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Ukraine: more than just another outsourcing destination” by Alex Golod, Intetics
 

Ukraine: more than just another outsourcing destination” by Alex Golod, Intetics

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The presentation highlights the latest social and economic trends in the country, discusses why Ukraine is becoming a hot outsourcing destination based on its industry growth, its access to a skilled ...

The presentation highlights the latest social and economic trends in the country, discusses why Ukraine is becoming a hot outsourcing destination based on its industry growth, its access to a skilled well educated talent pool, and the government support. Special emphasis is placed on the favorable environment for direct investments in next few years, as well as expected growth of M&A activity in the country. In conclusion, the argument is made that Ukraine will gain prominence as ITO and especially BPO hot destination within next 3 to 5 years.

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  • Intetics is happy to share the good news: We have just opened a new office in Germany!

    What does it mean to our clients in Europe and to Intetics itself? What are the greatest advantages of this step?

    First of all, it improves our capabilities in serving German - speaking clients in their native language. Secondly, having the office in Düsseldorf makes us closer to European clients, so we can meet face-to-face even more often. Thirdly, in addition to its operations in the USA, Intetics now fully supports the European Union legal framework, which opens additional opportunities for outsourcing making it simple for EU companies.
    And finally, this step brings us further along in our mission to build professional, integrity-driven, innovative and experienced IT business units to help our clients to turn the most complex technological ideas into reality.
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    Ukraine: more than just another outsourcing destination” by Alex Golod, Intetics Ukraine: more than just another outsourcing destination” by Alex Golod, Intetics Presentation Transcript

