6 Key Facts That Make Ukraine a Great Software Development Outsourcing Destination
During the past decade, outsourcing has become the top business trend with Information Technology as the most high-demanded outsourcing area.
“Gone are the days when outsourcing or the acronym BPO was synonymous with cost-cutting or labour arbitrage,”
says Keshav R. Murugesh, group chief executive of outsourcer WNS Global Services and current chairman of the Indian outsourcing association Nasscom BPM Council.
“Today, it is about partnering to drive better business outcomes leveraging the domain expertise of the partner, high-end technology, and analytics. It is about partnering to ride disruptive business trends, which is a complete change from the humble beginnings of outsourcing for cost efficiencies alone.”
If you’ve made up your decision to join the global outsourcing hub and clearly realize that hiring a remote team is your golden chance to grow business faster and more cost-effectively, you have to answer one more question about your future outsourcing engagement:
Though India is still the leader in offshore IT outsourcing, today the country’s tech community is facing numerous challenges, including the rising prices for software development due to fierce competition, failing infrastructure, employee turnover, and quality showing no tendency to improve. Is there a better alternative?
For businesses that are looking for reasonable value-cost balance, one safe bet might be to outsource their software development to Ukraine. If you’re not sure whether or not Ukraine is your happy medium for IT outsourcing, this article may help you reconsider.
The rise of Ukraine
Since 2007 Ukraine has been one of the top players in the Information Technology outsourcing market. More and more companies are considering Ukraine as their primary destination for outsourcing the development of their software products or even opening their R&D labs or development offices there.
The country has been listed among top 30 outsourcing destinations according to the Gartner, world’s leading research organization, and reaching top 25 in A.T. Kearney GSLI 2016 report, leaving the UK behind. Also, Ukraine been named as the 1st outsourcing market in Eastern Europe (Outsourcing Journal), the “Offshoring Destination of the Year” at the 2017 Global Sourcing Association (GSA) awards ceremony, and has received many other awards.
Let’s get into more details on the advantages of this dynamic and attractive market for IT outsourcing.
1. Level of technical education
Ukraine has strong scientific heritage and impressive achievements in computer science and engineering.
It was Ukrainian scientist Sergiy Lebedev who developed the first fully operational computer in continental Europe in 1951. Also, Ukrainians designed and assembled the biggest and the most weight-lifting aircraft in the world An-225 Mriya. Today Ukraine is among the top 10 countries in the world that can go through a full cycle of native aviation hardware engineering and production.
The first brain-child of S.A.Lebedev – MESM, L.N.Dashevsky(right) and S.B.Pogrebinsky are at the control desk.
Noticeably, Ukraine is on the 13th place in the world for educated labor. According to a comprehensive report on Ukrainian IT industry by UADN and AVentures, country’s 402 universities annually deliver over 36,000 graduates with technical degrees, and among them 15,000 graduates with degrees in IT-related subjects.
Ukrainian higher educational institutions possess powerful teaching potential. They have both a solid scientific basis in the face of old-school representatives and strong motivation of the young generation. Scientific and teaching staff is listed as having about 80,000 teachers and lecturers.
State technical institutions are mostly located in the biggest Ukrainian cities, like Lviv, Kyiv, Odesa, Kharkiv, and play a significant role in training specialists in engineering, microelectronics, programming, physics, and maths.
Apart from the numerous universities and colleges, an increasing number of private IT schools and courses is emerging in the big cities. They focus mainly on practical skills and knowledge enough to embark upon a software development career.
Non-profit organizations also play their role in improving Ukrainian educational environment. One of the volunteers, BrainBasket foundation, aims at turning IT sector into the driving force of economic growth in Ukraine, as well as training up to 100.000 new IT professionals by 2020.
Ukrainians won numerous prizes in the world maths and programming contests. According to Bench Games, that aim to identify the skills and knowledge of professionals within IT industry in over 600 skill areas, Ukraine is ranked 2nd in the ‘Most Master Level certified nation’, leaving Russia, India, and Romania behind.
