This blog is all about my experiences and insights as an Offshore Software Development Entrepreneur. It describes the inherent challenges that come with offshore development as well as the solutions we use at Ignite to create a high-performance cost-effective onsite-offshore software development model

February 20, 2014

Outsourcing to India – The NO PROBLEMS problem

India has become a high competitor on the outsourcing market, striving to march its way to success. As it started fitting the high ball game of the IT world, it looks like many developing countries are left in the shadow of this giant. The main reasons for the Indian market for spreading its tentacles at the Outsourcing arena are:

- India boasts a large pool of computer literate and English speaking professionals
- It has the largest number of annually graduating students compared to any other country in the world
- The NRIs (Non Resident Indians)
- Cost effective
- Seemingly excellent process standards

The Indian software industry has been a remarkable success story, while managing to grow more than 30 percent annually for the past 20 years. India exports software services to more than 60 countries, with two thirds to the United States, including half of all Fortune 500. Indian software companies quickly moved up the value chain from performing low cost programming abroad to providing comprehensive software development services from India to overseas clients. An abundant pool of Indian, technical manpower due to early Government investment in technical education, created a series of good technical and management institutes that responded to a severe global shortage of technical manpower. English-speaking, trainable Indian firms, sent staff to onsite client facilities in the United States.
Indian professionals in Silicon Valley built personal networks and valuable reputations and used their growing influence within US companies to help Indian companies get a foot in the door of the expanding opportunity of outsourced IT work. Once the potential of software exports was demonstrated, the Indian Government helped build a high-speed data communication infrastructure, which allowed overseas Indians to return home and set up offshore sites for U.S. and British clients. The Indian “brand” image for affordable speed and quality grew.

So, it’s no wonder that India will lead the software developer population by 2018 according to a new study by Evans Data Corporation in its latest Global Developer Population and Demographic Study. India now has a software developer population of 2.75 million but by 2018, it is projected to show  an increase of almost 90% resulting in nearly 5.2 million developers.
The growth of IT in India is mainly helped by the rising population ( about half of the population being under the age of 25) and of course, economic growth.
Ukraine has joined Gartner’s list of TOP 30 outsourcing destinations since 2007 and it’s scored well on quality grounds. Increasingly, companies are choosing offshore providers in Eastern European countries such as Ukraine, where computer science skills are better and outsourcing providers appear to have a more in-depth understanding of their clients than competitors further east. And why is that?
If we take a look back to my previous blog article, I mentioned there that Ukraine was a major hub of scientific research for the Soviet Union , 40% of the total share, so there is a longstanding tradition of having strong educational system and significant availability of the high-qualified IT engineers. About 70% of the population has secondary or higher education, while 60% of Ukrainian Universities have graduates with majors in physics, mathematics and programming. With only 1% of all world’s population, Ukraine boasts 6% of the world’s physicists, mathematicians and computer programmers! India may win in terms of numbers or ITO development speed, but it’s no match to Ukraine’s longstanding scientific and strong educational system tradition.

So, in spite of the dazzling figures I mentioned above, I believe software outsourcing is more than a huge number of engineers that are ready to perform IT work cheaper comparing with the developed countries' engineers. Indian culture is very much service oriented and stuck into a passiveness that is not considered as an advantage when we are talking about software business. Just forget about any sign of proactive attitude when you turn to Indian developers. Maybe that’s enough for a customer service, but not when you need to be creative in your development. As a consequence of their service orientation, the Indian culture encourages swapping problems under the table and presenting any problems they may encounter as nothing to worry about.
Indian culture is in habit of not confronting authority, while Software development is all about identifying problems, and resolving conflicts through arguments (in a healthy manner). An Indian colleague of mine once said " there are NO PROBLEMS in India, the only problem in India is the NO PROBLEMS problem…."

This doesn’t happen in a real life software project as problems and challenges along the way are inevitable. It’s always best to discuss and solve the issues whenever you come across them along the way, then at the end of the project. This is something a Ukrainian developer is used to -raise the issues and find creative solutions to them. Think of the result and less of the process!

