Businesses today strive to maintain a delicate balance in a dynamic environment, especially when it comes to their digital strategies and tech transformations. They aim to achieve ambitious goals while keeping costs under control and ensuring the security of their operations. To gain a competitive edge, many enterprises are turning to IT outsourcing services.
Numerous global tech leaders, such as Microsoft, Mercedez, Siemens, and others, have chosen Ukraine as their software development outsourcing destination. This is unsurprising, as the country is recognized as the second-largest engineering talent pool in the CEE (Central and Eastern Europe), with over 300,000 ICT specialists in 2023 [1]. Even despite the ongoing russian war, the industry has proven impressively robust, and companies across Europe, North America and other parts of the world continue to outsource to Ukraine. While the war caused a temporary slowdown, the long-term growth trajectory remains intact.
This article explores the advantages of software development outsourcing in Ukraine. It highlights the country's large and skilled IT talent pool, the presence of numerous software development vendors, and major outsourcing hubs.
Overview of the tech industry in Ukraine
Ukraine has one of the largest pools of IT specialists in the CEE region. - Kerry Hallard, President of Global Sourcing Organization and CEO at GSA UK
The technology sector contributes significantly to the Ukrainian economy. Making up 4.9% of the nation's Gross Domestic Product (GDP) in 2022, it represents a vital source of income. This impact extends beyond direct output, as each tech professional employed is estimated to create an additional 2.7 jobs in other sectors. Furthermore, the tech industry's contribution to Gross Value Added (GVA), a measure of economic activity, was $5.5B in 2022, highlighting its importance within the broader Ukrainian economy valued at $130.6B GVA and $161B nominal GDP.
Prior to the russian invasion, a highly competitive market drove up IT talent costs. While the sector's growth has moderated since then, the talent pool is now more accessible, and attrition rates have decreased. Ukraine's tech industry has emerged as a vital economic force during the war. It sustains its own growth while driving innovation in various areas: military technology, civilian solutions, and globally competitive products. A significant driver of this growth is software development outsourcing in Ukraine, with its skilled workforce and competitive rates attracting international clients.
Key facts about software development outsourcing to Ukraine:
- According to the 2023 Kearney GSLI, Ukraine (2.65) is more financially attractive than Malaysia (2.58), China (2.09), Mexico (2.39), Poland (2.10), and Estonia (1.87).
- Ukraine is home to more than 2,150 IT service providers. It is the leader in CEE, followed by Poland (around 1,300), Romania (over 750), and Bulgaria (approximately 500).
- More and more Ukrainian outsourcing companies are recognized by Global Outsourcing 100 by IAOP, Software 500, Inc. 5000, and other industry ratings.
Let's look at the country's IT industry dynamics, engineering talent pool, and how to benefit from software development outsourcing in Ukraine.
1. Tech expertise and talent pool
By the end of 2023, the country was home to over 300,000 ICT professionals, and the number is constantly growing. Software engineers in Ukraine are globally recognized. According to HackerRank, Ukraine ranks 11th with an overall score of 88.7 points out of 100 among the top 50 countries with the best software developers in the world. Also, the country is ranked 6th on the TopCoder rating of countries with the best programmers. Additionally, Ukrainian software engineers specialize in various coding languages and technologies. According to the DOU 2023 research, Ukraine's most widely used programming languages are JavaScript, Java, Python, C#, and TypeScript. Other popular languages are PHP, Kotlin, C++, DB, Swift, Go, and Ruby.
Around 40% of software developers and IT specialists in Ukraine are currently employed in software outsourcing [2]. Military draft impacts on project teams are mitigated by a combination of factors: lower overall attrition rates, effective succession planning, and a more competitive hiring market.
Ukraine has taken a strong stand in the global software development market. It is known for its extensive IT talent pool, excellent STEM education, and high-quality engineering expertise. Around 39,000 qualified IT and engineering students from 38 tech universities graduate annually. Many Ukrainian software engineers start coding independently at a rather young age. Students often work as trainees in software development companies and start freelancing or creating their own projects. Therefore, when they graduate at 21-22, they already have a few years of hands-on experience, enabling them to work in software development outsourcing in Ukraine.