It is anticipated that soon computer science and information technology will be among the most popular career choices for Ukrainian graduates. Western standards in the corporate culture of IT companies, decent employment conditions and encouragement of professional growth are just some of the reasons why IT sector is so appealing to the young generation.
According to the most recent assessment of technology market of Ukraine by Akholi Research, a non-profit organization helping countries evaluate their economic performance, Ukraine is uniquely positioned to become a true global technology leader, staying next to Japan, India, Korea, and the United Kingdom.
2. Labor Force
Skilled labor force and a vast talent pool of software engineers are Ukraine’s main strategic asset and unique selling point. Currently, the country houses 90.000 IT professionals, 50.000 of which are software developers. By 2020 the number of IT employees is expected to grow to 200.000. These impressive numbers put Ukraine way ahead of the rest of Europe in terms of tech talents.
Three-quarters of all Ukrainian IT professionals have a university-level degree. Ukraine has the world’s leading density of Science, Technology Engineering, and Mathematics (STEM) resources and currently, it’s the 8th largest globally, according to Akholi Research.
Demographically speaking, IT professionals in Ukraine are one of the youngest active population groups, with 80% of them being under the age of 30.
Many of the talented developers launch their tech startups that fuel the rapid growth of Ukrainian IT industry. Among the most successful Ukrainian startups are Grammarly, DepositPhotos, Mobalytics, Ecoisme, InvisibleCRM, TemplateMonster, GitLab, Sixa, PetCube, Preply, Looksery, Attendify, Readdle, CleanMyMac, NewOldStamp, and the list can go on and on.
As well, Ukrainian vibrant tech community hosts major tech events, including IT Arena, DevFest Ukraine, iForum, Agile Eastern European Conference, ITEM, AI & Big Data Conference, PyCon Ukraine, to name a few.
Most of the companies who work with Ukrainian software teams note that Ukrainians actively participate in the development process rather than blindly follow instructions. They deep dive into every project, ask many questions and try to find the most reliable and cost-effective solution. They think before doing.
Ukrainian remote teams thoroughly investigate the project from various angles to come up with project and process improvements. They are usually well educated in math and physics, so they are able to tackle technically complicated problems. Their inherent open-mindedness makes them particularly suitable for creative and experimental tasks.
High level of transparency and straightforwardness, ability to think from the client’s perspective and provide insightful advice, focus on ‘better’ rather than ‘good’ are distinctive characteristics of Ukrainian IT resources. These people will not hesitate to tell that something is going wrong, and they will provide honest statuses. They believe that open communication and cooperation help build trust between them and their outsourcing partners.
If you need to successfully solve a complex technical challenge, build a sophisticated product, or save a distressed project, Ukrainian software engineers should definitely be high on your list.
4. Largest IT market
Ukraine has the biggest IT outsourcing sector in Europe. According to Emerging Europe, Information Technology is arguably the only sector of the Ukrainian economy that has shown sustainable growth by 20-25% yearly. Despite the political and economic turmoil, the export volume of Ukraine’s software development and IT services is showing double-digit growth year after year.
According to PwC analysis, in 2011-2015 Ukrainian IT market has increased by 150%, and it is going to reach $5.7 billion by 2020. In the first half of 2017, the volumes of Ukrainian IT export increased by 18.3% (to $1.256 billion), as compared to the same period in 2016. Software development alone makes up more than 70% of Ukrainian outsourcing volume.
Almost the entire software outsourcing industry of Ukraine is oriented towards external markets, and more than a half of all software engineers work for outsourcing companies. The US market is the main destination for exported services, as well as the most significant partner for joint R&D activities, followed by European Union and Israel.
