Ukrainian IT Labor Market and Its Potential for Dutch IT Companies

Oct 22, 2014

Surveys and studies in 2011 and 2012 show that the demand for IT outsourcing in Netherlands is slowly but steadily growing. In 2012, 74% of the study participants stated they would continue outsourcing IT activity at the same rate in 2013, and 46% of them said they would probably outsource more. The possibility to reduce operational costs and get access to IT labor force that is in relatively short supply in the Netherlands continue motivating Dutch businesses to outsource IT activities nearshore and offshore.

Though Asia remains an undisputed global outsourcing leader, more and more European companies discover the benefits of outsourcing IT somewhere nearer: to Central and Eastern Europe. More attractive geographical location (which means insignificant time difference and shorter travel time), visa-free travels for European citizens, and a narrower culture gap, as compared with India or China, make Central and Eastern Europe the optimal outsourcing choice for Dutch and other Western European companies.

Unknown and unspoken of in the IT world some 10-15 years ago, today’s number one outsourcing destination in Central and Eastern Europe is Ukraine. According to the report of the Investor Day Central and Eastern Europe 2013, the value of IT outsourcing market in Ukraine reached  €1.5 billion, involving over 500 service providers and more than 50,000 professionals. By 2016 it is expected to reach €3 billion. This active growth is justified by something more than a convenient geographical location: it is the IT labor market that makes Ukraine the outsourcing leader in the region.

What Are the Key Factors that Make Ukrainian IT Labor Market Attractive for Dutch Businesses?

1. Labor Market Size.

Ukraine is #1 in the Central and Eastern Europe and #4 in the world by the size of its IT labor market, with around 40-60 thousand IT professionals. Another 16,000 young developers graduate from Ukrainian universities every year and join this vast talent pool.

2. Excellent Educational Background.

Ukraine has the reputation of an educated nation, ranking second among most Master Level Certified nations and boasting over 650,000 university graduates annually. Combining the Soviet academic heritage of technical universities that used to prepare aerospace engineers with educational initiatives of Ukrainian IT companies that are interested in qualified developers, young IT professionals graduate with a decent level of preparation.

3. Attractive Salaries and Operational Costs.

One of the factors that makes Ukraine the outsourcing leader in Central and Eastern Europe is the fact that software development is 20% cheaper there than in nearby Russia or Belarus. The Ukrainian IT salaries are, naturally, much more attractive for Dutch businesses that those of local developers: for example, the average annual salary of a Senior Software Engineer in Netherlands is about €49,000, as compared with €25,000 a specialist of the same level makes in Ukraine.

4. A Variety of Experts in Different Technologies.

Ukrainian labor market offers a great variety of experts in different programming languages and technologies, from “classic” C++ and PHP to relatively new or rare technologies like AngularJS or Erlang. Among the most demanded fields of expertise are Java, .Net, Mobile development (Android and iOS), PHP, C++.

Do Dutch Companies Currently Outsource IT to Ukraine?

Many Netherlands-based businesses already outsource their IT activities to Ukraine. These include Philips, Booking.com, Vliegtickets, Symphony Solutions, U-Wiss, Kwebbl, and many others. The main outsourcing models are as follows:

Local Divisions

Dutch IT companies that are interested in long-term work with Ukrainian developers open local divisions in the biggest IT cities, such as Kyiv, Lviv, Kharkiv, Dnipropetrovsk, or Odessa. Sometimes these Ukrainian subsidiaries operate under Dutch management, specifically relocated to Ukraine  to run the division, but very often all the executives are recruited locally.

Dedicated Teams

Another model lets Netherlands-based companies set up a remote group of developers that will work as a virtual part of their in-house team. This is often done using the services of locally-based staffing companies that deal with recruitment and organizational issues.

Project Outsourcing

In this case, the business hires a Ukrainian IT company - a software engineering firm, web or game development company - to complete a certain project. The Dutch company is a customer in this scenario, while the process is managed internally in the contractor company. Even though the project budget will include these managerial expenses, for many Dutch firms outsourcing a project is still more cost-effective than completing it in-house.

Relocation

Sometimes the company needs one or two developers and prefers to handle all IT activities in-house. In this case, relocation becomes the solution, with Dutch businesses recruiting a Ukrainian programmer and offering them a position on site. This model most often requires the assistance of Ukraine-based staffing and recruitment companies.

Ukraine is obviously a very attractive outsourcing destination with a potential for growth, and its IT labor market is the key factor behind this success. Taking advantage of the vast talent pool Ukraine offers can open new possibilities for Dutch business, allowing them to cut down the investments while producing quality software products.

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