The year 2022 started with astonishing volumes of IT services exported by Ukrainian software development companies. However, the success wasn’t exponential due to the full-scale Russian invasion in late February’22. Because of the war, almost all spheres of the Ukrainian economy suffered dramatically and stopped bringing profit to the state budget. Ukrainian IT service export became an exception.
Content:
- The effect of war on Ukrainian IT
- Benefits of delegating software development to dedicated Ukrainian teams
- What’s the difference between dedicated teams, outsourcing, and outstaffing?
- List of Ukrainian dedicated development team service providers in 2023
- How to hire a dedicated team of developers?
- Why choose MWDN?
- The perspectives of IT outsourcing and outstaffing for 2023
The effect of war on Ukrainian IT
The export of all spheres of the economy that traditionally brought the Ukrainian budget high revenues has fallen drastically with the beginning of the full-scale Russian invasion. Metallurgy has lost almost 60% of its export, the loss of Mineral products export composed more than 46%, and Chemical products production have 42% less revenue than the previous year. At the same time, the export of Ukrainian IT services has risen by almost 10%.
The explanation for this phenomenon is simple – Ukrainian IT companies put all possible and impossible efforts into maintaining their clients and continue providing software development services of the utmost quality. But what exactly has the industry been through in 2022, and how has it dealt with all the obstacles?
Wartime challenges for Ukrainian IT service companies
According to IT Ukraine Association and Top Lead survey, these are the most common challenges the Ukrainian IT companies faced in 2022:
- Constant migration of IT specialists and their families
- Conscription of IT specialists to the national service
- Currency regulations by the government
- Relocation and challenges connected to it
- Active shelling
- Territories occupation
- Tax regulations
- Blackouts in October 2022 – February 2023
Most companies were there for their employees in times of need, helping with every obstacle. Ukrainian IT giants and medium-sized companies tried to relocate their employees to safer zones, booked key specialists from conscription, and sent their employees Starlinks and Ecoflows to maintain working processes when there was no electricity and Internet in their cities.
As a result, today:
- nine out of ten IT companies manage to maintain over 80% of their business processes;
- 34,3% of companies managed to cope with all the wartime challenges, and
- 61,3% of companies haven’t dealt with all the obstacles but still manage to provide software development services at the same level as before the full-scale invasion.
Fortunately, efficient troubleshooting of Ukrainian IT service companies helped them to persuade international customers that Ukrainian IT vendors are still reliable and should be trusted.
Other factors that boosted the export of IT services by Ukrainian vendors
When analyzing the wartime success of the Ukrainian IT companies, we cannot ignore the support of the industry by the government and the external factors that affected the market.
1. The exit of Russia and Belarus from the international market.
Both countries used to be important destinations for delegating software development and other IT services. However, starting from February 2022, they faced unprecedented sanctions, which made their work for European, American, some Asian, and Israelian customers impossible.
Those who got used to working with IT service companies from the Eastern Europe region opted for Poland, the Czech Republic, and Ukraine instead of their previous and now toxic counterparts.
2. Growth of outsourcing, outstaffing, and dedicated team popularity.
The trend for delegating software development to third parties started at the end of 2022 when major tech companies started sacking their developers due to the “overhiring during the pandemic.” CEOs of Amazon, Meta, Google, Twitter, and other tech leaders stated that the rapid growth of the IT sector during the pandemic made them too optimistic. As a result, they hired too many specialists, and the new volumes of tech teams became inadequate for the new realities of the market and the global recession of 2022-2023.
3. The IT Generation project founded by the Ukrainian government.
A lot of Ukrainians lost their jobs at the beginning of the full-scale war. One of the ways in which the Ukrainian government tried to help unemployed citizens was by offering them new opportunities. One such opportunity was the IT Generation project that suggested people with no experience in digital transformation or intellectual technologies try themselves in digital and IT professions, like software and mobile development, quality assurance, and business analysis.
4. Opening of new offices in European countries.
Previously local Ukrainian IT companies decided to go abroad and open new tech hubs in European and American cities. This helped them relocate their employees, hire developers from around the globe, and protect all their assets that previously might have been on the front line.
MWDN, for example, is now hiring in all English-speaking countries, including Israel and Western Europe. Moreover, in January 2023, we opened a new office in Warsaw. These actions help us guarantee our clients working processes stability.
Image: MWDN office in Warsaw
Benefits of delegating software development to dedicated Ukrainian teams
The reasons why customers from the USA, Great Britain, Malta, Israel, Cyprus, Germany, and other countries continue choosing Ukrainian IT vendors are the same as they were back in 2021.
A large pool of experienced technical talents
For the past five years, the number of IT specialists in Ukraine has grown from 185,000 in 2018 to 289,000 in 2021 (almost 2% of all employed citizens). In 2022, some Ukrainian IT experts moved to the bordering European countries, like Poland, Hungary, or Slovenia, but Ukrainian entities still employ these specialists.
