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Buyer’s Guide to IT Outsourcing to Ukraine

Posted Mar 10, 2020 Ukraine

IT outsourcing in Ukraine is the 2nd largest export services industry projected to generate $5.7 billion by the end of 2020 and $8.4 billion in revenue by 2025. Being the first most popular employment destination, the IT outsourcing industry in Ukraine currently employs about 200,000 tech specialists in 4,000 IT outsourcing companies. The industry is experiencing a stable 26% growth and expects an influx of another 30,000 entry-level tech specialists in 2021.


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IT Outsourcing to Ukraine: Why Companies Do It?

Ukraine has 200,000 tech specialists and 450 universities that generate additional 30,000 entry-level tech talents annually. A.T. Kearney, IAOP, SkillValue, and TopCoder acknowledge the expertise level of Ukrainian programmers while IAOP and WorldBank recognize Ukraine as one of the top IT outsourcing destinations for tech companies from the US, Israel, and Western European countries. About 45% of all projects outsourced to Ukraine belong to the US tech companies and 45% of Israeli tech companies delegate IT outsourcing to Ukraine and hire developers in Ukraine.

Why do Tech Companies Delegate IT Outsourcing to Ukraine?

  1. 200,000 tech specialists
  2. $25-46 moderate developer rates
  3. 47% of developers in Ukraine speak fluent English
  4. Ukraine is 1-2 hours away from most European countries
  5. IT outsourcing companies offer flexible cooperation models

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.

ukraine-best-it-outsourcing-destination

Why Has IT Outsourcing to Ukraine Become Popular?

  1. 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. Now, Ukraine is a plain field the multinational tech giants only began to explore: Samsung Electronics, Microsoft, Apple, Boeing, Skype, eBay, and 94 other large tech companies have R&D offices in Ukraine.
    • PwC lists Ukraine among the five most popular IT outsourcing destinations due to the rising popularity of Ukraine's tech potential. Kyiv, Kharkiv, Lviv, Dnipro, and Odesa are the major tech hubs that house about 4,000 Ukrainian tech companies.
    • In 2020, Ukrainian software development companies have already stepped over the 6,000 developers threshold and have offices all around the country. In the last two decades, IT outsourcing to Ukraine has become a widely-used practice among European and American countries.
  2. 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.
    • About 652 universities are currently educating about 1.5M students. About 25K students will graduate from polytechnic universities by the end of 2020. In addition, the majority of Ukrainian state universities offer stipends and free education to talented students.
  3. 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. 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.
  4. 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. 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.
  5. 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 York - 7 hours
        Boston - 7 hours
        Chicago - 8 hours
        Austin - 8 hours
        Denver - 9 hours
        Los Angeles - 10 hours
        San Francisco - 10 hours
        Seattle - 10 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 workday 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.
       
  6. 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.

    • Buyer’s Guide to Outsourcing to Ukraine

      Get best practices businesses need to know to outsource to Ukraine successfully

      buyers-guide-outsourcing-ukraine

    • 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.

  7. 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 of 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. Close cultural fit is one of the major reasons why foreign businesses hire Ukrainian developers and support long-lasting working relationships.

Overview of the IT Industry in Ukraine

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%. 

Growth of the IT Outsourcing in Ukraine in 2015–2019
2016201720182019
17.80%24%29.3%31.4%

Growth of the IT Outsourcing Export in Ukraine 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

Outsourcing Rates in Ukraine Compared to Other Outsourcing Destinations

Ukraine's offshore developer rates range between $25 and $50, which is a happy medium compared to outsourcing rates in other popular IT outsourcing destinations. The high cost-quality ratio is seen even in comparison with Ukraine's close neighbors such as Romania, Hungary, and Czech Republic. 

outsourcing-rates-ukraine-world

IT Outsourcing Rates in Ukraine

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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The Biggest IT Outsourcing Companies in Ukraine

The Full List of 10 Biggest IT Outsourcing Companies in Ukraine:

  1. Epam
  2. SoftServe
  3. GlobalLogic
  4. Luxoft
  5. Ciklum
  6. Infopulse
  7. NIX Solutions Ltd.
  8. Eleks
  9. EVOPLAY
  10. DataArt

According to the IT Ukraine Association, in 2018, the greater part of the tech industry belonged to IT outsourcing companies in Ukraine. 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.

    Two IT outsourcing 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.

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

    The most popular models of cooperation 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.

    IT outstaffing 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: 

    The Number of Software Developers in Ukraine

    There are about 200,000 software developers in Ukraine in 2020. Ukraine’s 2nd largest IT outsourcing destination in CEE (A.T. Kearney). If the 26% industry growth rate remains stable, before 2025, the number of developers in Ukraine will reach 242,000. Around 39 Ukrainian tech universities generate about 30,000 tech specialists annually.

    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. 
     

    Seniority Level Ratio in Ukraine
    Years of Experience1-3 years4-6 years7-10+
    Percentage51.1%21.2%27.9%

    Source

    average-developer-salary-ukraine-structure

    Average Developer Salary in Ukraine - Structure

    Check out a list of related articles:

    What Is the Average Developer Salary in Ukraine?

    The average developer salary in Ukraine is $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.

    Average Developer Salary in Ukraine
     JavaScriptC# .NETPHPJavaPython
    Junior$1300-$1900$1100-$2100$1100-$2200$1100-$1900$1100-$2100
    Middle$1900-$3600$2100-$3600$2200-$3100$1900-$2900$2100-$3600
    Senior$3600-$5000$3600-$4600$3100-$4600$3100-$4600$3600-$4600

    What Factors 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.

    1. 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.
    2. 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.
    3. 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.
    4. Business Model

    Cost Structure Comparison in IT Outsourcing in Ukraine and IT Outstaffing in Ukraine

    • 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.

    Portrait of Ukrainian Software Developers

    About 40% of software developers live in Kyiv. Kharkiv and Lviv have 15% both and Dnipro and Odesa house 8% and 5% developers respectively. 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%
    1. 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 
    2. 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.
      • ukrainian-developers-english-skills

        English Skills of Ukrainian Developers

    3. 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 the 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.

    What Makes Daxx a Great IT Outsourcing Company?

    daxx-top-software-development-company

    Daxx Top Software Development Company

    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. 

    Daxx obtained security expertise certificates ISO 9001:2015 in 2019 and ISO 27001:2013 in 2020.

    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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