IT outsourcing situation: sunset or rise?
Crysberry, Management29 August 2019
At the beginning of 2019, several media forecasters were citing job losses during this year. However, others were claiming that the IT outsourcing situation had seen its best times and predicting a slow, methodical slump upcoming. So, are we going to celebrate the nearest years in terms of expanded outsourcing growth, and, if so, in what areas? Or is it the time when outsourcing will die? We will find out the answers to these questions in today’s article.
Outsourcing Market Trends
First of all, let’s admit that the GSA report shows us that outsourcing is not dying. Moreover, it makes us predict that the area is moving forward and progressing. In 2018, the global outsourcing market amounted to 85.6 billion U.S. dollars, including 62 billion U.S. dollars generated by the IT branch. So, according to the report:
- 70% of the companies surveyed are going to outsource more in the upcoming years
- 35% of them plan to do so significantly
- 84% of service providers expect the outsourcing industry to grow
- 37% believe it will do so remarkably.
There are lots of reasons and benefits for companies to use outsourcing in 2019. Talking about the IT specifics, there are some trends, which affect the growth of outsourcing:
Global Skill Shortages
Companies are searching everywhere for the right skill sets and candidates which correspond to all the requirements. For example, over 70% of technology employers in the UK expect to face a talent shortage over the next year. And we can find nearly 600,000 vacancies in digital technology. We can see the same situation in the USA. A report by Gartner predicts that by 2020 there will be 1.4 million computer specialist job openings. And, universities will be able to cover only 30% of that. So, the lack of local IT talents will be one of the major drivers of the IT outsourcing industry during the next few years.
Not only cost-savings
Reducing costs remains the main outsourcing advantage. But, for the first time in a long time, it may not be totally about dollars. The necessary tech skills, knowledge and qualifications to carry out the services needed is the key factor to choose an outsourcing company.
Another essential thing is the relationships between a client and a software development provider. Nowadays, clients are looking for IT outsourcing companies, that can become systems integrators and partners to their customers.
The 2018 year showed serious breaches of security, such as the Cambridge Analytica scandal. It scared companies into tighter security measures. Additionally, new GDPR causes new data security changes affecting anyone interacting with European data.
For sure, the advantages of AI in the tech world will still have a large impact on IT development. AI’s potential customize tech to individual consumers can’t be evaluated. In the past years, we’ve seen only a part of its capabilities. So, clients are looking for AI experts to meet their demands.
While India and China were taking leading positions in 2018, this may change in the coming years as there are strong competitors from Eastern Europe. This a result of the education level, which leads to the number of high-level professionals.
IT outsourcing situation in Ukraine
Ukraine has the biggest IT outsourcing sector in Europe and great potential growth to be the top player globally.
According to the 2018 Global Innovation Index, Ukraine reached 43rd place. And, this is a jump of twenty-one spots since 2015. Ukrainian companies reached 18th place in The 2018 Global Outsourcing 100.
We have already covered 14 Valid Reasons to Outsource Your Software Development to Ukraine. But let’s shed some light on myths connected to Ukraine outsourcing.
Myth 1: No top-level experts
At the beginning of 2019, Ukraine had 90,000 tech workers, which is the largest tech talent pool in Europe. It also places Ukraine in 4th place globally, preceded by the US, India, and Russia. By 2020, the Ukrainian tech workforce can easily reach 200,000.
Talking about the number of specialists in certain technologies globally:
- The 1st place: C++ and Unity.
- The 3rd place: PHP, ASP.NET, Python, Ruby, and Symfony.
Myth 2: Cultural and language communication difficulties
About 80% of Ukrainian tech workers speak English at an intermediate level of higher. You should not expect the impact of any cultural difference as well. Most of Ukrainians share the Western mentality, especially among the young generation. Also, Ukraine techs are working with Europe and the US clients/partners constantly.
Myth 3: Cost Cutting is the only reason for outsourcing in Ukraine
Salaries in Ukraine are lower than those in Europe, the US, or Australia. However, if you need a top-shelf Ukrainian professional to be ready to pay at least $2,500–$4,000 per month. Also, having a full-time employee in-house includes insurance, bonuses, office space, hardware, and a lot of other things you need to pay for monthly. In Ukraine, these costs are much lower.
Myth 4: Distance and time difference
The time difference between Ukraine and other European countries is only 1 hour ahead. Many direct flights connect Ukrainian largest tech hubs with European cities, and they don’t last longer than 2 hours. As for American companies, the time difference between Ukraine and the East Coast is only 7 hours. It allows finding a convenient overlap in working hours.
Myth 5: Risks of the unstable political situation
We can’t deny that some parts of Ukraine are unstable at the moment. However, with an area of over 600,000 sq. km and 700 km away from the capital and major tech hub, it’s not that much risk. R&D centers of the multinational tech giants are still located in Ukraine.
For the end: IT outsourcing isn’t dying
We can see that outsourcing is still “alive”. However, the leaders are moving from Asia to European Countries. Outsourcing to Ukraine is an opportunity that can bring you lots of benefits despite all the myths connected to the country.l.sidorenko