In November 2022, there were 557 active IT service companies in Ukrainian cities and 89 R&D centers (not to mention 1 815 IT product companies that don’t participate in the export of IT services). So, even in war conditions, there are specialists and companies to choose from.
Cost-efficiency
Ukrainian dedicated software development teams are not the cheapest in the world; however, for every penny you pay, you get the result you expected. As of December 2022, the median remuneration of Ukrainian Middle Software Engineers comprises $2,600 per month or $31,200 per year.
Let’s compare these sums to the fees of the same specialists in other countries.
As of February 2023, a US-based Middle Software Engineer can get, on average, $94,000 annually.
In December 2022, the year pay-check of the same specialist in Germany was $63,790.
In Israel, the average salary of a software developer as of the beginning of 2023 is $62,000.
So, by delegating software development and other IT services to Ukrainian tech vendors, customers from these countries can save up to 75% on direct labor costs.
Background and education
According to the Ukrainian Tech Ecosystem Overview, as of February 2023, there are 181 universities, 130 colleges, 34 schools, and 40 courses that graduate thousands of STEM and computer sciences students every year.
According to the latest survey by DOU (the largest IT media and community in Ukraine):
- 7.6% of software engineers who filled in the questionnaire have more than ten years of experience,
- 22.6% of respondents are specialists with 6-9 years of experience, and
- 36.4% of developers have 3-5 years of experience.
- Only 6.9% of respondents have less than a year of relative experience in software development.
Established models of cooperation with international clients
The Ukrainian Government wants to transform the country into a digitalized state, which is why it offers multiple privileges and exemptions to Ukrainian IT companies. For example, international and Ukrainian companies can choose the employment model with a 5% or 6.5% taxation rate.
IT service companies in the central IT hubs of Ukraine (Kyiv, Lviv, Kharkiv…) also have well-established cooperation modes – from traditional outsourcing and dedicated teams to staff augmentation and outstaffing. See the key differences between these models below.
What’s the difference between dedicated teams, outsourcing, and outstaffing?
In some regions, there is even no such division between different approaches to outsourcing as in Ukraine. However, in Ukraine, we like everything to be clear, concise, and transparent. We divide three main types of delegating software development: outsourcing, outstaffing, and dedicated teams.
Outsourcing means trusting some parts of your business processes to third parties. However, software development and IT services outsourcing have some peculiarities. It is often chosen by non-technical companies that don’t have their own team of developers and need some particular task or project to be implemented.
For example, once, Havas advertising agency hired a Ukrainian outsourcing company to make personalized smart watches for a particular event. These watches were further given as a gift to the guests and became an important part of the following advertising campaign. Havas didn’t have their own team of developers and data analysts; however, they had a very clear understanding of what they wanted to get from their Ukrainian IT vendor.
Outstaffing is usually chosen by technical companies that want to reinforce their in-house team with rare specialists. For example, a healthcare company understands that it lacks a software engineer with a deep understanding of the medical sphere and finds him or her miles away. A new team member will be able to boost the company’s productivity thanks to their unique knowledge and will further boost the customer’s competitive advantage.
However, this model won’t suit companies that don’t have an IT department of their own or those who don’t want to participate in the management of the remote team. On the other hand, it will suit perfectly those who don’t have a clear understanding of what kind of result they need and those who want the unique experience of foreign specialists to stay their intellectual property.
The dedicated teams’ method is the third type of cooperation between the customer and the IT vendor. By choosing this model, you get the best from both worlds: outsourcing and outstaffing. On the one hand, you get a fully-fledged team of experts ready to work on your mobile app, e-commerce, or whatnot without taking too much time to manage them, as they’re usually supervised by an experienced in-house product manager.
List of Ukrainian dedicated development team service providers in 2023
Large and most medium IT services companies survived the challenges of 2022 and are still active in March 2023. The situation is not positive with small businesses of one to ten employees, as quite often they were forced to close their doors – timely or forever.
Due to the higher stability of companies of the enterprise type, we recommend hiring dedicated development teams from IT vendors with more than 100 employees. Among the leaders in IT services outsourcing are:
- Ciklum
- Data Art
- Innovecs
- Infopulse
- EPAM
- Global Logic
- Luxoft
- Sigma Software
However, these companies rarely offer outstaffing services, as their main focus is traditional software development outsourcing.
If outstaffing and dedicated development teams are more in line with your needs, consider these companies:
- MWDN
- Solvd.Inc
- ProCoders
- Flytika
- Brocoders
- Kultprosvet
- QIT Software
- GTM Plus
- Rocketech
With over 560 IT service companies operating in Ukraine, every customer will find what they’re looking for.
How to hire a dedicated team of developers?
With staff augmentation and dedicated teams, you participate in recruitment. Here’s how the typical process of outstaffing looks:
Decide what you need, so your IT vendor can start searching for the best-fitting developers among their tech talents and through the Ukrainian and worldwide labor market. In several weeks,
→ you will get a short list of candidates who might join your team. After that,
→ you interview top candidates to select those who suit your company’s values and principles. When you make an offer,
→ your IT vendor starts hiring and onboarding.
