It’s no secret that IT outsourcing is one of the best ways for a business to boost its technological edge and general productivity. Some of the greatest tech innovations of the last ten years were conceived in the US, Europe, or Israel, then developed into real products in places like India or Ukraine.
On average, companies can cut their average cost per developer by almost two-thirds through outsourcing. Assuming the business does its due diligence and hires or assembles a good development team, there is absolutely no drop in the quality of work.
There’s the catch, of course. To outsourcing newbies, landing the right team is a monumentally complicated task. One must consider dozens of variables from language, to finances, to simple logistics. Even a question like “To which country should we outsource?” is daunting.
For Israel, at least, the two most popular choices are India and Ukraine. Let’s look at the pros and cons of each.
Ease of Travel
Video conferencing and collaboration software are fantastic, but most project managers and executives still prefer an in-person meeting at least a few times per year. Nothing can completely replace face-to-face communication, and it’s the most effective means to keep disparate teams in sync. In-person meetings are also crucial in helping remote workers feel included and invested in the business.
That said, let’s look at the realities of travel between Israel and Ukraine, and Israel and India.
- Flying from Tel Aviv to Bangalore generally takes over 13 hours. The cost varies by airline, of course, but averages about $500 (₪1,900).
- By contrast, a flight from Tel Aviv to Kyiv, the major outsourcing hub in Ukraine, is a relatively easy hop of just over 3 hours. Due to the large amount of outsourcing that Israel does in Ukraine, there are multiple direct flights per day. The average cost is $300 (₪1,100).
Any outsourcing relationship is only as good as the communication between the remote workers and their client. A team that can’t quickly gain a clear understanding of the client’s requirements is more of a liability than an asset.
A common language is obviously the most important aspect of good communication. Although any development house worth its salt will keep an English-speaker on hand for client relations, the rest of the team may not be fluent. For Israeli companies, Russian is often an even better option than English when dealing with non-Hebrew speakers, in any case.
- Russian in Ukraine: Russian is the most commonly spoken non-native language in both Israel and Ukraine. As of a 2001 survey, over 8 million Ukrainians speak the language.
- English in Ukraine: In addition, over 50% of the Ukrainian population speaks English to some degree.
- Russian in India: Russian is not commonly spoken in India.
- English in India: English is well-represented in India, with the country laying claim to the title of “second-largest English-speaking country.” If English is the preferred language of your organization, you are unlikely to have trouble communicating with Indian personnel.
Of course, these numbers are much higher when dealing with IT outsourcing firms and other professionals who make a living speaking with foreigners. It’s not difficult to find English-speakers in the IT industry in either country, but Israeli firms without a strong command of English may have difficulty when visiting India, or when dealing with team members besides the lead.
Winner: Ukraine – especially if Russian is your preferred language.
The other important piece of good communication is a compatible schedule. The world is a big place, and time zone differences add up fast. Emails can only go so far, and one of the most frustrating things in outsourcing is the inability to get someone on the phone when you need to.
Over time, that frustration can turn into actual lost productivity. The ability to simply ping your opposite number overseas when you have a quick question is more important than you might realize, and it’s cleared up more than one misunderstanding.
- Israel and Ukraine share a time zone. Scheduling is simply not an issue with business between these two nations, as their clocks are always in sync.
- India and Israel are 3 hours and 30 minutes apart. Indian outsourcing firms close shop around 14:00 in Israel.
To anyone who has begun researching options for outsourced IT, it should be obvious that both India and Ukraine boast enormous labor pools. Both nations are quickly producing experts in every aspect of IT, from tech support to coding to software engineering.
The reasons for this are similar in each country. Both are served by a large number of universities, and the governments of each nation are keenly aware that software outsourcing is an economic windfall.
- Ukraine is home to the largest number of IT workers in Europe. 2013 data indicates there are 4,000 IT companies and about 90,000 software development professionals in Ukraine, generating more than $2 billion in annual revenue.
- India is much larger, with about 2.5 million IT workers generating $147 billion annual revenue. However, the market is also much more crowded, with many companies worldwide going to India for IT.
There’s something of a cultural decision to be made here, as well. Anecdotal evidence suggests that Ukrainian firms may be a better fit for working with developed countries. Take that as you will.
Winner: India – On sheer numbers alone.
For most businesses, cost savings are the driving factor behind the decision to outsource. Wages in developed nations like Israel are enormous when compared to much of the world. By utilizing IT in another country, companies can achieve the same or better results for a fraction of the cost.
- Israeli software engineers command an average salary of ₪261,000 ILS (about $72,000 USD) per year.
- A Ukrainian in the same position earns about ₪93,000 ILS (approximately $25,500 USD) per year – less than half.
- In India, a software engineer’s average annual salary is ₪24,000 ILS (just $6,500 USD) – even less.
There’s no question that India offers some of the least expensive software developers in the world. However, there’s also no question that the overall cost to outsource in Ukraine is cheaper, especially for Israeli clients.
The salary isn’t the only cost to consider. Compared to India, Ukraine is right on Israel’s doorstep. Quicker, cheaper travel and better communication means a Ukrainian outsource partner will complete projects faster, more efficiently, and ultimately more cost-effectively for Israeli clients than a comparable Indian firm.
Winner – A tie, when considering all the potential cost factors.
Ukraine – A Strong Contender for Israeli Outsourcing
Every company needs to make its own decisions regarding whether to outsource, and with whom. There are innumerable factors to consider, and every business is unique.
However, we hope that companies in Israel will take a long look at the benefits of outsourcing to Ukraine. Gauged along every metric, it’s clear that Ukraine has a great deal to offer.