7 reasons for Israeli firms to outsource to Ukraine

7 Reasons for Israeli Firms to Outsource to Ukraine

Daniel Elliot by Daniel Elliot
Among software firms, it’s common knowledge that Ukraine is quickly becoming the #1 outsourcing destination. According to the European Business Association, the IT outsourcing market in Ukraine grew by 15-20% in 2016, and could double in 2017. Companies in the United States, in Western Europe, and especially in Israel are finding more and more that a team in Ukraine just makes sense. The reasons why Ukraine is great for outsourcing in general are clear. The nation boasts about 100,000 highly skilled IT professionals, with more graduating each year. Meanwhile, wages and cost of living remain low enough to represent an enormous cost savings for overseas and nearshore firms looking to boost their development capabilities. Software development in Ukraine is an especially good fit for Israeli businesses. Here are 7 reasons why.

Easy Communication

One of the greatest challenges faced in outsourcing is the language barrier. A development team is only as good as the instructions, and frustrations can quickly mount when attempting to spec out a complicated project to a PM who can’t quite grasp the fine details. Communication problems like this typically don’t occur when Israeli companies outsource to Ukraine. Nearly 50% of the country speaks English fluently, with a much higher percentage among the skilled IT labor pool. Russian is even more common, with fully half the population reporting it as their native tongue. So, in other words, two of the most commonly spoken non-native languages in Israel are shared by citizens of Ukraine. Easy and accurate communication is rarely an issue between the two peoples.

Synced Clocks

Another logistical obstacle to outsourcing is the inconvenience of scheduling conference calls and video meetings around disparate time zones. Collaboration is key to modern project management, and development moves fast. Meetings in the small hours of the morning or late at night are counterproductive and inconvenient to everyone. Fortunately, Israel and Ukraine are in the same time zone. Marketing, customer service, and other local employees (to say nothing of executives) can easily ping their counterparts across the Black Sea without catching them in bed.

Easy Travel

Similarly, it’s relatively easy to physically travel between the two nations. A flight from Tel Aviv to Kiev (a major hub of IT outsourcing) is just over 3 hours. That’s not quite short enough for a daily commute, but certainly feasible for a monthly strategy meeting. Due to the good trade relations between the two nations, travel is also very easy from a legal standpoint. Visas are neither required for Ukrainian citizens to travel to Israel, nor for Israelis to travel to Ukraine. The Ukrainian government is very much aware that the export of IT services to the Israel, the US, and elsewhere is an increasingly vital piece of the economy. The nation does what it can to facilitate this type of trade, and the favorable travel conditions are unlikely to change.

Compatible Culture

The favorable travel and trade arrangements between Ukraine and Israel come from many years of positive relations. Much has been said about the “true friendship” between Israel and Ukraine, and that is nowhere more apparent than in business. Many Ukrainian IT professionals have been working with and for Israeli companies for years. The Ukraine business culture has become very similar to that of Israel. Ukrainian developers know the market, and they know how to build for Israeli clients. This means that by outsourcing to Ukraine, an Israeli firm can expect a good working relationship almost immediately. Skipping the tedious and unproductive “getting to know you” phase that often comes with fitting a foreign team into the workflow saves time, expense, and frustration for all parties.

Cost Savings

At the same time, Ukrainian IT professionals are able to work for far less money than their Israeli counterparts, to say nothing of Western countries. Perusing Glassdoor makes the cost savings of software outsourcing to Ukraine extremely obvious. The average annual salary for a software engineer in Israel is ₪240,000. In Ukraine, the same position is reported to earn an average of ₴360,000 (Ukrainian hryvnia), or just under ₪50,000. The low Ukraine outsourcing rates are the real draw for nearshore and overseas firms. When highly skilled employees and contractors can be found for a quarter of the cost, that translates to wonderfully improved efficiency and profit for the employer. Coupled with the logistical ease of running a development team in Ukraine, outsourcing becomes a no-brainer for almost any Israeli business.

High Expertise

Despite its low wages and cost of living, Ukraine is home to a highly educated population. There are over 300 colleges and universities in the country, producing hundreds of thousands of graduates seeking skilled positions. The growth of the IT export is a self-fulfilling prophecy when it comes to filling those positions. The more overseas and nearshore companies take advantage of Ukraine’s IT labor pool, the more young Ukrainians wish to join it. The more the labor pool grows with young Ukrainians, the more appealing the sector becomes to overseas and nearshore companies. Ukrainian developers are often highly skilled in a range of coding languages and modern development techniques, such as Agile and Scrum. Several of the greatest software products of the last several years were developed in Ukraine, such as Leverate and Wix. It’s a far cry from the slipshod programming that some might expect of outsourcing to a relatively poor nation.

Strong Precedent

To speak further to that point, here are some of the most well-known Israeli firms that outsource their R&D and development to Ukraine. The list speaks to the success many companies have found in partnership with Ukrainian development houses, and is a testament to the benefits of outsourcing.
  1. Plarium – The mobile and social games developer is responsible for Vikings: War of Clans, Total Domination, Stormfall: Age of War, and numerous other top-grossing games.
  2. Playtika – Self-described as “the world’s largest Social Casino games company”, Playtika was acquired in 2016 for $4.4 billion USD.
  3. Wix – The leading cloud-based “drag and drop” website development kit is used by over 90 million customers.
  4. PlayTech – Another giant in online casino games, this Israeli-managed company employs over 5,000 people in 13 countries, including Ukraine.

The Logical Choice

What does all this mean? Ukrainian and Israeli tech businesses are simply a good fit. High levels of education and quality of work mean that a Ukrainian team is ideally suited to support the needs of Israeli innovation. The cost savings, existing good relations, and favorable tax situation mean that it’s easier than ever for Israeli companies to take advantage of that expertise. All of these factors add up to a clear conclusion: Ukraine is today’s best choice for Israeli firms seeking to offload their software development and IT work.