Outsourcing: the essence and features of implementation in Ukraine.
Maxim Levichev, 110i, KNEU
Understanding phenomenon of outsourcing and its influence and role in business in Ukraine should be started from defining what Outsourcing is in its nature.
Outsourcing is the business practice of hiring a party outside a company to perform services and create goods that traditionally were performed in-house by the company’s own employees and staff. Outsourcing is a practice usually undertaken by companies as a cost-cutting measure. As such, it can affect a wide range of jobs, ranging from customer support to manufacturing to the back office.
Outsourcing was first recognized as a business strategy in 1989 and became an integral part of business economics throughout the 1990s. The practice of outsourcing is subject to considerable controversy in many countries. Those opposed argue that it has caused the loss of domestic jobs, particularly in the manufacturing sector.
Supporters say it creates an incentive for businesses and companies to allocate resources where they are most effective, and that outsourcing helps maintain the nature of free-market economies on a global scale.
Outsourcing can help businesses reduce labor costs significantly. When a company uses outsourcing, it enlists the help of outside organizations not affiliated with the company to complete certain tasks.
The outside organizations typically set up different compensation structures with their employees than the outsourcing company, enabling them to complete the work for less money. This ultimately enables the company that chose to outsource to lower its labor costs.
Businesses can also avoid expenses associated with overhead, equipment, and technology.
In addition to cost savings, companies can employ an outsourcing strategy to better focus on the core aspects of the business. Outsourcing non-core activities can improve efficiency and productivity because another entity performs these smaller tasks better than the firm itself. This strategy may also lead to faster turnaround times, increased competitiveness within an industry and the cutting of overall operational costs.
Situation in Ukraine
Key takeaways helped to make out some important issues from outsourcing definition and now It is easier to analyze situation in Ukraine.
There are a lot of services that a developed in Ukraine, for instance: business-management, accounting, IT engineering etc. As data shows IT industry outsourcing is the most popular and the most profitable area.Reading this arises only one question – Why? It is quite simple to answer it. So lets survey Ukrainian outsourcing on the example of the most modern field of the business activity – IT .
First of all it is education. Six Ukrainian universities are included in the QS ranking of the world’s best universities, three of them are located in Kyiv, the capital of Ukraine. In fact, when it comes to computer science, the best are the Kyiv Polytechnic Institute and the National University named after Taras Shevchenko, which offers a number of specialties in computer science, computer programming languages and more abstract computing sciences.
It is a fact that Ukrainian IT specialist are professionals who were educated in Ukrainian universities that means that education in our country is on the top level.
Second, and maybe the most important, are low hourly rates. The less you pay for your app development, the better it is for you, of course. So entrepreneurs are looking for more appealing prices, but price should be combined with quality. That is where Ukraine comes to rescue. An average software development hourly rate in Ukraine is $50. Eastern European countries provide very good rates keeping a top-notch quality level.
Third factor is law in Ukraine. By the word law I mean taxation rate. As Ukraine is in number of developing countries, our government try to stimulate different start ups/businesses that reflects in law taxes, subsidies and privileges.
The taxation system in Ukraine for IT business owners is simplified and affordable. IT specialists have low tax rates, and that is why hourly development rates are also not high. This advantage is distinct, and it is an appropriate country to start your business as well.
Fourth advantage is High level of oral and written English. Majority of Ukrainian specialists, not only in IT sphere, have great English skills. All software development companies that are outsourcing providers pay great attention to the English language skills. They hire an English teacher for their employees to improve their written and oral English skills and communicate with customers efficiently.
Therefore, communication won’t be a problem for you. For example, at Cleveroad, all project managers along with software development specialists speak English fluently. It is a must-have skill.
Fifth factor is eazy communication and non-Viza zone. It is very important because CEOs must feel the progress.Ukraine invites entrepreneurs from all over the world. That is why the country opens its doors to more than 50 countries. If you plan to visit the country for a 90 days-term, a visa is not required. So you can quickly fly to Ukraine and visit the company you plan to outsource the development to, to know everyone better and discuss all the details.
All in all, Ukraine is a reliable destination for hiring a dedicated business team. We see businesses from increasingly more companies recognizing the potential of investing in the technological capabilities of Ukraine.
The comparatively low cost of living, the positive dynamics of the Ukrainian economy development, and the related legislation, data protection, and security regulations make Ukraine an attractive outsourcing destination.