Software Ukraine: Nearly Two Decades On

Discovering the Soviet Legacy

Yet not so long ago bizarre-sounding, the word “outsourcing” has been increasingly in vogue throughout the West: the smell of offshore dough has turned out to be too irresistible a lure for many Western businesses and entrepreneurs, who rushed to develop the newly arisen opportunity in their thousands. The desire to spend less and, thus, earn more has dispelled the “jungle fears” of many and helped build not only viable, but also very profitable businesses. What had previously been considered a suspiciously outlandish and perilous venture became the carrying pillar of the world’s most innovative industry.

Eclipsed by the more well-known outsourcing locations, with their almond-eyed beauties, trained to please the hearing of Western customers with their painstakingly acquired North-American accents, the much less exotic, post-Soviet Ukraine still managed to emerge as a budding offshore zone in the late 90-s. Legions of start-ups inundated the country, their founders hitting the bull’s eye: the previously military-oriented, immense scientific potential that was generated by one of the best educational systems in the world, was finally tapped and coupled with some of the creme-de-la-creme Western entrepreneur talent.

Time flies fast and it’s been almost 20 years since the advent of the first overseas software developers in Ukraine. Are they still there, how do those folks fare and what are their prospects?

The Now of Ukraine’s Software

It would really be hard to tell now what actually secured the pioneering software businesses against the mishaps that befell some other daring and commendable business undertakings in the Ukraine of the 90-s, but there is no gainsaying the fact that the Ukrainian software industry has not only survived, but it has also been able to achieve impressive and sustained growth over the years.

From the very outset, the newcomers tended to settle in the traditional scientific centers of the 48-million strong nation: the Ukrainian capital of Kiev, the cities of Kharkiv and Lviv. Currently, the former two are home to hundreds of software outfits. Often, joint ventures were founded: surprisingly, many Western businessmen seemed to easily find common language with their Ukrainian counterparts, considering that the mentality of the business community in the then Ukraine was largely one that can be referred to as post-Soviet. This was probably because many of those who were involved with software development in Ukraine came from circles related to science – research institutions or institutes of higher learning.

The early 2000-s saw further growth, as the desire to bring into play the yet untapped but well-qualified human resources brought about the industry’s expansion into the country’s other regions. Now, the names of some of the newcomers’ “old countries” take more than just a smattering of geography to place, whist the product lines of these vendors are, probably, as diverse: from Web sites and Internet stores to billing systems and banking software. Most firms employ teams of 30-50 developers and QA engineers, but companies that hire 200-250 and more staff are becoming quite common too. However, so far, companies that have more than 250 employees are very scarce and a rosy picture of gargantuan growth is, unfortunately, still one you can observe only elsewhere.

The Driving Force behind the Phenomenon

As you may guess, it’s neither pricey machinery nor billion dollar investments that generate profits in the software industry. Were the opposite the case, Ukraine would at best be lagging behind, reluctantly housing hundreds of grimy artisan-style sweatshops that crank out semi-functional Internet stores for peanuts. However, unlike with a host of other industries, this relatively poor but inescapably European country just happened to possess exactly what was required to succeed on the global software development market: talent. The nearly 100% literacy rate Ukraine boasts and the uniquely high educational standards have always been strikingly out of sync with the patently low and frequently delayed wages. The relatively high salaries and attractive fringe benefits that could easily be afforded by Western companies provided an excellent incentive for some 35% of the high school graduates to enroll in computer science-related university courses.

Currently, most Western and joint software development companies pay their Ukrainian programmers (naturally, depending on their qualifications), an equivalent of 400 to 1500 USD -an amount of money, locally coveted by many and unlikely to be earned elsewhere by a university graduate who isn’t self-employed. Besides, in order to enhance their offerings, many vendors provide several kinds of fringe benefits, otherwise unavailable to the average Ukrainian as part of his or her compensation package. These fringe benefits include fully or partially paid lunches, free sports facilities, traveling opportunities, corporate parties, comfortable working environment and other benefits.

It’s not only far overseas where the high qualifications of the Ukrainian developer force have found recognition. The regular “inroads” into the Ukrainian labor market, made by the HR Managers of Moscow and other Russia-based companies through the headhunting websites, have become an established practice. However, the exorbitantly high price of lodging and some other obstacles have prevented a considerable outflow – most of those who decide to look for greener pastures elsewhere still opt for the West: an estimated 2000-3000 IT specialists leave Ukraine annually.

The inexpensive, readily available, and eminently qualified workforce is just one of the numerous advantages Ukraine has. The low rental costs and some other advantages, such as, for example, the existence of several well-established professional organizations, add to the list of the benefits the country sports. All this says that apparently Ukraine will continue to grow into a major world -scale software development hub. How much headway has already been made?

What Does the Future Have in Store?

Unfortunately, despite all the progress made over the years, Ukraine continues to remain a bit player compared with some other popular offshore software development zones that initially had a better start, largely owing to the timely, early support from their governments.

Although the worth of the Ukrainian software market may often be estimated somewhat imprecisely due to a presumed large number of legally unregistered deals, one can say with confidence that in the early 2000-s the real figures exceeded those officially announced manifold.

However, in terms of growth, the overall picture is definitely positive. For example, according to some of the estimates (a research, conducted by the company Techlnvest), in 2004 the amount of the Ukrainian software exports rose by 57 per cent from 2003 to reach USD $ 110 million. The annual market growth rate was then estimated to be around 50%.

In addition, it would not be an exaggeration to say that since recently, the number of overseas market players in major Ukrainian cities has been growing at a rate that suggests only one possible definition for the much acclaimed phenomenon – boom.

This latter cannot but bode well for the country on the rise, promising it a better, more affluent future and giving it the strength and inspiration to achieve further goals.

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