Presentation IAOP
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This document provides an overview of the outsourcing industries and technology landscapes in Belarus and Ukraine. Some key points: - Belarus and Ukraine have large, skilled talent pools for outsourcing with thousands of IT graduates annually and lower costs than Western Europe. - Both countries have a strong technological foundation from Soviet times and continue to invest in education. Minsk is considered an emerging outsourcing destination and Kyiv is in the top 100. - The cultural environment is considered more similar to Western clients than locations like India, with a shared Eastern European mindset, though some differences exist like a preference for discussion over simple agreement. - Both countries offer government support for outsourcing through organizations that
Presentation IAOP
- 1. Eastern European IAOP Chapter October 8th-9th , 2013 Mining for Talent: Outsourcing Industry And Technology Landscape of Ukraine and Belarus Svetlana Kritsyna, Key Account Manager, Leo Topol, Key Account Manager Intetics Co.
- 2. AGENDA Belarus & Ukraine Country Overview Technological Environment Business Environment: Cultural Proximity Government Support & Legal Conditions Education & Talent Comparison of Popular IT Outsourcing Markets Cost Savings Time & Travel Summary
- 3. Belarus: Country Overview Country Profile: Capital: Minsk Population: 9.5 Million GDP in PPP: US$147 billion GDP per capita in PPP: US$15,633 Official languages: Russian, Belarusian Macroeconomic Conditions: In 2008 Government started a program to attract more foreign investments 58th economy in the world (2012) Currency: Belarusian ruble (BYB/BYR) Exchange rate: US$1 = Br 9132 World organizations: CIS The World Bank, International Monetary Fund Outsourcing Industry Snapshot: IT outsourcing market volume: US$ 0.8 billion Number of IT outsourcing companies: About 800 Number of specialists involved in IT outsourcing services industry: 33,000 European Bank for Reconstruction and Development GATT (General Agreement on Tariffs and Trade) Ease of Doing Business 2012: 58 (China – 91, India – 132)
- 4. Ukraine: Country Overview Country Profile: Capital: Kyiv Macroeconomic Conditions: Population: 45 Million GDP in PPP: US$345 billion GDP per capita in PPP: US$7,598 37th Economy in the world Official languages: Ukrainian, Russian Total FDI in 2011 was $45 billion Currency: Hryvna (UAH) Exchange rate: US$1= ₴ 8.13 Trade organizations: Outsourcing Industry Snapshot: IT outsourcing market volume: US$ 1.3 billion Number of IT outsourcing companies: over 1300 Number of specialists involved in IT outsourcing services industry: CIS GUAM WTO 47,000
- 5. Things you probably didn’t know… World famous actress Mila Kunis (“Black Swan”), Mila Jovovich (“The Fifth Element”) and Olga Kurylenko (“Quantum of Solace”, “Oblivion”) were born in Ukraine. George Gershwin wrote one of the world’s most famous songs, “Summertime”, after being inspired by an old Ukrainian lullaby called “Sleep Is Tiptoeing About” performed by the Ukrainian National Chorus. Ukrainians invented the largest plane in the world – the An-225 “Mriya”. Originally it was designed for spacecraft transportation. Now it specializes in freight haulage. Ukrainian “Yuzhmash” (Dnipropetrovsk) produces the most environmentally friendly launch vehicles in the world. Bart Mayer, Co-Founder of MetroGoldwyn-Mayer (MGM) Pictures, was born in Minsk, Belarus Marc Chagall, a famous painter, was born in Belarus. In his painting “Over the City“ Chagall and his wife Bella appear to be flying over his native city Vitebsk Nathan Shwartz, the founder of Timberland, was born in Odessa in a family of shoemakers .
