In the past three years Ukraine has undoubtedly become the most attractive outsourcing destination in Eastern Europe. With the second largest population after Russia, a legacy of Soviet science and success-hungry entrepreneurs, the country boasts the fastest- growing software development industry.



According to goaleurope.com the offshore outsourcing market in Ukraine has reached $246 million in 2006. It grew 47% in 2006 with 30,000 IT graduates arriving into the workforce each year. A lack of the integration with the EU keeps the prices in check and IT professionals from leaving the country. It is not unheard of for Poland and other new EU member states to seek qualified IT resources in Ukraine. And Germany recognizes the outsourcing opportunity in Ukraine - German customers (60 in total) employ 6% of all offshore outsourcing resources in Ukraine.

The industry benefits from visa-free regime with European Union and North America and geographical proximity to Europe, but has recently had frequent changes in the government. Whilst changes in the government do not affect the outsourcing businesses, its policies such as increase of education budget to 6.5% of GDP play a positive role in the long-term prospects of the software development industry.

The industry is well established in Kyiv, where more than 50% of all software development professionals are employed, but is simultaneously rapidly expanding into Lviv and Kharkiv. The outsourcing industry is quite fragmented. Of the 70 companies interviewed, only seven of them employed more than 300 people in 2006 whilst 21 companies had 100 employees or more.