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Buyer’s Guide to Outsourcing to Ukraine

Posted Mar 10, 2020 Ukraine

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1. Outsourcing to Ukraine: Why Companies Do It?

Outsourcing to Ukraine is a popular business practice in which a company delegates software development or any other technical function to another company in Ukraine. Primarily attracted by Ukraine’s abundant technical talent and reasonable cost for quality services, EU and US companies also enjoy the ability to scale their businesses faster and use flexible collaboration models.

Numerous international businesses have already opened their own R&D offices in Ukraine, while most medium and small-size companies still prefer to outsource to Ukraine. As of writing this article, more than 100 companies from Fortune 500 have outsourced their software development to Ukraine.

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ukraine-best-it-outsourcing-destination

Why Outsource to Ukraine?

Get data on the state of the Ukrainian IT market and discover why Ukraine is one of the top destinations for outsourcing software development in 2020.

2. Why Has Outsourcing to Ukraine Become Popular?

Short Overview of the Software Development Industry in Ukraine

Kyiv, the capital of Ukraine, was the only city in the entire USSR to produce and develop multi-purpose computing machines in 1965 and 1970. Ukrainian scientists wrote software for the famous “Dnepr” computer and left a strong scientific legacy for years to come. 

After the fall of the USSR, domestic demand for software development rapidly decreased, but foreign tech businesses reached out to Ukrainian universities for cooperation. This put the beginning of IT outsourcing to Ukraine.

At first, software development companies were founded as part of universities where they used research laboratories as offices. In 2020, Ukrainian software development companies have already stepped over the 6K developers threshold and have offices all around the country. Within twenty years, Ukraine has grown into the best IT outsourcing destination in Eastern Europe.

ukrainian it community

Source: dou.ua 

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How to Hire Software Developers in Ukraine with Daxx?

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Strong Educational Background: Numerous Tech Universities and Research Institutions in Soviet Ukraine

The beginning of the IT industry in Ukraine traces its roots back to the times of Soviet Ukraine. In 1990 about 70% of the country's population had higher education diplomas.

The largest number of people with higher education were registered in 1989, when an impressive 95K adults graduated. About 24 technical universities and research institutions in Soviet Ukraine gave a powerful boost for the development of the IT industry in the country for decades to come.

Nowadays, most of Ukrainian state universities offer stipends and free education to talented students. About 652 universities are currently educating about 1.5M students. About 25K students will graduate from polytechnic universities by the end of 2020.

The majority of polytechnical university graduates will enter the tech industry in the biggest tech hubs of Ukraine. With a constant influx of new talent, Ukraine is continuously growing its strength as an IT outsourcing destination.

Access to Diverse and Rare Talent

The Ukrainian talent pool counts 200K tech specialists and is expected to add another 20K by the end of 2020. 

Most tech workers are located in five major IT centers, which simplifies the search for talent. One-third of all tech talent — about 68K developers — live in Kyiv, about 21K are based in Lviv, and 25K in Kharkiv. 

Number of Software Developers in Ukraine

According to LinkedIn, Ukraine boasts big JavaScript, Java, PHP, and .NET communities. In addition to popular tech skills, there are also plenty of developers who specialize in C++ and other highly-demanded yet rare languages.

Perfect Cost for Quality Work

Tech workers in Ukraine combine two essential aspects foreign businesses hunt for — deep expertise and reasonable cost for high quality work. An average software developer salary in Ukraine is lower than in Poland and Germany, while the quality of development services is the same.

Ukrainian engineers are also known for their exceptional critical thinking skills, and are interested in not only doing their particular part of the project well, but in contributing to overall project success.

regular flights to europe

Regular Direct Flights from Ukraine

Airlines offer fares of all price ranges. Low сost airlines such as Wizz Air and Ryanair fly directly from London, Berlin, Amsterdam, and other cities to Kyiv, Dnipro, Kharkiv, Lviv, and Odesa.