More than 100 international companies have founded their R&D offices in Ukraine. Among them are such industry leaders as Samsung, NetCracker, SysIQ, Siemens, Magento, ABBYY, Huawei, Ericsson, Boeing, Oracle, Siemens, Adstream, SimCorp, and many others.
During Outsourcing World Summit 2016 leading global association IAOP’s has released an annual rating where 10 IT companies with R&D offices in Ukraine have hit the top 100 world’s best outsourcing service providers.
5. Superior Value For Money
Ukraine’s IT service providers offer competitive pricing paired with excellent technical expertise and innovation. Overall, by locating their core IT development in Ukraine, businesses from Western Europe and the US can expect to save 40% to 60% on their total in-house development costs.
According to Numbeo Index, Ukraine’s cost of living is twice lower than in the US and is the lowest in Europe. At the same time, the country has improved the process of starting a business by simplifying tax and legal system and reducing business registration procedures. Ukraine’s taxes for the IT sector are comparatively lower than in most developed countries. As a result, Ukraine was listed in world’s top 30 outsourcing countries, as compared to the 89th position in the previous year.
Ukrainian software development companies provide a full spectrum of outsourcing services, including full-cycle software product development, web and mobile development, quality assurance, UX/UI design, business process outsourcing (BPO), dedicated team, research and development services, IT consulting and maintenance, etc. Most companies have already tuned their development processes to the Agile model.
Ukrainian IT companies supplement software development with a range of value-added services, including technology consulting, business analysis, user experience design, data science, etc. They always pair deep technical knowledge with domain expertise.
Overseas clients have a possibility to save time and costs as Ukrainian outsourcing companies can cover the whole range of their needs ‘under one roof’ rather than distribute the team across multiple cultures and time zones.
The vast majority of Ukrainian outsourcing employees are hired as independent contractors. This model of work is beneficial for both companies and employees cope with the project requirements nor communicate the failure neither technically. because an employer does not have to pay taxes on the salaries and the employee pays a fixed rate of only 5% of earnings. VAT does not have to be paid either.
Just a typical case to sum it up. One of Relevant Software clients has initially chosen an Asian vendor during the software development outsourcing tender. The lower price was a major determinant of the client’s choice. Soon, this client renewed their cooperation with Relevant Software, because eventually, the Asian vendor was unable to cope with the project requirements nor communicate the failure neither technically.
This case is one of many showing that software development in low-cost countries may not appear that cost-efficient in the end. Eventually, it may cost more, as precious time is wasted, development takes longer, and quality is often poor.
6. Cultural and geographic proximity
As a European country, Ukraine possesses the cross-cultural ties that make it compatible and extremely attractive nearshore and offshore location. When compared to other popular outsourcing destinations such as India — Ukraine belongs to a low-context culture, as do the Western cultures, and offers far less cultural gap that Asian countries.
Ukraine’s time zone compatibility with the majority of European countries plays a significant role in improving the coordination and communication during the projects’ implementation. There is only a 1-2 hour difference between Ukraine and Western European countries. When a company is outsourcing to Ukraine from the United States – Ukrainian developers work while their clients sleep.
Geographical proximity creates a possibility of live meetings with the teams in order to establish productive working relationships. On average, it takes 3 hours to fly from major European cities to Ukraine, and 8 hours to fly from New York. Besides, visitors from European Union, USA and Canada do not need a visa to enter Ukraine. As well, Ukraine has a well-developed business infrastructure, telecommunication, and transportation systems.
In a nutshell, western values and mentality of people, as well as west-oriented government policies allow establishing long-term business relationships in software outsourcing between the US and EU companies and Ukrainian software development partners.
Outsourcing to countries with the cheapest labor force may look very attractive financially, but very risky and insecure in terms of quality and overall project delivery.
On the contrary, Ukraine stands out as the perfect destination for software development outsourcing due to its Western-oriented business values, highly educated and biggest in Europe talent pool, lower costs compared to EU and North America, significantly higher quality and delivery commitment than in Asia.