IT outsourcing in Ukraine: Troubleshooters In Action
“Outsourcing is in the air, everywhere I look around”. With the popularization of outsourcing even the songs of John Paul Young are getting a new modern sound.
The term “IT outsourcing” is so frequently used nowadays, that it’s hard to find a person that hasn’t heard it yet. But still, there are too many questions around this topic. So we prepared a complex article about IT outsourcing for you, that will probably be interesting for everyone, who: wants to try outsourcing, but has some doubts or fears; has already decided to outsource software services, but doesn’t know where to find not just an IT company, but a team of real troubleshooters, who will find the perfect solution for all your needs; wants to get the latest information about the state of IT outsourcing in Ukraine. Let’s keep going?
IT outsourcing in Ukraine: to put it briefly
In the simplest terms, outsourcing is a process in which a company delegates it’s assignments (partially or completely) during creation, maintenance or modernization of a software product/service to an external company or freelance developer.
It means that you can optimize your working process by not focusing on unimportant issues and specific tasks that are above your paygrade.
But before you experience all the benefits from IT outsourcing, you have to cope with a very important task. It can be called as the challenge of “the three Cs”: Choose Country & Company.
Correctly deciding on an outsourcing destination is probably half of the success. So you have to pay special attention to the selection of the outsourcing country for your business: it has to be well respected, reliable, and ever-growing in the IT field.
Speaking about software outsourcing in Europe, we can emphasize on the countries which are most attractive as outsourcing providers (according to the A.T. Kearney report):
Ukraine holds the 7th position, and has a huge potential to reach higher positions in this list. Ukraine is situated in the central part of Eastern Europe and is one of the most rapidly developing states in this region. Moreover, Ukraine can even be considered as a would-be Second Silicon Valley.
We’re not pulling these facts out of thin air, so we’ll let the numbers speak for themselves:
- 90 000 IT professionals (#1 in Europe, and 200, 000 are expected by 2020)
- 1000+ IT companies
- the shares of IT in national export is 4%
- 4th place by the number of certified IT professionals in the world (according to Colliers International)
- Ukraine is home to over 100 R&D centres with a staff of more than 12400 people (Microsoft, Samsung Electronics, Apple, Wargaming, Skype, eBay, IBM, Oracle, Siemens, Ericsson, Huawei, Upwork, Grammarly, ABBYY, Opera Software, Boeing etc) 380,000 IT graduates annually (besides those experts, who are trained on special IT courses)
- the Ukrainian IT market is full of creative ideas and boasts more than 2,000 startups, including Grammarly, InvisibleCRM, Readdle, Jooble, PetCube, Preply, DepositPhotos, TemplateMonster and Attendify.
As you can see, the statistics are quite impressive. However, the numbers alone are not enough to tip the scale in favour of IT outsourcing in Ukraine. You have to carefully analyze all the risks and сompare them with prospective benefits. Let’s take a look together>>
As you can see, there are many facts to discuss and a lot more detailed information that you could search for.
To save you time and precious nerves from continuous thinking and monotonous scrolling through Google pages, we have already done all that boring work for you. We collected the most popular fears about IT outsourcing in Ukraine and even found the ways to overcome them.
Are you ready to play mythbusters?
TOP 6 MYTHS about IT outsourcing in Ukraine
Myth #1 The Ukrainian economy is unstable and it’s hard (and even dangerous!) to hold business relations in such circumstances
Sometimes foreign media outlets post articles about the critical economic situation in Ukraine. High levels of corruption, decay in key economic spheres, difficulties caused by the revolution in 2014 and conflict with Russia… Sounds terrifying, yeah?
KEEP CALM: everything is not so bad! Yes, these aren’t the best times for the ukrainian economy. But this country has shown good results in crisis management and economic growth.
A number of leading experts polled by UNIAN say that they expect positive dynamics to be achieved in all major macroeconomic indicators, while the key factors in accelerating growth will be strengthening by the fight against corruption and attracting investments.
And you can see positive changes even now.
