Ukrainian IT Outsourcing Market Landscape

Ukrainian IT Outsourcing Market Landscape

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Recent Trends in IT Outsourcing in Ukraine

In 2020 the entire global economy has been experiencing rapid change. The beginning of an economic crisis was predicted and came right on schedule, at the start of the year, but has now overlapped with a powerful catalyst that the quarantine  has proven to be. The global quarantine has affected the business sector in ways not many could predict at the end of 2019. Despite a perhaps common misconception, the IT outsourcing market isn’t an exception and has also been affected by these crises’ overlap.

Ukraine is without a doubt one of the major IT outsourcing hubs and the recent market statistics show visible change, while the future prognosis remains uncertain for the time being.

Let’s take a closer look at what is happening on the market, why these developments are in fact an opportunity for businesses and what the forecasts are telling us of the coming months.

Trends in the Ukrainian IT Industry

  • Investors are freezing some of their activities and are waiting out the big pandemic quarantine, assessing the future investment landscape. This is an opportunity for startups to also take a beat and take note of business models surviving these dire times. Now is the moment to work on your pitches and do course correction. For practical advice on these matters Qubit Labs have prepared two pieces for you recently: one on the situation on the Ukrainian investment market right now and another, with  tips on how to prepare your perfect pitch to the investors after this is all over.
  • Big companies will have it tough – automation and cost cutting are underway everywhere, so 20-30% cuts in costs should be expected only at the expense of cutting projects, hence downscaling in teams, hence a number of really highly qualified specialists will enter the job market. This becomes an opportunity to hire specialists your business couldn’t attract before, and most probably at a lower rate. All in all, the job market will be filled with high quality talent.
  • This however might not be the best time for individual IT specialists – it isn’t the best time for companies to expand, branch out or invest in innovation. Projects are dropping in numbers while the amount of new clients is also going down. This will most definitely reflect on salaries and overall rates in the industry.
  • On the other side of this unexpected economic flip are businesses that already operate online and deal in goods and services that have become essential to the quarantined population. Retail, logistics, delivery services, online health and educational services, fintech and e-commerce – word is, these fields are bursting at the seams with demand for software developers. So essentially, the demand for IT talent is being re-channeled and re-shaped at the moment. Many will find this to be an opportunity, too.

 

The IT  outsourcing in Ukraine mostly stems from outsourcing and over ⅔ of Ukrainian software development business provide services for companies in the USA and Europe. And even though Ukraine experienced the hit of the pandemic a little down the timeline and not as hard compared to a lot of western countries, having over 60% IT industry basically rooted in other countries’ economies, has naturally reflected on the wellbeing of the sector. Let’s take a look at the current IT employment market in Ukraine.

Time to Hire Top Ukrainian Developers

Meanwhile, businesses should seize the new employment opportunity – in offshore outsourcing hubs like Ukraine, a lot of top-tier IT workforce is entering the market and the rates are inevitably dropping. Now is the time to hunt for your perfect software developer. The undeniable fact is that just like many other spheres of our lives, finance and economy will steadily continue on the path of digitizing and the need for software engineers and coders won’t decrease, but rather the opposite. The current economic drop will kill some businesses, there is no use in sugar coating that, but it will also be an essential stepping stone to betterment and prosperity for others.

History and economics teach us that every crisis is an opportunity and a ladder of perpetual innovation. In a similar fashion, this crisis is expected to be a boost in technological development of so many processes, such as advanced automation and robotization of core business processes, in-depth business analytics, etc. What is important for businesses to do now is to observe, take notes, react in the fastest way possible and make adjustments. Success in the post-corona world will be based on adaptability and innovation.

What’s going on and how will it affect the employment market?

  • There are big shifts in consumption trends. As a result of the quarantine, overconsumption has become a well-defined tendency.
  • In recent years, Ukrainian economy was growing on borrowed money, but the situation is about to change.
  • Productivity of the businesses is unlikely to change due to the quarantine, since IT usually operates remotely anyway. Social distancing will have a minimal effect on productivity and might even increase it – there are just so many things you can do locked at home.
  • There will be a definite surge in cost cutting and cost optimizing. Employees might see some benefits taken away or paused. The crisis is also to lead to the temporary salary reductions.
  • Clients are requesting  price reductions on projects, pausing ongoing projects in attempts to optimize their budgets and freezing new recruitment, so many companies have already reported salary cuts.
  • Unfortunately, the most certain thing right now is uncertainty. As mentioned before, the pandemic hit and overlapped with an already progressing economic crisis. There is a myriad of forecasts, some polarly different, but the truth is, it’s still a little too early to tell what will be

The DOU has conducted a survey on how the quarantine has affected the employment market and salary rates in Ukraine. 16% of the respondents mentioned salary cuts. According to the survey, almost every third respondent indicated that the company was losing customers. Many reported that some of the employees simply don’t have new projects to work on, so raises and promotions are being frozen, offices are being moved to spaces with lower rent rates, while some companies are even obliging their employees to use some of their paid vacation days by a certain time. Quarantine has reduced wages by more than 25% in 3% of respondents, and overall, 9.5% have experienced wage cuts.

