It’s no secret that outsourcing software development has been a global trend for a while and is nowhere near stopping. In fact, a typical IT budget that goes to outsourcing vendors has risen sufficiently this year. According to a recent Outsourcing Study executed by Computer Economics, in 2019 it has grown by more than 30% compared with the previous year, from 9.4% of the total IT budget in 2018 to 12.7% in 2019. The reasons why these numbers keep progressing might be numerous but what they keep showing is that companies are familiar and comfortable with relying on outsourcing partners.
Another interesting shift in the IT outsourcing sector we are witnessing these days is the change of the primary reasons for outsourcing. Traditionally, it was deemed that companies opt for outsourcing as a way to cut budget costs, improve operational flexibility, maybe increase the quality of their services or just augment in-house capabilities. But none of these reasons implied long-term commitment. So what has changed? Today outsourcing is not about saving money and finding a quick fix, today companies are after real partners they can collaborate with, disrupt markets, implement new services companies are not capable of doing by themselves and generally drive innovation and leave their competitors far behind.
Today outsourcing is not about saving money. So why do companies outsource?
This leaves us with two questions — what is the current state of the affairs on the IT outsourcing market and where to find a software development partner that is not just a vendor but can potentially become your strategic partner? To answer the first question, let’s have a brief overview of this year’s statistics as well as some prognosis for the following year. As to the second question, instead of taking a tour across the globe and reviewing all potential outsourcing regions and countries, our focus is on one of the most popular outsourcing destinations — Ukraine.
Software outsourcing climate in 2019
So what are the organizations after as they decide to spend a fair share of their IT budget on the outside help?
IT functions that organizations typically choose to outsource:
According to a recent study, application development is the most frequently outsourced function (56%), closely followed by IT security (48%), while services like application management or network operations are losing in popularity.
When it comes to software application development, the most popular IT service companies choose to outsource, things are only getting better. 55% of companies are planning to increase the share of work being outsourced, compared with last year, while only 11% are planning to decrease it.
And within those organizations, the majority is pretty content with the services they receive. 84% either receive the same or better service with outsourcing software application development.
When it comes to identifying the profile of an organization interested in outsourcing its IT needs, the financial services sector appears to be a top client, closely followed by manufacturing and retail. The whole list of the frequency of outsourcing software application development looks the following:
Collaborating with any software outsourcing partner, no matter how high their professional level or business integrity is, always has room for improvement. A global outsourcing survey conducted by Deloitte last year notes that when asked what companies would do differently when launching their outsourcing program, the top response is to spend more time on selecting the service provider or RFP. Another popular response involves adopting a more strategic approach and taking actions like increasing the scope of service, transforming the process or spending more time in transition.
This survey shows that companies are getting more serious about the screening process and as software development becomes not just something that requires an augmented workforce, but a strategic business element that needs disruptive technologies and strong technology consultation. In this status quo, companies are looking not simply for vendors capable of performing set tasks but a strategic partner that can offer more innovative solutions.
And when outsourcing is more about a strategic partnership, the stakes are getting higher and the process of finding your ally is becoming more serious. In the next part of our detailed look at the state of outsourcing affairs in the IT sector, we will look more closely at one of the most popular and fastest-growing outsourcing destinations — Ukraine.
Outsourcing climate in Ukraine
The interest in Ukraine’s IT outsourcing market is not coincidental. The country has become a top outsourcing destination in Eastern Europe and is among the most desirable outsourcing places in the world. Ukraine has one of the fastest-growing numbers of IT professionals in Eastern and Central Europe. The number of IT specialists is expected to reach the 200,000 mark by 2020.
Today Ukraine houses numerous software development companies of various sizes and types that work with renowned clients across the globe. With the US being a top market interested in the country’s IT outsourcing capabilities. Roughly 80 % of all Ukraine’s exported IT services go to the US.
On top of that, over a hundred major global tech firms from across various industries, including electronics, e-commerce, software, gaming, telecoms choose Ukraine for their software R&D activities. Companies like Samsung, Cisco, Oracle, Boeing already have R&D offices in Ukraine. These companies have entered the market either as a joint R&D effort with local outsourcing or outstaffing company or directly, through M&As. Among the most popular Ukrainian cities for opening R&D center, Kyiv holds a top position, followed by Dnipro, Kharkiv, Odesa, and Lviv. Startup unicorn like Grammarly or PetCube not only have their research and development units in Ukraine but actually originated in the country.
So what makes Ukraine such a friendly environment for software development? Not to hypothesize on the subject and dwell on the possible reasons like similar mentality with the western world, close cultural proximity or another beloved argument — the time zone, let’s turn to cold hard facts. Below is a detailed look at how the Ukrainian software development market is doing in 2019. It relies on the research conducted by dou.ua, Ukrainian online IT community that publishes news, the latest data and research on Ukraine’s IT market.