The ongoing mobilization in Ukraine has presented unique challenges for businesses operating within the country. However, several factors have mitigated its impact on the IT industry. A decrease in overall attrition rates compared to pre-war levels has helped offset the effects of mobilization. Additionally, established robust succession planning processes and a competitive hiring market have enabled companies to maintain operational continuity and fill vacancies promptly.
2. A large number of outsourcing vendors in Ukraine
Another aspect that makes software development outsourcing to Ukraine so attractive is the variety of companies to choose from. Clutch lists over 1,000 Ukrainian firms, with over 58% being midsize and large vendors. This is nearly 2/3 of all IT outsourcing and software development companies registered in Ukraine.
These companies offer various services, from IT staff augmentation to complex solution development or niche expertise like data analytics, embedded and IoT, or automotive testing. In the image below, you can see that vendors in Ukraine also have versatile domain expertise, as they have experience partnering with businesses in many verticals.
Ukraine's IT vendors demonstrated impressive fortitude and growth in the midst of russia's war. By rapidly adapting to challenges, such as relocating employees and implementing remote work strategies, Ukrainian IT companies maintained a high service delivery level of approximately 95%. Strategic implementation of business continuity plans further enhanced the industry's capacity to withstand disruptions and maintain operational efficiency.
During frequent power outages in late 2022 and mid-2024, Ukrainian IT specialists faced significant challenges but largely maintained their work effectiveness. IT professionals adapted by using generators, working from various locations with power, and adjusting their schedules. Companies responded by providing their employees with electricity and internet access.
Ukraine has significantly enhanced its cyber defenses in response to persistent Russian attacks. By establishing a volunteer cyber army, rapidly responding to incidents, and fostering international partnerships, the country has demonstrated resilience in the face of cyber warfare. To further strengthen its cyber capabilities, Ukraine has prioritized infrastructure improvements, workforce development, and public-private collaborations. Recent agreements with the EU aim to deepen cooperation on cybersecurity, focusing on safeguarding critical infrastructure and combating disinformation. These combined efforts position Ukraine as a leader in cyber defense and innovation.
3. Major hubs for software development outsourcing in Ukraine
Kyiv
Kyiv is a major administrative, cultural, and scientific hub of Ukraine. The Kyiv region houses a significant portion of Ukraine's tech talent, with 85,000 specialists representing 28% of the national total as of 2023. Even with the challenges posed by the war and subsequent relocations, Kyiv remains a central player in the country's tech sector, contributing 40.1% to the industry's overall revenue. Global enterprises such as Samsung, Huawei, Ericsson, NetCracker, and others have R&D centers in the capital. Moreover, many enterprises and large businesses choose the city to outsource software development to Ukraine.
The region maintains its leadership position in job creation, directly employing a substantial number of workers and indirectly supporting over 230,000 jobs across other sectors. This represents more than a third of the Ukrainian tech industry's overall job impact.
Nearly half of Ukraine's verified tech companies, including N-iX, have a presence in Kyiv, with a third exclusively operating within the region. Additionally, Kyiv is a startup-friendly city: successful tech startups such as Grammarly, Petcube, Terrasoft, and Augmented Pixels have offices there.
Lviv
Lviv is the largest city in Western Ukraine, housing close to a million people. The ongoing conflict has reshaped Ukraine's tech landscape, positioning the Lviv region as a primary relocation destination. In the past year, the region has experienced a surge in tech professionals, surpassing the 51,000 mark and claiming the second-largest tech talent pool in the country. This represents a sixth of Ukraine's total tech workforce. Lviv's contribution to the tech industry's overall revenue stands at 14%.
The Lviv region has also witnessed a growth in tech company presence, with 599 companies operating or having branches there as of 2023. Nearly half of these are locally based, while the region hosts offices for 28% of Ukraine's tech firms. Lviv is a leading center for software development outsourcing in Ukraine. The State of European Tech report states that most Lviv developers work for outsourcing (46%) or outstaffing (11%) IT vendors.
