippines work opposite hours, ASEAN teams can participate in the full development lifecycle in real time.

The Friend-Shoring Infrastructure

Governments across ASEAN are actively supporting the friend-shoring trend. Indonesia launched its "Making Indonesia 4.0" roadmap, which includes digital talent development as a priority. The Indonesian Ministry of Communication and Informatics has funded digital literacy programs and coding bootcamps, recognizing that technology services are a strategic export opportunity.

The Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) provides a trade framework that simplifies cross-border technology services between the two countries. Similar agreements exist between ASEAN member states and Japan, South Korea, and New Zealand, creating a web of preferential arrangements for technology trade.

For companies looking to build a website development team or expand their software engineering capacity, these trade frameworks reduce the friction of cross-border engagement, making ASEAN a structurally easier place to do business than it was even five years ago.

Practical Considerations for Diversification

Shifting from a single-source model to a friend-shored ASEAN model requires some operational adjustments. Here is what experienced teams recommend:

• Start with a pilot team - Engage one or two developers on a specific project before scaling. This lets you evaluate communication patterns, code quality, and cultural fit without committing to a full engagement.
• Invest in asynchronous workflows - Even with overlapping time zones, well-documented async communication (Loom walkthroughs, Notion specs, Slack threading) makes the partnership more resilient.
• Use Employer of Record (EOR) platforms - Deel, Remote, and local Indonesian EOR providers handle payroll, benefits, and compliance, removing the administrative burden of direct international hiring.
• Prioritize cultural bridge-building - Having an in-country partner who understands both the local talent context and your business goals is the single strongest predictor of success in any new geography.

The Bottom Line

The friend-shoring trend is not a temporary reaction to geopolitics it is a structural shift in how technology companies think about talent sourcing. ASEAN, and Indonesia in particular, offers a rare combination of scale, talent quality, favorable time zones, and regulatory alignment that makes it a natural complement to traditional outsourcing destinations.

The companies that start building their ASEAN talent presence in 2026 will have a meaningful advantage over those that wait until the next disruption forces them to diversify under pressure.

Next IT (PT Niaga Expert Teknologi), based in Bandung, Indonesia, specializes in connecting global businesses with ASEAN tech talent. With 5+ years of experience, 50+ completed projects, 100+ active IT talents, and 98% client satisfaction, we help companies build high-performing software teams that are ready for the challenges of 2026. Visit our website to learn how we can support your technology team expansion.