Battling the ever-growing tech talent shortage, the German companies address nearshore software outsourcing to countries with larger tech talent pools. From big to small, German companies in tech successfully hire software developers in Ukraine and some of them build a software development team in Ukraine.
For over five years Simon has been advising companies from the DACH region in starting up development operations and extending their development teams in Ukraine. He frequently travels between Germany and Ukraine and has a deep understanding of both the Eastern European and Western business culture and mentality and how to reconcile them.
The question: Is nearshore software outsourcing to Ukraine a perfect solution for all German companies in the tech industry? What are the key benefits and challenges a client might face when working with a software development team in Ukraine? What steps can German companies take to make sure they choose the right option?
We talked to Simon Ricker, a Daxx Business Development Manager responsible for the German market, to have his say on these questions.
Q: Hi Simon. What are the problems that German companies face when hiring locally or outsourcing to other popular nearshore software outsourcing destinations?
Simon: There are some problems that are bigger and smaller in different cities.
It’s no secret that in Germany there is a serious shortage of IT professionals, a problem that manifests itself in almost all regions of Germany.
In Munich and Cologne, the problem is more pronounced, while in Berlin the issue is less obvious, as it’s a place many people actively want to live.
When it comes to the decision between hiring locally and hiring from a vendor, Germans will always prefer homegrown talent if they can get it. Outsourcing, therefore, isn’t so much a matter of choice, more of a necessity — especially when companies cannot find the resources they need locally, or when the resources they do need are too expensive. The latter is particularly true for smaller companies.
Q: So why do German companies come to Daxx?
Simon: Most of the time people come to Daxx when they can’t find the developers locally for one reason or another.
Sometimes it’s because they live in areas with low levels of availability for developers: for example, there are a lot of IT companies in the Ruhrgebiet, but not so many developers. Daxx helps these German companies hire software developers in Ukraine where the availability of tech talent is higher.
Companies from other areas that have a shortage, for example, Munich in the south, face another issue — the salaries of software developers are much higher. For these companies, both the shortage and high costs of local developers are top reasons to address outsourcing vendors.
Q: What kinds of companies do you typically work with?
Simon: In the main, we work with German companies that are either fairly small or medium-sized.
We don’t work with the large companies in Germany, mainly because, as I said before, Germans tend to source talent close to home. The really large companies, which sometimes need 200 developers at once, would simply open a subsidiary somewhere instead of working with a company like Daxx. This puts them in control of absolutely everything, but it requires a huge amount of resources.
Q: For whom is Daxx a good solution?
Simon: Daxx can be a good solution for small or rapidly growing German companies, some of which may not have enough resources in their own recruiting departments or can’t source talent fast enough. These companies like to invest as much as possible in their product, so try to save on overhead costs like human resources and recruiting personnel. Daxx can help them hire software developers in Ukraine.
Our developers are less expensive than in Germany, but still very good, which allows companies to save on labor costs without compromising quality. However, because remote communication is a little different than in-house communication, these companies need to be agile in their approach — far more than traditional companies that have fixed processes in their development department do.
Q: What are the key benefits that convince your German clients to choose Ukraine in general as outsourcing destination, and Daxx in particular?
Simon: Usually it’s a mixture of factors.
Often they choose to hire software developers in Ukraine because other European countries such as Poland and Romania have become too expensive — the salary levels have gone up and taxation is higher. Plus, there’s not much difference in quality between a Ukrainian and a Polish developer. That’s the advantage of Ukraine over many other European countries.
However, the reverse is true between Ukraine and Asian countries. However, it is very German not only to look at costs when choosing, but also to look at the quality and cultural factors. A lot of companies I’ve spoken with have had bad experiences in communication with Asian firms, simply because there seems to be a bigger difference between a German and an Asian developer than between a German and a Ukrainian one. This makes communication between Germans and Ukrainians easier.
Education is better here — a lot of companies I’ve talked to can confirm that the quality of Ukrainian developers’ work is better.
All in all, you pay a little bit more, but you also get a little bit more for your money.
One of the reasons German companies choose us is that there are many IT companies in Ukraine and India but very few that have a German as a contact person, who you can call and talk to in your mother tongue. When you talk to someone about purchasing a service, or when you want information about that service — it’s easier if it’s done in your native language.
