IT-BPO Cluster Brochure

open to the world

In 2008 KPMG recognized Lviv

as one of the best IT-BPO1

destinations along with 30 other

cities in the world and among 11

cities in the EMEA2 region

Source: Exploring Global Frontiers, KPMG, February 2009

The Program for Economic Development and

Increasing Lviv City Competitiveness was

launched by the Foundation for Effective

Governance (FEG) together with Lviv city

authorities and Monitor Group in October

2008. According to the developed strategy Lviv

needs to accelerate economic development

by driving the development of key highly

competitive clusters such as Business Services

and Tourism and supporting overall economic

growth through focusing on four key economic

pillars namely, aligning education with business

needs, investment promotion, boosting

governance transparency, and investing

in supporting infrastructure. In order to

implement the strategy, City Administration

together with the city leadership have

established Lviv City Competitiveness Center

with two focused Task Forces – Business

Services and Tourism Task Forces.

1 IT -BPO - Information Technology and Business Process

Outsourcing; 2 EMEA – Europe, Middle East, and Africa

LVIV CITYCOUNCIL

We are making every effort to fulfill this ambition and your participation will facilitate the process.

Lviv does have unique advantages such as geographical, cultural and mental proximity to Europe as well as highly educated and talented labor pool.

In the course of preparation to host the European Football Championship 2012, we aim at attracting large-scale investments in order to develop state-of-the-art infrastructure with particular emphasis on public transportation, hotels, business parks, airport and railway to bring them in line with international standards.

The City Administration is strongly committed to providing investors with administrative support, local tax incentives, transparent and business-friendly regulations, and consulting.

We believe that our local government, city environment, unique atmosphere, and bright talents – engineers, developers, scientists, and managers – will do their best to bring change in the world.

Andriy Sadovyy

Lviv City Mayor

Lviv can become one of the most comfortable and attractive cities in Europe to live and work in as it has already become for the Ukrainians.

OvErvIEw

Being a fast growing and at the same time •ancient city, Lviv has repeatedly been recognized by international experts as an attractive destination for foreign investments in the field of business services and innovations.

Lviv’s key advantages are its favorable •geographical location, historical heritage, and rich cultural traditions which make it a true European city.

It has become an important technological and •r&D center of Ukraine since the end of the 20th century due to high-quality educational background and talented labor force. The core specialties are technical engineering, applied sciences, economics, and IT. The majority of students and almost all the staff in Business Services companies have a good command of foreign languages - russian, Polish, English, as well as German, French, Spanish, Italian, and Slavic ones.

Intellect and creativity were the factors that •fostered a rapid growth of such industries as Business Services in the city. Possessing a large pool of skilled labor force, Lviv has an undoubted superiority in the development of this industry. IT-BPO sector in Lviv is attractive due to insufficient capitalization and investments.

Lviv is expecting substantial investments •into its infrastructure in connection with Euro 2012 preparation, primarily into transportation, hotels, and business parks.

Lviv city authorities are striving to create a •welcoming business climate for investors by providing them with information support, improving business set-up procedures, and offering various incentives.

Lviv is open to the world and invites investors •and business partners for cooperation!

IT-BPO DesTInaTIOn OPPOrTunITIes

CITy SnAPShOT

Geographic Locationwestern Ukraine, 75 km from the border with Poland to the south-east, in the centre of East-ern Europe

Transport Facilities/ Connectionsrailways, Airport, A3, A5 international routesBy air: Kyiv – 1 hour (550 km), warsaw – 1 hour (400 km), Prague – 1.5 hours (850 km), Moscow – 2 hours (1120 km), Budapest – 630 km, vienna – 720 km, Paris - 1850 km, London – 1950 km

Time Zone: GMT +02:00

Population: 765 000

ClimateMild moderate continental climate, with the average summer temperature + 20°C, and average winter temperature – 3°C

Main IndustriesElectronics, engineering, tourism, IT, construc-tion, chemicals, food

GrP: $31 Bn

GDP per capita, PPP: $4,3001

average salary: $2601

FDI: $275 mln (~$30 mln in innovations)1

KEy CITy ASSETS

DIsCOver LvIv

Competitive Labour CostAverage monthly salary in the business •service sector in 2007 was 2-3 times lower than in Krakow, wroclaw, and Budapest

Human resource Potential

130,000 students and a pool of highly •educated graduates from 38 higher education institutions

Western Mentality and entrepreneurship spirit

Long historical and cultural connections with •Austria, hungary, and Poland

Cultural centre of Europe included in UnESCO •world heritage List

59% of citizens want to have their own •business

Trans-Border Location

Key transportation corridors connecting Lviv •with the EU (to be modernized in accordance with EU standards)

