Do you know what plays one of the biggest roles in German economic development?

A start-up movement.

Start-ups are supported on a state level in Germany. The country offers start-ups a good infrastructure, growth environment, lots of support and funding opportunities.

Do you know why? 

Because they innovate the internal market and offer new jobs, thus strengthening competition on the international market. Think about the hottest startups such as EyeEm, N26, Coya, Auto1, SoundCloud, Delivery Hero, etc.

Germany has its IT hub in Berlin which is known for the fastest-growing ecosystem of startups in the world. Berlin receives the most venture capital investment in Europe and is very often compared to Los Angeles Silicon Valley. Berlin is not the only player on the market. A special place in the development of the startup community also occupies Munich, Frankfurt-am-Main, Stuttgart.

Now let’s go to the challenges.

Germany’s digital transformation is supplemented not only by a high level of innovations and rapid IT market growth. It also causes one of the biggest challenges – lack of resources to maintain market rapid development.

More and more companies tend to outsource the development of their mobile and web apps abroad. The most typical locations where Germans outsource their development needs are Ukraine, Poland, Russia. Sometimes a choice falls to Vietnam or China.

I noticed that the Germans began to show more and more interest to their Ukrainian neighbor in 2018 and decided to devote an article to the topic.

Have you wondered why?

The Ukrainian IT outsourcing market has lots of advantages for the German business. Let’s analyze the market and figure out how you could leverage from a large Ukrainian talent pool now.


We are going to talk about:

→ the problems that German companies face when hiring locally

→ the average salary of Ukrainian developers, its comparison with German

→ key benefits of choosing Ukraine as an outsourcing destination

→ how to find the right software company in Ukraine



Problems that German firms face in 2019

1. Shortage of human resources

Even though at a first glance it may seem that there is no lack of developers in Germany and businesses handle their development needs in-house, the severe reality forces German companies to hire developers from other regions.

A pretty contradictory thing. Because on the one hand, Germany has the biggest developer population in Europe and its number seems to be quite enormous for the country size.

Number of professionals by country

On the other hand, Germany tends to outsource almost half of the IT functions to other regions.

How many Germans outsource corporate IT functions?

According to the first chart, Ukraine takes the last 10th place.

So why?

Seriously, why would Ukraine be a good destination for Germany to outsource its development services and IT functions?

Let’s take a closer look.

The difference lays in the types of IT services that Ukrainian and German companies tend to deliver.

The pool of the Ukrainian IT market includes mainly software development companies. According to DOU.ua, only about 4.8% of Ukrainian companies are startups. With over 1000 IT companies on the Ukrainian market, that would be about 50 startups of different sizes.

Types of Ukrainian companies

The figure is close to the truth because in February 2019 there were about 28 startups in the tech category.

Ukrainian Kickstarter

The pool of the German IT market includes mainly startup companies such as Delivery Hero with its 6,000 employees operating in different fields. The number of startups constantly grows causing a higher demand for resources.

Of course, it’s difficult to count exactly, but they say there are about 6,000 startups in Germany claiming 80,000+ various new jobs. According to Bitkom, Germany’s digital association, half of these vacancies, relate to the IT niche. Thusly, in January, 2019 there were over 40,000 open vacancies for IT professionals.

So what’s the problem?

German IT market

German companies say that sometimes they struggle to fill in a position locally.

This can be strengthened by the recent survey conducted by Bitkom:

  • 60% of the surveyed IT companies claimed a shortage of IT specialists

Sixty percent.

Just stop for a while and think about it.

 Some other curious findings were:

  • 64% of the IT companies have vacancies for software developers
  • 27% of end-user companies are looking for similarly-skilled staff
  • 48% of the firms were looking for expertise in cloud computing
  • 45% were looking for expertise in big data
  • 33% wanted to get experts in programming

Another factor that causes a huge appetite for developers is the digitization of businesses in traditional sectors. Change of their business model leads to higher demand for resources able to help them get to a new level.

Not being able to manage on their own, German businesses have to apply to other countries for help. And next moment comes to Ukraine that can go the rescue and fully satisfy German’s need in resources on a cost-efficient basis.

2. The high cost of local resources

Have you ever compared the salaries of developers in both countries?

Let’s do that now.

Salaries of German developers are significantly higher compared to what they earn in Ukraine. Very often the question of saving money becomes an edge for startups as they simply can not afford to hire an in-house team. At long last, who doesn’t want to save money with no damage to quality? 

