[Challenge:Future] Boosting Ukraine competitiveness through IT-outsourcing
1. Boosting Ukraine competitiveness through IT-outsourcing
Team name: Dream Port
Selected EE country: Ukraine
Team leader: Andrii Kardakov
Team members: Azat Yermegiyayev
Countries the team members come from: Ukraine and Kazakhstan
School: Business School Lausanne
2. It Outsourcing In EE
40 • Fast growing industry
20 • Total Spending on IT-outsourcing is 252 $billions
• There is an increase for 2.5% from 2011
• Eastern Europe is among the leaders
3. IT-outsourcing in Ukraine
From 2003 to 2011 Industry size grew 10 times
Ukraine combines relatively low price for service
with high level of technical qualification
Because of educational base, Ukraine can supply
growing demand for it-specialists
Ukrainian companies are young and highly
responsive to changes on market
Five biggest companies employs 45% of all
Biggest shares of activities goes to support
outsourcing, but R&D outsourcing grows
Main disadvantage for growth of industry is a
lack of government support and troubles with
4. Interview with Alain Haut, professor in International Management Institute Ukraine
and associate professor in Business School Lausanne:
Want to see Ukraine flourish? Give freedom of speech, travel and innovation.
Political situation in Ukraine is far from being stable.
In 2011 political situation showed room for improvement, but inadequate actions of government shattered this possibility
Ukrainians do not have freedom of democratic choice as most of major political parties are backed by oligarchs (people
whose capital come from privatization) or consist of them.
Behavior of ruling party (Party of Regions) repulse foreign aid and investment
Infrastructure (road system in particular) is in very poor shape
Everything happens in Kiev and few other major cities. Need for development good suburban areas and other more
remote (i.e. non-Kiev) business centers potentially in less costly places
Ukraine can exploit advantage of being gateway from East to West, monetizing its traffic current.
Underdevelopment of internet coverage (estimated 30% of population)
Education system still too traditional and based on hard skills and knowledge.
Dire need for getting educated in softer commercial and business skills.
Ukrainian universities should reinvent themselves to raise competitiveness of Ukraine
Creation of high-quality alternative for public universities would fuel innovation
Ukraine partially retained technological education base from Soviet Union
5. Interview with Nadine Omelchenko, Director of HR policy at Octava Group:
Quite easy to build perfect strategy from a point "If I were a government". Much harder is
to accept that at best government won't help and start doing what you are have to do.
Easiness of doing business in Ukraine is one of the lowest in Europe
Ukraine holds global record for number of taxes
The only way for business to flourish is to have foreign support or to lobby your interests
Corruption tangled whole Ukraine, but worse offender is the President (Victor Yanukovich) and his family. In 2012
year, company of President's son gained government contracts in sum of 2 billion
There are only few globally competitive hi-tech industries in Ukraine including rocket manufactory, weapons manufactory
IT-outsourcing considered most promising industry in Ukraine as it showed approximately 30% growth for last nine years
For most of Ukrainian enterprises, cost of outsourcing services too high and they can't feel virtuous effect from growing
Newly granted tax concessions for IT-industry not granting desired effect
Since dissolution of Soviet Union, "brain drain" become serious problem
Each year, thousands of most promising university graduates leave country. Main reason for it is a lack of interesting
job, lack of opportunities and lack of possibilities for providing good live even with high salary.
Companies with foreign capital started to provide social environment to counter "brain drain"
6. Vision of IT-outsourcing industry in 2022
IT-outsourcing industry in 2013 IT-outsourcing industry in 2022.
Relatively small industry Core industry of Ukraine
• It-Outsourcing industry amounts 0,7% and employs 25 • IT-outsourcing industry amounts 6% of GDP and employs
thousand of employees 200 thousand of employees. Development of IT industry
also boosted other industries
Competitiveness based on price. Competitiveness based on value.
• Companies making profit from providing lower cost of • Companies use highest in EE quality of service and unique
service than competitors. technologies to achieve competitive advantage
Outsourcing of service. Outsourcing of R&D
• Companies doing medium skilled job of distant • Creation of research laboratories and improvement of
maintenance and coding. education allowed Ukraine to become most attractive
destination for outsourcing in Europe
Companies exposed to corruption and arbitrariness. Strong lobby protects companies from arbitrariness.
• Companies alone confronting government injustice. • Companies joined forces and created association that
Professional association do not have power to influence influence government
• Industrial public education Postindustrial public and private education
• Ineffective and over theoretical education public • Balanced practical and theoretical aspects in education.
education that lack integration with companies Wide network of quality private institutes built. German
apprentice system implemented.
High level of specialist flight. Balanced level of immigration and emigration
• Most qualified workers going out country because of • Companies provide lot of social benefits for employees
poor living conditions and lack of interesting job. including healthy food and childcare centers inside
7. Laws needed to boost growth of
Ukrainian IT industry
Goal Law Result
Protection from Establishment of court of justice that Creation of legal code
government deals exclusively with Hi-Tech for IT-outsourcing
companies. All lawsuits toward IT industry that will
companies should go through it. Dealing protect ensure that
with most of cases would be conducted companies can
through internet. Legal procedures will flourish without
be overseeing by foreign judges. arbitrariness of
IT industry has fixed solitary tax that can government
be paid to through internet.
Reform of education Gives IT-lobby ability to oversee and
influence the education of public
universities. Tax break for newly
established IT private universities.
Creation of tech parks Distribution of land and giving
companies interest less loan for
developing Tech parks.
8. Positioning – Outsourcing in CSR- as a
Ukraine should have a competitive
advantage from other advantage
countries. e.x. India
Safe Low cost High quality As part of New way of
marketing indicating a success
Nowadays an outsourcing highly competing industry. But Ukraine has natural a predisposition for outsourcing.
Ukraine has a good IT education. The market is full of qualified IT specialists. So the main advantage of the Ukrainian
Outsourcing industry will be low cost and high quality. Also English speaking specialist will make big difference.
Ukrainian industry should be positioned as safe fast and highly standardized. Also CSR should be as a part of marketing
which will make a difference from competitors. So CSR will indicate companies success.
9. Quality Result
By 2020 the competition between companies will be high. So the
main directions of development will be Quality and Corporate
Social Responsibility. Quality means increase of service quality
which will be mainly gained by motivating workers . CSR will play a Overall influence on
great role I companies development. As the CSR will indicate a Ukrainian economy will be
CSR success level of the company. It will also highlight the company enormous. A fast
from other competitors. development of
outsourcing industry will
increase level of IT in
general. A positive effect
Popularity of So this factors will enhance the popularity of the job.
on education cant be
overestimated. So the
the job main directions will be
Quality and CSR. It will
With increase of the popularity of the job will increase change the priorities from
the education level. Demand for the better IT education will low cost product to high
Education Increase. It will lead to improvement in educational system.
Also IT companies will provide their own courses .
10. GDP in 2012 GDP 2020
0.7% Outsourcing Gdp of the country
6% This growth will remain incase:
The growth of the GDP will increase 4% each year
The growth of IT Industry will be for about 30% each year
In real terms, size of IT-outsourcing industry
Gdp of the So approximately in 2022 IT industry
country will make 18 billion dollars.
GDP of Ukraine would be 287 billion dollars