13 Ukraine-based IT companies enter list of world’s top IT outsourcers

Thirteen Ukrainian information technology companies have won places on the International Association of Outsourcing Professionals (IAOP) annual list of top tech firms, The Global Outsourcing 100.

The 13 software developers listed are either subsidiaries of international tech companies that have research and development offices in Ukraine, or are purely local IT firms.

The ranking includes EPAM, Luxoft, Ciklum, Intetics, TEAM International Services, and Softjourn, all of which have R&D centers in Ukraine. The six local Ukrainian firms are N-iX, SoftServe, Program-Ace, Eleks, Miratech, Softengi and Sigma Software.

The list was posted on the IAOP’s website on Feb. 20.

The IAOP list shows the world’s hundred best IT companies in alphabetical order. It serves as a reference for organizations seeking reliable providers of outsourcing services.

The companies are assessed according to four important criteria: size and growth, customer references, awards and certifications, programs for innovation, and corporate social responsibility.

This is the 12th time the IAOP has compiled its list, which is designed to help customers select the best IT outsourcing companies with which to do business, and the number of Ukrainian companies included in the list is growing.

The IAOP picked only four Ukraine-related outsourcers for the list in 2015. Next year, in 2016, it selected 10. This year it had risen to 13.

“This, first of all, is evidence that our IT market is developing, the companies, and the services they provide, are of better quality and bigger in scale,” said Stepan Veselovskyi, the CEO of Lviv IT Cluster. “It means our success is not going unnoticed in the global IT market.”

Valery Krasovsky, the CEO of Ukrainian IT firm Sigma Software, told the Kyiv Post that recognition from the IAOP meant a lot to him.

“This shows that our clients appreciate us; that our engineering centers are at the top level,” Krasovsky said, adding that it’s good Ukrainian IT companies have started entering the global markets more actively. “This helps us to become more visible to the world.”

Outsourcing popularity

Technology has been the main driving force behind globalization, and it has dramatically changed the way people run business, regardless of which industry they operate in.

Global connectivity has created an environment where geographical distance and boundaries have less relevance than ever.

Deloitte research shows outsourcing is now emerging as an innovation center by solving capacity issues, creating global scalability, and providing access to intellectual capital.

Some see outsourcing as the ultimate empowering force for both global businesses and the labor force. Others envisage the end of the outsourcing era, with advances in automation, artificial intelligence and robotics already having wiped out some manual jobs.

However, service outsourcing and especially IT outsourcing are on the rise.

According to a Computer Economics study, the percentage of the typical IT budget for outsourcing purposes was slowly rising in 2016.

Outsourcing accounted for 10.6 percent of companies’ IT budgets on average, which is slightly up on 2015.  Besides, recent findings by Gartner, a U.S. research and advisory firm providing information technology related insights, indicate that worldwide IT spending on outsourcing is expected to reach $3.5 trillion in 2017 – 2.9 percent more than in 2016.

Ukrainian IT spurt

The Global Outsourcing 100 list features well-known companies like Accenture, Colliers International, Hewlett Packard Enterprise, IBA Group. The growth in the number of Ukrainian IT companies and vendors with R&D centers in the country being listed there is a good sign.

Andrew Pavliv, the founder and CEO of N-iX, a Ukrainian company that has experienced significant growth this year and was also listed in GO100, is optimistic about further development of the Ukrainian IT sector.

“Recognition by the IAOP means that we’ve reached an important milestone,” said Pavliv. “The fact that the number of Ukrainian companies on the list is growing every year only reinforces my belief that the Ukrainian IT industry is on the right track.”

Deloitte research shows that the reason for global companies to outsource remains low cost and the possibility to focus on a core business, while outsourcing non-core portions of work.

But Krasovsky from Sigma Software thinks Ukraine’s main attraction is not low cost – it’s smart people with a good education.

“Ukrainians are set to invent new products, solutions – creative things,” Krasovsky told the Kyiv Post. “I would say that we have here more of a boutique service of engineering services.”

Taras Kytsmey, founder and managing director at SoftServe, agreed.

“The global tech industry is developing along with the IT outsourcing trend, and talent is in demand,” Kytsmey told the Kyiv Post. “Ukraine is rich in talent. Here, knowledge of how to build a good IT company is in the air.”

An extensive study by PwC carried out together with the European Business Association shows that in 2016 the amount of human capital in the Ukrainian IT industry increased almost by 20 percent. The sector has doubled in size since 2011, and currently employs around 90,000 tech specialists, according to the Ukraine Digital News report.

The value of IT outsourcing exports in 2016 reached $2.8 billion, which made it the third biggest industry in terms of exports after agriculture and metallurgy.

And SoftServe’s Kytsmey said that “(Ukraine) can reach $7-10 billion.”

Kyiv Post staff writer Denys Krasnikov can be reached at krasnikov@kyivpost.com. The article includes reporting by N-iX.