The GDP of Ukraine is constantly growing (90.94 USD in 2015 to 119.13 USD in 2018) and is expected to become approximately 163 USD in 2022. Also Ukraine has improved its positions in Doing Business Rating by 76 positions from 2012 to 2018.
Myth #2 Ukrainian IT outsourcing companies are unreliable partners, because of the conflicting situation in eastern Ukraine
The conflict with Russia makes the political conditions in Ukraine quite tense. Such circumstances can cause difficulties for developers to provide good outsourcing services.
KEEP CALM: Despite the poor political situation in Ukraine, Forbes says you should keep your head held high. Ukraine has got a high-quality, low-cost workforce. The conflicting zones of Donetsk and Luhansk are at a safe distance from developers located in the main IT technology centers - Kyiv, Kharkiv and Lviv. Moreover, IT companies have grown qualitatively and quantitatively even over the past few years of conflict.
A BBC report shows that from 2011 to 2015, the share of Ukraine's annual economic output coming from IT outsourcing grew from 0.6% to 3.3% and the number of IT specialists has more than doubled (from just over 40,000 to nearly 92,000; moreover, 200, 000 are expected by 2020).
Myth #3 There are many gaps in the Ukrainian legislation, especially in the sphere of intellectual property and taxation
Ukraine is not an EU member (not yet!) and its laws aren’t very “all-inclusive”. So it may be problematic to regulate legal questions.
KEEP CALM: The Ukrainian government has already taken a number of steps to improve those legal acts, which are unprogressive and don’t meet the modern needs of citizens. For example, in 2016 Ukraine considerably simplified the taxation system for the IT sphere.
Also during a meeting with the heads of leading Ukrainian outsourcing companies in 2018 the prime-minister Volodymyr Groysman gave the promise to improve legislation in the technological sphere.
But these promises have already started to be implemented in particular steps. The Cabinet of Ministers of Ukraine has recently accepted the concept of the development of Ukrainian digital economy (to 2020), which became a strong basis for positive changes in the Ukrainian legislation system.
Also in Ukraine there is no VAT payment for the exporters of IT services in favor of non-residents. It means that foreign companies that place orders for IT outsourcing services in Ukraine eventually receive them at a lower price, as their Ukrainian counterparties do not have to pay VAT on the export of these services. Because of such tax regime, Ukrainian companies have an ability to offer competitive prices to foreign customers.
Moreover, enacting law #4496 (which is commonly called “the law about freelance developers”) in 2016, the government of Ukraine facilitated the work of foreign clients with Ukrainian freelancers. Now you don’t need to waste your time on boring paperwork:
- the contract between the client and developer can be presented in an e-form in the language of one of the contractors;
- the act of provided services can be replaced by invoice;
- e-signature is officially recognized.
And finally, Ukraine has International Agreements for the Avoidance of Double Taxation with 67 countries of the world.
Myth #4 Prices for the services of the software development companies in Ukraine are inadequate.
The rates are higher than in some Asian countries. Moreover, there is always a risk that the quality of the final software product, created by ukrainian developers, will not correspond to the amounts spent.
KEEP CALM: It’s a well-known fact that the cheapest outsourcing destinations are India, the Philippines, China, etc. Ukrainian outsourcing rates are higher than in those countries.
However, the price to quality ratio for outsourcing web development in Ukraine and software solutions is one of the best and is quite adequate in comparison to average world rates:
As you can see, the IT outsourcing rates in Ukraine are the least expensive (after Asia, of course). On the other hand, such low prices can be an indicator of an underdeveloped country. But don’t make hasty conclusions!
Let’s inspect the salaries of web and app developers in Central and Eastern Europe. We can see the following>>>
On this diagram we clearly see that Ukrainian salaries are the highest (even higher than in Poland, the Czech Republic and other developed countries). The job of a software engineer is one of the highest-paying in Ukraine, because the key advantage of ukrainian developers is their ability to transform into real troubleshooters when they face challenging tasks. That’s why their work is highly appreciated by clients and well-paid by IT companies.