Other cities
Ivano-Frankivsk has emerged as a significant tech hub in Ukraine, demonstrating impressive growth, particularly since the onset of the war. The city's IT workforce expanded by over 60% between 2021 and 2023, with the number of IT professionals reaching over 5,000. This surge was primarily driven by an influx of IT specialists from other regions seeking refuge from the russian aggression.
The city's IT sector, comprising 120 companies, has played a crucial role in supporting the industry's growth and fostering collaboration. By implementing remote work strategies and adapting to new market demands, IT companies in Ivano-Frankivsk have successfully navigated the crisis.
Kharkiv is the second-largest city in Ukraine, and it houses more than 1M citizens. Kharkiv hosted over 10% of Ukraine's tech companies and employed approximately 20,000 IT specialists in mid-2023. Though enduring heavy shelling and the displacement of nearly half of its IT professionals, the tech community in Kharkiv demonstrates perseverance, with many displaced IT workers maintaining business registrations and continuing to support the local economy through tax payments. The Kharkiv IT Cluster promotes education, and supports veterans while advocating for policies that retain IT talent crucial for Ukraine's wartime economy.
The Dnipro region has experienced significant growth in its tech sector due to the influx of displaced individuals and businesses from eastern Ukraine. The region's tech workforce expanded by over 30% in 2022, contributing to an increase in local tech industry revenue. Currently, Dnipro accounts for 7.5% of Ukraine's total tech industry turnover.
The region is home to over 18,000 tech professionals, representing 6% of Ukraine's tech talent pool. Based on current trends, this number is projected to increase. The Dnipro region has attracted 12% of Ukraine's tech companies, with a majority of these companies having multiple locations within and outside of Ukraine.
Odesa has also become a destination for IT specialists and their families displaced from conflict-affected areas. The tech workforce expanded by 30% in 2023, reaching 15,000 professionals, though still smaller compared to Kyiv, Lviv, Kharkiv, and Dnipro. The region currently accounts for 5% of Ukraine's tech talent and companies. While Odesa hosts 132 active tech companies, only 15% are locally based, with the remaining operating as part of larger networks.
4. The business climate for software development outsourcing in Ukraine
When evaluating software development outsourcing in Ukraine, consider its advantages beyond a large talent pool and numerous vendors. Ukraine boasts strong performance in various international rankings, such as those listed below:
- 42nd position in the A.T. Kearney Global Services Location Index 2023;
- 55th place in the Bloomberg Innovation Index 2023;
- 55th place in the WIPO Global Innovation Index 2023.
Like most emerging economies, Ukraine struggles with corruption, but the situation has improved significantly in recent years. The country is on the way to its EU integration, so it's taking active steps to implement the EU association agreement that came into force in 2017. An important part of the integration plan is dedicated to fighting corruption. The 2023 CPI Index ranked Ukraine 104th with a 36 (out of 100) score, marking its highest score ever and one of the most significant improvements globally in the past year. This is conducive to software development outsourcing in Ukraine.
Despite the ongoing war, foreign direct investment (FDI) in Ukraine has increased compared to some pre-war years. Reinvestment of earnings by existing foreign companies is a key driver, with net inflows in 2024 exceeding the same period in 2023. Notably, new investors from various countries, including the Netherlands, the United States, and Poland, are establishing businesses in Ukraine. While the war poses significant challenges, government support for strategic sectors and the country's long-term potential continue to attract investment. According to 2024 data from NBU, the Netherlands ($1.19B), Cyprus ($1.13B), the United States ($361M), and the United Kingdom & Ireland (combined $297M) are the top sources of foreign direct investment in Ukraine. Although the war has negatively impacted the business climate, over 2,600 foreign-owned companies have been established in Ukraine since 2022, with entrepreneurs from Turkey, Poland, the United States, and Germany leading the charge.
