Outsourcing

What Entrepreneurs Should Know About Outsourcing to Ukraine

Tech talent abounds in this Eastern European country.
What Entrepreneurs Should Know About Outsourcing to Ukraine
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Guest Writer
CEO and Co-Founder of Perfectial
5 min read
Opinions expressed by Entrepreneur contributors are their own.

Ukraine seems to be on its way to becoming the new darling of IT outsourcing. The country's pool of engineering talent is extensive, and its software development and quality assurance rates arefairly cheap. This is why many tech giants, including Samsung, IBM and Oracle have already set up their R&D offices there.

Related: Are the Baltic States Right for Your Startup?

The outsourcing industry in Ukraine has been growing at a stable rate since the early 2000s. It is projected to reach $4.5 billion by the end of 2018 (increasing 20 percent from 2017) and, therefore, it'll become the third most profitable field for the country's economy. The overall number of software engineers in Ukraine, according to IT Ukraine, is nearing 116,000 while by 2025 it's expected to grow by a whopping 125 percent.

Why is Ukraine's IT outsourcing sector booming?

Since the country's separation from the USSR, Ukraine's universities have made impressive headway in modernizing and adapting their degree programs and making them comparable to leading institutions of higher education in Europe and America. Many Ukrainian schools, especially those specializing in business, science and technology, frequently launch joint academic projects with world-renowned universities and have reputed guest lecturers giving talks on the latest methodologies and trends. The curriculums they provide prepare students comprehensively for jobs that require high-level qualifications.

Though the quality of education is high, it typically costs substantially less to enroll in various programs at Ukrainian universities than, say, at prestigious academic organizations in the U.S. or Europe. As a result, the country has an extensive pool of experts (scientists, software engineers, managers, etc.) with diverse expertise and strict work ethics to boast of.

Related: The Differences Between Eastern and Western European Startups

Here's where Ukraine is, in terms of software engineering skills, according to various ratings:

  • Global Sourcing Association (GSA) named Ukraine the "Outsourcing Destination of the Year" in 2017.
  • Gartner has featured the country in its list of top 30 countries for offshore services for seven years straight.
  • 18 Ukraine-based IT companies are on the IAOP's list of the world's top outsourcing providers of 2018. Ukraine, therefore, has more of its companies included in the list than any other country.
  • Clutch.co, a reputable research firm from Washington D.C., regularly adds Ukrainian IT vendors to its global leaders matrix in both "Top Custom Software Development Companies" and "Top IT Outsourcing Firms" categories.
  • SkillValue's 2018 rating of the countries with the most talented developers includes Ukraine at eighth place. The average score index of a Ukrainian developer is 91.26 percent.

Many large tech firms are contracting out their development initiatives to Ukrainian vendors to have them executed diligently and at a cheaper price. This is due to the wide range of technologies Ukrainian engineers have proved to excel at, including:

According to DOU, one of Ukraine's most respected technology outlets, software engineers account for 52 percent of people employed by software vendors in Ukraine (14 percent of these people are QA engineers and only 6 percent are top and middle level managers).

Why do companies choose Ukraine?

The reason Ukraine has managed to become an offshore darling despite its political turbulence of the last years is quite nuanced. I'd say that, for the most part, companies such as Intel are just impressed by the sheer quantity of talented engineers living in the country.

Ukraine, though not a small country, only has about one-seventh of the population of the U.S. yet, every year, it produces nearly half as many software engineering graduates. For Ukrainians, as opposed to Americans and those living in western Europe, software engineering is among the most lucrative jobs available, so there's no wonder the IT talent pool over there keeps growing a frenetic pace.

Related: Working Across Borders: Why Estonia Is Launching a Visa for Digital Nomads

Another appealing factor is, of course, the prices. That the job title "programmer" isn't all that revered among American youth, resulting in a fairly low number of talented engineers available for hire in the U.S. The demand outstrips supply and, therefore, top (and even mediocre) engineering talent costs a lot.

An average software engineer in the U.S. might charge as much as $100 per an hour of work, while a more experienced one might only agree to a $150/hour rate. This puts a substantial strain on the budget for American companies who decide to opt for local sourcing exclusively, whereas employing a Ukrainian team can help them avoid overspending.

Junior programmers (up to two years of experience) in Ukraine can cost as low as $20 per hour. Mid-level developers (two to five years of experience) charge about $30/hour, while senior software engineers with five-plus years of experience will usually work for you if you pay them $40/hour. Add this to the fact that most of them speak English at an intermediate level and that the country's location -- in the center of Europe -- makes it easily reachable from almost any place in the world, and you'll get why the likes of Apple, IBM and Microsoft have been so eager to open their R&D centers there.

All in all, Ukraine is a great location to outsource your development to. Though it generally costs a bit more to hire Ukrainian developers than, say, the ones from India, the quality of work they provide is well worth the price.

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Outsourcing Is a Shortcut; Insourcing Is an Investment