Ukraine IT Landscape:
IT Geography

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In July of 2001, Ukrainian President Kuchma signed a decree called the "Program on Development of Investment Activity in Ukraine in 2002-2010."  In this decree, he states that the Program should contain complex measures aimed at further improvement of the investment climate in Ukraine, namely: #14) Stimulate investment attraction to the scientific, technical, and innovation activity, create new and develop the existing techno-parks, techno-polices, and innovation business-incubators.17 While the year 2010 may not seem like a long way for some of us.  For IT professionals in the Ukraine, it might as well be forever.  This may explain why smaller firms and groups of IT professionals have, for several years, been courting software firms around the world to hire Ukrainians for their offshore software development needs. In so doing, these firms have created their own "virtual" techno-park. Offshore software development is loosely defined as the practice of moving software and other IT work, such as project analysis, design, coding, testing, and maintenance from companies in expensive, developed countries to software companies in inexpensive, developing countries where a large number of experienced and qualified IT workers are present.  Ukrainian IT software entrepreneurs sell their political stability, experience, scientific potential and high level of IT expertise, increased production cycle and lower wages (costs) when marketing their offshore development services to the Fortune 500's of the world.  Offshore software development in Ukraine does have its negative side.  Their inability to protect intellectual property rights is a big risk for offshore IT companies doing business here. Ensuring that source code developed for a client remains secure and is not resold could be a challenge. Nonetheless, energized by the potential of winning lucrative contracts from Western clients, dozens of new information-technology outsourcing ventures, including many with foreign founders, have sprung up throughout Ukraine. The combination of plentiful, inexpensive labor, relatively low overhead and modest start-up costs means that offshore-programming firms are easy to establish in the country.  About 20 companies have more recently started operations.  Some have only two or three on their payroll; others employ dozens. Frogwares Ukraine is the software-development arm of Dublin-based Frogwares Ireland Ltd. Established in Kyiv last fall, the company is focusing on partnerships with large software-development companies in Ireland and France.  The company has 11 local programmers currently working on 30 or so projects for clients like AGS Soft, a French IT group, and Air France. The  KIT Group LLC is a staff of six programmers and a number of subcontractors who started late last year in Kharkiv, a city the group says is the Silicon Valley of Eastern Europe. KIT has established partnerships with Wisconsin-based 1Prospect.com LLC and Technology Architects, Inc. Kharkiv-based Telesens KSCL Ukraine has more than 200 programmers working for such clients as Deutsche Telekom, BT Cellnet and France Telecom Mobiles, via its German parent company, Telesens KSCL.  Telesens Ukraine started in 1998 and specializes in billing software. Germany's PopNet Internet AG group entered Ukraine last year with a development office in Kyiv staffed by 60 programmers.  According to officials there, PopNet 's Kyiv programmers will be developing server-side e-commerce Web solutions for corporate clients in the West. International Company Services Ltd. is an offshore banking and consulting firm based on the Isle of Man in the United Kingdom. It set up in Kyiv an IT outsourcing firm of its own - Viva Solutions. Atlantic Group, a Based-based media holding company, recently sold a controlling stake in Digital Design & Marketing (its programming, design and animation production company) to Los Angeles-based DBA Media.  Jed Sunden, publisher of the Kyiv Post, last fall launched Sputnik Development, an IT-outsourcing firm employing 20 programmers.   Sputnik Development has landed a series of contracts from both inside and outside Ukraine. 18 There are Ukrainian-owned offshore software development companies too. Kyiv's Miratech Software Group was established in 1992 by a group of programmers from the Hlushkov Cybernetics Institute and employs more than 100 programmers. The Lviv-based Softserve software development company was created by a group of programmers from Lviv Polytechnic Institute in the mid-1990s. It employs 100 programmers and works primarily for U.S. clients. According to IT experts, while many of the new ventures have been attracting a lot of attention because they are legally established by foreigners, thousands of Ukrainian programmers have been busy programming for the West for years behind closed doors, to avoid the tax authorities.  They estimate that local underground programmers have been doing tens of millions of dollars worth of work annually for the West in recent years, a figure much higher than the official state figure of about $1 million. Some of these "underground" programming companies are rumored to be located in Kyiv, Dnipropetrovsk and Vynnytsya. 19 While Western IT firms have used Indian programmers for about two decades, Eastern Europe hope to become a substitute if India's IT workforce moves to the US or they price themselves out of the market with higher wage demands.  However, recent declines in the global economy and negative IT trends may eliminate some of this need. But if the offshore trend continues, it might help ease fears of a Ukrainian brain drain, as workers will be able to stay here while employed by foreign companies at higher wages.

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