Thursday, April 19, 2007

Ukraine: A Promising IT Outsourcing Hub

Ukraine , an Eastern Europe country with a small population of 46.7 million, has started making its mark as an IT outsourcing destination. In the last five years the country's export of IT and related services has only risen. In 2006, Ukraine 's IT exports reached $280 million registering a growth of over 60% over the previous year. This is remarkable compared to the paltry $70 million in 2003.

In the recent past, the country has attracted many technology companies like Cisco, Motorola and IBM. In 2005 Belarus-based software development company EPAM that services American and European clients also opened a development center to leverage on low-cost engineering skills in the country. TechnoPark and GlobalLogic are other companies that have bet on Ukraine 's promise. Some of these companies are planning more centers in the country.

"GlobalLogic is planning to set up two more development centers in Kiev ," says Rohit Sharma, Director, Marketing, Global Logic. "We are also planning to establish a center of excellence for telecom software. Ukraine offers a skilled and cheap talent pool. "

The Ukrainian government is actively supporting the industry with pro-active legislation. In 2006 the government passed more than 20 laws, and many laws, including those to do with intellectual-property issues, are being revised to provide impetus for growth. The government is also actively promoting Ukarine as an outsourcing destination by participating in roadshows and organizing events.

"We have developed liberal rules for the IT sector," says Yuriy Kovbasyuk, Deputy Head of Kiev Region, State Administration. "We are taking several initiatives to attract foreign companies and to make Ukraine a promising outsourcing hub."

Ukraine stands tall in one of the fundamental drivers for globalization of service delivery — having a large base of educated and skilled labor pool. Its large labor has been instrumental in keeping wages stable, and its software programmers are comparatively cheaper in the region. IT salaries in the country are less than the salaries of EU and U.S. IT specialists, according to research by Jones Lang LaSalle, a real-estate services and money-management firm.

A number of professional organizations has contributed to the development of industry in Ukraine : Ukrainian Association of Software Developers, which espouses policies and conducts programs to promote technology and market growth, and IT Committee of American Chamber of Commerce in Ukraine , committed to the development of the IT market in the country.

Ukraine has been in the spotlight for sometime with all the right elements to score as an outsourcing destination: Skilled labor pool, stable wages, low operational cost and favorable government initiatives. Tholons, an outsourcing advisory firm has ranked Kiev , the capital of Ukraine among the top 50 outsourcing cities in the world. Its geographic proximity to Europe makes it an ideal nearshore destination. While it cannot match the scale of India or scale it can position as a desirable destination for small and medium companies.