Kharkiv: Ukraine’s IT outsourcing hub

Kharkiv, Ukraine’s second biggest city, is house to over 450 active tech companies utilizing more than 25,000 IT specialists, states a current massive research study by PwC and IRS Group.

“Kharkiv is the cradle of three Nobel laureates in economics, physics and medication, the nation’s greatest academic school of science and a variety of other prestigious universities, which every year make it into the international rankings,” says Victor Shalnyev, CEO of NIX Solutions, a leading custom software development business based in Kharkiv.In 2017, 95 per cent of Kharkiv’s overall sales in IT services were exported, of which the main recipients were the US with 65 per cent of total exports and Europe with 25 per cent. Why exists such a huge distinction between the export to the US vs Europe?”When it comes to NIX Solutions, it is situation-dependent. Having begun working with a big United States corporation back in the 2000s, we earned a rock-solid credibility there and concentrated on the US market for some time. For the last couple of years nevertheless, we have been exploring the European market carefully and we now are expecting the European and United States parts of our turnover to end up being equal in the future,” Mr Shalnyev informs Emerging Europe In contrast to other emerging Europe markets, Mr Shalnyev is adamant that Kharkiv, along with Ukraine, wins the day in regards to the cost of living, even if other European cities lead with respect to what he calls convenience of living, such as the number and quality of services and sustainable metropolitan environment. On the other hand, the space in the comfort of living has actually been narrowing in the last years. In numerous respects, Kharkiv can be compared with numerous other European cities.However, despite the fact that PwC has considered Kharkiv to be a”massive outsourcing center in Ukraine,”some of the reports findings are less encouraging, and could hurt the IT sector in Kharkiv and Ukraine as a whole.First of all, when it pertains to IT services the whole industry in Kharkiv counts on exports, according to a number of the CEOs spoke with for the report, and the lack of a domestic market might be a constraining factor.Another problem is remuneration. With increased need for IT specialists, wages provided in Kharkiv can be similar to those provided in the United States, which according to some might press worldwide clients to

take a look at their domestic markets instead of outsourcing. Also, the increased need for higher compensation can also impact the start-up eco-system, specifically for those in the early phases of development.”The level of reimbursement is increasing in Kharkiv and can reach up to 3,000-4,000 US dollars per month,”discusses Pavlo Obod, creator of Sloboda Studios.”This could convince clients that it would be simpler to employ domestic specialists, since they speak the exact same language, live in the exact same time zone and have a much better insight of the regional market.” Another issue triggering issues for Kharkiv is the lack of decent infrastructure and communications (transportation). According to the report, only 37 percent of flight was made by direct flight, which implies that two-thirds of those visiting the city need to do so by means of connecting flights.In current years, foreign direct investment(FDI)into Kharkiv and Ukraine in the IT sector has actually stayed steady, and is not really growing. According to Mr Shalnyev, the reason for low FDI growth lies in an absence of trust.”I think it is associated to the low trust of investors(foreign along with Ukrainian) to governmental guarantees which we acquired from the previous regime. However, the circumstance is changing for the much better, but this procedure is still quite slow.

I make sure that we’re currently standing on the edge of substantial financial investment development. A second element is an unpredictability in needs and development perspectives of the field,”discusses Mr Shalnyev.Despite the obstacles, the report reveals that Kharkiv is an excellent destination with room for enhancement and possibly chances for large corporations to assist establish the city and its facilities. The macroeconomic model developed by PwC forecasts that by 2025, the IT market of Kharkiv will double in size and deserve around 1.85 billion US dollars.”The discussion of this research will absolutely improve activity in affordable segments close to IT. It can already be utilized as an excellent base for developing business-plans,”concludes Mr Shalnyev.Tags