Convenient Time Difference

Ukraine is seven hours ahead of the US which makes it a more attractive offshore destination than the Philippines, Vietnam, and India by offering more common working hours.
New YorkBostonChicagoAustinDenverLos AngelesSan FranciscoSeattle
7 hours7 hours8 hours8 hours9 hours10 hours10 hours10 hours

Thanks to the time difference, companies in the US can use the”follow-the-sun” model. It significantly increases the development time per day allowing companies to cut time to market for their products.

Within the model, when an American engineering team’s work day is over, they hand off the results to Ukrainian software engineers who continue developing the product.

European countries are one hour behind Ukraine which results in a fully matching working day in both destinations and seamless communication.

Vibrant Tech Community

Software development and product companies in Ukraine unite into business platforms — IT Clusters. Through joint efforts, companies create a favorable business environment for small and medium-size companies by communicating the needs of the IT sector to the government.

There’s also no shortage of tech conferences, meetups, workshops, and hackathons, including those dedicated to specific technologies like JS, Java, .NET, Python, and PHP.

The biggest tech event in the Eastern European region, IT Arena, has already gathered more than 14K attendees. Annually, tech experts gather at Outsource People Kyiv, JS Fest, Blockchain UA, and many other events. Startups also create communities and accelerators for sharing ideas and knowledge creating a local Silicon Valley vibe.

Good Culture Fit

The Ukrainian way of doing business is best described as data-driven, which is characteristic of most Western cultures. In contrast to Eastern cultures that acknowledge status as the most significant aspect in any cooperation, Ukrainian business ethics rely on figures and facts.

Ukrainian software engineers have well-developed critical thinking and take ownership of meaningful parts of a product.

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3. Overview of the IT Industry in Ukraine

Growth of the Tech Industry in 2015–2019

In 2019, the tech industry in Ukraine constituted 4% of GDP. In the last two years, the 50 largest IT companies have grown one-third in size, from 43K to 58K employees. Two companies have crossed the threshold of 8K specialists.

The tech industry shows a rapid, yet steady growth. In 2016, the IT service export grew by 17.8%, in 2017 — by 24%, and, finally, in 2018 it grew by 29.3%. 

2016201720182019
17.80%24%29.3%31.4%

Name: Growth of the Tech Industry Export in 2016–2019

  • Ukraine climbed up the ladder of the 2019 Global Services Location Index by A.T. Kearney, moving from the 42nd to the 20th place
  • The 2019 Global Outsourcing 100 listing recommends 13 software development companies with R&D offices in Ukraine.
  • Software Developer Shortage in the US 2019

4. Outsourcing Rates in Ukraine Compared to Other Outsourcing Destinations

Ukraine has proven to be one of the most comfortable outsourcing destinations in terms of quality, cost, and geographic location. Ukraine's outsourcing rates range between $25 and $50, which is a happy medium compared to outsourcing rates in Latin America and Asia. Check the chart below.

offshore developer rates

Average Developer Rates in the World

In South America, the average developer rate fluctuates between $30 and $50 an hour. The geographic proximity of South America to North America stimulates local development companies to charge higher rates than Eastern European ones. A slightly lower rate range of $18–$40 is seen in Asian and African countries.

average offshore rates

Ukraine is the runner-up on the list of Eastern European countries both by the size of the tech talent pool and the affordability of software development services.

Among the main reasons clients from European countries prefer Ukraine to Poland as their primary outsourcing destination is reasonable rates and high quality talent.

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5. The Biggest Software Development Companies in Ukraine

According to the IT Ukraine Association, in 2018, the greater part of the tech industry in Ukraine belonged to service companies. They comprised 70% of the 80–200 employee group, 43% of the 200–800 employee group, and 14% of companies with 800+ specialists.

Currently, there are 4K tech companies in the industry, and they’re expected to generate an export volume of $8.4B by 2025. The top five largest tech companies in Ukraine as of 2020 are:

  1. Epam
  2. SoftServe
  3. GlobalLogic
  4. Luxoft
  5. Ciklum

Two companies from the list have over 8K employees.

Companies with over 20 years of experience on the market are actively collaborating with the world’s giants such as KPMG, Toyota, EY, and Samsung.

Companies with an international presence like SoftServe, Eleks, Team International have a network of offices in Ukraine as well as in the US, Canada, Germany, Estonia, Poland, and the UK.

