How Much Does it Cost to Open R&D Center in Ukraine?

How Much Does it Cost to Open R&D Center in Ukraine?

Establishing an R&D center is one of the optional expenses for the company, which, however, allows for launching new products, services, or software. Both small businesses and large enterprises leverage the opportunity of establishing R&D centers, especially abroad. In this way, they get qualified employees while cutting expenses and gaining insights into the foreign markets.

Speaking of the small companies, in particular, an outsourcing R&D center allows them to cooperate with skilled experts right away, without spending money on establishing an additional department in-house. 

Before getting to the topic, let’s do a quick recap of the R&D center benefits. They include:

  1. First-to-the-market advantage. When cooperating with top-level experts, you get brand-new products within a shorter term. This, in its turn, allows you to stand out among competitors and benefit from a faster time to market.
  2. Higher incomes in the long run. Offering unique solutions to the customers helps to win their loyalty, and if you’re the first one to do this, you have higher chances to increase future revenue.
  3. A solution that addresses current customers’ needs. A company that offers a USP (unique selling proposition) right when the customers need it has a higher chance to win their trust. So, an R&D center can help you stay on the same page with current trends and address clients’ pains. 
  4. An opportunity to attract additional investments. Although SMBs might find research and development high-priced, there are various industry-specific grants they can apply for to decrease the load on their budgets.
  5. Attract more talents. Usually, innovative companies are appealing to top-notch industry experts, so you can easily cooperate with the best experts from all over the world.

When you decide to open R&D center in Ukraine, you can optimize your business processes, decrease expenses, and make your company more competitive.

But what about the costs associated with establishing an R&D center? Qubit Labs is here to address this question, so let’s get to it.           

 

Extensive research into the country

Ukraine is one of the fastest-growing IT industry players, being home to several world-known startups, namely Grammarly, Preply, and Petcube. 

It has a convenient geographic location, so you can conveniently travel to the country without spending a fortune on the tickets. Speaking of the local IT hubs, these include Kyiv, Lviv, Odesa, and Kharkiv. You can opt for a smaller city with lower developer salaries, but it’s harder to find engineers with a specific tech stack there.  

Besides, local programmers have higher education degrees and upper-intermediate English levels. 

As for the salaries of Ukrainian developers, on average, they vary from $800 to $4000 per month. 

Factors affecting the cost of an R&D center in Ukraine: the city (bigger cities offer higher salaries), the tech stack, the average salary.

 

Aligning with legal concerns and handling requirements

In Ukraine, there are two central taxation systems for private entrepreneurs, namely, general tax rules and a simplified tax regime. All the employees’ salaries are subject to specific charges, including income tax–18%, military levy–1,5%, and single social payment–22%

If you decide to open R & D center in Ukraine, you’ll enjoy favorable tax rules because they make the cooperation with local IT experts cost-efficient. Besides, since all the developers are usually registered as PEs, it simplifies the legal chores by reducing liabilities of the employer-employee relationship, turning them into employer-contractor cooperation. 

Factors affecting the cost of an R&D center in Ukraine: taxes, the sum of which depends on the employee’s salary.

 

Setting up office space for the center

As mentioned, there are 4 major IT hubs in Ukraine, but other cities are also rapidly advancing their statuses as well. You can opt for a larger city, like Kyiv, and enjoy the availability of experts for any technology. However, you’ll pay more money for the office there because it’s the country’s capital and the demand for office spaces in the city is higher.  

What affects the office rental value?

  • Location. The closer to the city center the office is, the higher its rent. Also, if it’s located in a historical area or near the metro station, the price will increase as well. 
  • Size. This factor plays a different role in each particular case. A big open space in a popular office center will be more expensive. However, the situation might be contrasting when there’s more space, but the price is lower due to the ineffectiveness of additional square meters. 
  • Communications. The Internet, water supply, sewage system, heating, parking, security, and other factors affect the monthly price of an office. Also, if it’s in perfect condition and has an appealing design, the price will be higher.  
  • Furniture, equipment, and supplies. Often, the lessors offer to use the related equipment for additional pay. 
  • Infrastructure. You can often see many offers both in the downtown and uptown, so if you want advanced infrastructure, be ready to pay more. However, it’s not always advisable to overpay for the office in the city center, especially if you don’t have clients that need to visit it. Instead, it’s better to opt for an open space that isn’t in the downtown but still has developed transport links.  