It’s worth to note, that this very special skill is not just a feature of natural talent. It’s a result of diligent work and professional education. Just look at this info>>
Myth #5 The Ukrainian timezone is uncomfortable for foreign clients.
You sleep when they work and they sleep when you work, literally. You might face delays and expirations of time limits because of the difference in working time, and it could slow down the progress of your project.
KEEP CALM: Ukraine is 7 hours ahead of the U.S. east coast, and 1-2 hours ahead of most European countries, including the U.K. So this fact can significantly facilitate your cooperation and working communication with Ukrainian developers. Since their day probably begins before yours does, they will already have progress to report on your daily Skype call or email. Also nearly the half of Ukrainian IT export fall on US, so experience shows us that timezone is not an obstacle for successful cooperation.
Myth #6 ”It’s so scary to trust the development of my key software product to a ukrainian IT outsourcing company! They will ruin my business!”
Just a simple and a very common fear of almost every serious business owner.
KEEP CALM: and take a deep breath:) What is the most convincing argument in such situations? A real-life example>>
Have you ever heard about the ukrainian IT outsourcing company ELEKS? In 2001 their team started cooperations with the consulting boutique Teologica. They were concentrated on providing ongoing delivery of transformative digital solutions for the public sector. This Ukrainian outsourcing company showed excellent results of their work, so this cooperation evolved into a strong strategic alliance.
The big success was the delivery of the flagship Customs and Excise System for the Administration of Revenue (CAESAR II) for the government of the island of Jersey. The island underwent tax reforms that made the majority of consignments arriving into the island subject to tax collection. The project team had to re-engineer the customs processes, allowing the agency to stand up to the challenge of extreme capacity growth and control over operating expenses at the same time.
CAESAR II automated the full cycle of transactions between the government and customs applicants. The new system allows the Jersey customs department to efficiently process more than 10,000 consignments per week, compared to the previous 200 per week.
The map of ukrainian outsourcing: big cities and perspective IT destinations
Now that the most common myths about software outsourcing in Ukraine are busted (we hope so!), the next point for us is to help you in choosing the best city/town, where you can find a prestigious company with highly qualified experts.
So we invite you to participate in a small excursion to the best IT destinations in Ukraine! Are you ready? Before we start, we have to mention that the IT sphere in Ukraine is rapidly developing. As we said previously, there are more than 1000 software development companies in this country (and this number constantly increase). Moreover, 18 Ukrainian companies have gotten into the world’s top 100 IT companies (and it’s a real breakthrough!).
Of course, it’s natural for the biggest and the most affluent companies to be located in the capital of Ukraine (Kyiv) and other big cities.
In a course of time these companies formed IT clusters (to consolidate their efforts for improvement of their work and general development of the IT sphere in Ukraine).
Nowadays, the key IT hubs are located in Kyiv, Kharkiv, Lviv, Odesa and Dnipro >>>
But these cities are not the only place where you can find сool IT outsourcing companies. The latest tendencies show that more and more new companies have begun to appear in smaller towns. There are also IT clusters in Vinnytsia, Cherkasy, Lutsk, Ternopil, Ivano-Frankivsk, and Mykolaiv.
There are also many other towns that have the potential to be part of an IT cluster. For example, one of the most prospect towns in the IT sphere is Khmelnytskyi. There are more than 40 successful IT companies located there which are expected to be assembled into an IT cluster. One of the initiators for the creation of such clusters will probably become the software development company MassMedia Group.
And last, but not least
As you see, there are many IT destinations in Ukraine.
Which one do you choose and which company do you entrust the outsourcing of your software? It’s your decision. We just want you to always remember: it doesn’t matter if the company is big or small, or if it’s a part of an IT cluster or not.
The only important thing is this company’s ability to meet your needs and it’s ability to turn even your craziest ideas into reality.
Don’t search for ordinary companies - search for a team of TROUBLESHOOTERS! And let your business evolve at an extraordinary rate, making your competitors sweat!