Ukrainian product companies are experiencing rapid growth. Depositphotos, Grammarly, SnapChat, and Jooble are just a few of the world-famous products that originated in Ukraine.

6. IT Outstaffing, IT Outsourcing, and Other Popular Cooperation Models in Ukraine

There are several ways for an international business to collaborate with a Ukrainian tech company. The most popular models are software development outsourcing, IT outstaffing, and opening an R&D center.

IT Outstaffing Model

IT outstaffing is the easiest way to hire remote talent in Ukraine. Within this cooperation model, the client delegates the finding and hiring processes to vendors, but still takes part in interviews with candidates.

This model works equally well for tech companies that are looking to hire just one developer or grow an entire cross-functional team. That said, it’s important to note that it also requires technical expertise on the side of the client that will be able to manage the remote team directly.

The biggest benefits of IT outstaffing are flexibility, ability to work with developers directly, and a transparent cost structure. Foreign clients can scale their remote teams fast and easily thanks to the potential of the Ukrainian talent pool and the ease of doing business in the country, while vendors are taking care of all the associated legal and administrative aspects of collaboration.

IT Outsourcing Model

The majority of Ukrainian tech companies work with foreign clients using the IT outsourcing model. Within this model, the client delegates product development services to the vendor, with the latter bearing full responsibility for the product's delivery.

Outsourcing product development is the best approach for companies that don’t have their own engineering team and therefore require full tech expertise from the vendor. Big businesses turn to the IT outsourcing model to delegate product development within a specific budget and skip the team management part.

Research & Development Offices

Unlike small and medium-size businesses, the likes of Samsung, Amazon, and Oracle can afford to open their own offices and hire their own employees in Ukraine.

Learn more about cooperation models in the related articles: 

7. The Number of Software Developers in Ukraine

Ukraine, the second-biggest outsourcing company in Eastern Europe, is predicted to boast around 200K tech specialists by the end of 2020. If the 26% industry growth rate remains stable, before 2025, there will be about 242K software engineers living in Ukraine.

Number of Software Developers in Ukraine

A LinkedIn-based research shows that despite the fact that the population of Ukraine is several times smaller than that of the US, the former has more PHP developers than the latter — 9K software engineers.

More than 8K and another 8K software engineers in Ukraine indicated JavaScript and Java as their major technologies.

Python has a developer community of 3K, followed by Ruby on Rails with 1K software developers.

The tech industry quickly adds on entry-level engineers almost without losing middle and senior developers. According to the 2019 DOU statistics, more Ukrainian developers have started using JavaScript, Python, C, C++, TypeScript, Kotlin, and Go. 
 

Years of Experience1-3 years4-6 years7-10+
Percentage51.1%21.2%27.9%

Source

developers by technology

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8. What Is the Average Developer Salary in Ukraine?

On average, a developer in Ukraine earns around $4K a month which adds up to an annual salary of $48K. A yearly salary of a mid-level software developer is around $30K with $2K paid each month. An entry-level software developer earns about $1.5K a month which amounts to $18K annual salary.

Please keep in mind that the salaries indicated in the article have advisory character and vary depending on the vendor, market fluctuations, and other external factors.

 JavaScriptC# .NETPHPJavaPython
Junior$2700-$3500$1000-$2100$2700-$3800$2700-$3500$2600-$3800
Middle$4700-$5300$2100-$3800$3800-$4700
$3500-$4000
 
$3500-$4600
Senior$4800-$6500$5000-$6400$4700-$6000$4800-$6500$6,500

What Aspects Influence the Average Developer Salary in Ukraine?

A developer’s salary is defined by the expertise of each individual engineer, the popularity and the demand of a given technology, the level of responsibility on the project, and the business model the vendor applies.

Seniority Level

Following the UK and the US, where the tech industry went through a rapid development phase in 2013, Ukraine is now facing a devaluation of seniority.

These days, a developer is considered to be a junior if they have one to two years of experience, while mid-level engineers have two to four years of experience, and seniors four and above.