So, although India out thrones Ukraine in the numbers of developers, I definitely prefer one stubborn Ukrainian developer over ten obedient Indians! 
January 23, 2014

Did Ukraine hit the IT jackpot?

During the last decade, Ukraine has been a leading player in the software development space and has been ranked at the top of IT outsourcing  service providers in the global market.

I think that not many  people know, that December  25 the 1951 is considered as the beginning of the computer science era, when the Ukrainian academician from Kyiv,  Sergey Lebedev, introduced the first computer in the Continental Europe. Also, Ukraine was a major hub of scientific research for the Soviet union , 40% of the total share, so there is a longstanding tradition of having strong educational system and significant availability of the high-qualified IT engineers.  Moreover, the Soviet Rocket program was developed in Ukraine and since 1951 , Ukrainian Space Industries have been  developing and producing  about 60% of launch vehicles and strategic missiles of USSR.  Sergey Pavlovich Korolev  is the Ukrainian rocket engineer and spacecraft designer who led the Soviet space program and as he was born in Zhitomir, where I also have an Ignite office, I pass every day by his statue. There are still many interesting facts worth mentioning about Ukraine , for example,  Ukraine represents only 1% percent of the world’s population, yet 6% of the world’s physicists, mathematicians and computer programmers are from Ukraine. No wonder why it has become an  IT hub .

As my business has also expanded in Ukraine, I think that its high qualified staff is at the core of the software development business. The fact that they have educational institutions for IT staff training plays a very important role in the industry development.
Actually, Ukraine has a long standing reputation as a major technology region with a well-developed scientific and educational base:
  • - Ukraine was ranked 32nd  in Education on the 2010 Legatum Prosperity Index of 104 countries – ahead of India, China, Mexico, Brazil and other popular outsourcing destination
  • - Ukraine has more than 800 higher education institutions and in 2010 the number of graduates reached 654,700 people

In terms of IT services outsourcing,  Ukraine mainly highlights its deep IT talent pool. With 16.000 IT specialists graduating from Ukrainian universities every year, the country holds the fourth position in the world in the number of certified IT specialists, following the USA, India and Russia, according to the IT outsourcing report, published by Ukrainian Hi-Tech Initiative. On top of that, the experts recognize both quantitative and qualitative potential of the Ukrainian specialists.

Last but not least, Ukraine was recognized by experts as the top destination for IT outsourcing and was also nominated as the “Outsourcing Destination of the year” by the European Outsourcing Excellence Awards at the European Outsourcing Association Summit in 2011.
Adding this to the Ukrainian proactive , creative and result driven attitude we have a clear picture why this country is so sought after.

As in 2008 Ukraine’s economy was ranked 39th in the world according to the 2008 GDP  with the total nominal GDP of 188 billion $ , top brands have started developing their businesses in Ukraine: Atlantic Group, Ernst&Young, Baker&McKenzie, the TMF Group  KPMG, Bosch, Siemens &Junkers, Alcatel and Huawei are only some of the Western companies that have developed their businesses in Ukraine. IT outsourcing  continues to be the top export industry with revenues over 1 billion $. However, the Ukraine IT market doesn’t come without certain challenges:
  • - The corruption, which makes it very hard to do business there
  • - Almost no support for IT market development from the government. The whole IT trend in Ukraine is driven by market demand , the great talent pool and the universities which are legacy of the old Soviet Union
  • - Level of English - English is not widely spoken
  • - Unclear, uncertain an unstable tax regime which makes it hard for IT companies and customers alike to plan ahead IT costs
  • - Fragmented IT market – many small companies very few big companies
  • - Very hard to get credits from the banks and as IT companies require fairly large working capital, most of them (especially the small to midsize companies which are 80% of the IT market) are struggling every month with financial difficulties and live from one month to the other

I discovered the Ukrainian talents over 7 years ago. Before working in Ukraine I established an R&D center for Mind CTI in Romania. Romania joined the EU, the talent pool started immigrating to Western Europe and the labor costs started climbing. This is why, when I established Ignite, that specializes in Software Development services from Eastern Europe to Western European customers, Ukraine was a natural choice – I don't regret it for a minute - after gaining experience in hundreds of development projects I can personally testify that those facts are actually true.