If you choose a reliable IT contractor, you can expect some instant benefits, like the unique solution of your particular case, financial transparency with no hidden payments, and only high-quality candidates that correspond to your needs, as well as saved time and money.
Why choose MWDN?
Among hundreds of Ukrainian and thousands of worldwide dedicated development teams, why choose MWDN? Here are just some of our benefits:
Let’s dive into the details.
- Vast software development experience.
MWDN was founded more than 20 years ago. We started as a traditional outsourcing company but soon concluded that staff augmentation and dedicated teams models are more cost-effective for the client and risk-free for our business.
In the beginning, Israel was our core market, but today we have customers all around the world, including the USA, Canada, Great Britain, and Western Europe.
- Cost-efficiency.
More than 90% of our tech talents have a Middle or a Senior title and more than five years of experience working with the most popular technologies. Along with that, we keep our services’ prices affordable to stay profitable contractors for our customers. Our average hourly rate is $25 – $49 / hr, so our developers charge less than tech specialists of their level who live in Germany, Israel, or the USA.
- Protection of intellectual property.
All our employees sign a non-disclosure agreement, so you can rest assured that all your commercial secrets and technical know-how will stay private to your company, and there will be no leaks from our side. The NDA is also why we can share only a tiny part of our success cases with the world, keeping the most astonishing portfolio cases private.
- Expertise in different domains.
Our managers and tech experts have hands-on experience with the following IT domains:
- Medical software and healthcare
- Logistics
- Engineering
- FinTech
- Telecommunication software
- HR and recruitment software
- Cybersecurity
Within these domains, we can help you with software development, web, and mobile application development, quality assurance, research and development, design, and marketing support.
- Flexibility and agility.
These are two indicators of dedicated teams compared to traditional outsourcing. You don’t have to keep a full roadmap of your project in mind to start cooperating with MWDN. The same level of agility and flexibility is applicable when it comes to recruiting your perfect remote team – you can make amendments to the job profile, and we will adapt.
- Financial transparency.
We have a fixed fee for every team member you hire with our help. This remuneration covers the search for tech talents, their onboarding, and HR management (which includes vacations, sick leaves, payrolls, and taxation).
The perspectives of IT outsourcing and outstaffing in 2023
Recent changes in the IT industry in 2022 and the beginning of 2023 can result in dramatic changes in the IT services market. Apart from the war in Europe and predicted economic recession, we dealt with massive layoffs of employees among tech giants and the rise of AI-based technologies. What can the current changes bring to IT outsourcing and outstaffing in 2023?
Decrease of open in-house positions
After the furious rise of the IT industry during the Covid-19 pandemic and its sudden fall due to the recession of 2022, CEOs of tech companies became sadder but wiser. They understand that one of the main reasons behind the November 2022 – January 2023 layoffs in the industry was over-recruitment in 2020-2021.
Whenever tech companies need additional labor assets today, they would consider delegating new tasks or opting for staff augmentation instead of hiring in-house employees.
More maintenance, less innovation
During the recent staff cuts, some tech giants closed entire departments. While Amazon reduced its recruitment department (which, as believed, will be substituted with AI tools), Google and Meta decided to cut expenses in innovative directions, which demanded high investments.
In 2023, companies are eager to invest in the spheres with higher chances of investment return, leaving R&D departments and innovative ideas with less financial support.
Sagging demand for tech talents
Companies are afraid to hire new engineers, which leads to a decline in demand for tech talents. Engineers of the Senior and Middle levels might have fewer but still enough job offers, while it will become harder for Juniors to get their first job. A decline in demand for software development engineers can also lead to lower remuneration among IT specialists.
New destinations for outsourcing and outstaffing
In 2022, countries of Eastern Europe have become key destinations for IT outsourcing and outstaffing. Many Ukrainian IT specialists became refugees and moved to Poland, the Czech Republic, Hungary, Armenia, Romania, Latvia, and Lithuania. The same countries became popular among Russian and Belarussian citizens running from mobilization in their native countries. So, in 2023 Eastern Europe is fueled with experienced, affordable, and desperate-to-work software development engineers.
Increased demand for cybersecurity services
According to warfare rules 2023, IT infrastructure becomes a legitimate target for cyber attacks. Therefore, all software, websites, applications, and networks should be better protected. The need for higher protection increases the demand for IT and cybersecurity specialists.
Development of military tech
What was a Governmental domain of state security became an object of private companies. Today, more than 40 Ukrainian companies are busy in military tech, developing software for the Army, AR/VR technologies, and robotics. The sphere will continue to grow as 2023 is full of military and political threats.
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Hiring dedicated development teams is a way out for tech companies that want to augment their staff in 2023 but don’t want to increase their in-house personnel. Notwithstanding the war, Ukrainian IT vendors are still a cost-efficient and profitable option for European, American, and Israeli customers. If you’re looking for a reliable contractor with vast experience and a good reputation in the international market, contact MWDN managers.