Another reason why German companies choose us over other, typically smaller companies, is that Daxx has a very well structured approach. We have a dedicated Service Delivery Director, who evaluates client requirements. For Germans, it’s very reassuring to know that someone is taking specific care and not just rushing.
Our approach works because we take a lot of steps to make sure we find people our clients really like, not just throw candidates at them that don’t fit. Germans don’t like it when you’re not honest with them.
For instance, if a German company is considering hiring SAP developer, and even if they are thinking of going remote, we don’t just immediately say “yes, we can definitely do that”. This would make them invest a lot of their time, but unless we’re sure, we could leave them with no candidates at the end. If that is the case, we will admit that these developers are almost impossible to find in Ukraine and not waste their time.
We always start by analyzing whether it’s possible for us to close a certain vacancy. If it’s not — we say so, and Germans like that.
Q: What do you think of the compatibility levels between Germans and Ukrainians? Are there any peculiarities of completing a hiring process with German clients? Do they like to interview developers personally or have a certain number of interviews?
Simon: Once the remote choice has been made, the hiring process is also remote. In days gone by, a candidate probably would have seen his future employers’ office during the hiring process. The whole point of remote model is to be remote, so there’s no point in conducting a face-to-face interview. However, companies hiring for inhouse positions with us tend to have a final stage personal visit.
Sometimes, clients do their onboarding in Germany during the trial period. If a German company chooses the remote model, they are likely to onboard a person in Germany, get to know them a bit better, but then work remotely after that.
The hiring process itself is not that different from the hiring process in Germany. The only difference I do notice, which can sometimes be a problem, is that Germans want to get to know a person they’re going to work with. Usually, they don’t make hiring decisions quickly, whereas Americans generally decide to fire and hire someone within 2 days. Germans want to make sure they’re hiring the right person instead of hiring and firing 3 and ending up with the 4th as the right person.
Unfortunately, the time they take to make a decision can at times result in losing the candidate, because developers in Ukraine typically want everything and they want it yesterday. Frequently, if you don’t answer within a week, a developer will simply accept another job offer.
Sometimes cooperation doesn’t work out because there’s a mismatch between how fast Ukrainian developers want an answer and how fast German companies can give it.
Q: Do clients come to visit their remote teams?
Simon: German clients would rather invite their remote team to visit them in Germany.
Q: Have you noticed any trends in technologies that German companies are looking for? What is the most popular one?
Simon: It’s very varied actually. I don’t really think you can say that one is more popular than another. The technologies clients are looking for strongly depends on the industry - if a company operates in web development, of course, this would be PHP, CMSs, and front-end technologies. More established product companies will tend to use a lot of .NET and Java. In general though, we don’t find that one technology is inherently more popular than any other.
Q: If a German company is considering hiring a Ukrainian developer, what actions would you advise them to take before actually hiring one?
Simon: I would advise them to think about two things. First, what would it be like from the developer’s side to work for them? The amount of information prospective candidates have about their future projects and how this is presented can make the difference to choose for or against you.
The more compelling information you pass on to the Ukrainian partner company you are working with, the easier it will be for them to attract genuine talent and not someone just in it for the money. Second, it's important to understand that remote teams work differently than in-house teams. With this in mind, take some time to find a partner company who takes a consultative approach to helping you set up the right communication channels and project management structures within a remote team.
Q: How long have you been living in Ukraine?
Simon: I have been permanently living in Ukraine for over five years, but travelling between Germany and Ukraine for around 8 years.
Q: What are your impressions of the country?
Simon: I think Ukraine has a lot of unfulfilled potential, not only in IT. It has beautiful nature and a rich culture, which could attract more tourists than it does. The land itself is also very fertile and underutilized, but the infrastructure to support growth in these sectors is missing.
Q: What are the top 3 reasons to love Ukraine?
Simon: In Ukraine, things can change really fast. This actually makes Ukrainians very adaptive and inventive when they are faced with quickly changing circumstances. If all Ukrainians were developers, one could say agile is in their blood.
This can-do attitude extends to old people. There are hardly any nursing homes here, instead, a network of friends and family will take care of the elderly to make sure they are not socially isolated.
Ukrainians are very welcoming to foreigners. They are eager to talk with you and will also always be prepared to help you out.