Ukraine: IT Offshoring Rates and Resource Availability

Some recent data published by the Ukrainian Hi-Tech Initiative provides an interesting snapshot of what you should expect to pay for software development resources in Ukraine:

Average Market Rates (maximum – minimum)	$42 (max) – $14 (min)
Average Market Rates	$25-$26
Project Manager	$34
Senior Developer	$29
Middle Developer	$25
Junior Developer	$20
QA Tester	$22
Application Architect	$36
Business System Analyst	$37

Source: “Exploring Ukraine. IT Outsourcing Industry”, Ukrainian Hi-Tech Initiative, 2012

Maybe I’m crazy to post these rates on our blog, but informed buyers would have found this data anyway, so I’ll save you the effort of scrounging around to find this data on your own.  Those of you who have done offshore work in India will find that these rates are pretty similar to Indian rates.  You might find a company in India that will quote you a price a couple of dollars less per hour than these rates, but if it’s much less than that I’d run away, quickly!  So Ukraine is fairly competitive with India, the largest offshore IT destination, in terms of price.

I have some comparisons of the typical rates in various Central and Eastern European (C&EE) countries*, but they are from 2010.  The data for 2012 isn’t available yet.  The 2010 rates are a little bit dated, so I don’t think we should use those rates on an absolute basis, but I think it’s reasonable to use 2010 data to compare the relative costs for software developers in those countries:

Relative Costs of C&EE Countries vs. Ukraine (Ukraine = 1)**

Poland	Hungary	Czech Rep.	Slovakia	Romania	Ukraine	Belarus	Bulgaria
1.29	1.28	1.24	1.16	1.10	1.00	0.95	0.94

**My calculations, based on data from Central & Eastern European Outsourcing Association Report, 2010, using a blended average of various positions and levels

So Ukraine is among the least expensive countries for software development talent, beaten only slightly by Belarus and Bulgaria.  Other C&EE countries cost more money—some significantly more.

So what about your prospects for finding the talent you need in these places?  There’s no point in going somewhere cheap where you can’t get the resources you need.  If that worked, then maybe you’d go and develop software somewhere like Congo (which has the lowest GDP per capita in the world).  One way to look at this is at a macro level: How many people are employed in the IT sector in these countries?  And in particular, how many are involved in IT outsourcing?

	Poland	Hungary	Czech Rep.	Slovakia	Romania	Ukraine	Belarus	Bulgaria
Number of Employees in IT Outsourcing	9,200	9,600	7,800	2,800	14,200	18,100	10,400	8,700
1 year growth in IT Outsourcing Staff	1,500	1,600	500	200	1,800	2,300	1,200	800

Source: Central & Eastern European Outsourcing Association Report, 2010*

Here, we can see that Ukraine has more developers engaged in IT outsourcing than any other country in C&EE, and the growth each year, mainly due to Universities pumping out new grads that are hired by the industry, is also highest in Ukraine.  (Romania and Belarus are also interesting by this measure, and actually these are smaller countries than Ukraine in terms of population, so there is a good “density” of developers in those countries, although the absolute number of developers is smaller than in Ukraine).  And, actually, there are more developers than this in all of these countries, since these figures don’t include staff in companies not focused on IT outsourcing.  For example, previously I managed a captive 50-person group in Ukraine for a US company, but our staff would not have been included in such statistics.

So if you’re thinking about where to locate some offshore developers for your company, what does all this mean?

1)     You want to work with an IT offshoring firm in a country that has competitive costs.  OK that’s pretty obvious.  Maybe cost isn’t your primary driver—this data doesn’t tell us anything about the relative productivity of the developers in these countries—but cost is certainly one of your drivers.

2)     You want to be in a place where you can scale, and find the resources you need.  Maybe you meet someone who tells you that, for example, Slovenia has some really good engineers.  Could be, but with a tiny population of 2 million people in Slovenia in total, it could be a struggle to find a decent number of developers if you need more than just a couple.  In a place like Ukraine, there is a population of 46 million people in the country, and more people work in the IT offshoring industry than in any other country in Central and Eastern Europe.  So your chances of finding the resources you need by working with an offshoring firm in Ukraine are pretty good.

I don’t want to say that you shouldn’t consider, say, Poland, or the other countries in C&EE.  You could probably make it work in several of these places.  And, look, I’m not an unbiased observer here—our resources are located in Ukraine.  But objectively, Ukraine is cost competitive with larger IT offshoring destinations such as India, and has a lot of IT resources.  So you should give Ukraine serious consideration as a place to find offshore IT resources.  And we haven’t even talked about the quality of the resources in Ukraine, which I think stack up very well vs. other countries.  Maybe we’ll talk about that in a future post, and discuss why this is the case.

Mike Sadowski

CEO, Cayuga Software Development

*The C&EE Outsourcing Association, for some reason excludes Russia, which has a large number of developers.  I’d like to see them include Russia, but Russia tends to be relatively expensive these days, and places like Ukraine, Belarus, and Romania seem to be more popular IT offshoring choices for North American and Western European companies right now.

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