According to dou’s annual job market research, conducted by the end of each year, in 2018 the number of IT specialists has grown to roughly 160,000 or by 26% compared with the previous year. And over the last 2 years, the IT sector in Ukraine has grown by 60%.
Market growth
This growth, in turn, shows another positive dynamic — job openings in the sector have grown by almost 50%, from 37,742 available positions in 2017 to 55,438 in 2018.
A closer inspection shows the most in-demand positions by category. These are Front End developers, QA engineers, PHP, .Net, Java and DevOps engineers. Project managers, marketing specialists, designers, and sales experts close the top 10.
Now that we’ve established the market demand, it’s time to look at what the Ukrainian IT sector has to offer in terms of the workforce.
So who is an IT specialist in Ukraine? A research conducted by Developers.org.ua shows the following data. On average, the age of IT professionals in Ukraine is quite young. 63% are in their 20s, 18% check the 31-35 box, while only 3% are more than 40 years old.
The age of Ukrainian IT specialist
Traditionally, younger specialists (less than 25 years) are employed either in development or non-technical fields (i.e. HR, PR, Sales), while IT specialists over 35 years tend to hold senior positions in top management or PM office. The majority of IT specialists (67%) live in big cities (Kyiv, Kharkiv, Lviv), while only 3% live outside the country.
Women’s share of the IT workforce is showing a positive dynamic and growth each year. In 2019 24% of the IT specialists in Ukraine are women, compared with 23% in 2018, 20% in 2017, and 16% in 2016.
Gender Ratio
In professional terms, the share of developers out of the country’s IT workforce is 53%, followed by QA engineers — 15%, managers — 6%, non-tech specialists (HR, PR, Sales) — 6%, designers — 5%, business analysts — 5%.
The average experience of IT specialists in the country is 3-5 years. Kyiv, being the biggest city, as well as the country’s capital, holds the leadership in employing experienced resources, compared to other major IT cities in the country (Kharkiv, Lviv, Dnipro).
Average experience
When it comes to job titles, 36% hold a middle position, 27% are at the junior level, 19% are senior specialists, and 11% are in the leading positions. But the situation is not homogeneous across the whole country. For instance, the share of junior specialists is 22% in Kyiv, while in Lviv it has reached 33%. Also, Kyiv is the only Ukrainian city, where senior specialists exceed juniors.
In terms of the distribution of the workforce, every second IT specialist in the country works for an outsourcing company, while every fourth is hired by a product company. Only 3% choose to work for a startup or freelance.
Where Ukrainian IT specialists work
Another interesting aspect of professional portrayal shows that more than half (56%) have higher STEM education, another 28% have higher education, either in economics, management or other non-technical fields. The percentage of women with higher education is a bit higher than men, 87% to 82% for men. However, men tend to have technical education more often than women, 61% vs 41%.
Another aspect of education, English proficiency shows that the overwhelming majority has an upper-intermediate or intermediate level of English, only 4% have elementary or no command of language. Business analysts, project managers, and top managers are among those with the most advanced level of English.
English proficiency levels
From a professional standpoint, Ukrainian developers have always been among the top. HackerRank, a platform that ranks and scores engineers based on their professional skills, has placed Ukraine on the 11th position in its list of the best developers in the world. A similar chart by TopCoder community ranks Ukraine as the 7th country in the world.
When it comes to technologies Ukrainian software developers use, Java and JavaScript are traditionally the most used programming languages by software developers, closely followed by C#, PHP, and Python.
The most popular programming languages used by Ukrainian developers
As an additional language, JavaScipt is still the most popular choice but compared with the previous year, Python is being used more often.
But Ukrainian software developers don’t stop at the achieved, 64% plan on mastering another programming language in the following year. Among the most popular choices are Python, JavaScript, and Go.
The analysis illustrates that the Ukrainian software development market shows a positive dynamic with each year. An interest in the country from companies looking for an outsourcing partner and tech giants that consider Ukraine talent pool a suitable place for opening their R&D divisions all add up to the country’s growth in the IT sector. Inside the country, the climate is quite favorable as well, with the majority of specialists having higher technical education, good command of English, and sufficient experience in the industry as well as solid knowledge of programming languages.
In 2019 we are witnessing the maturing of the IT outsourcing model. What started as a way of cutting costs has developed into a real partnership where each party brings its strongest suits to the table. Companies are putting more trust and faith in their software development partners, and they, in turn, have grown from service providers and vendors to equal allies capable of not just completing tasks but contributing to the problem-solving process, introducing innovation, and cutting-edge solutions. And in this respect, Ukraine is proving to be an excellent place to look for such a partner.