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The Ukraine is an undisputed leader in the CEE outsourcing market

The Ukraine is getting a great amount of attention as a very attractive outsourcing destination. Being ranked the first by the volume of IT outsourcing services provided, in the number of IT outsourcing companies operating in the market and in the number of IT specialists working in the industry among 16 Central and Eastern European countries,

the Ukraine remains a natural choice for the western European and North American companies looking to outsource their IT works.

Western-oriented government policies, adopted intellectual property legislation and better regulations in economy sector, encourage partnership and close business ties with US and EU companies. Although, the Ukraine’s economy experienced the slowdown during the global financial recession, it has resumed its stable growth, mainly due to the measures taken by government to overcome the negative consequences of the crisis. But despite the stable economic situation, the Ukraine remains in need of investment in all sectors of industry. The share of foreign investments in the Ukraine is currently estimated at 19% of GDP, indicating that the Ukrainian economy has huge growth potential. In contrast, the share of foreign investments in the economies of developed European countries has reached around 28-30% of GDP.

The favourable geographical location, shorter journey times, insignificant or no time zone differences (negligible for Europe) and allowing to overlap with the US, proficient foreign language skills and cultural proximity make it very attractive for conducting business here, specifically for nearshoring. Moreover, there is no need in visa for entering the country for all western European and North American countries.

The Ukraine is the most attractive location for nearshore and offshore software development due to low cost of services, strong hi-tech educational system, large number of universities and research and development (R&D) centres, and of course the available pool of IT resources.

The IT outsourcing sector in the Ukraine employs over 20,000 IT specialists and this figure is likely to increase over the coming years. The availability of extensive IT talent pool and educational systems that have a strong focus on fundamental engineering education ensures that outsourcing industry gets highly qualified IT workforce. According to Ukrainian Hi-Tech Initiative, in 2011 the number of IT specialists working in the industry reached 25,000 people with 20% growth. With 16,000 IT specialists graduating from Ukrainian universities each year, the country is among the top ten countries with the most certified IT specialists, following the US, India, and Russia. However, it must be noted that the significant potential of high school graduates with educations in IT specialties are not being fully used. For example, in the Ukraine, of 16,000 IT graduates only 4,000-5,000 are employed in companies that provide professional IT services. This number could easily double if the Ukrainian government helped foster more favourable conditions for IT outsourcing business development.

Reasonable costs, reliable and well-developed infrastructure, telecommunications and a legal system allow creating very favourable conditions for business in the Ukraine. Jointly with Poland, the Ukraine has been appointed to co-cost UEFA EURO 2012. There are expectations that this event is likely to bring possible economic benefits and improvements in infrastructure and quality of life. Thus, the main airports have been modernised, and new terminals were opened in Kyiv, Odessa, and Kharkiv airports. The new terminals are expected to be opened in other largest cities like Lviv, Dnipropetrovsk and Donetsk. Many hotels have been also modernised and new ones have been built. This means that travelling to the Ukraine and around the country is now becoming more convenient and easier.

The Ukraine’s IT outsourcing industry demonstrates a stable growth in the past several years and shows the highest rates of market growth, comparatively to the CEE countries, leaving other countries far behind in terms of the volume of IT outsourcing services exported. In 2011, the volume of IT outsourcing services market indicated the growth of 20% and reached US$1.1bn (source: Ukrainian Hi-Tech Initiative). The market development process is also defined by the number of companies operating in the country’s market. One of the main features of developed markets is a substantial share of large companies with a significant number of specialists employed and volume of outsourcing services provided. In 2011, the number of companies providing outsourcing services reached more than 1,000 companies. Mainly these are small-sized and middle-sized companies.

However, growing technical expertise and demand for IT specialists has led to increasing cost of services; but with highly skilled IT labour that is still far cheaper than in western Europe or North America. Moreover, rates remain lower than in EU counties as the Ukraine is not the EU member and cost of life is lower, respectively.

One of the indicators of the maturity of the industry is the presence of professional associations and communities. Such leading association in software development and IT outsourcing industry in the Ukraine is Ukrainian Hi-Tech Initiative. The association unites more than 70 members that employ more than 8,500 IT specialists. Ukrainian Hi-Tech Initiative has been working in IT outsourcing services market since 2003 and conducting different activities aimed at promotion of the Ukrainian market of IT outsourcing services provision to global markets. The association provides consultations on the market opportunities and development and offers assistance with selection of the potential partners and providers of outsourcing services.

Primarily because of high quality of services provided and outsourcing companies that appear to have all the necessary skills and a more in-depth understanding of their clients needs, the Ukraine is one the best destinations for outsourcing in the CEE region.