Developing Infrastructure. Office supply

rapid growth in ICT infrastructure, mainly •telecommunications and Internet services

Office space supply: 60 000 sq.m in 2009 and •more than 150 000 sq.m till 2012 forecast

eurO 2012 Perspectives

Total construction investment of ~$1Bn will •significantly improve city infrastructure

The number of planned to be constructed 3* •and 4* hotels to be doubled

Quality of Life

Cost of living is more than twice as low as in •Kyiv and CEE capitals including housing costs

Little traffic. EBrD loan of €38 mln granted •to develop city’s transportation

Air pollution is much lower than in Ukraine •on average

1 2007

Source: Monitor Group, Lviv bureau of statistics

EDUCATIOnAL FACILITIES & ABILITIES In FOrEIGn LAnGUAGES

PeOPLe MaTTer

Lviv is the leading educational center in ukraine and one of the largest in Cee:

38 universities and institutions •

130,000 students •

30,000 highly educated graduates every year •

Lviv has a large pool of university students...

Krakow

Lviv

Bucharest

Budapest

Prague

Brno

Bratislava

170128

100

91

80

63

56

The main universities are the following:

national Polytechnic university• - 31,000 students (25% of the overall students pool in Lviv), specializing in Applied Sciences, Engineering, and IT;

Ivan Franko national university• – 25,000 students (20% of the overall students pool in Lviv) specializing in both humanities and Applied Sciences, especially in Foreign Languages and Mathematics;

Lviv Commercial academy• – 8,500 students (7% of the overall students pool in Lviv) with focus on Commerce, Management, Science of Law and International Economics;

national Forestry Technical university of • ukraine – 7,000 students (5% of the overall students pool in Lviv) specializing in Ecology, Forest Management, Technologies;

Danylo Halytskyy national Medical • university – 5,000 students (4% of the overall students pool in Lviv) specializing in Medicine.

More than 30,000 students study deeply Engineering & IT and additionally more than 5,000 - Mathematics and Applied Sciences.

Key trends in Lviv education sphere:

Lviv is increasingly attracting more students •from the other regions of Ukraine

Quality of education is on a rise, especially •after recent reforms by the national government

Graduates of Lviv universities are sought •after by leading Ukrainian employers.

Due to its proximity to Europe and the crucial international cultural role, Lviv is abundant with the students and graduates with good command of foreign languages, where English is prevailing.

...and multilingual population

native: Ukrainian, russianeasy to Find: English, German, PolishCan be Found: French, Spanish, Italian, Slovak, Czech, hungarian, Bulgarian


SKILLED LABOr FOrCE

QuaLITy PLus CreaTIvITy

Lviv, as well as the whole ukraine, stands out for its vast pool of highly educated, talented, and skilled labor force.

Together with lower operational costs of setting up and housing business, competitive salaries of well-trained and hard-working personnel make Lviv very attractive to outsource activities.

average wages in comparison with some of capitals of Cee countries

Krakow

riga

vilnius

Budapest

Prague

Kyiv

Lviv

1,958

1,595

1,320

1,611

1,291

1,038

598

Key facts about Lviv labor market:

Labor force is highly flexible and trainable •due to low average age

Lviv is an “exporter” of skilled personnel •to EU and north America especially in ICT sphere

Labor code is flexible with low firing costs •compared to other CEE Business Services centers

The key advantages of Lviv pool of human resources are their talents, ideas, and creativity.In the 20th century, Lviv became one of the important centers of Engineering. And afterwards, in the beginning of the 21st century the city became one of the leading centers in IT and software development.

The most important benefit of the Lviv’s workforce in IT-BPO sector is that experienced staff is equipped with high-end managerial skills.

$, PPP (based on purchasing power parity), 2007Source: Monitor Group, Lviv bureau of statistics

BUSInESS InFrASTrUCTUrE

yOur COMFOrTaBLe PLaCe TO WOrK

In 2009, Lviv was recognized as the cultural capital of ukraine and the most comfortable ukrainian city to live in.

Lviv business infrastructure is still underinvested and underdeveloped.As Lviv co-hosts EUrO 2012, city authorities plan to build the state-of-the-art infrastructure, especially public transportation system, hotels, business parks, an international airport, and railways up to the international standards in 1-2 years.

