Why Israeli Companies Outsource to Ukraine

Introduction

In a book published a decade ago, Israel was called the start-up nation. Today, despite some slowing down on the global scale of things, the country is still in a position to retain this title. Moreover, a lot of new companies overcome their teething problems with advanced technological opportunities and succeed in the global arena.

Challenges for a Tech Business in Israel

A great number of Israeli start-ups belong to the tech sector. It is growing very fast and the local talent market just can’t catch up.

Last year, 15% of vacant positions in the industry were left unoccupied. This corresponds to some 15,000 open positions. Areas that are in the most severe need of skillful employees are the niches of software development and production infrastructure management.

The government tried to solve the problem. In 2017, a 5-year educational program was launched. The Council for Higher Education intended to increase the number of tech graduates by as much as 40%. Still, today, the gap keeps on yawning.

Another reason for the lack of qualified personnel in small and medium IT businesses is that software developers in Israel prefer trying their abilities in large corporations like Google, Apple, Intel, and Microsoft. These giants offer tempting social benefits and higher salaries.

Finally, the strong demand for talent in the sector creates conditions for increased compensation. Today, earnings in the tech industry are 2.5 times greater than in other areas of the economy.

Outsourcing as a Solution

Israeli enterprises embrace different approaches to tackle the situation. Some try inviting foreign experts to fill local positions. To get employment, foreigners have to receive a special tech visa. Yet, this is more suitable for attracting top-notch experts with deep knowledge in particular fields rather than addressing the general lack of local talent.

More useful seems the program Back to Tech aimed at getting the Israelis working in tech sectors abroad back to their homeland. It is to bear fruit over time, but the number of such talents is limited.

Another initiative is about emphasizing equal opportunities and diversity. Currently, women comprise only 23% of dev specialists and 16% of management in the tech sector. The share of Arabs in tech companies is between 3% and 8%.

The most widespread and efficient solution is offshore outsourcing. A lot of Israeli enterprises rely on contracting talent abroad. It is cost-effective and allows filling the gap in the local labor market.

The most popular country for outsourcing is Ukraine. It is the choice of as much as 45% of Israeli businesses that recourse to hiring foreign labor. But why do Israeli companies choose Ukraine?

Overview of the Ukrainian Tech Landscape

Ukraine’s high-tech sector is booming. According to DOU, an active and industry-wide renowned Ukrainian IT community, the number of jobs in the industry rose by 26% last year.

Surveys show that the overall pool of employees in the high-tech is somewhere between 160,000 and 185,000. IT is the second largest export sector in Ukraine and consists of more than 4,000 businesses.

A lot of leading world brands run offshore development centers in Ukraine, including Google, Microsoft, Samsung, and ABBY. More than 100 of businesses outsourcing to Ukraine belong to Fortune 500.

According to Unit.City’s report, 18 Ukrainian outsourcing providers are listed in the Top 100 ITO companies. Top 3 customer countries are the US, EU and, of course, Israel.

With such statistics at hand, you can see that Ukraine is a strong and significant player in the world’s high-tech market. Now, let’s look at some more specific reasons why Israeli companies seek to partner up with Ukrainian providers more than others.

1. Aligned Cultures

Israel has close cultural ties with Ukraine. The main reason is quite simple. In the 80-90s, there was a massive immigration wave of Ukrainians of Jewish descent, and the process still continues, though on a far smaller scale.

Immigrants brought the understanding of the Ukrainian culture. Business owners and executives, which are immigrants of the first or second generation, feel comfortable outsourcing to people they feel related to.

On the other hand, long-standing business relations helped Ukrainians understand and internalize modern Israeli values and best practices. It is not that they just know what foreign clients expect, they have come to apply the same principles in their own companies.

You should be aware that onboarding and integrating a foreign team can be very frustrating. There is always a chance that despite all the expertise and skills, providers from abroad might turn out incompatible with your culture and business processes. In the case of Ukrainians, you can expect full alignment and proactive approach to the client’s needs.

2. No Language Barrier

Clear and efficient communication is essential to any collaboration. Ability to convey one’s thoughts and guide the discussion in a constructive way is a must-have skill. Unfortunately, sometimes, the interaction is disrupted by a poor command in a foreign language as well as weak interpersonal skills. Even more so in the tech sector, where concepts can be very complex and require long and elaborate discussions.

In the case of Ukraine, there is no such problem.

All Israelis of the former USSR origin can speak Russian. Ukraine, itself a former USSR republic, has Russian as an unofficial second language in many regions. Almost every Ukrainian can speak or at least easily understand it.

Surely, it is English that has become the language of international communication. In this respect, Ukraine is standing out as well. Most IT employees speak good English and can discuss complex topics off-hand. Almost every high-tech company offers in-house language courses. In this way, even those who did not have any interest in English beforehand get an opportunity to master the language along.

This situation is very beneficial for international business. Creating a complicated specification for your project, you can rest assured that your Ukrainian team will understand it in every detail. There are no fears that instructions may be misinterpreted or that developers will be left guessing what you meant.

3. Shared Time Zone

The two countries share the same time zone. It is the case even in summer, as both use daylight saving time with clocks set one hour forward.

In terms of the modern project management, synchronization of teams and their members is essential. Short iterations in development and pressing timeframes mean that even a several hours’ delay can impact one’s business.

Naturally, you can have developers switch to your own schedule, but shifted working hours are not likely to make them happy.

Conferences and meetings in the small hours of the night can be very exhausting. Even when the working hours overlap, you should consider periods of peak productivity. When one party is vigorous and full of zest, the other can be already weary of the day’s work. When you are still drinking your first coffee, the person on the other end may be already on track and eager to get to the business. In these circumstances, efficient communication is often difficult to achieve.

With the same time zone, an Israeli company can avoid all these issues partnering with a Ukrainian provider.

4. Easy Traveling

When outsourcing to another country, video conferences are often not enough. Despite modern connectivity, business owners and executives understand the importance of establishing and maintaining personal contacts.

Supervising a project can also require regular onsite presence. Some things just can’t be done remotely.

To go on a business trip to Ukraine from Israel and vice versa, you don’t need a visa. So there is no need to prepare any documents and wait.

There are regular flights from major Ukrainian cities to Israel as well. The same cities happen to be homes of leading IT communities. A trip from Kiev to Tel Aviv can take as little as three hours.

Visiting offices of Ukrainian providers is usually a pleasant experience for Israeli executives. Shared informal approach and business values facilitate mutual understanding and help to find common ground.

5. High Quality With Reasonable Pricing

When outsourcing to Ukrainian providers, companies on Israel market benefit both from the top-notch services and cost-effective collaboration.

The high standards in education and common practice of continuous self-development make Ukrainian talent a go-to choice for clients all over the world. With a wide range of programming languages and expertise in cutting-edge technologies available, you can always find a perfect match for your project.

The standard of living in Ukraine is relatively low, and local specialists work for much more moderate wages. The difference in the cost of living is more than 60%, and an average software engineer in Ukraine is paid more than two times less than in Israel. Combined with the high quality of work provided, it makes the cost to value rate very attractive.

Famous Success Stories

Every promising field needs explorers who show with their own example that potential advantages can be actually realized. There are a lot of Israeli companies that have successfully partnered with Ukrainian providers and now can boast that they made the right choice.

• Plarium. A mobile and web MMO game developer. Most famous titles include Vikings and Total Domination.
• Playtika. A mobile and web game developer. It offers casino, bingo, and strategy games in the digital format.
• PlayTech. A gambling software development company.
• Wix. A cloud-based web development platform used by more than 90 million clients worldwide.
• MyHeritage. An online genealogy platform.