In short: I love Ukrainians I hate Ukraine: I love the talents I meet in Ukraine – bright, motivated, hungry for knowledge and determined to prove themselves guys – pretty much like Israel used to be back in the 90's. Ukraine as a country, though, is not helping the Ukrainian IT tiger – its caging it!

My next blog will explore the outsourcing market in India.
December 12, 2013

The Fat Wealthy West and the Skinny Hungry East

Software development is quickly becoming a profession more common in the east (and by east I mean both Far East countries like India and China, and Eastern European countries like Russia and Ukraine) then in the west. Yes, nobody is yet risking the high ratings popularity and prestige universities in the US and Western Europe still hold, but a deeper view would show you that the number of students from the East is rapidly growing in these universities. The next stage - the thrones of the prestige universities in the west will be thrown and the new kings in the East will rise...

I live in Israel – the Startup Nation. For the last few decades Israel was well known for the booming High-Tech industry. In a small country that lack natural resources all we had was brains, creativity and entrepreneurial spirit. Combining this with the high-end engineering departments in the Army this led eventually to a vibrant Civilian High Tech market where the amount of startups companies is second only to Silicon Valley. At any given time there are 5000 new engineers needed on the market and the IT market cannot catch up with the demand.

So entrepreneurial spirit we have for sure what about the desire to study hard, work hard and become a software developer in the engineering department of such promising startups??? Nooooo, the most sought after profession in Israel is a lawyer, not an engineer. This puzzles me – why do people prefer to be unemployed lawyers than well-paid engineers. I have my own theory for that…

Everyone knows that recruiting new IT talent has become one of the biggest challenges that independent software vendors, (ISVs) are facing now. Putting aside my guts feelings, looking at the Fraunhofer Center for Experimental Software Engineering reports, cloud computing and mobile applications are the two paradigms that have increased the demand for software engineers. Also, a December 2010 report by the London based Centre for Economics and business research, estimated that cloud computing could add 2.4 million jobs in Europe’s biggest economies by 2015. I could go on with this and say that software engineering ( a field that has been definitely on the move for quite some time now),was voted the best job in US for 2012 by career guidance website Career Cast. Is this for real? It certainly is, as offshore development companies have talked about a growing demand for their services from the western countries. As a CEO of an offshore development company I face the same trend with growing demand for our services. The demand is there –it's a fact, but where are the western professionals? The answer is simple, the Western professional are almost nowhere to be found and the lack of skilled IT professionals in developed countries has become so great due to several reasons that can definitely bring some light into the matter:

• Constant Increasing Demand for Developers It’s a fact that more and more services and businesses are beginning to use software as a tool for their work, so in general the software engineers demand is increasing. The USA Bureau of Labor Statistics projects 30 percent job growth in coming years for the software developers. This is a more than encouraging percentage for any skilled student, but I doubt it’ll bring out all the expected IT professionals.(
• Salary & Compensation the IT world doesn’t play as an appealing option for the professionals in western countries more than other white collar professions. It’s not hard to find out why, since the IT industry average pay checks in the western world are similar to those of white collar profession.
 • Education and Science Studies Popularity If I think of education, not only the difficulty of the computer science studies, but also the big amount of time required for gaining enough experience to become skilled, determines the bright minds in the developed countries to avoid IT professions and go to business management faculties that are facing great increase in demand for their studies.

It’s not hard to see why software development companies turned their attention to developing countries, where the approach on IT professions is quite different. Why students in developing countries are not afraid of the hard work that a computer science brings about? Because this is their lucky ticket out of poverty and into the life style they desired, a leap from the lower class into the stability and advantages that the middle class has to offer. And as long as you’re there, you don’t want to get back to where you came from….so you keep the standards up and turn into the skilled developers so chased after by the software development countries abroad…like us. There’s also another plus that IT professions hold up their sleeves: the relocation option into a developing country. I think this is the greatest achievement for a IT professional in a developing country and the last touch of a profession that can offer it…all.

It’s high time that the kings in the East should rise…and they have. Next, I want to exemplify what I stated above by studying and comparing two fast emerging markets that have becomes kings in the offshore IT world: Ukraine and India.