Main Reasons Why Outsourcing Continues to Attract Businesses

Many businesses today are searching for innovational ways to make their enterprises beneficial for spending less money. Outsourcing is one of the most popular business models today which implies accomplishing the set goals with the help of offshore companies or agencies.

There several reasons why companies apply outsourcing work to external service providers. Amidst the main reasons are lower prices, market capacity, availability of a great variety of services, etc. However, one should mind cultural peculiarities as well as doing business styles when choosing an external outsourcing agency. We’d like to dwell more into the matter and discuss the aforementioned reasons and solutions in detail.

Cost saving

Despite everything, the price remains the top benefit outsourcing provides. Hiring an offshore team of experts for the sake of cost-saving is a plus but it doesn’t necessarily limit to it. Many companies do not need to establish a separate IT department for the sake of a project or two. Hence, elaborating cooperation with external software development provider is the key option which may later grow into a constant relationship. There is a number of countries on top of IT outsourcing services provider.

Ukraine has become one of the largest IT outsourcing destinations due to its comparatively low prices for high-quality services. Although the average salary of an engineer depends on experience, the number of working technologies and skills, these costs are still lower than in Western Europe or North America. Hence, the clients receive a good product at a reasonable price. Such trend attracts entrepreneurs from mainly middle and small businesses, since, these often have to reduce their expenses and still get a desirable result.

Growing technical expertise and demand leads to an increase in labor costs, hence, overall industry growth. Yet, skilled technical employee’s rates are by far more reasonable than in EU and US. Outsourcing reduces development cost, providing you with clear control over the budget along with access to world-class talents that may not be available for you onshore.

Motivation to grow

Although many specialists claim the salary not to be their main reason for joining the high-tech world, they understand that the level of their knowledge and expertise influences the amount of money earned. Since the salary gap between Junior and Senior developer in Ukraine is quite vast, many engineers work hard to grow professionally and, therefore, earn more. In the chart below we provide the average salary for the developers in Ukraine according to the level of their expertise.

Average Salary for a Software Engineer

Market capacity

As elsewhere in the world, IT is attractive since it a burgeoning market with rapidly growing opportunities. Many specialists consider becoming an engineer since the sphere offers high salaries and numerous perks. This is what stimulates the youth’s interest in obtaining technical education. Currently, IT talent pool amounts to over 125K specialists and this number is constantly growing since more than 30 thousand engineers annually graduate from both state and private educational institutions. This year, for instance, IT is the second most popular specialty among the applicants to obtaining higher education.

Another issue taken into consideration by the potential clients is the level of Englis. According to the statistics, around 80% of the engineers in Ukraine are intermediate and upper-intermediate English language speakers; moreover, a vast number of engineers also speaks German, French, Polish or Russian. IT outsourcing services are mostly provided in English, and less commonly in German and Russian.

Cultural peculiarities

The key thing that makes Ukrainian developers in demand among the western companies is common mentality and way of thinking. It makes the collaboration process easier and simpler and helps a lot in establishing a vision that meets the interests of the two parties. If your company is from the US and your partners are from CEE or Asia, your teams would probably have different state and religious holidays as well. Hence, it is advisable to communicate official or religious holidays in the early stages of cooperation. Such peculiarities shall be learned beforehand, so then you don’t mess up the work.

No matter where a developer comes from, s/he should be communicated with as part of the company, not as a foreigner. Simply arranging a schedule with the tasks without proper communication can be harmful to the overall process. Negative experience with outsourcing sometimes serves as a warning sign to others so they refuse from applying this business model; however, it shouldn’t be this way. Avoiding misunderstanding and having all things discussed puts all cultural aside.

In order to avoid misunderstandings in terms of content and deadlines, such obviously self-evident points should best be made in writing. However, there are differences to note, especially with Asian cultures: a “yes” is not always to be understood as an American “yes”. These differences often lead outsourcing companies to unprepared issues, and such complications can be easily avoided with a well-structured approach and accumulated experience. The contact with other cultures can even be an interesting enrichment for the daily work of both sides.

Intellectual property and GDPR compliance

So far, all the companies in Ukraine managed to implement the GDPR-compliant contracts and regulations, especially it touches upon the outsourcing companies that have partners all over the world. This is no longer a reason to worry for those businesses that enter the Ukrainian IT market and seek cooperation here.

Ukrainian Intellectual Protection (IP) Laws include copyright protection for both computer programs and databases. As elsewhere in the world, copyrights can be transferred and licensed, while the author keeps the moral rights (for example – to be recognized as the author, etc.). Close attention shall be addressed to ownership and the transfer of IP rights in order not to violate the laws. According to the Civil Code, property rights are jointly owned by the employee and employer, unless otherwise is specified in the agreement. Therefore you should make sure that copyright ownership along with an authorship fee (for transfer of the ownership rights of the developer to the customer) is carefully specified and the description of property rights is present in the contract. After the new GDPR regulation coming into force, Ukrainian tech companies as others in the world working with the European clients have revised and improved their policies in order to comply with the new regulations and provide appropriate services. Therefore, outsourcing to Ukraine is safe and secure. IT industry here is growing; therefore it is mandatory to keep up with all the requirements in order not to lose clients or damage the reputation.

Despite the cost growing tendency, Ukraine remains one of the most secure and best IT outsourcing destinations. It’s a good option for the European countries as it’s a rather nearshore one, unlike other popular destinations.

About Author

Sergiy Kornienko is a co-founder and CEO of Agiliway. With 20+ years of experience in the industry, Sergiy has built and grown multiple successful software development teams in both Ukraine and other CEE countries.

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