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R&D Globalization: A Ukraine Perspective
R&D Globalization: A Ukraine Perspective
R&D Globalization: A Ukraine Perspective
R&D Globalization: A Ukraine Perspective
R&D Globalization: A Ukraine Perspective
R&D Globalization: A Ukraine Perspective
R&D Globalization: A Ukraine Perspective
R&D Globalization: A Ukraine Perspective
R&D Globalization: A Ukraine Perspective
R&D Globalization: A Ukraine Perspective
R&D Globalization: A Ukraine Perspective
R&D Globalization: A Ukraine Perspective
R&D Globalization: A Ukraine Perspective
R&D Globalization: A Ukraine Perspective
R&D Globalization: A Ukraine Perspective
R&D Globalization: A Ukraine Perspective
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R&D Globalization: A Ukraine Perspective

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Ukraine is the second largest contiguous country on the European continent, after Russia. As compared to established locations such as India and China, Ukraine does not figure as prominently on the …

Ukraine is the second largest contiguous country on the European continent, after Russia. As compared to established locations such as India and China, Ukraine does not figure as prominently on the radar of companies looking to globalize their R&D operations. During the period 2000- 2008, foreign direct investments inflow increased in the country, which indicates that Ukraine is emerging as one of the key economies in Central and Eastern Europe (CEE).

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  • 1. R&D Globalization: A Ukraine Perspective 2009 Zinnov LLCZinnov LLC CONFIDENTIALThis report is solely for the use of Zinnov and Zinnov Clients.No part of it may be circulated, quoted, or reproduced for distribution without prior written permission
  • 2. Overview SCOPE  This report is intended to provide an overview of the R&D landscape in Ukraine in the context of Central and East European (CEE) countries*  Specifically, the report seeks to provide detailed information on the following aspects  Size of IT offshoring market in Ukraine with specifics for the R&D offshoring market  Primary drivers for offshoring of R&D to Belarus Czech Poland Ukraine Republic  Key offshoring locations for R&D within Ukraine Ukraine Slovakia Hungary  Macro and micro challenges that may Romania hinder the progress of Ukraine as a key Bulgaria R&D offshoring destination CONTENTS  The current document is a preview to the complete study and covers the R&D offshoring market numbers for Ukraine along with an overview of the key drivers for offshoring of R&D to the regionNote: *The scope of the study includes countries Poland, Belarus, Czech Republic, Slovakia, Hungary, Romania, Bulgaria and Ukraine only
  • 3. Agenda 1 Market Overview 2 Lay of the Land 3 Location Analysis 4 Key Restraints 5 Case Study
  • 4. The IT offshoring market in Central and East European (CEE) countries has rapidly evolved over the last 3 years CEE IT Offshoring Market, 2006-08 CAGR 18% USD Million Belarus Czech Poland Republic Ukraine Slovakia Hungary Romania Bulgaria This is a preview. The total slides displayed are limited. For full access contact info@zinnov.comNote: The scope of the study includes countries Poland, Belarus, Czech Republic, Slovakia, Hungary, Romania, Bulgaria and Ukraine onlySource: IT Ukraine, Zinnov Analysis
  • 5. Among the CEE countries, Ukraine has emerged as the largest IT offshoring market IT Offshoring Market Size of CEE Countries, 2008 Ukraine has achieved this status with a significantly large talent pool of about 25,000 IT resources, supportive government policies and lower operating cost structures Ukraine accounts for more than 20 percent of the total CEE IT offshoring market USD Million This is a preview. The total slides displayed are limited. For full access contact info@zinnov.comSource: IT Ukraine, Primary interviews with stakeholders of service providers and industry associations, Zinnov Analysis
  • 6. The Ukrainian IT offshoring market is predominantly driven by R&D related activities IT Offshoring Market Split by Activity Based on Size, 2008 The talent pool in Ukraine is highly IT Offshoring Market Split by Activity Based on Headcount, 2008 capable of performing high end R&D work, as a result of the relatively advanced educational system inherited from the erstwhile Soviet UnionNote: * IT/ITES – Information Technology / Information Technology Enabled ServicesSource: IT Ukraine, Russoft, Zinnov Analysis
  • 7. Agenda 1 Market Overview 2 Lay of the Land 3 Location Analysis 4 Key Restraints 5 Case Study
