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.

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.