Read more: How to choose the best offshore development company in Ukraine
5. Software developer salaries in Ukraine
Median salaries for middle, junior, and intern positions have shown a slight downward trend over the past two years, while senior salaries have remained relatively unchanged since 2022, reports DOU. There has been a slight decrease in salaries for junior, senior, and team lead roles in back-end development since 2022. In mobile development, the median for lead and more senior roles is below average. Front-end development has faced more significant salary reductions compared to other specializations. Across all experience levels, except for tech leads, salaries have declined. Full-stack development has seen a decrease in mid-level salaries. Team lead salaries have generally decreased, except for full-stack developers, where they remained unchanged.
Medians for developers across various programming languages show a downward trend. C#/.NET and JavaScript developers have experienced stagnant or declining salary growth, while PHP developers generally earn below the market average with signs of further decline. Additionally, C language developers tend to have lower average salaries compared to other programming languages.
According to the IT research Ukraine study, 10% of tech professionals experienced decreased income in 2023. Salaries in Ukraine are generally lower than those in Western, Central, and Eastern European countries, with the gap being particularly pronounced at the lower job levels, Mercer 2022 reports.
Read more: How to hire a development team in Ukraine: Ultimate guide
6. Ukraine's government policies bolstering the tech sector during the war
The tech sector has emerged as a strategic pillar of Ukraine's economy, driving innovation and economic growth. While facing the unprecedented challenges posed by russian aggression, including infrastructure damage, mass displacement, and cyberattacks, the Ukrainian IT sector has shown impressive adaptability and resilience. The government has recognized the industry's critical role in rebuilding the nation and has intensified efforts to support its development. The Ministry of Digital Transformation continues to collaborate with IT clusters to mitigate the impact of the war, facilitate business continuity, and attract foreign investment.
Ukraine's tech strategy aims to stimulate economic growth by attracting investment, creating jobs, and fostering innovation amidst the war while simultaneously developing cutting-edge military technology to support the war effort. The ultimate goal is to position Ukraine as a global tech leader in the post-war era. The Ukrainian government implemented the following key initiatives:
- Tax breaks: The Diia.City platform offers reduced tax rates for IT and tech companies, attracting both domestic startups and international giants like Samsung and Visa.
- Startup support: The Ministry of Digital Transformation oversees the Ukrainian Startup Fund, which invests in promising startups, with a recent focus on defense technologies.
- Defense tech hub: BRAVE1, a joint initiative by several ministries, aims to fast-track innovation in defense and security tech by supporting startups and established companies.
- International investment: Ukraine is actively seeking foreign investment in its tech sector. The European Innovation Council has allocated €20M to support Ukrainian startups, and the Seeds of Bravery project connects Ukrainian startups with international mentors and funding opportunities.
- E-residency: Launching in late 2023, this program will allow foreign tech professionals to register businesses in Ukraine and benefit from favorable tax conditions.
Software development outsourcing to Ukraine: Featured success stories
1. Gogo
Gogo is a global provider of in-flight broadband Internet with over 20 years of experience and more than 1,000 employees. The company has partnerships with 16 commercial airlines and has installed in-flight connectivity technology on more than 2,900 commercial aircraft and over 6,600 business aircraft.
Gogo initiated a complex data governance project to ensure the flawless operation of the equipment and the high speed of the in-flight Internet. The client engaged N-iX as its strategic software development partner.
Together with our client, we completely migrated Gogo data solutions to the AWS cloud and shut down its costly on-premises infrastructure. Our team built a unified AWS-based data platform that collects and aggregates data from 20 different sources and can process up to 3 TB of streaming data daily. With Data Science and Machine Learning algorithms, we developed models for predicting failures and health monitoring of antennas. Predicting antenna failures reduced unnecessary downtime and maintenance costs while also mitigating penalties paid to airlines for malfunctioning equipment.
2. Lebara
Lebara is a global telecom company with a long-term partnership with N-iX. Our software engineers have helped Lebara with software development, quality assurance, database administration, application and infrastructure support, and more. We set up an offshore development center for Lebara (over 100 experts) and worked on products such as LebaraPlay, MyLebara, LebaraMoney, Bluepipe, and others.