On the other hand, some specific fields of IT haven’t felt the hit as hard. Gamedev is riding a wave of demand. 13.3% of respondents said that the crisis was not felt, and the situation in fact, got better while another 77.7% chose the option “No, everything is unchanged”. A quarter of respondents said that due to the weakening of the hryvnia, their income increased.

The dynamics of salary changes is more pronounced in small and medium businesses that have scarce resources and little resilience to tolerate the crisis. But together with large companies’ crises, smaller businesses may embrace the new opportunities by hiring experienced developers who lose their jobs now at much more competitive rates than a couple of months ago. The market landscape gets ever more favorable for talent hunters, promising greater expertise at lower costs to most businesses.

The trend for IT outsourcing and outstaffing has swept the globe, now that technological tools allow for smooth online communication and businesses around the world realized they didn’t have to limit themselves with their local employment pool, but could look for their best match for a developer literally anywhere. Thanks to this trend, several hubs developed as the most prominent IT outsourcing destinations, Eastern Europe and Ukraine in particular, being one of them. The country is considered to be one of the first big players among the software developing hubs in the CEE region and has even been named the Offshoring Destination of the Year in 2017. In this whitepaper, we’ve gathered statistical data regarding the current state of the Ukrainian IT market and disclosed the reasons why Ukraine has become one of the top destinations for outsourcing software development.

10 Reasons to Outsource IT in Ukraine in 2020

  1. The number of IT professionals in Ukraine is currently nearing 200,000.
  2. The Ukrainian educational system has always been renowned for its tech inclination and graduates 35,000+ specialists every year.
  3. The country sports over 1500 software development companies and is home to over a 100 R&D centers for big international companies. It’s a vibrant tech scene all around.
  4. Most of Ukrainian developers have excellent command of English and have a reputation of diligence and professionalism.
  5. It’s hard to find a better price/quality ratio than that of software engineers in Ukraine. On top of that, with the current drop in the global economy and ubiquitous salary cuts, it’s an opportunity to hire top scale professionals who were previously hard to get
  6. Ukraine’s convenient geographical location allows for smooth operation and communication with practically any other corner of the world. It’s especially convenient for businesses in Europe, where there is a maximum of 2 hour time difference in the working day.
  7. Ukraine can boast a rather favorable business environment. The government offers a variety of tax reduction or exemption laws along with programs specifically supporting the IT business in Ukraine.
  8. Ukraine has a large talent pool of IT professionals and experts of various tech background. So, whether one is looking to add a person or two to their existing team or scale up to a much larger team, they will be able to do it in the same location. This makes operations smoother.
  9. Cultural compatibility is extremely important for some projects and some businesses, and Ukraine being a sort of a gateway from west to east is a treasure trove in terms of business culture and adaptability.
  10. One of the major foci of the Ukrainian IT scene is innovation. Ukrainian software developers are keeping in pace with the latest tech developments and have numerous awards and titles to prove that.

Additional reading for you: How Much It Cost to Outsource Software Development?

One extra reason to be hiring Ukrainian software developers right now comes from the delicacy of the current economic situation. Businesses that are less affected by the overlap of  the general economic slump and the COVID-19 employment crisis, will now have a unique opportunity to hire the cream-of-the-crop developers that were hard to attract before or were simply too expensive. This, of course, will also help prevent the surge of unemployment.

What to Expect?

Global economy is going through a unique and unpredictable phase where a general and more predicted economic slump is catalyzed by an external force of a dangerous pandemic, so the world is adapting and coping on the spot and partially in the dark. The IT industry has become absolutely essential to most aspects of life in the developed world, so it’s only natural that it will see the immediate effect of the crisis. However, this is the industry with some of the highest levels of adaptability, so it is safe to say that IT and software engineering will come out stronger for it on the other side. Some companies will not only survive, but will thrive in the new market realities. As discussed before, these are the businesses riding the wave of high demand induced by the quarantine – online platforms rendering remote services and retail logistics providers, along with businesses focused on adult products, food delivery, health and sports products, Fintech, Computer Vision, Business Automation companies, all of these are expected to enjoy the greatest market success in the coming years, if not months.

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Iva Kozlovskaya
Managing Partner
Iva Kozlovska is a Managing Partner of Qubit Labs, a software development company that focuses on building dedicated teams and mini R&D centers in Ukraine. Mrs. Kozlovska has been working in human resources, sales and project management from the beginning of her career path. Nowadays Iva runs her company that helps clients from the USA, Europe, and the Middle East to establish their development teams in Ukraine.