Office Space Supply:

More than of 60,000 sq.m, 70% of them of B •and C classes (among them Lemberg Business Centre, Dominant Plaza, Optima Plaza, nTOn Business Centre, and others)

Plan to be doubled by 2012, especially class B•

Modern exhibition hall in Lemberg Business •Centre

Hotels and Private accommodations:

49 hotels in the city, including five 4 star •hotels

2 115 hotel rooms in Lviv hotels•

101 hotels in Lviv region•

high supply of private first-class apartments •for rent

Quality of Life:

Cost of living is twice as low as in Kyiv and •other CEE Business Services centers

Lviv does not suffer much from traffic •problems

EBrD granted the loan of • €38 mln to develop city’s public transportation

Air pollution is much lower than in Ukraine on •average

Crime rate is rather moderate•

OvErvIEw OF BUSInESS SErvICES SECTOr

reaDy TO GrOW

Lviv Business services sector has shown a rapid growth in 2005-2008.

The main reasons for that appeared to be skilled labor pool, boosting domestic and foreign markets and direct investments.

Business services Clustersales Growth in Lviv, %,

CAGr: +33%

05 06 07 08

100

134

213

234

Business Services is one of the fastest growing industries in Lviv with average annual growth rate 33% for the last 4 years.

More than 20 foreign Business Services companieshavealreadybenefitedfromdoingbusiness in Lviv.

recent ~40% currency depreciation of •the Ukraine national currency - hryvnia significantly improved cost competitiveness

Economic crisis led to a significant increase •in the number of unemployed specialists and reduced wage demands

Minimum Total yearly Costs per IT specialist, 2007

Poland

hungary

Estonia

romania

Czech

Bulgaria

ukraine

32.8 32.430.7 30.1 30.0

27.326.0

The labor costs were rather lower than in Cee BPO centers.

In 2008, the world economic slowdown resulted in further decline in wages and operational costs in business services sector.

2005 is taken as the base period


strengths

Challenges


Macroeconomic and political risks are still •significant

IT-BPO OPPOrTUnITIES In LvIv

OuTsOurCInG? BraIn sOurCInG!

attractiveness and Competitiveness of the Key service areas in Business services

software • Localization

Full-Cycle software • Development

Cee Contact Centers•

Payroll services•

embedded systems•

software for CDMa•

IT Consulting•

KPO / LPO•

Financial • Transactions

Procurement•

Finance and accounting• network Services•

Data Storage•

Enterprise Application •hosting

record / Account Management•

Bookkeeping•

Competitiveness (Local Assets, Incumbent Firms, Location . . .)

Attractiveness (Size, Market Growth . . .)

low

Full-Cycle Software

CEE Contact Centers

Embedded Systems

Software for CDMA

Software Localization

IT Consulting

KPO / LPO1

Payroll Services

Finance & Accounting

Financial Services

high

education/ Linguistic skills

expertise/ Competencies Capacities Customer base Examples of leading companies in the field

SoftServe, ELEKS Software, Lohika

high

Austrian Airlines, Adelina Call Center, Kyivstar

SoftServe, Intellias, GlobalLogic, ELEKS Software

Impulsis

ELEKS Software, Lohika

SoftServe, Epam

Lviv Juridical Center, Pravo

Skelia

DK-Ukraine, J&L Consulting, Contracty-Audit

Source: Monitor Group

Lviv has more than 10 attractive highly competative business service subindustries.

Lviv is well positioned to capitalize on the future trends in the global outsourcing market by developing its current Business Services cluster with focus on high value-added target areas.

Bank Lviv

First of all, the key driver of investments in IT and R&D in Lviv is its large pool of brilliant minds, highly educated and skilled young staff that attract foreign outsourcers. Moreover, the innovation potential of the city is really underestimated.

Secondly, now is the right time to start. The attractive location of the city, decline in costs and wages, strong commitment of the local government and growing loyalty and awareness of young talents make Lviv your prospective nearshore business services hub.

Last but not least, since Lviv has missed the first wave of investments in the BPO industry in CEE, nowadays it is seriously underinvested. The city, like an uncut diamond, is a great opportunity for those who plan to come first and be served first.

So we welcome reliable investors and IT-BPO companies to Lviv with open arms and are ready to support all innovative, creative, and progressive projects.

Oleksiy SkrypnykChair of Business Service Cluster Task Force

By stating that Lviv is a prospective IT-BPO center in Europe I would like to emphasize the following:

Oleksiy SkrypnykChair of Business Service Cluster Task ForceCEO of ELEKS Software+38 (032) 297 12 51 [email protected]

victoriya DovzhykCo-chair of Business Service Cluster Task Forcehead of Economic Development Division of Lviv City Council+38 (032) 297 57 [email protected]

Serhiy KiralHeadofForeignEconomicRelations&InvestmentOfficeofLvivCityCouncil+38 (032) 254 60 [email protected]

Contact Information

Documents

IT-BPO Cluster Brochure