Aspects of Offshore Outsourcing to Ukraine
by Ihor Pidruchny
(the article was written by Softheme's top management and reflects ten years experience in IT outsourcing)
Though Eastern Europe occupies only near 5% of world offshoring industry, it shows the highest growth. While the average growth within nearest 3 years will count 25%, Eastern Europe is expected to show nearly 35%.
This, combined with high level of IT services based on strong educational system and scientific heritage of the country, attracts many US, European and other clients to the Ukrainian offshore market. This article aims to depict few aspects of offshoring to Ukraine. We will show you how you can make the whole process of launching the development center or establishing relations with outsourcing services provider with less risks and money & time expenses.
Advantages of Offshoring to Ukraine
Offshoring to Ukraine has several strong advantages.
First of all, Ukraine's culture is very close to Western values, and it was forming during centuries when Ukraine was the trading and therefore cultural cross road between West and East. Secondly, people who work in IT industry fluently speak English, and some of them also know German, French and Italian, which helps maintaining clear communications with clients from many countries abroad.
As it was noticed before, Ukraine is a country with strong education system and scientific infrastructure, and it lies in the depth of Ukrainian culture: Ukrainian mental schemes presumes digging into the nature of things, establishing unvivid connections and correlations, following intensive way of development instead of extensive. This is especially important in IT, and most of offshoring clients remark the ability of Ukrainian engineers to mine new knowledge and find unobvious solutions to diverse problems. This means that work offshored to Ukraine can have higher intellectual level, which makes offshoring more intensive and therefore profitable.
Major Ukrainian cities have well developed infrastructure, which enables quick entrance onto the market without capital investments.
Disatvantages of Ukrainian Offshoring
Nevertheless, the coin has its back side. Reading about unfavourable areas, you'll also find our recommendations how to reduce risks and even step into more favourable conditions where others prefer not to operate.
Well developed infrastructure is limited only by major cities. Others don't have direct airline communication and modern hotels which can make your staying less comfortable. If you decide to explore any regional cities of Ukraine, you'll have to traavel by bus or train, and either rent an apartment for yourself or live in old hotels which are not marked with any stars. Despite this, we possess the examples of offshore development centers located in smaller (not main) cities and towns of Ukraine which help to reduce costs of ODC operating. Such cities are Kharkiv, Mykolaiv, Lviv, Ivano-Frankivsk and others. Every of such cities have one or few technical universities where quite strong IT specialists graduate.
Prices could be a disadvantage, too. Hourly rates vary from $15 to $30 and in many cases purchasing offshoring services in Ukraine makes no sence. On the other side, the rates are quite respective to the level of services, and the company wins when redirects more complicated projects and more intellectually complicated tasks to Ukrainian developers.
Bureacratic barriers is another disadvantage, if you decide to launch your own offshore development center. There will be issues concerning taxation, salaries and other things, which are usual to Ukraine but unusual for foreigners. In this case you will have to hire a good specialist on bookkeeping and corporate finance to guide you through relations with governmental organizations with minimum concerns.
Establishing Offshore Development Center
Launching ODC is a good choice for middle and big IT companies with annual turnover of $50 mln and more. Some aspects to which you should pay attention are:
* Property prices. Property market is highly speculative in Ukraine. As of April 2007, prices for purchasing office properties is $2,300 per square meter, for rent - $30+ per square meter per month.
* Situation on HR market. Workforce market demonstrates high intensivity. Much time is needed to find appropriate specialists and you'll have little time for decision making about every candidate due to high demand for IT sector specialists. Therefore you'll have to provide candidates with attractive promise including both material and non-material compensation and stimulation.
Finding an Offshore Outsourcing Service Provider
Finding a outsourcing company in Ukraine is a good solution when you want to minimize your investments and risks with high quality of services. Companies which give feedback about working with Ukrainian developers emphasize that at equally high level of final products communication style, management approaches and processes transparency play an important role in the total cost of each project. Offshore outsourcing suppliers pay more and more attention to how business processes are held in the providing company. Side by side with high technical quality, not all companies follow the paradigm of client-oriented management which can yield to additional risks. We recommend to pay attention to such issues:
* Is there a particluar person responsible for the communication processes in the company (account manager) and the final result?
* How staff is treated in the company? Due to great demand for IT specialists inadequate HR policy could cause to workforce flow.
* Transparency and accessibility of both top management and every team of the project. Transparency of team structure.
Comparing Ukraine to Other Global Offshoring Areas
Eastern Europe in all and particularly Ukraine has found its niche in the global offshore outsourcing market. It became to win in quality and "intellectuality" of provided services compared to the services. Due to culture which is closest to Western values, rising quality of management and constatly high level of software development Ukrainian hourly rates, which vary between $15 and $30, rise the total profitability of offshoring to Ukraine. Definitely, Ukraine cannot compete in price segment of India and South-East Asia, where rates are $8+, but it becomes strong in the mid-price segment of software development market with high level management, staff involvement and return on investment into human development mix.
Learn more about successful IT outsourcing:
http://www.softheme.com/component/option,com_frontpage/Itemid,1/src,5/
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