Through this collaboration, Lebara achieved significant improvements across various aspects of their business. Customers now enjoy a seamless omnichannel experience, while Lebara benefits from streamlined business processes and optimized data flow management.
The newly developed website caters to a broader audience with comprehensive functionality for users in the UK, France, Germany, Netherlands, Spain, and Denmark. Additionally, Lebara adopted a multi-cloud strategy, enhancing flexibility and avoiding vendor lock-in, which translates to better negotiation power with cloud providers.
Data lake development led to faster and more efficient BI reporting, while the transition to a cloud-based infrastructure with microservices architecture reduced costs, improved scalability, and accelerated time-to-market. Furthermore, the implementation of a test automation framework minimized downtime and ensured faster innovation cycles thanks to the microservices architecture.
3. A Fortune 100 engineering and technology company (under NDA)
Our client is a multinational engineering and technology company based in Germany. The company operates in over 60 countries worldwide through a complex network of over 440 subsidiaries and regional entities.
The client introduced an internal logistics platform to improve the logistics between the warehouses. The warehouse staff use the platform to allocate and manage goods and materials efficiently. After being used in several warehouses for several months, the platform proved unsuitable for further scaling and had many flaws.
We helped the client migrate the platform to microservices, implemented the best DevOps practices, and built a Computer Vision Solution that allowed contactless tracking of goods with industrial optic sensors, Nivida Jetson devices, and more. This enabled contactless tracking of goods, resulting in significant improvements in warehouse efficiency, reduced labor costs, and enhanced inventory management.
Why should you choose N-iX for software development outsourcing to Ukraine?
- N-iX has a talent pool of over 2,200 seasoned tech experts.
- With more than 21 years in the market, the company has shaped long-term, strategic partnerships with businesses from the US, UK, Germany, Nordic countries, and other locations. Today, the US is the biggest market for N-iX, as we partner with many established American businesses.
- We provide a comprehensive suite of cooperation models and services. This includes Team Extension, Dedicated Development Teams, Custom Software Development, and Tech Consulting.
- N-iX is a certified AWS Advanced Tier Partner, a Microsoft Solutions Partner for Digital & App Innovation, Data & AI, a Google Cloud Platform Partner, an SAP partner, to name a few.
- N-iX is recognized as a trusted vendor by IAOP, GSA, Inc. 5000, Software 500, Clutch.co, and others.
- N-iX has always been an active player on the Ukrainian tech market, supporting IT clusters, developing and promoting the Ukrainian IT industry, investing in education, nurturing tech communities, developing infrastructure projects, and more.
- We also offer a veriety of technical services, including cloud consulting, data engineering and analytics, AI consulting and implementation, embedded software development, IoT, RPA, UI/UX design, and more.
Our security policy
At N-iX, we prioritize safe data access and use by complying with the following data protection standards to ensure we meet all contractual, legal, and regulatory requirements:
- ISO 27001:2013. The standard ensures that a company's client management systems are secure.
- ISO 9001:2015. The standard demonstrates our commitment to a high standard of quality management.
- PCI DSS. The standard ensures financial data security handled by companies accepting card payments.
- GDPR. This EU regulation safeguards data protection and privacy within the European Union.
Looking ahead
Contrary to dire predictions following russia's invasion, Ukraine's IT sector has demonstrated remarkable resilience. While the war caused a temporary slowdown, the industry's long-term growth trajectory remains intact.
Ukraine's IT sector has steadily grown since 2010, contributing significantly to its GDP and exports. The invasion initially slowed development, but exports rebounded by April 2022, exceeding pre-war levels. Overall, 2022 exports surpassed 2021 figures.
Ukrainian IT companies have become more persistent in pursuing clients and have expanded their global presence through new offices. Ukraine continues to attract investment due to its strong value proposition. This war-defying growth highlights the adaptability and strength of software development outsourcing in Ukraine, positioning it for continued success in the future. Statista's prognosis suggests a steady upward trend, with the market size increasing sevenfold by 2028 compared to 2023, from a little over $2B to almost $14B.
References
- Future of IT Report by Emerging Europe
- Portrait of Ukrainian IT specialist by DOU.ua
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