To increase their competitiveness in the market and reduce production costs, modern companies are increasingly transferring secondary tasks to external contractors or specialized agencies, which have highly qualified personnel. This practice is called outsourcing, which is “a working approach that consists in the transferring of both individual functions and business processes to external organizations to optimize all types of resources and focus on the main activity”.
With the emergence of Internet technology and the transition to project management, managers solve personnel issues in the organization by hiring temporary workers to perform certain assignments. The most frequently outsourced are IT and telecommunications services, design and project development, recruitment, and accounting services. When hiring external contractors, companies rely on their high professionalism and narrow specialization in a certain field. This is also the reason numerous western firms hire developers from Ukraine. More about outsourcing IT assignments to UKR specialists – read below.
Outsourcing in Ukraine
Ukraine occupies 24th place in the TOP-25 of the Global Services Location Index, compiled by the American consulting company A. T. Kearney since 2004. The outsourcing potential of each of the countries is assessed by 38 indicators, comparing financial attractiveness, professionalism, and the availability of the necessary human resources, as well as the business environment. When deciding to outsource to this state, enterprises are frequently guided by the following advantages:
- Expense reduction. First of all, it means saving money on an additional social benefits package that the employer provides to its staff, replacing existing employees;
- Flexibility in cost allocation. It includes mobility and reduction of permanent staff and attracting temporary employees as needed;
- Access to the best professionals in the field. It can be achieved by replacing existing employees with highly-qualified UKR contractors, which proved to be one of the best IT specialists in the world;
- Predictable, standardized (international) processes. UKR IT specialists comply with the international rules and standards of contract work and show high professionalism in completing different assignments.
Of course, there are also many opponents to the practice of outsourcing. They oppose outsourcing, arguing that jobs are lost during the relocation of production processes, which is especially noticeable in the industrial sector. However, there are arguments in favour of a more efficient allocation of resources, which, in turn, corresponds to the nature of a free-market economy in the world.
The research by Headhunter, UCMS Group, and Intercomp shows that outstaffing is currently in demand among large firms. Thus, depending on the size of enterprises, in organizations with less than 50 employees, 42% use outstaffing to optimize their own activities, while this figure is already 33% for firms with more than 500 employees. Also, outstaffing is mostly typical for foreign enterprises located in Ukraine – 55% of all enterprises with foreign capital actively use outsourcing to reduce their expenses.
The most frequently outsourced tasks
Outstaffing in Ukraine has its own characteristics in terms of the popularity of some of its varieties. According to research in Ukraine, outsourcing is more common in the following spheres:
- IT services (40%),
- logistics (35%),
- resource provision of production processes (27%),
- marketing services (21%),
- recruitment (18%),
- accounting (13%),
- salary calculation (13%),
- information processing and systematization (8%),
- outsourcing of medical representatives (8%),
- personnel accounting and support (5%),
- administrative functions (2%).
IT outsourcing, i.e, Information technology outsourcing, covers numerous areas, including the development of various types of software; maintenance of hardware, management of information systems, communication systems and business processes, web design, IT security, etc.
Ukraine has long been known for its enormous potential in the field of IT. Therefore, for the last ten years, companies from the United States and Western Europe have been actively cooperating with Ukrainians. Besides, most of the enterprises represented in the famous Silicon Valley have their offices in UKR cities. As a rule, local pros are involved in software development – the offices of such enterprises are represented in such regional centres as Lviv, Odesa, Dnipro, Kharkiv, and Kyiv. The activity and enthusiasm of Ukrainian IT representatives make this state a promising outsourcing destination.
In the Central and Eastern European region, the UKR IT outstaffing market is one of the fastest-growing due to numerous qualified employees and low staff costs. Its total cost annually reaches 2.4 billion dollars. However, it is still difficult to compare Ukraine with such outsourcing giants as, for example, India, whose IT outsourcing market is worth $86 billion. In addition, according to the IT Association of Ukraine, this country ranks fourth in the world in the number of certified IT professionals, as well as belongs to the TOP 30 locations for the transfer of orders for software development. This indicates that there is a huge growth potential for the industry, and it is worth considering this country as a perfect outsourcing location.
Since February 24, Ukraine faces unjustified large-scale Russian aggression, and millions of brave Ukrainian residents are forced to leave their homes to save their lives. Unfortunately, millions of them have lost their jobs, as many land-based enterprises were totally destroyed by heavy shelling. Thus, outsourcing business tasks to this country now also has a humanitarian impact. Keeping in mind that Ukrainian specialists remain talented remote employees, you indirectly invest in the rebuilding of the destroyed cities, as well as stimulate the Ukrainian economy.
The world is changing much faster with the fourth industrial revolution, the labour market is undeniably affected when most work is simplified by technology. Our work environment to which we are accustomed is changing radically today. New forms of cooperation can take legal relations, which often lack territorial boundaries and are in high demand for effective solutions. Ukraine is ready to provide international firms with the highly-qualified remote employees, especially in such fast-growing segments as IT. Ukrainian specialists are mainly engaged in developing custom software from Western Europe and the US. Freelance services are also quite common in Ukraine. Freelance has a lot to do with IT outsourcing – for a firm that hires freelancers and IT outsourcers, they are third-party contractors.
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