According to PayScale, the average annual salary of a PHP Developer with 5 years of experience in Frankfurt-am-Main, Germany, would be €51k (about USD 58,400). That would be Euro 4250 per month (USD 4870).

Salary of PHP developer in Germany

The average annual salary of a PHP developer in Lviv, Ukraine, with the same level of experience would be EUR 26,000 (USD 30,000), while the monthly salary would be EU 2180 (USD 2500). Even their highest salary (EU 2600 or USD 3000) would still be less than in Germany.

Salary of PPH developer in Ukraine

On the chart below you can see the average monthly salary of middle Java developer in Ukraine. Pay attention to how it compares to Germany, the USA, United Kingdom.

Salary of Middle Java Developer

So what?

Working with Ukrainian IT companies, German firms can potentially save up to 50% on developer retention and spend the rest of the money on the integration of new features.

Not bad, after all.

3. Employment termination

Let’s not forget about the employment termination process.

The decision-making processes in both countries are different. Ukrainian businesses tend to take decisions faster than German ones. To understand why let’s carefully study the processes of employment termination in both labor markets.

Hiring a developer in Germany would make one think twice or even three times as much prior to taking any steps. This cautiousness is based on the complexity of the dismissal procedure that German companies should follow. It’s not that easy to terminate an employment contract in Germany. Sometimes it’s almost impossible to fire an employee.

The minimum notice period for both parties in Germany equals to four weeks and takes effect either on the fifteenth day or the end of a calendar month.

The notice period for dismissal by an employer depends on the length of an employee’s employment:

  • 2 years employed = 1-month notice period
  • 5 years employed = 2-month notice period
  • 8 years employed = 3-month notice period
  • 10 years employed = 4-month notice period
  • 12 years employed = 5-month notice period
  • 15 years employed = 6-month notice period
  • 20 years employed = 7-month notice period

So here we go.

The notice period in Ukraine is shorter. According to the Ukrainian labor code, a statutory notice period is 2 weeks and it comes into force from the moment of the decision on dismissal. There may be cases when the parties sign a labor agreement with different terms, but this happens rarely.

The most interesting fact is that knowledge of the labor code of Ukraine can be useful to you if you enter into an agreement with the developer directly. In the case of working with a Ukrainian company, an entire dismissal procedure passes by you. You will not have to worry about dismissing or replacing an employee, it all falls on the shoulders of the Ukrainian company that you work with. If a developer does not suit you, you simply notify the company and they replace them. No need to wait for months. Thusly, you can save time, money, and yourself.



Key benefits of choosing Ukraine as an outsourcing vendor

Geographical proximity

Pretty often German companies outsource the development of their projects to China and Vietnam. Having faced such challenges as a language barrier, cultural differences, significant time difference, more and more German companies tend to choose Ukraine as their outsourcing vendor. One of the main reasons is the geographical proximity.

Ukraine is only 1,700 km far from Germany. It takes just about 2 hours of a direct flight from Frankfurt-am-Main to Kiev. Kiev hosts about 40% of Ukrainian IT companies meaning that you would not even need to travel further.

Time zone

Germany and Ukraine have only 1-hour difference in time making communication easier for everyone. That makes a big difference compared to the time difference with Vietnam – 6 hours or China – 7 hours.

Cultural proximity

The majority of Ukrainian IT outsourcing companies work with clients from the USA, UK, Europe. The number of Ukrainian software development agencies that cooperate with German firms is quite big. Ukrainians understand the cultural considerations of their clients. Of course, there is a difference in mentality and approaches to business in both countries, but the difference is hard to spot.

Full control

Geographical proximity and an opportunity to visit your app development team in person make it possible for you to keep full control of the development process. If any trouble appears or project derails, you may come with a personal visit to get everyone back on track.

Proficiency in English

Both Germany and Ukraine have a high level of proficiency in English. You will have little to no communication issues while working with a Ukrainian IT company. About 64% of Germans and 53% of Ukrainians speak English.

English proficiency

Proficiency in German

It’s difficult to calculate, but there are about 35,000 of Ukrainians who speak German. A lot of Ukrainian IT companies who target the German market have a German speaking employee as a contact person. That can make the communication process much easier for you.

Saving costs

Based on the comparison of salaries of software developers, it becomes obvious that outsourcing from Germany to Ukraine can help you save up to 50% of your money.

Large resource pool

The Ukrainian IT outsourcing market counts about 160,000 highly-educated IT professionals. Let’s compare the talent pools in both countries and make figures speak for themselves.

Big choice of companies

There are over 1,000 IT development companies in Ukraine that provide their services for years. They have run-in processes, well-balanced teams, impressive portfolio. Besides, they have positive references from German companies setting the risks you take to zero.

Company focus

According to Zfort Group research who surveyed 764 German companies in 2013, the most outsourced solutions in Germany are mobile and web technologies. Not much has changed since that time.

IT functions outsourced by Germany

The IT services that are outsourced from Germany fall directly into the area of expertise of the majority of Ukrainian IT companies. Enterprise solutions are less popular both for Germany and Ukraine, still, this question can be addressed as well.

According to my research and analysis of the top 168 IT companies in Ukraine, about 60% of companies offer custom mobile and web software development. They can solve almost any task related to software development.

Focus of Ukrainian IT companies

Client-side boarding

A lot of Ukrainian companies realize the importance of face-to-face meetings, especially when it comes to planning the launch of projects. That is why many companies offer client-side onboarding of teams. As a result of such approach, everyone remains in the best position: the team is fully synchronized with the client, all the details and requirements are revealed, the possibility of risks is set to minimum.

Quality

Ukraine has been known as a top IT outsourcing destination of the world. It has been providing its services on the international market for more than 10 years. During this time, Ukrainian companies managed to build up a portfolio, calibrate processes within companies, and learn to provide high-quality development services. All that makes Ukrainian developers competitive on the international market.



How to find a Ukrainian software company

Web research

You can easily find an app development company in Ukraine online. A more complicated process can be their evaluation. As a first step, pay attention to their website look, portfolio, type of projects they used to develop previously, expertise in your target niche, experience of launching products to the similar markets, testimonials.

B2B listing platforms

B2B listing platforms can help you choose providers and evaluate companies based on a lot of criteria, including their customer feedback, hourly rates, location, industry focus, etc. One of the leading platforms is Clutch, but there are lots of others for your consideration. The difference between such platforms is based on the methods of websites research and review. This is the full list of the top websites similar to Clutch.

GitHub

Software companies with an established reputation tend to choose the apps they want to code and don’t grab any job. Thanks to their experience they are able to contribute to various open source projects and are not afraid of demonstrating their programming skills by contributing on GitHub. That’s why you can easily find developers on GitHub.

Conferences

There can be different types of conferences to find a software development team. Companies with a vast portfolio of projects related to certain niche would most likely attend niche events.

For instance, if you work in healthcare business and a development company specializes in the development of projects in this niche, most likely they will be attending the same medical fair as you.

Otherwise, you can meet at bigger events such as

  • Collision
  • WebSummit
  • TheNextWeb

There are also local conferences in Ukraine. Check IT Arena 2019, the largest tech event in Ukraine and Eastern Europe.

References

It is worth asking if any from your business network previously worked with a Ukrainian company. Chances are you will find such people. Don’t hesitate to them ask for recommendation and feedback about the vendor.

Ukrainian IT Outsourcing: an Utmost Insider Guide

Local platforms

You can use websites like DOU to find Ukrainian companies, track their social behaviour, see pictures of their offices, people and much more.

Freelancing platforms

Freelancing platforms connect businesses and professionals. The majority of them are focused on freelancers, but some have corporate accounts. That’s why you can find there not only independent contractors but also software development agencies.

As a rule, big companies with an established brand are not active or even not present on such platforms as they have a pipeline of inbound inquiries. But still chances are that you find a suitable firm out there. You can start with this list.

  • UpWork
  • Guru
  • Freelancer
  • TopTal
  • Fiverr
  • Outsource.com
  • CrowdSource

Design communities  

Consider Dribbble or Behance as another option for finding a software agency in Ukraine. Even though they are design platforms, there are a lot of Ukrainian software development agencies that provide fully-fledged solutions.



Bottomline

Ukrainian IT industry is at the top of the world arena. Compared to the other outsourcing destinations, Ukraine has 3 main advantages: high-quality services,  competitive rates, large talent pool.

The choice of companies suits every taste and budget. Should you find this information useful, please share this article to help spread the insider facts about the Ukrainian IT outsourcing market.

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