Outsourcing is often the best way for a company to access a large talent pool and adopt technological advancements, successfully tackle new market challenges and increase business competitiveness. The choice of an IT outsourcing destination is not only a starting point but also a crucial moment in the decision-making process of choosing a reliable offshore development partner.
Nearshoring to Eastern Europe has turned out to be effective for many companies. The region provides enough talent and technological expertise for delivering the projects of any scope and complexity. In a series of articles on the best IT outsourcing destinations, we explore the benefits and downsides of outsourcing to different countries, analyzing the number of IT specialists they can provide, their professionalism, the quality of technical education, business climate, etc.
Ukraine and Bulgaria are among the top IT outsourcing destinations in this region. They are supplying the market with qualified IT specialists and are actively adopting the latest digital technologies and trends. IT outsourcing to Ukraine has its advantages as the country offers the largest tech talent pool in Eastern Europe. Whereas, Bulgaria has a good business climate and tech expertise. In this article, we compare these two countries to determine the best destination for outsourcing software development.
Availability of talent
Ukraine has a solid pool of highly-qualified developers with more than 100,000 IT professionals in more than 1,000 IT companies, which is the biggest number in Europe. Around 40,000 of all IT specialists are involved in IT outsourcing sector in Kyiv, which is the biggest Ukrainian IT development center. Moreover, according to Colliers International, the country is 4th globally by a number of IT professionals. And this is just a beginning since Ukrainian engineering capacities are expected to increase to over 200,000 by 2020. What’s more, Ukrainian BrainBasket Foundation aims to train 100,000 new IT professionals by 2020, which will thus turn the IT sector into the number one export industry in Ukraine.
Bulgarian IT market capacity is not as high as the Ukrainian. It comprises 24,000 of specialists employed in 400 companies. The capital city Sofia employs around 8,000 software developers being the driving force behind the country’s IT development. Bulgaria also benefits from the presence of the global IT giant – Hewlett-Packard, which employs more than 6,000 IT pros. The country is ranked 8th in the world for the total number of IT specialists and 53% of specialists are ICT certified. The IT outsourcing sector of the country is financially attractive since it generates $250M income to the state budget. Furthermore, different analysts predict that Bulgarian IT market may reach over 30,000 employees by the end of 2017.
Ukraine has a strong tech education with more than 38,000 highly qualified IT professionals graduating year by year with certificates in technical disciplines. Over 400 educational institutions are situated in Ukraine and many of them maintain IT related programs. The most popular institutions that provide courses in technical disciplines are the National Taras Shevchenko University of Kyiv, National Technical University of Ukraine “Kyiv Polytechnic Institute”, Lviv Polytechnic National University, etc. Ukrainian universities have also launched a number of IT-related courses in IoT, Artificial Intelligence, Data Science, etc. Most Ukrainian developers have a good command of the English language. Around 40.2% of them have fluent English skills while 38.6% of respondents maintain an intermediate level. Ukraine holds 34th place in EF English proficiency index 2015 and improves its position every year.
On the whole, approximately 3,500 IT specialists graduate from Bulgarian universities annually. Around 220 high schools offer tech courses including software engineering, information technologies, and other IT related subjects. IT industry is influencing higher educational establishments prompting them to launch new courses. Thus, more than 15 Bulgarian universities included ICT classes as a part of their educational programs. Among the most famous institutions providing IT education are Technical University of Gabrovo, Technical University of Sofia, Technical University of Varna, etc. Furthermore, Bulgarian students study English as a compulsory subject, which allows them to have a rather good command of English.
IT Industry Overview
Ukraine holds a strong position in the software development market as its IT industry grows exponentially. PricewaterhouseCoopers estimated that the contribution of IT to the Ukrainian GDP has increased from 0.6% to 3.3% during the 2011-2015 period. Moreover, during 2016, the IT industry grew by 15-20% while the market grew from $2.5 billion to $3 billion. No wonder why the country has been consistently featured in Gartner’s top 30 offshoring and outsourcing destinations for the past six years. Also, it was recognized as number one in Europe in the sector of IT-outsourcing in 2016 according to IT Outsourcing News.
Additionally, 12 Ukrainian IT companies, including N-iX, Ciklum, Eleks, etc., were included in the list of Global Outsourcing 100 2017 by the International Association of Outsourcing Professionals (IAOP) as the best outsourcing providers. Ukraine was also recognized as one of Top 25 countries according to outsourcing Global Services Location Index by AT Kearney. This study ranks different countries in terms of financial attractiveness, skills and the availability of resources as well as business environment development.
What’s more, over 100 R&D centers of global companies from a variety of industries, including software, gaming, telecoms, and e-commerce are located in Ukraine. They include such companies as Microsoft, Samsung Electronics, Apple, Wargaming, Boeing, Skype, eBay, Siemens, IBM, and others. Also, such global tech companies as PetCube, Grammarly, DepositPhotos, Jooble, Viewdle (bought by Google Inc. for about USD 45 million), CleanMyMac have all started in Ukraine.
Software development industry in Bulgaria is not as developed as the Ukrainian. Nevertheless, it has been showing a double-digit revenue increase for the fourth consecutive year and reached 1.86% of the GDP. The Bulgarian Ministry of Finance forecasts a growth of 2.1% in 2016, whereas the EU is a bit more pessimistic, with an expected growth of 1.5%. Moreover, around 69% of Bulgarian IT professionals work in local private companies. The country has a rather high number of R&D offices of multinational IT corporations such as HP, SAP, Johnson Controls, Oracle, VMware, CISCO, ProSyst, and Atos.
Ukraine’s business environment is evolving quickly and starting a business is now much easier due to the simplification of the taxation system and improvement of registration procedures. As a result, Ukraine moved up 20 positions since 2014 in the World Bank’s Ease of Doing Business 2016. Moreover, the World Economic Forum ranks Ukraine 68th out of 140 countries in its Global Competitiveness Index, with high scores in education, business sophistication, health care and innovation. Local authorities recognize the need to support and develop the Ukrainian IT-industry as a strategically important area for the country’s evolution. For instance, the adoption of the law on the simplification of export services and an increase in the state order for graduates of technical specialties are stimulating the development of the IT industry.
The Bulgarian government is aiming to improve the country’s business environment by offering a range of incentives for foreign investors. The country currently has one of the lowest rates of personal income tax in the European Union and it offers fiscal citizenship to foreign nationals who work in Bulgaria. In 2015, Bulgaria was named “Offshoring Destination of The Year” by the UK’s National Outsourcing Association (NOA). Overall the BPO sector’s contribution to the country’s economy amounts to 3%. Furthermore, according to the Economist Intelligence Unit, Bulgaria ranks 46th in the world in terms of business environment for the period of 2014-2018.
All things considered, both Ukraine and Bulgaria are growing quickly and keeping up with the latest updates on the software development market. Ukraine remains one of the top IT outsourcing destinations in Eastern Europe due to its impressive talent pool, moderate prices, constantly developing business infrastructure and interest towards innovation. The country was recognized among Top 25 IT services exporters and succeeded in attracting a conglomerate of leading international companies. So, depending on the factors that are crucial for your business, you may decide which of these destinations is better for you and choose your best IT outsourcing provider for a fruitful long-term partnership.