The average monthly price for offices in major Ukrainian IT hubs (however, usually, to know the price, you need to multiply a rental rate by the amount of sq.m.):

  • Kyiv$2,500-$11,800
  • Lviv$800-$4,200
  • Kharkiv$1,100-$8,400
  • Odesa$1,600-$4,000

Factors affecting the cost of an R&D center in Ukraine: office rent, which depends on the city.

 

Recruitment and hiring process

For the R&D centers to be efficient and come up with innovative solutions, there should be a sufficient number of employees with the required skills. To find them and not get lost in the requirements of the local labor market, it’s better to opt for hiring a skilled specialist who can easily guide you through the talent acquisition process.

The costs, in this case, hinge on the position you need to fill. It comprises the popularity of the specific technology among local developers, the required experience level, and the employee’s salary.

Factors affecting the cost of an R&D center in Ukraine: the complexity of a talent acquisition process and the number of people in the team.

 

Knowledge transition (training/orientation for the new employees)

Although the employees you’ll cooperate with when open R&D center in Ukraine boast the required experience, they still need time to adapt to project requirements. So, to facilitate this process, employers often opt for training, the cost of which depends on your goals.

Besides, the more time the R&D center team spends on their tasks, the more money it requires. However, the revenues are usually higher than the expenses. For example, Amazon spent $22,6 billion on its R&D center in 2018 but received an income of $177,9 billion that same year.

Factors affecting the cost of an R&D center in Ukraine: the cost of the specific training/orientation programs.

 

R&D Centre Setup: Costs Breakdown

When setting up an R&D center in Ukraine, the business owners usually pay in two different ways: every month and one time, at the outset. Let’s take a closer look at the costs associated with an R&D centre:

One-time spending (for a team including 15 specialists) Cost
Work station (including tables, chairs, computers, etc.) $11,703
Software $23,276
Branding expenses (office, notebooks, T-shirts, etc.) $3,500
Corporate event (once a year) $2,500
Total cost $40,979

 

As you can see, the total sum of one-time spending on an R&D office in Ukraine is $21,003. However, this is an approximate number because there are several factors affecting the cost. For example, you can opt for a more expensive office design or, in contrast, give up some company branding products.   

Monthly spending (for a team including 15 specialists) Cost
Salaries (net) $30,615
Office rent $4,000
Internet, utility bills, administrative expenses $500
Taxes (3% from salary) $918,45
Insurances $760
Benefit packages (including, vacation time, social benefits etc.) $800
Total cost $37,593

 

So, the average monthly spending for an R&D center in Ukraine is $37,593. However, the sum varies from company to company. For example, if you set up an office in Kyiv, the price will be higher than in Lviv. Also, the office’s size and location also play great roles, as well as the elements included in your benefit package. 

 

The average total cost of opening an R&D center in Ukraine

One-time spending  Monthly spending
$40,979 $37,593
Total cost
$78,572

 

*When calculating the average salaries, we took the average mobile app development team as an example, which includes the following specialists:

  • Mobile developers iOS + Android (4 specialists) – $5,240
  • Backend developer (1) – $2,800
  • DevOps (1) – $3,800
  • UI/UX designers (2) – $4,680
  • QA specialist (1) – $2,200
  • Project manager (1) – $2,500
  • Product manager (1) – $3,050
  • Business analyst (1) – $2,775
  • HR specialist (1) – $1,120
  • Office manager (1) – $800
  • System administrator (1) – $1,650

The mentioned numbers are approximate but if you need to know the salaries of programmers specializing in a certain technology, make sure to check out this article.  

 

Conclusion

You can open R&D center in Ukraine and enjoy the rapid growth of the country’s IT industry. Local developers are always advancing their skills, coming up with solutions that can easily make a breakthrough in the global market.

If you’re hesitating about opening an R&D center in Ukraine, you should make a decision at an early date because more and more companies see the country as a promising software development partner. 

We understand that opening an R&D center is complicated, so Qubit Labs is here to help you out. With us, you can get expert help with:

  • hiring experienced developers
  • managing all the legal issues
  • establishing smooth communication between you and the team
  • taking care of the employees’ office space. 

 Feel free to contact us and get that first to the market advantage. 

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