- 6. Technological Environment Historical: Historical: The “Silicon Valley” of the USSR Used to manufacture over 50% of computers and computer parts for the USSR Software industry hub since 1960s Belarusian IT experts and companies have been involved in the design and construction of space stations, global communication systems, R&D projects for the military, and advanced nuclear developments projects. Current: Mobile/cellular: 10+ million; mobile phone penetration nearly 110% Internet users: 57% of population Ukraine is a leader in space flight and is among the top 5 countries in the world possessing a full technological range of a rocket based systems. Ukrainian city of Kharkov was the first location in Europe where the atom was split. Current: Mobile/Cellular: 49+ million Internet hosts: 234,349 In 2011 Ukraine was ranked 9th in the "Top 10 Internet countries in Europe“
- 7. Business Environment: Outsourcing Industry Outsourcing Market Size: 0.8 US$ bill 33,000 Software Professionals Market Growth +25% 16,000 ICT graduates every year 50 years of software industry Minsk is an emerging outsourcing destination according to Tholons 2012 Included in Gartner’s Top Offshore Locations 2012 Outsourcing Market Size: 1.3 US$ bill 47 000 Software Professionals Market Growth: +18% 30,000 ICT graduates every year Kyiv and Lviv included in Tholons’ Top 100 Outsourcing Destinations 2013 Kyiv is amongst the 25 safest cities for offshore/nearshore outsourcing Ukraine is the 4th in Top 10 countries with the most certified IT professionals (after US, Russia and India)
- 8. Cultural Proximity Think & Work “à la Western”: Belarusians and Ukrainians share the same cultural and business principles with customers in Europe and the USA Eastern European Mindset Proximity: In the Ukraine you can find many young dedicated people who really want to work hard to please you. But don‟t expect they will just say „Yes, we will‟, but will give a good discussion to find out what the best way is. The only question is if you as client can handle such criticism and understand that you can get better results through it. Ha Vo, COO at Railsware, Netherlands “In the last fifteen years Belarus has quickly grown individualistic with all the values of the western mind. The country is strongly Westoriented. An average Belarusian can laugh at the same things that American will do; their working process and the way of making business is similar to the American and European.” -FORBES Magazine
- 9. Cultural Differences Are there differences between Eastern Europe and the Western clientele? Some cultural differences do exist… Self-criticism tends to be greater in Slavic cultures (“great” for Americans tends to be evaluated as “alright” for most Slavs) Stubbornness: if something is being done incorrectly there is an urge to fix it The cultural proximity and business environments are still much more similar than other outsourcing destinations, such as India or China. The differences that do exist are easily manageable.
- 10. Government Support & Legal Conditions Supporting Organizations: Supporting Organizations: Infopark: www.infopark.by Ukraine Hi-Tech: www.hi-tech.org.ua Belarus Hi-Tech Park www.park.by IT Ukraine www.itukraine.org.ua Favorable Tax System: IT companies are exempt from all corporate taxes, including VAT, profit, real estate and land taxes. Individual income tax has a fixed rate of 9% for the employees of HTP companies. That resulted in a fast boost of IT industry in the country. Even payroll taxes are reduced to average wage in the country, effectively meaning that payroll taxes are paid on about 30% of the wage Newly Adopted Tax System: Unified tax code adapted in 2010 One of the main goals of the new system is to attract foreign investors Corporate income tax to be reduced to 5% for IT companies by 2014
- 11. Education 55 universities Spends 6% of GDP on education; ranking 30th (of 132) in global education spending Possibility to be trained entirely in English Belarus is among the top 30 countries in the world for higher education attainment and accessibility (Legatum Prosperity Index 2012) – ahead of Switzerland , the United Kingdom, India, China, as well as Japan. Belarusian State University (BSU) was ranked in the top 10 of programming universities worldwide (the TopCoder challenge) 861 Universities 84% graduation rate Provides training in 74 fields and 600 specializations Ranked 16th from 105 countries for the total number of university students Ranked 46th for higher education (out of 139) in Global Competitiveness Report Has 6% of world’s physicians, mathematicians and programmers Ranked 7th for the number of students pursuing technical specializations (Global Education Digest) Kyiv National Taras Shevchenko University is one of the top 10 programming universities worldwide (the TopCoder challenge)
