Social Benefits of IT Outsourcing – Bringing Reforms to Ukraine

We’re continuing our series of blog posts about the benefits that software outsourcing is bringing to the Ukrainian economy and the IT specialists who are the main driving force of its development. Today we’re trying to understand how IT outsourcing can change the economy of Ukraine and bring new reforms to the tech sector.

As we’ve already let you know, according to the Ukraine High Tech Report 2015, the Ukrainian IT market, valued over $5 billion, is one of the most important industries in the economy; generates almost 4% of the Ukrainian GDP and is #3 in the Ukrainian export sector.

The Ukrainian IT market is growing by 25% each year. During the last 10 years it has grown by 10 times. By its export value, Ukrainian IT is in third place, just after heavy metals and agriculture industries. According to the report by the National Bank of Ukraine, in 2015 the export volume of IT services was $2.1 billion or 17% of the total export volume.

The key reforms that IT outsourcing may bring during the next couple yeas are: educational, research and scientific, new form of trade relations with foreign contractors.

Educational reform

We’ve already made a post about educational advantages that IT outsourcing may bring to Ukraine. Read it here – Social Benefits of IT Outsourcing – Education and Skills Improvement.

One of the brightest examples is the educational project – Technology Nation. This project is organized by the educational foundation BrainBasket and is supported by the the Presidential Administration of Ukraine and some outsourcing companies. Technology Nation is a project of free courses on computer programming that are based on courses of the world’s best tech universities – Harvard, Stanford, MIT and others. The courses will be held on the basis of 100 libraries in 22 cities across Ukraine and will last for 3 months. It’s expected that 40K people will attend this program in 2016.

Research and scientific reform

Some tech corporations have already opened R&D offices in Ukraine. Most of these offices have been opened by the US companies (45%), followed by the EU companies and Israel. This list includes such companies as Samsung, eBay, ABBYY, UpWork, Boeing, Huawei, Oracle, Siemens, and others. You can check the full list of such companies in the Ukraine High Tech Report 2015 (pages 158-160). Ukrainian R&D developers work on innovations in such industries as gaming, software,telecommunications, and e-commerce.

After the big changes in 2014, the Ukrainian IT community has mobilized itself and initiated creating IT clusters. Six IT clusters were formed in Lviv, Odesa, Kharkiv, Kyiv, Dnipropetrovsk and Lutsk to foster regional development.

Changing trade relations with foreign contractors

Last month Verkhovna Rada of Ukraine registered a quite important bill for Ukrainian IT outsourcing. The key points of this bill are:

  • The company, that is exporting its IT services, does not need to have a printed contract with wet seals that has to be verified by a bank authority. The contract for providing services could be singed online with electronic signatures after accepting a public offer and sending the invoice for the payment.
  • The banks are not required to have the contract presented just in Ukrainian, forcing the need for translations; the contract could be provided in English.
  • Before an invoice couldn’t be accounted for as a primary document, but with this bill it will be. So it will be easier to keep accounting records and to communicate with the State tax authorities.
  • The banks will be able to identify the export operations, but the currency control over the export services will be eliminated.

The Ukrainian government seems well aware of the importance of the IT sector for the country’s modernization and global integration, yet much remains to be done to bring the current reform effort to full results.

If you find this topic interesting, read other posts about benefits of IT outsourcing: