There are plenty of reasons, but the main business reason is that it’s profitable! Using outsource software developers can save you up to 50% of your budget, which can be invested in development. Moreover, companies themselves say that the reason they outsource their IT is to save money.

But why has it spread so much over the last few years? Let’s look at the factors that influenced the growth of outsourcing and offshoring

1. Cost of labor in different countries.

Two 2021 trends in the global economy, – the dominance of the developed countries in the technology sector and wage difference between IT talent in the USA vs. the rest of the world, – sped up the rise of IT outsourcing and offshoring.

Of the Top 100 ranking Global Tech leaders, compiled by Thomson Reuters, 45 companies are based in the USA, 14 in Europe, 13 in Japan, and only 8 come from developing economies (5 from India and 3 from China). According to a StackOverflow survey, IT talent salaries in the USA on average are more than twice as high as those in the world (surplus of 111%).

2. Pandemic increased our Demand for Technology.

Although historically the IT industry has been accelerated several times by the advent of blockchain technology, cloud computing, and other technological breakthroughs, this sector never has been so heavily affected outside of its digital bubble, not to mention beyond its sphere of influence. The Covid-19 pandemic has had several major impacts on the IT market:
1) it showed us how much IT products affect our lives on an everyday basis, and
2) it led to incredibly rapid evolution of work from home (WFH) models.

As a result – almost all aspects of team cooperation and project implementation had to be adjusted.

3. We changed our attitude toward remote work.

The mass expansion of WFH culture changed employers’ approach to the remote model of work, which was considered the main disadvantage of offshoring and outsourcing. This trend has played out in favor of the offshoring concept: the main problem of remote cooperation has now been reduced by the fact that most IT technical work is done remotely during a pandemic by companies’ local teams as well.

4. Automation affects Jobs with Routine tasks across BPOs, ODCs, and ITO companies.

As automation evolves, some of the lower-skilled routine jobs are being replaced by robotic process automation and BPaaS. But that automation has to be managed by somebody.

5. The global Shortage of Skilled Talent to hire.

The Global Skills Staff Shortage Report explored the reasons why human resources managers are struggling to recruit the right candidates (83% of respondents confirmed they had problems recruiting suitable talent).

According to the report, there are plenty of factors that make recruiting process a tough nut to crack for many companies. Nevertheless, 5 out of 6 responses are fully resolved by the offshoring company.
Whether you are looking to cooperate on a delivery-based or time & material model of engagement, the select offshoring partner ensures candidates have the needed work experience and have the right technical and soft skills. Such companies also take care to supply enough candidates for interviews and discuss salary expectations. The only pain point that offshoring companies cannot eliminate is competition from other employers, but such a situation usually proves great value for the money supplied by the partner.

1. Your company can focus on its main activity and use the extra resources to achieve its main goals.
2. You don’t need to hire IT specialists or expand the IT department in your company, especially just for one project.

Outsource companies use the best cutting-edge technologies and their specialists are professionals in this field. So you’ll get the best solution for your task. It is not surprising that the IT outsourcing market is going to reach nearly $360 million by the end of 2021 and 37% of small businesses are already outsourcing their projects and that number continues to grow from year to year.

Okay, so outsourcing is good, but what’s the angle?

Of course, like anything else in our lives, it has two sides. And they have a different weight for different people. Let’s quickly go through the pros and cons of it:

As you can see, there are some minuses, but mostly good offshore companies can manage those challenges so it is easy for the vendor to work with offshore teams. And big companies who hire them agree with the move!

Offshore Development Center (ODC) is a global extension of the IT department of a company set up to fulfill part or most of the development work for a project in a semi-autonomous manner. Such centers are usually established in countries with lower remuneration levels than those in the headquarters country for cost-saving purposes.

There are three different cooperation model structures in offshore software development services:

– Project-based delivery

– Time & Materials

– Dedicated Team

A project-based / fixed price model of cooperation with offshoring companies suggests full transfer of the responsibility for a specific scope of work onto the vendor. In this model, an offshoring company undertakes to deliver a project within the agreed upon time and budget.

This is a low-risk contract for a client but needs a thorough detailing of the outcome to the vendor to achieve satisfactory results. This model is perfect for small businesses and startups or if you need to quickly accomplish a one-time task that requires a highly demanded skillset. These contracts may require very little cooperation or collaboration.

The Time & Materials model is used when the scope of work of the project is unknown and may vary during the implementation. The work is charged as per the agreed-upon rate sheet and the talent may be hired and released as per project needs.

Such cooperation can be lengthy or not so much. The vendor undertakes little responsibility for the completion of the project but ensures the right talent is hired for the project. Such a model can be used for smaller tasks and bigger projects that differ in length.

The Dedicated Team delivery method suggests that several roles are hired as a global extension of a team performing specific duties for a prolonged period. Such a team will be located in a single space, get familiar with company standards, and sustain the client’s code of work ethics. Technically such a team will be able to ensure project continuity the best of all models.

To sum up this all, check the table below:

Types of OSD cooperation process flow:

Fixed project model:

Dedicated Team / Offshore Development Center Model:

Ukraine is one of the biggest offshore development centers in Eastern Europe. It has recognition from many big companies around the world. For example: Boeing, UBS, Deutsche Bank, HTC, BMW, Mercedes, Nordstrom, Burberry, Fossil, Guerlain, A.S. Watson’s group, Google, and other brands.

There are more facts about Ukrainian Software Development Market:

Ukraine in global rating:

There are over 200,000 tech specialists around the country and the number continues to grow. (There are 8 Ukrainian universities with tech faculties in QS World University Rankings 2022).

About 85% of tech professionals have at least an intermediate English proficiency level.

Despite the public health crisis of 2020, the volume of Ukrainian IT exports exceeded $5 billion for the first time and showed an increase of 20.44% compared to 2019.

40 Belarusian IT companies and 2,000 freelancers have moved to a permanent place of work in Ukraine after the August presidential elections in Belarus. While Belarus is fighting for transparent Presidential elections, some IT companies are relocating teams to Ukraine & Baltic countries (e.g WarGaming, PandaDoc).

Website: https://zoolatech.com/

Zoolatech is a service provider specializing in high-end software development. Founded in 2017, Zoolatech already has received awards as one of the TOP-30 fast-growing IT companies by clutch.co and TOP-100 IT-Employers in Ukraine.

Industry focus: Retail, Finance & FinTech, Media & Social, Construction, Travel & Hospitality.

Key clients: Nordstrom, Credible, Procore, Reddit, Glassdoor, Grubhub.

Why Zoolatech?

Zoolatech is an IT service company that develops technological solutions for digital business transformation. Our goal is to create an environment where both customers and employees can create extraordinary solutions in the conditions of support, respect and continuous development.

We are focused on Custom Software Engineering, Quality Engineering, Support and Maintenance, UI/UX Design, Cyber Security to provide custom-built solutions that are tailored to the client’s unique needs. We help them to overcome challenges and celebrate their wins as our own.

Team size: 350 employees.

Locations: Ukraine, Mexico, US.

Contact us by:

Social media: Facebook, Instagram, Linkedin.
Email: [email protected]

Clutch is a good tool for choosing the IT company that suits you the best. There you can access the company’s reviews, clients and experience, market presence, and more.

According to Clutch, these are the TOP-10 Kyiv companies who can produce ads for your business or startup:

1. Sigma Software
2. GBKSOFT
3. Stfalcon
4. AgileEngine
5. Master of Code Global
6. LITSLINK
7. Uptech
8. Cleveroad
9. Zoolatech
10. IDAP