The salad days of software projects outsourced to Ukraine seem like an eternity ago. In the early 1990s, and later, after the dot-com bubble, Ukraine's fledgling information technology (IT) sector was struggling to stay afloat. As years went by, as the skills of managers and programmers were being honed, not only did the sector keep itself afloat, it was booming. This has been truly astonishing, keeping in mind the practical absence of any form of tax relief. Our country is unlikely to ever rival India or China, famous outsourcing destinations, in terms of governmental support.
Keeping Pace with the World
A company's staff is probably one of the most important ingredients an organization considering outsourcing IT work should look out for when discussing a project with a prospective offshore company. Outsourced software start-ups and corporations that are now thriving in Ukraine would have hardly achieved their current stellar status without the Ukrainian IT experts that are their most valuable assets.
According to "Global Skills Report 2006" published by Brainbench®, Inc., internationally acclaimed skill-assessment company, "…Eastern Europe, specifically the former Soviet bloc, has become a fascinating study in social and economic change." Highly-qualified, veteran managers and developers will surely get your project done in time and on budget, while seemingly a less-expensive workforce is likely to incur future costs through ill-documented processes, lack of upward compatibility or bug-ridden builds.
At this time - and hopefully in future - this is not the case with Ukraine. According to the above report, and keeping in mind the ratio of Ukrainian population (46 million) to that of India (1.126 billion), the country's success story is quite remarkable.
Ukrainian Outsourcing Pitfalls at a Glance
There are a lot of things a potential outsourcer of software projects or services might need to take into account.
First, it is necessary to make sure you understand the work habits and mentality of a typical Ukrainian programmer. Most, probably 99 percent, of Ukraine's developers are perfectionists. In other words, they are likely to go beyond the call of duty to write the software that would meet the industry's highest standards, even if it means putting the deadline at stake. If the prospective Ukrainian companies employs skilled managers, with hands-on experience, that risk would most likely be contained.
Another snag to watch out for is the staff's proficiency in English. With over 7 years of experience in technical writing, proofing and editing, I have seen every kind and type of error. However, in recent years a growing number of Ukrainians have successfully overcome the English-language barrier, a very important development.
What might seem like an insignificant communication issue in everyday life poses a real risk when it comes to clearly written specifications. Incorrect comprehension by a programmer might result in ambiguous requirements, and, subsequently, inadequate software or outright project failure.
One of the nastiest facets of the hopes you pinned on your project might be the prospective company's incompetent management. And this is not something to be taken lightly, keeping in mind that Ukraine has only started on its way to Western-style management practices, with few people who have ever delved into such fields as effective project management or other industry standards.
Again, the situation seems to be on the mend: "Global Skills Report 2005", Appendix B-3, Country Skill Rankings, states that Ukraine ranks among the Top 5 countries well-versed in Project Management. According to the latest 2006 report, Ukraine now takes the 4th place, sharing it with the United Kingdom.
Ukraine's Outsourcing Marketplace: What Is It Worth?
It is extremely difficult to give even a ballpark estimate of Ukraine's outsourcing market value because a great number of small companies are not members of any official IT associations or software development consortiums.
It is estimated that currently there are around 500 private firms and startups, with an average workforce of 4-7 each. Also, there are about 45 larger corporate operations developing software for the world's heavy-hitters, like Adobe, Inc. and similar firms.
With an average Ukrainian IT corporation's yearly income topping $5 million, these giants probably account for $225 million. Add that 45 percent of the country's yearly outsourcing exports to the 55 percent churned out by the smaller companies, and you have a total nearing half a billion dollars a year.
Approximately the same statistics are cited by the Ukrainian HIGH-TECH Initiative. However, it is impossible to give precise figures, as a lot of smaller business ventures simply do not report their exact income for fear of problems with the State Tax Administration. A less optimistic estimate for 2006 put the stakes at $200 million, according to http://www.logicaster.com/.
Human Resources Departments with a Human Face
The most serious problem - and maybe the only one - that plagues Ukraine's outsourcing sector is a growing lack of human resources. This is reflected in an agreement among around 10 outsourcing companies binding each of them to inform the others if an employee of a group member sent his/her resume to another member of the group (http://freeprogrammer.blogspot.com/). Some consider this agreement as highly negative, almost a form of virtual slavery. However, the reporting agreement was still in effect in 2005 and 2006.
Luckily, those people who started their programming careers as early as 1988 for as little as $40 a month have by now grown into highly organized, extremely qualified workforce with a strong sense of camaraderie, blacklisting those companies involved in the above-described agreement, and resulting in those firms eventually loosening their human resource retention policies.
Talent Retention Still a Major Issue
In judging a company's ability to complete a project, a company contracting for the services might want to take a look at the outsourcing firm's record of staff retention. Conditions that might be considered negative and point toward possible problems with project completion could include the outsourcing firm's inability to hold its employees as evidenced by staff turnover rates of more than 20 percent a year. Other negative signs might be the absence of any career plans for staffers, and frequent job advertisements for new programmers to replace those joining the staff-focused companies elsewhere in Ukraine.
Shaping the Future
Based on the facts cited above, what might one think is in store for Ukraine in terms of information technology and outsourced software development sector? With no letup in the headhunters' cutthroat competition for prospective employees, software development costs are unlikely to go down anytime soon. However, in spite of being higher than those in India and lower than the ones offered by Russia, the charges are still extremely competitive, securing Ukraine's leading role in today's outsourcing market. Unable to match India in costs, Ukraine's only way to cement its current success would be the process of branching out into long-term, elaborate and highly specialized projects. The country is definitely not a venue if you are looking for a lucrative call center or 24/7 support, but, with the populace's keen interest in programming careers, steadily growing numbers of computer-science university graduates, and unparalleled expertise in complex software projects, it will probably remain one of the most cost-effective destinations for high-end outsourcers.
Alexander V. Timanyuk is acting president of the Ukrainian Technical Writers Club. http://www.technicalwriters.com.ua/
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