IT OUTSOURCING CLUSTER IN UKRAINE

Alicia DerezaOlga Dyachenko

Ukraine And IT

• 4th place after USA, India and Russia• Largest cluster in Europe• More than 2 000 companies• More than 25 000 IT specialists• One of the Highest salaries in Ukraine• Best conditions for work in Ukraine• The only cluster that didn’t suffer

during crisis

Basic facts about UKRAINE

Location Eastern Europe

Borders Russia, Belarus, Poland, Hungary,

Slovakia, Romania

Territory 603628 km2

Population 44854 thousand people

Language Ukrainian, Russian

Capital Kyiv

Independence 24 August 1991

Economic performance of Ukraine

• 56th economy in the world• GDP per capita $ 7600• Growth of GDP 5.2%• Debt 93.5% of GDP• Average salary 2500 hryvnias/month• Unemployment rate 8.5%• Inflation rate 3.7%• Export-oriented (50% of GDP)• Budget revenues $ 53.07 billion

expenditures $59.58 billion

Composition of Ukraine’s economy

• Mineral resources• Fuel and energy complex• Metallurgy complex: export-oriented

ferrous and non-ferrous metallurgy • Machine building complex: export

oriented heavy and agricultural machine building, instrument-making and machine-tool construction

• Chemical complex • Agriculture: farmer lands – 42.4 mill

hectares (70% of the territory)

Business environment of Ukraine

Proximity to both the EU and Russia

Large quantity of consumers

Membership in WTO

Free-trade agreement with EU

Main barriers of business development in Ukraine

Key barriers for business

Profile of the cluster

Government

Consumers – 70% American or European customers

Educational institutions

Legislatures

InstitutionsBusiness

Regional state administration

Local government

Core of the cluster:National and

international IT outsourcing companies

Telecommunications

Professional Associations and

Communities

Telecom, Internet, Rent

Internet Retail Banks Auto industry Etc

Number of companies and IT Specialists in the cluster

IT Outsourcing Companies

IT Specialists

Economic performance of the cluster

The volume of provided IT outsourcing Services from 2003-2011

Snapshot

• IT outsourcing cluster growth rate 2011–20 %• More than 2 000 IT outsourcing companies• 25 000+ specialists involved in the IT

outsourcing cluster• Ukraine has more than 800 universities and

colleges• Majority of Ukrainian IT specialists (est. 70 %)

work for American or European customers• A number of government initiatives introduced

to support and promote the Ukrainian IT cluster

Why IT cluster in Ukraine?

Factor (input) conditions

• Inherited IT achievements• Large pool of highly-skilled specialists,

top-notch technology talent • Strong educational system• Lower costs, including labor cost• Good command of English language• Travelling to Ukraine conditions

Context for strategy and rivalry

VAT relief for IT sectorHigh competitionGood conditions for start up

– Still low governmental support

– Low country development

Related and supportive industries

• Professional Associations and Communities– Ukrainian Hi-Tech Initiative– IT Ukraine– DOU

• Telecom Infrastructure • Cost of Internet• Office Space

Demand conditions

TOP Clients of Ukrainian Software Companies

Recommendations forthe country

• Improve business environment of the country: taxation, permits, inspections, regulation of export, etc.

• Develop education system, first of all - secondary education.

• Workforce development and, in particular, the increase of computer literacy.

• The establishment of industry clusters in the field of information technology.

• Promote the development of innovative research in IT industry.

Recommendations forthe cluster

1. To develop human resources, increase the level of competence in the field of IT for all categories of labor resources in the region:• Conducting foresight studies to identify the

most important and promising areas of the cluster.

• Development of the joint educational projects by companies and universities in accordance with the priorities of the IT cluster.

Recommendations forthe cluster

2. To improve cooperation between the participants of all regions where IT clusters were established :• Create a database of products and services of

the IT cluster, distribution business offers of the cluster’s members among the potential customers

• Build a strong brand for the Ukrainian IT cluster.

• To attract new companies to participate in the working group of the IT cluster.

Recommendations forthe cluster

3. To improve the infrastructure in the cluster:• To create science parks and business

incubators to search for new talents and development of new innovative companies in the field of IT.

• To develop technical infrastructure to provide broadband Internet access throughout the area, the introduction of high-frequency mobile connection to the Internet and digital television.

Thank you

for your attention!