Pros and Cons of IT Outsourcing to Ukraine

In 2010, Ukraine was named the top outsourcing country for the nearshore software development. Is the situation still the same? Let me walk you through some pros and cons of IT outsourcing to Ukraine so that you could make a balanced decision.

Ukraine is ranked 6th in the list of the countries with the lowest cost of living. Only a decade ago the cost of labor was the lowest in the whole world, but now as the market has been heating up, IT specialist tend to charge more for their services. Despite the fact that the development cost has somewhat risen, overall prices remain to be very attractive for the clients from the USA and Western Europe, not to say cheap.

Locating their core IT development in Ukraine, Western Europe’s companies are likely to save 40 to 60% of their total in-house IT spending. Ukrainian cities Kharkiv and Dnipropetrovsk rank 3 and 5 accordingly in terms of cost effectiveness in FDI Magazine’s rating of Top 5 Major European cities.

I used to work in a small outsourcing company in Ukraine. Jan Koum, the CEO and co-founder of WhatsApp was looking for remote designers, and his former colleague from Yahoo recommended us, as he used to work with our team before. First, we were helping WhatsApp on-demand, but as the messenger was becoming more and more popular, the amount of work grew, and finally we were designing only WhatsApp and nothing else. We worked as a dedicated team for some time and now we are proud to be an integral part of WhatsApp as its employees!

The benefits for the client I can outline here:

1. We were a coordinated team of experts.
2. The client could try our performance without any risks — if he hadn’t liked us, he would have terminated the contract.
3. He also didn’t need to hire a lot of people in-house at once.
4. We were flexible and ready to learn: for example, we mastered interfaces of some not-so-popular operating systems — Nokia Series 40 and Series 60 Symbian, Blackberry.

There were some complications, though. The main one was time difference: we worked from Ukraine, and WhatsApp is headquartered in California, so there were 10 hours of difference. We got through this issue with the help of long-term planning, emails, and late skype chats. Communication, at first, was also an issue, but in 6 months we overcame it — you just need some time to get used to each other. Also, business trips helped a lot.

Alisa Kryzhanovskaya, designer at WhatsApp *

* When WhatsApp was only a start-up, they outsourced all the design to Ukraine.

Historically, Ukraine has been a technology center for many decades and the legacy of scientific success is still strong today. Each major city has tech universities, and more and more young people choose the tech-related fields for their study. IT guys are known to earn much more than an average Ukrainian employee, so the competition between future students becomes higher, as they start to think about their future.

However, IT graduates are not completely ready for this fast-moving market, and here the industry takes matters into its own hands. Every big web development company and even some small have organized their own training courses for programmers, designers, quality engineers and managers to provide themselves with the highly skilled workforce. This kind of education is either free or costs less than a laptop.

Ukraine is in the 3rd place by the number of certified citizens, in the 2nd place by the most Master’s degree certified nation, and it is the 4th in Top 10 countries with the most certified IT professionals. Ukrainian IT specialists showed outstanding results at Bench Games Leaderboard 2013 — the international online competition that measures skills and knowledge of IT professionals around the globe. More than 11 million participants from 50 countries took part in the competition. 56 Ukrainians showed the best results in the individual standings in different programming languages, web frameworks, databases and graphics.

The country has dozens of thousands of engineer graduates each year, 16,000 of them being IT specialists. In the end of 2015, there were 90,000 IT professionals in Ukraine, which is 20% more than in 2014. Almost 60% of them work as outsourcers. By 2020, the IT workforce is expected to double to over 200,000 specialists.

Ukraine is ranked 21st in terms of average broadband Internet speed across the country. But here is the fact that is never included in such global Internet researches: the cost of 100 Mbps connection with unlimited traffic in cities is no more than $5 per month!

It is impossible to become a programmer without the at least intermediate level of English, as all the documentation and specs are in English. Ukrainian developers have a decent level of English, which is enough to do their job well. Project managers, account managers, team leads have advanced fluent English, both oral and written.

Every major outsourcing company in Ukraine have either English teachers in-house or contracts with the best language schools in the city. So IT specialists in Ukraine work on their English skills at least twice a week. Sometimes a client wants to talk to developers directly. Usually, it takes 6 months for a team to polish their written and oral English and communicate directly with the client.

Pros of working with a remote Ukrainian team

Pros:

1. Good prices.
2. Good knowledge.
3. I can trust you guys.

Cons:

1. Communication because of remote.
2. Need to explain simple tasks thoroughly, because it's not possible to sit next to each other.

Robert Keus, CEO at brth.rs, The Netherlands

Indeed, there are a bunch of advantages of IT outsourcing to Ukraine, but are there any downsides?

There is a war in progress there, one may say. Well, there are some military operations still, but they are located only in a border region which makes less than 10% of Ukraine’s total area. The rest of the country is completely safe. I would compare the current situation in Ukraine with Israel. They are used to deal with Palestinian attacks on the everyday basis, and the country continues to prosper as one the world’s tech centers. Israel’s startup ecosystem is only second to Silicon Valley, and companies like Google, Microsoft and IBM run their R&D facilities there.

Crimea and Donbass weren’t among IT leaders of Ukraine, and when the invasion started they have moved to the safe regions of Ukraine. The communication lines (electricity and Internet) don’t depend on these regions, so there is no threat to the stability of the rest of Ukraine.

With the highest IT outsourcing market value in the Central and Eastern Europe region, 16,000 IT graduates each year, Western orientation, WTO membership, and the highest democratic level among the non-EU CEE countries, Ukraine is emerging as a Silicon Valley of the CEE region.

Ukraine’s infrastructure is rapidly evolving. The availability of extensive IT talent pool, supported by the highest in the CEE region public expenditures on education, can ensure that every single industry segment gets highly qualified IT workforce.

Of the 113 Ukrainian IT outsourcing providers, 97% primarily do project outsourcing on a fixed price / time-and-materials / milestone basis. Slightly more than 50% engage with clients by establishing offshore/nearshore development centers, while more than 40% offer a hybrid business model — a mix of onsite and offshore resources.

Ukraine has the best offering of innovative business models, which are able to bring value to Western clients. The distinctive hallmarks of these models are:

Such mix allows close interaction between the buyer and provider, a better understanding of client’s business needs and opportunity to fully monitor and track the development process.

The country’s political turbulence has had little impact on the existing activity of most industry players, but remains an obstacle to stronger growth. The industry has the potential to reach a completely different order of magnitude, given the size and quality of the country’s workforce, should reforms succeed and new strong players emerge.

The English proficiency level among IT professionals has grown significantly over the past few years, but remains lower than that of some other CEE countries.

Over the past year, Ukraine has significantly improved its status in international business venue rankings, while its taxes for IT-related businesses have remained relatively low.

At Kultprosvet, we’ve been outsourcers for mobile app development as well as website design and development for many years. Contact me directly, and our team will show you why Ukrainian programmers are considered to be the best.