  • 8. Post 2000, Ukraine has rapidly evolved into a leading destination for R&D Offshoring among the CEE countries Evolving R&D Offshoring Landscape in Ukraine Soviet Era Reform Era Growth Era 1960s-1980s: 1990s - 2000: 2001-Current: • Ukraine was an important center • The country became independent • In 2001, the Government revised for Soviet arms industry and hi-tech in 1992 after the dissolution of the legislative laws concerning research during the 1960s Soviet Union software products to increase IP protection • Most of the R&D related activities • Post the soviet regime Ukraine were state-funded for defense, moved from a planned economy to • The Government implemented a space and military programs a market economy, the transition of visa free entry for citizens of US and which resulted in an economic Europe to attract experienced • Restrictions in society and recession talent especially due to restriction in relations with the West, the • In the early ‘90s the IT sector • About 60 – 70 percent of the software sector in Ukraine was suffered a backlash in the form of a service providers began operations underdeveloped until late the ‘80s. brain drain. At that time the best post 2000 qualified specialists and programmers found a job abroad or • Post 2004, the government has also immigrated to the US, Canada or introduced various initiatives and Western Europe laws to promote the IT industry in Ukraine • Commercialization and applicability of programming resources was first • Between 2000 and now the IT introduced and developed after industry has grown at an average of 1991 40 percent annually and has resulted in Ukraine being the largest R&D offshore destination in the CEE region This is a preview. The total slides displayed are limited. For full access contact info@zinnov.comSource: Ministry of Commerce-Science, Technology and Innovation System in the Ukraine, Zinnov Analysis
  • 9. Compared to CEE countries, Ukraine has witnessed its R&D offshore market grow at more than double the rate of that of the CEE average in 2004-08 R&D Market Growth, 2004-2008 CAGR 18% Ukrainian R&D offshoring market has CAGR seen explosive growth in the past few years with the growth rate being 40% more than double of that of the CEE average, which can be attributed to the highly capable talent pool, low attrition, low costs and increased government support This is a preview. The total slides displayed are limited. For full access contact info@zinnov.comSource:IT Ukraine, Russoft, Zinnov Analysis
  • 10. The key reasons for the rapid growth in R&D outsourcing to Ukraine include presence of highly skilled R&D talent pool, lower cost of operations, supportive government policies and proximity to EU countries Key Drivers Description Impact of the Driver 1 Ukraine has highly capable resource pool of about 8,000 to Talent Pool 10,000 working in R&D related activities. The number of R&D resources installed in companies in Ukraine are the highest in the CEE region 2 Cost of running operations in Ukraine is about 60-70 percent Cost Arbitrage cheaper than in the US 3 The government has been actively supporting the IT Industry Government Support and specifically R&D activity in Ukraine. Though the support came recently, Ukraine is poised to be a significant R&D outsourcing destination Close proximity to Europe makes Ukraine a preferred 4 destination for near-shoring. In addition, good proficiency in Proximity to Europe English and European languages facilitates easy transition of projects and co-ordination between client teams Impact This is a preview. The total slides displayed are limited. For full access contact info@zinnov.com High LowNote: ‘Impact of driver ‘ indicates the important factors based on which global firms offshore R&D projects to Ukraine service providers . It is purely a qualitative rating based on Zinnov’s observation across key product development firms globallySource: World Bank-Ukraine Economic Update; PWC-Doing business and investing in Ukraine; Zinnov Analysis
  • 11. 1 Talent Pool A Talent Pool Size In terms of talent pool, Ukraine has a significant population of highly skilled manpower capable of working in R&D related activities Installed R&D Resource Pool, 2008 Since the Soviet times, Ukraine has had a long Soviet standing reputation as a major technology hub Legacy with a well developed scientific and educational base Ukraine’s traditions of physical, mathematical and Education programming schools are very strong. Nearly 60 System percent of the universities in Ukraine have graduates who have majored in these fields With only 1 percent of the world’s population, the country has 6 percent of the world’s physicists, Ingenuity mathematicians, computer programmers and other highly trained professionals This is a preview. The total slides displayed are limited. For full access contact info@zinnov.comSource: IT Ukraine, Zinnov Analysis
