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NEARSHORING NEXT DOOR. EUROPEAN COUNTRIES WHO INVEST MOST IN UKRAINE

Our second detailed material devoted the prospects of nearshoring software development in Ukraine for European companies

11 July 2024

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Introduction

Over the past few decades, Ukraine has been recognized by European countries as a nearshoring software development location that provides an ideal balance between skilled technological talent and financial attractiveness. Many European countries bordering Ukraine, as well as firms located there, continue to open their R&D centers and offices here, hire Ukrainian specialists and developers, and invest in interesting and profitable projects that guarantee product success. Among them, we can mention first Poland, Germany, Sweden, Czech Republic, Netherlands, and many other EU countries, as well as global European IT giants.

In this article, we’ll take a closer look at the statistics on investments in recent years by the above-mentioned countries, as well as draw a parallel with such a phenomenon as nearshoring, because it’s thanks to this trend that cooperation between neighboring countries began.

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History of Nearshoring in Ukraine

The trend of nearshoring in Ukraine dates to the distant 1990 when the popularization of the IT sector in many European countries began. Back in those years, many Ukrainian developers were already filled with enthusiasm, and even though they were just beginning their acquaintance with innovative developments, and programming languages were learned from textbooks, they were already getting used to cooperating with European countries, which were never as accessible as after Ukraine's independence. In twenty years, between 1990 and 2010, nearshoring software development in Ukraine expanded to 30 companies, and a total of 20,000 it-specialists and developers. Today, as the number of software developers in Ukraine has increased to 220,000 developers, nearshoring software development in Ukraine includes over 5,000 IT companies, providing a wealth of choices when it comes to implementing nearshore software development strategy.

Perhaps the main reason why the IT sector in Ukraine has outperformed expectations over the past few years is that it’s fueled by close cooperation with EU countries and foreign capital. This in turn creates competitive salaries and career opportunities for skilled IT professionals motivated to stay relevant in the Ukrainian IT market. The nearshoring model itself allows EU companies to establish long-term relationships with their nearshore software development resources. This symbiosis benefits both sides of the nearshore software development partnership: EU organizations get better quality produced by skilled and more accessible resources, while software developers in Ukraine get the opportunity to grow professionally by being part of companies with European leadership standards.

Startups and projects that you have probably heard of but haven’t guessed who made them come into this world.

Today, the information technology sector is the most promising area for investment. The rapid development of the industry ignites the interest of young investors who would like to multiply their capital. Every month several hundred IT companies appear on the market, and their popularity doesn’t diminish for a minute. Information technology is gaining momentum, becoming more widespread, and regularly modernized with new developments and techniques. That is why investors who decide to invest in this sphere, can count on a significant income because IT technologies are characterized by huge potential and excellent prospects. In addition, this market is provided with various types of investments, and although the most popular is still investing in startups and projects, it’s also worth noting such types of investments as buying shares of IT companies, investing in the game industry, investments in digital assets, as well as various grants to small IT companies with great potential.

Among the European countries that have already joined in investing in the Ukrainian IT sector is Germany. Many well-known German companies such as SAP and Siemens have opened offices and R&D centers in Ukraine, allowing many qualified developers to show their talent. In addition, Siemens cooperates with the Ukrainian company SoftServe in the field of software development for the industry.

German investors also actively continue to support Ukrainian startups. The most vivid example was the investment of the German company Rocket Internet in the Ukrainian startup Rozetka, which wasn’t known to many people at that time, and they didn’t miss, it because today Rozetka isn’t just a startup, but a company with online retail #1 in Ukraine.

If we talk about the relationship between Germany and Ukraine today, Germany plans to provide important assistance to Ukraine in connection with the invasion and the beginning of the war the amount of investment in the economy of more than 240 million dollars, some of which will also go to support the IT sector, projects, and startups. This shows that close and promising relations have been formed between Germany and Ukraine, where each country is ready to lend a helping hand in a difficult situation.

Among the leading European countries that are actively investing in the Ukrainian IT industry is also Poland. Due to geographical proximity and cultural ties, Polish investors find Ukraine a great opportunity to turn their desires into reality. One of the examples of successful investment in Poland in the Ukrainian IT industry is the opening of R&D offices of Polish companies in Ukraine. For example, the Polish company Luxoft, specializing in software development, opened its office in Kyiv. This allowed the company to get access to highly qualified Ukrainian developers and experts, as well as to expand its client base.