- 12. Talent Pool 30,000 ICT graduates every year about 30% work in software development after graduation For every 10,000 people there are 465 students in Ukraine (6 th in the world after USA, Poland, Finland, Russia and Belarus) 16,000 ICT graduates every year For every 10,000 people there are 467 students in Belarus (5th in the world after USA, Poland, Finland and Russia) Technology & Engineering is the choice of study for each 4th student in Belarus 61.5% of researchers work in the field of Technology & Engineering Lifelong learning policy of the Ukrainian government allows over 30,000 graduates to be retrained annually 508,000 students enter Ukrainian technical institutions annually 44.6% of higher institution researchers work in the field of Engineering & Technology The number of university students per 10,000 population USA Poland Finland Russia Belarus Ukraine Norway Hungary Kazakhstan Austria Italy Japan Germany Tajikistan Azerbaijan
- 13. IT Labor Market Overview The percentage of specialists in various technologies in Belarus 69% of Ukrainian IT specialists identified IT as their hobby. The next two are the Literature (56%) and Movies(54%). The percentage of specialists in various technologies in Ukraine Other Other
- 14. Comparison of Popular IT Outsourcing Markets Belarus Ukraine Russia Romania Mexico Egypt India China Population (M) 9.5 45 138 22 115 84 1,205 1,343 Outsourcing Market Volume (B US$) 0.8 1.3 4 0.6 15 1.1 70 20 Outsourcing Market Volume per capita (US$) Outsourcing Market Growth 84 29 14 27 130 13 58 15 25% 18% 27% 40% 10% 7% 10% 13% 38 - 12 42 - 14 56 - 17 46 - 13 64 - 37 38 - 11 35 - 10 40 - 12 37% 42% 54% 43% 79% 36% 33% 38% Typical Rates (maxmin), $/hour Rates in IT (compared with US, %) * Sources: http://itonews.eu/ http://www.russoft.org/ http://www.payscale.com/ http://www.averagesalarysurvey.com http://www.bipsearch.com/ http://www.worldbank.org/
- 15. Cost Savings: Comparable to labor costs in many Asian countries Hourly labor wages in the IT sector are on average 5% to 36% lower in Belarus than in many other outsourcing locations in Central and Eastern Europe Minsk is ranked 185 out of 300 cities in the "Cost of Living Index 2011," where 1 is the most expensive. Lower wages than EU members (including other EE countries like Poland, Hungary, Czech Republic, Slovakia and Romania The annual salaries of IT professionals in the Ukraine range from $18,000 to $48,000, depending on the job profile. Wages vary between regions. Kyiv ranked as most expensive region; Kharkov the next biggest city is about 15% cheaper Western Companies are likely to save 40 - 60% of their total in-house IT spending - According to European IT Outsourcing Intelligence Report
- 16. “For IBM…the total cost of its employees in India used to be about 80% less than in America; now the gap is 30-40% and narrowing fast.” – Bundeep Rangar, The Economist, January 2013 Cost Comparison 44% of outsources still consider cutting costs as the main reason to outsource Eastern Europe is seen as less cost efficient than India or China, but that is likely to change: rising salaries of these countries drive outsourcing costs up: World-at-Work estimates salary rise of 10.7% for India and 8.8% for China Cost comparison: All in USD/hr* Belarus Ukraine India China Germany USA Hourly Rates (max-min) 38-12 42-14 35-10 40-12 90-30 90-31 Average Hourly Rate for Software Engineer 23 25 21 23 52 61 Project Manager 30 32 28 31 77 80 Senior Developer 26 28 23 26 64 72 Junior Developer 18 19 14 16 34 31 *Hourly rates estimated using BLS, ILO, Payscale.com and ITOnews.eu …plus transportation costs…
- 17. Time & Travel All prices in USD** Belarus Ukraine India China Roundtrip* from New York JFK ($; hrs) 821; 12 hrs 767; 12 hrs 1181; 19 hrs 943; 16 hrs Roundtrip* from London Heathrow ($;hrs) 390; 3 hrs 281; 3-6 hrs 718; 9-14 hrs 742; 13-20 hrs Visa Needed Yes No Yes Yes Time Zone EET (UTC +2) EET (UTC+2) IST (UTC +5.30) DST (UTC +8) *Roundtrip to the capital city **Cheapest ticket, prices estimated 2 months in advance Ukraine was considered one of the top 10 countries to visit in 2012. The Lonely Planet travel guide recommended that tourists get acquainted with the “great unknown destination in Europe” – and by great they were not only referring to Ukraine’s status as the largest country in Europe by area.
- 18. …all of these companies already vested:
- 19. So…Why Eastern Europe? High-quality engineering professionals Cultural proximity and western mentality Full intellectual and creative rights immediately vested with clients Strong education system Deep scientific tradition Competitive rates Governmental support Mature and growing outsourcing market
- 20. Intetics: a brief intro Established: 1995 Head Office: Chicago, IL Global Locations: Minsk, Belarus Kiev & Kharkov, Ukraine Dusseldorf, Germany Over 450 employees Customers in 30+ countries ISO 9001 & ISO 27001 70% Certified Staff Microsoft & Oracle Gold Partner 2011-13: #1 Outsourcing Rising Star 2006-13: Top Outsourcing 100 2007-13: Global Services 100 6-Time Inc 500|5000 Honoree European IT Excellence Award NOA Outsourcing Award CRN Fast 100, Software 500
- 21. Follow us: Your feedback is very important to us. Please follow Intetics and leave your comments https://twitter.com/intetics http://www.linkedin.com/company/intetics http://www.youtube.com/user/InteticsVideo/ https://plus.google.com/107948198067741612890/posts http://www.intetics.com/feed/rss/
- 22. IAOP Chapter: Eastern Europe Virtual Meeting: Oct 8-9th, 2013 THANK YOU! Svetlana Kritsyna, Key Account Manager Leo Topol, Key Account Manager Intetics Co. 809 Ridge Rd. Suite 205 Wilmette, IL 60091, USA Tel: +1-312-625-5669 (USA) +49-800-186-0184 (Germany) +44-20-3514-1416 (UK) Fax : +1-847-256-3190 Email : odt@intetics.com