  • 12. 2 Cost Arbitrage The cost of operations is also significantly lower with the costs of R&D resource in Ukraine being 60 to 70 percent less than that in the US Illustrative Average Operating Cost/ FTE/ Year - A Comparison 200 150 Silicon Valley (150 – 175) Average Cost USD ‘000 60-70% savings Tel Aviv (115 – 135) Lviv is about 20% less expensive 100 than Kiev while other cities are about 25% lesser 50 Moscow (60 – 75) Shanghai (45 – 55) Bangalore Kiev (35 – 45) (37 – 40) Lviv Kharkiv, Donetsk (33 – 38) Dnepropetrovsk ( 30 – 35) 0 USA Israel Russia China India Ukraine Ukraine Ukraine This is a preview. The total slides displayed are limited. For full access contact info@zinnov.comSource: Primary interviews with stakeholders of service providers; Zinnov analysis
  • 13. 3 Government Support The government has also been providing active support by driving targeted initiatives to promote investment in the region International Co-operation Ukraine has entered into bi-lateral agreements with many countries such as Netherlands, Poland, Singapore, etc. to facilitate innovation & promote FDI Infrastructure Executive BodiesThe government is also taking active measures to The government has established dedicated agenciesimprove the infrastructure condition within Ukraine such as IT Ukraine, Ukrainian Hi-Tech Initiative etc.such as focusing on development of Transport Government to promote innovation and foreign investment in theCorridor Europe Caucasus Asia corridor, setting up of Support IT and software industries in the countrynew technology parks etc. National Programs Education Ukraine has worked constantly to improve the Various programs on a national level such as “Invest educational standard in the country through various Ukraine” have been introduced to improve the FDI programs and initiatives such as Bologna Process and status in the country EUREKA This is a preview. The total slides displayed are limited. For full access contact info@zinnov.comSource : Primary interviews with various stakeholders in executive bodies and service providers, Zinnov Research
  • 14. 4 Proximity to Europe Proximity to Western European countries is an added advantage as it has enabled companies to near shore their operations in Ukraine • Near-shoring locations are closer to the client which makes mutual visits easier enabling higher productivity and efficiency • The Central and Eastern European countries have close cultural ties with markets of Western Europe. Typical near-shoring location personnel have proficiency in the client’s language and better understanding of Belarus cultural background of the client. Czech Poland Republic • Strong reaction to instances of companies Ukraine moving jobs offshore (loss of good will) was the reason why European countries preferred Slovakia Hungary near-shoring. Romania Bulgaria This is a preview. The total slides displayed are limited. For full access contact info@zinnov.comSource: Primary interviews with stakeholders of service providers and industry associations; Zinnov analysis
  • 15. Additional Information  The current document is a preview to the complete study and covers the R&D offshoring market numbers for Ukraine along with an overview of the key drivers for offshoring of R&D to the region  The full report provides a comprehensive coverage of the R&D landscape in Ukraine with more details on offshoring landscape and key drivers for offshoring along with additional insights on major offshoring locations in Ukraine and challenges that can hinder the progress of the region as a key offshoring destination  Full report on Ukraine R&D landscape can be accessed at  Zinnov ‘s Global Location & Talent Pool Portal. Sign up today for a free trial account http://zinnov.com/US/demo_signup.php  Or, email us at info@zinnov.com
  • 16. Zinnov LLC4701 Patrick Henry Dr.Building 7Santa ClaraCA – 95054Phone: +1-408-716-843221, Waterway Ave, Thank YouSuite 300The WoodlandsTX – 77380Phone: +1-281-362-277369 "Prathiba Complex", 4th ACross, Koramangala Ind. Layout5th Block, KoramangalaBangalore – 560095Phone: +91-80-41127925/611, First Floor,Paras Downtown Center, info@zinnov.comGolf Course Road, Sector 53, www.zinnov.comGurgaon – 122002Phone: +91-124- 4378211/13 @zinnov Zinnov LLC ( Confidential) 16

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