Demand for Tech Skills

Proficiency in one of the top-tier languages such as Python and JavaScript would bring a larger salary than, for instance, Java. The tendency here is that technologies that are dropping in demand result in slightly lower salaries.

Level of Responsibility

The higher the level of responsibility, the larger the salary. Within a team, a developer can be classified as a junior, a middle, a senior, a tech or team lead, or an architect.

Business Model

Cost Structure Comparison in IT Outsourcing and IT Outstaffing

The two major business models, IT outsourcing and IT outstaffing, have different cost structures and provide different value to the client.

Within the IT outsourcing model, a vendor charges hourly rates that include hidden costs for support staff and administrative expenses.

IT outstaffing is different in that the hidden costs are reduced to zero and a client only pays a vendor’s fee and their developer’s salaries.

9. Portrait of Ukrainian Software Developers

The IT industry is a fast-paced and competitive environment that attracts plenty of talented specialists. As a rule, the best talent flocks to bigger cities where they can get more employment options.

Here’s the current distribution of tech talent among the biggest tech hubs in Ukraine:

  • Kyiv: 40%
  • Kharkiv: 15%
  • Lviv: 15%
  • Dnipro: 8%
  • Odesa: 5%

Technical Education

According to research by DOU based on 5K answers, about 87% of women working in the tech industry have higher education diplomas. More than 82% of men have an academic degree, with 61% having graduated from a technical university.

More than half of the respondents (56%) have majored in computer sciences. About 30% have studied economics and management.

Self-education is a popular method of increasing expertise. 72% of the respondents have said they read specialized literature, take online courses and seminars, and attend tech events.

High English Proficiency

The research also showed that the majority of software engineers speak Intermediate and Upper-Intermediate English – 33% and 35% each. About 12% of software engineers use Advanced English on a daily basis.

English Proficiency of Ukrainian Developers

Motivation to Join the Tech Industry

Love for technology is the key motivating factor to work in IT for 78% of developers in Ukraine. The second reason why tech workers decide to join the industry is the ability to grow professionally and work on challenging projects. 

Remuneration takes only third place among the reasons that motivate people to work in the IT industry. On a side note, junior software engineers are generally obsessed with numbers a lot more than their more experienced coworkers.

A quarter of respondents have stated that open-mindedness is one of most important reasons to consider employment in the field. Software engineers also pay special attention to corporate image, bonus packages, and the ability to work remotely or have flexible hours.

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10. What Makes Daxx a Great Outsourcing Company?

Daxx in Numbers

Extensive Experience and Expertise

Daxx is a Netherlands-based company with 20 years of outsourcing experience and 400+ specialists on board. We've already helped more than 300 clients from the Netherlands, the UK, the US, Belgium, Norway, Germany, Australia, and Israel hire developers in Ukraine.

We use a transparent IT outstaffing cooperation model to help our clients scale their development teams with high-quality tech specialists from Ukraine. Be it one developer or an entire cross-functional team, we’re ready to help you.

High-Quality Talent Retention 

The IT outstaffing model allows our clients to find highly qualified developers they can manage directly. However, our participation doesn’t stop once you’ve found a perfect fit, as we go on to provide retention services to make sure that the tech specialists you’ve hired with us remain in your team and enjoy their work.

Your developers become part of our retention program from day one. We set up an efficient onboarding process, initiate performance reviews, organize knowledge sharing events, and create an engaging community where everyone feels included.

Daxx Takes Care of Paperwork

We manage the administrative and legal aspects of cooperation with clients on our side. This means we take care of payroll, pay taxes, place your developers in comfortable offices, and provide fully equipped workstations based on your and your developers’ preferences.

International Quality and Security Certifications

Daxx qualified for the Microsoft Gold Certification in 2009 and has retained this high standard of software development services ever since. 

In 2019, Daxx obtained security expertise certificates ISO 9001:2015 and ISO 27001:2013.

Daxx is among the 50 biggest companies in Ukraine and was named third best IT employer in 2013.

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Kateryna Kachkovska

Content Marketing Manager

Kateryna is a Content Marketing Manager at Daxx driven to help business owners make data-based decisions. Feel free to contact her with offers on content promotion and collaboration.

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