Why Outsourcing to Ukraine in 2023 is something you should consider?

On Feb 24, 2022, only 14 hours after the war in Ukraine erupted, The Wall Street Journal posted an article named “Ukraine’s Booming Tech Outsourcing Sector at Risk After Russian Invasion.” A month later, CIO published a piece stating that the “Ukraine crisis” puts global IT outsourcing on edge and could cause “price hikes and talent crunches across the globe.”

Ten months in, two conclusions can be drawn:

1. Ukraine’s outsourcing sector was a global phenomenon, and its potential unrest immediately threw key industry analytics into a frenzy;

2. The grim predictions amounted to nothing, as Ukrainian IT outsourcing companies are more active in the market than ever.

However, does “active in the market” equal “attractive for sustainable cooperation”? Is it worth it to outsource to Ukraine despite all the odds? 

To help you make not a guess but an educated choice, I want to offer five reasons why you should consider Ukrainian outsourcing companies for 2023 R&D and QA projects.

Steady Quality, Continuous Growth

Ukrainian IT companies perform consistently and even grow, showing unprecedented resilience. Outsourcing firms manage to deliver as planned, keep old clients satisfied, find new contracts, and be the only growing industry in Ukraine that can also afford to pay the taxes forward. 

• According to the National Bank of Ukraine, in the nine months of 2022, IT services’ volume increased by 13% compared to the same period in 2021 and amounted to 5.5 billion US dollars; 

• Currently, IT accounts for almost half of the total export of services. For eight months of the current year, IT export grew by 16% compared to the corresponding period last year;

• IT Ukraine Association states that 52% of IT companies kept 100% of their contracts, and 32% of companies kept 90-99% of their contracts. Only 16% of companies lost 10% or more of their contracts;

• The same survey shows that 77% of Ukrainian IT companies got new customers in 2022, and 56% expect 5-30% growth this year.

• Only 1% of Ukrainian IT companies experienced problems paying salaries to their employees this year.

I can throw more numbers in this pot of dedication, resilience, and industriousness, but the key indicators are already there. Outsourcing IT companies are now a backbone of the national economy, and plan on keeping and strengthening this status in 2023.

Offers for Projects of Any Size, Type and Budget

The number of Ukrainian small and middle-sized outsourcing companies keeps growing in response to the increasing demand for domain - and budget-specific services. 

Companies focus on several key domains, assembling a team of experts with relevant backgrounds and success cases. It allows you to solve two problems at once — technical experts do their job also navigating the project through the constantly changing industry regulations.  

Diversification slices the market very thin. You can find a company that will provide you with price-to-quality balanced services almost on any reasonable budget. Ukraine is no longer home to cheap IT labor, but it works on the budget-friendly side of the outsourcing pricing spectrum. 

Government supports the IT industry, creating a more favorable tax environment. For example, many IT specialists work as individual entrepreneurs hired for specific projects, and "umbrella" companies cover their taxes. The tax-relief program now allows them to pay twice less in taxes (2% instead of 5%) than before. It enables companies to offer better prices to their end clients without compromising on quality.

Deregulation also plays an important role—over 450 outdated regulations were cancelled in the last two years.

Global Trust, Awarded Partners

Ukrainian IT sector works with over 100 Fortune 500 clients. Out of almost 5000 Ukrainian IT and tech companies, 18 are listed among the 100 TOP outsourcing businesses. It strengthens global trust and helps attract international capital.

As stated by the American Chamber of Commerce, an advanced IT industry with an attractive business climate, can be indicated by the number of multinational corporations conducting research and development in the nation in question. Ukraine has seen a steady increase in the number of global companies conducting R&D there, including such players as Boeing, Siemens, ORACLE, Samsung, Google, Upwork, Plarium, etc. 

Easy Communication, Mature Processes

Ukrainian IT specialists across the board have sufficient knowledge of the English language, and most outsourcing companies offer free language courses as a part of their bonus packages. 

Communication is nothing to worry about also due to the location — the Ukrainian time zone is suitable for at least four hours of daily intersection with most clients’ time zones. Due to massive relocations over the latest 2-3 years, many Ukrainian companies can also offer nearshore outsourcing services to companies from the US to Japan. 

Research proves that CMMI certifications help to mitigate risks associated with offshore outsourcing. The number of Ukrainian outsourcing companies getting apprised at CMMI-DEV maturity levels grows yearly. As a result, you get high-level transparency and control without hiring in countries with much stricter and more costly labor laws (Britain, US, Australia, the Netherlands, etc.).  

Profound Expertise in E-government Projects

Ukrainian central government portal Diia allows access to 50+ governmental services, and this number is growing monthly. The total economic and anti-corruption effect of electronic services in Diia in 2020-2021 amounted to ₴16.3 billion, and in 2022, according to forecasts, it will reach ₴48 billion. It is only one example of the State in Smartphone and similar initiatives in which thousands of Ukrainian developers take part. 

Developing apps integrated with e-government services, testing new applications that support the State in a Smartphone initiative, participating in the national educational program preparing skilled IT specialists — Ukrainian IT outsourcing does it all. And more.

As reported by Ukrinform, Deputy Secretary of State for Political Affairs Victoria Nuland stated that the experience of Ukrainian IT specialists and developers can be used in future US military operations. When allowed to employ subcontractors, national R&D companies affiliated with the defense industry worldwide will certainly benefit from collaborating with Ukrainian specialists with the corresponding background.  

Resilience in the Face of Adversity

We have to address the elephant in the room when speaking about outsourcing to Ukraine. Power outages happen, and the situation won’t change dramatically in the next few months. 

However, across-industry polls show that Ukrainian IT outsourcing companies anticipated a possibility of blackouts and connection problems back in spring and used this time wisely to prepare. Here are some common solutions that ensure business continuity: 

• Helping employed to relocate to Europe, Canada, and the US, or at least to much more protected and power-stable cities in Western and Central Ukraine; 

• Stepping up the international talent acquisition to diversify risks; 

• Supplying offices with reliable generators, fiber Internet not dependent on electricity, and Starlink solutions; 

• Securing space in co-workings with independent power supply for uninterrupted work;

• Supplying employees who need to work from with reliable portable workstations and independent power supply devices;

• Moving the majority of instruments to the cloud, and duplicating information to data centers in Europe. 

Quoting analytical experts of the American Chamber of Commerce in Ukraine: “Ukraine’s IT sector is resilient. [...] Ukrainian ICT professionals have all it takes to deliver high-quality services even during the war.”

As I see it, while Ukraine is not the only IT outsourcing market that answers the demand for mature, budget-friendly, and result-oriented cooperation, it is one of the top choices — for 2023 projects and further.