    • UKRAINE: More than just another outsourcing destination
    • About INTETICS
      • A leading global software development company focused on custom application development, software testing, Web system design and offshore staff augmentation services.
      • Two ISO 9001 certified development centers in Eastern Europe with over 190 software professionals.
      • An authorized Microsoft Gold Certified Partner with competencies in Custom Development Solutions and Business Process and Integration.
      • Named to Inc 5000 list of fastest growing private companies in USA and Deloitte Technology’s Fast 50 list.
      • Honored as one of the top outsourcing service providers in both 2007 and 2008 Global Outsourcing 100 by IAOP.
      • Named to the World's 100 Most Innovative Service Providers by Global Services magazine and neoIT.
    • Membership and awards
    • Country Overview
      • Population (est.): 47 million.
      • Languages: Ukrainian (official), Russian, others.
      • Education: Literacy - 98%. About 70% of adult Ukrainians have a secondary or higher education.
      • Work force: 23 million. Industry and construction – 32%; agriculture and forestry – 24%; health, education, and culture – 17%; transport and communication – 7%.
      UKRAINE - THE LARGEST COUNTRY IN EASTERN EUROPE
    • Overview of Economy
      • Ukraine is an emerging free market, with a gross domestic product that has experienced rapid growth in recent years.
      • Western-oriented government policies encourage partnerships and closer business ties with US and EU companies.
      • In 2008 Ukraine joined the World Trade Organization.
      • Ukraine now has the potential to be one of the region’s leaders in volume of foreign direct investment and portfolio investment
      • In 2007 Ukraine had the highest IT industry growth rate among Central and Eastern European countries. Ukrainian IT market ranked fourth after Russia, Poland and the Czech Republic, with almost 40 percent growth and over $3.4 billion in volume, according to IDC survey.
    • Main economic indicators GDP Industrial Output Gross Agricultural Output Retail Turnover of Goods Real State Budget Revenues (January - September 2008) Real Disposable Incomes of Population (January - September 2008) Consumer Price Index ( October 2008 to December 2007 ) Manufacturer Price Index (October 2008 to December 2007) Hryvnia depreciated to USD (November 1)    2 . 2 % 17.6 % 1 7 . 8 % 1 3 . 0 % 3 2 . 1 % 14.1 % 5 .8% 1 8 . 0 % January - October 2008 cumulative since the beginning of the year versus previous period : Since the beginning of 2008 : 2 3 .6%  Ministry of Economy of Ukraine     
    • Foreign Direct Investment Ministry of Economy of Ukraine (%)
    • Impact of global financial crisis on Ukrainian economy
      • The ministry of Labor expects the unemployment rate to increase to 9% in 2009.
      • In November the nominal wages of Ukrainians were reduced by 4.9%.
      • Export-oriented sectors of the Ukrainian economy face serious challenges due to reduction in consumption by EU and US markets.
      • Economic situation has made the labor market even more attractive to new investors, since the crisis stopped rapid wage growth in several industries, including outsourcing. Infrastructure costs, including office rent and communications, are also decreasing.
    • Outsourcing industry
        • Ukrainian offshore outsourcing companies have been providing software development services since the early 1990s.
        • Growing pool of qualified human resources as well as European mentality and competitive rates turned Ukraine into an exciting emerging outsourcing destination.
        • Ukraine is now among Top 10 outsourcing countries in the world, and inching up in the ratings.
        • Accelerated growth is forecast in BPO area, while ITO area might experience more moderate growth within the next 3 to 5 years.
    • Industry growth rate
      • The Ukrainian outsourcing market has experienced steady growth in the past 5 years despite soft domestic demand as a result of strong interest and demand on US and EU markets.
      • Rapid outsourcing activity growth in Western Europe, particularly in Germany, reveals potential of Ukraine as one of the top nearshore outsourcing locations.
      • Pronounced saturation trends in traditional ITO and BPO destinations and good professional and educational level of Ukrainian resources have attracted attention of US companies to Ukraine as emerging outsourcing destination.
    • Market acknowledgement
      • The achievements of the Ukrainian outsourcing industry are noted by the market experts:
      • Ukraine is included in Gartner’s top 30 locations for offshore services in both 2007 and 2008.
      • Kyiv was included by Tholons in Top 50 Global Emerging Outsourcing Cities list
      • Ukraine now appears in Gaming Industry’s Top 12 European Countries.
    • Talent pool
      • Over 20,000 Ukrainians are employed in ITO and BPO areas.
      • Ukraine’s rapidly improving IT and engineering skills have been a key factor in attracting foreign companies and direct investments.
      • Ukrainian skilled engineers prefer employment with outsourcing companies, as it provides challenging projects and higher than average salaries, and this, in turn, prevents industry brain drain and contributes to continuous resource availability.
      • Due to growing market demand, IT and engineering occupations have become more popular among university students as a good way to build a successful career. This results in increased competition between applicants and higher educational standards.
      • College graduates with non-technical degrees and foreign language skills attract attention of BPO firms.
    • Education
      • Ukraine has long standing reputation as major techn logy region , with a well developed scientific and educational base.
      • Ukraine’s traditions of physical, mathematical, and programming schools are very strong . Nearly 60% of its universities have graduates with majors in these disciplines.
      • With only 1% of the world’s population, the country has 6% of the world’s physicists, mathematicians, computer programmers and other highly trained professionals.
      • To bridge the gap between classical education and real business and technical processes, outsourcing companies have partnered with leading universities to offer additional classes and labs for students.
    • Government support
      • In 2007 the Ukrainian parliament adopted the Law “On the Foundations of the Development of Ukrainian Information Society in 2007-15”, which was followed by the “Action Plan on Implementing the Tasks Envisaged by the Law of Ukraine”. The goal of the law is to promote growth of an information society in Ukraine, strengthening the basis for IT sector development.
      • Government agencies for investment and innovation have started pushing for more effective cooperation with associations of Ukrainian outsourcing providers. Since 2006, the Ukrainian government has been providing support for the annual Ukrainian Outsourcing Forum in Kyiv.
      • Membership in WTO should also boost Ukrainian economy as a whole and ITO and BPO industries specifically.
    • Outsourcing to the CEE region in 2007 – market volume
    • Outsourcing to the CEE region in 2007 – number of employees
    • Outsourcing to the CEE region in 2007 – rates per year
    • Recent Ukrainian outsourcing industry trends
      • Software development rates in Ukraine are still globally competitive, despite rising wages and inflation over the last years. At the same time, the quality of IT services and products is increasing, along with the qualifications of IT specialists.
      • Large qualified work force in Ukraine is gathering attention from BPO segment of market. More EU and US companies are considering Ukraine as the preferred location for their BPO operations.
      • Acquisition of several successful Ukrainian service providers by such global players as EDB and GlobalLogic confirms growing interest in Ukraine by industry leaders.
      • The continuing decentralization of outsourcing industry in Ukraine remains a positive factor in further market growth.
    • Key outsourcing centers City Population, millions Part of outsourcing industry resources (mostly IT) % Average salary relative to Kyiv Property price level relative to Kyiv Kyiv 2.8 45 1 1 Lviv 0.9 18 0.66 0.38 Kharkiv 1.7 17 0.63 0.45 Dnipropetrovsk 1.2 8 0.67 0.50 Odessa 1.1 3 0.67 0.70
    • Kharkiv: an attractive outsourcing location
      • Second largest city in Ukraine.
        • O ne of the main industrial, cultural and educational cent ers of the country.
        • O ne of the most prolific centers of higher education and research of Eastern Europe :
        • 250,000 students in 42 national, state, and
        • private institutions of higher education.
        • 10 universities and colleges focused
        • on graduating technical specialists
        • and engineers.
        • Many foreign language specialists,
        • in English as well as German, Spanish,
        • French, and Slavic languages.
    • Conclusions
      • Combination of large talent pool and various value-added factors make Ukraine one the most promising outsourcing hubs in Eastern Europe.
      • Ukraine is a country possessing both the material resources and the political will to become an emerging global force.
      • Due to rapid industry growth and latest acquisitions of Ukrainian companies by global outsourcing providers, the next few years are considered by many experts as the best time for direct investments. More M&A activity is predicted.
      • Watch out for Ukraine to gain more worldwide recognition and prominence as both ITO and BPO destination in next 3 to 5 years.