IT Outsourcing Partners in Eastern Europe: Are They Worth Betting On?

A.T. Kearney’s 2017 Global Services Location Index included Poland, Bulgaria, Czech Republic, and Romania in the top 20 list, while the GSA UK Awards 2017 named Ukraine the offshore destination of the year. What attracts businesses to this emerging powerhouse for IT outsourcing?

First, it allows nearshoring and real-time contact with an IT outsourcing partner thanks to geographical proximity. This is one of the reasons Gameiom, a UK-based game developer and content aggregator, decided to collaborate with Innovecs in Ukraine and not with a developer team in India.

Second, technology development companies from Eastern Europe share similar working ethics and possess unique domain expertise including the Internet of things, blockchain, VR/AR, and machine learning. That is why big names as IBM, Microsoft, Samsung, Oracle, and eBay have opened their R&D offices there.

The IT outsourcing market has become one of the key revenue sources for the EMEA countries and for Eastern Europe in particular.

This year, Poland is projected to reach 5% market growth. The Czech Republic will make nearly 10%, while for Ukraine, the rate may be a bit higher totaling 15%.

Ukraine is said to be one of the fastest-growing outsourcing destinations in Eastern Europe. Currently, it accounts for about 116,000 IT specialists and will expand to 200,000 by 2020, IT Ukraine Association asserts.

What favors the rapid progress of outsourcing in Ukraine? How big is the IT market and what engineering expertise does it have? Here are the key, useful highlights.

Despite the fact outsourcing to Ukraine is not as popular as to Poland or the Czech Republic, Ukraine’s IT market is evolving at a rapid pace. In 2017, The Global Outsourcing 100 issued by IAOP featured 18 IT consulting companies either founded in Ukraine or with rep offices there.

These substantial changes in the development outsourcing industry began recently. According to EU4Business, the software development market in Ukraine saw a 58% rise throughout the years 2013 to 2016.

Imagine this! Ukrainian IT exports made $2,7 bln in 2015. This figure climbed to $3,6 bln two years later and accounted for 3.34% of the Ukrainian GDP. Future revenue predictions made by IT Ukraine Association look optimistic too. The graph below shows the expected IT industry export by 2025.

The survey says IT companies in Ukraine paid nearly $150 mln to the state budget. This is a significant contribution to the country’s economy, which has been surviving difficult times.

The country is now the home for about 1,000 IT consulting companies and more than 100 multinational R&D centers including Wargaming and Samsung Electronics. Furthermore, the Ukrainian tech startup investments have bounded up too. As Euromaidanpress states, the sum has increased to $265 million with Grammarly investing $110 million, PetCube – $10 million, and People.ai – $7 million.

On average, the IT outsourcing market in Ukraine is growing much faster than the global market. It has increased in size in 4.8 times since 2009, while the world index has expanded only in 1.7 times.

All these advances in the Ukrainian IT market are simply impossible without qualified tech experts. We have collected some stats on their qualifications in the next section.

Dou.ua research states 65% of the Ukrainian programmers plan to study an extra programming language. JavaScript, Python, Java, Go, Scala and Swift are among their favorites. Most of them will make use of tech documentation and manuals or take online and offline courses. The qualifications obtained are more than enough for Ukrainian IT specialists to carry out full-cycle software development and take QA, UI/UX, front-end and back-end roles.

Depending on the type of outsourcing projects and available budgets, IT companies in Ukraine suggest various partnership models. The most widespread ones are described below.

Most IT companies in Ukraine suggest choosing from similar cooperation models. They often include:

• Dedicated team

In this cooperative model, the company specifies the number of dedicated developers it needs, explains what skills are required, and distributes the tasks once the dedicated team is ready and in place. A software development provider searches and assembles the team, which then works only on that project.

• Team extension solution

The team extension model is a good fit for short-term employment. A company may need only several developers or QA testers to make their onsite team complete. This model stipulates all recruitment and employment issues are solved by the IT consulting provider. This model also requires huge client involvement to manage hired IT specialists.

• Project model

This team engagement model suits those who have a clear picture of the product they need. In this situation, all the hiring, project management and development processes are handled by the IT outsourcing company.

Other cooperative models can implement the creation of offshore development centers with all the technical team members on board; the time and material model for the companies that have not decided yet on the final product they need; establishment of R&D centers; and more. In a nutshell, businesses are sure to find a suitable team engagement model with a great variety of options offered.

Outsourcing to Ukraine has clear benefits. The IT market is motivated to grow since it encourages building strong bonds between countries and healthy economies.

Future predictions look very optimistic. As mind.ua has claimed, the IT outsourcing industry is estimated to rise by up to 30% or at least 20% in a worst-case scenario. The total amount of IT specialists is also predicted to double with about 100,000 new tech experts to enter the market. Generally, IT consulting services hold a $1bln export potential.

The good news is the Ukrainian government is showing more support for IT companies to develop as it is beneficial for both parties.

At Innovecs, we do hope for the best, strive to accumulate industry expertise and ship the highest quality products.