Another example of Polish investment in Ukrainian IT projects is the creation of partnerships between Polish and Ukrainian companies. For example, the Polish company CD Projekt RED, which you may know as the developer of the popular computer game "The Witcher", cooperates with the Ukrainian company GSC Game World, the developer of the game "S.T.A.L.K.E.R.". This partnership allows both companies to work together on different projects and utilize the strengths of each of them.

Ukrainian startups also received support - the Polish company Innovation Nest invested in the Ukrainian company Depositphotos, which is one of the largest photo stock platforms in the world. This allowed the Ukrainian company to receive financial support and expertise from Polish investors, as well as to expand its client base and increase its competitiveness in the global market.

Sweden can also be safely added to the list of countries that have chosen to cooperate with Ukraine in the format of nearshoring. The Swedish company Spotify, known to all of us as one of the most convenient programs for listening to music, cooperates with the Ukrainian company Grammarly in the field of software development for the music industry. Another example - is Creandum invested in the Ukrainian startup Preply, a platform for online learning and language learning. Such companies can see great potential in Ukrainian IT specialists and developers and seek to use their knowledge and experience to develop joint projects.

Why did European countries choose Ukraine as a country for nearshore software development?

When it’s time to choose a country for nearshore software development, most European companies try to comply with high-quality standards, which are crucial to ensure that the developed solutions meet their expectations and requirements. The list of such standards includes open and clear communication, intercultural competence, quality control, customer focus, a favorable environment with low pricing, etc.

The main lever that encourages many European IT companies to switch to the format of nearshoring and cooperate with Ukrainian specialists is most often the pricing policy. Professional developers are in high demand, and their salary expectations continue to grow - so many companies around the world are starting to think about other options. The hourly rates offered by professionals in Ukraine are very competitive, making them an attractive option for businesses looking to optimize their budgets while maintaining product quality. In addition, Ukraine boasts a pool of talented developers who can deliver quality work, helping to optimize ROI for hiring European companies.

In addition to all the above, coastal software development in Ukraine offers convenient proximity of time zones to countries such as Poland, Germany, Sweden, and Slovakia, which makes it much easier for the client and the development team to communicate with each other and work together. Real-time interaction, fast response times, and less delay in communication speed up development cycles and facilitate decision-making and project processing.

“When collaboration is established - quality control increases”. From the planning stage to final implementation, the development process is closely monitored to identify and eliminate potential vulnerabilities at an early stage. As practice shows, Ukrainian developers work closely with foreign internal teams to ensure that the developed solutions meet your quality criteria.

In conclusion, we would like to note that every day a lot of new established industry standards and best practices in software development are being introduced to ensure a high level of quality and reliability. Regular updates and meetings promote transparency and ensure effective project management, which is critical to project success.

Naturally, considering the prospects of nearshoring in Ukraine, European IT companies are more than confident that their business partners are reliable. We can see it through such actions as investing in startups and projects, the opening of offices and R&D centers by global IT giants here, and in general friendly relations between Ukraine and many EU countries.

Final remarks

The war has had a noticeable but not catastrophic impact on the IT sector in Ukraine. Since many countries despite the war continue to choose Ukraine as a country for nearshoring and locate their offices and R&D centers here, they provide most of the qualified specialists with jobs, thus enabling them to keep the country's economy afloat. According to the Ministry of Digital Transformation of Ukraine, it was the IT sector that showed remarkable resilience, with IT companies retaining 95% of foreign contracts.

Such indicators only tell us that IT nearshoring in Ukraine is really thriving, mostly due to the country's established contact with neighboring European countries. Every new investment, every new R&D center opened in Ukraine, and every Ukrainian developer that European companies choose to join their team - step by step strengthens Ukraine's position as a strong player in the IT market and certainly brings the country closer to victory.

We hope that this article was informative and useful for you, our reader, and you learned everything and a little bit more about IT nearshoring in Ukraine and about European countries with which Ukraine shares its resources, in return receiving investments in projects. Our blog has a lot of equally useful articles on IT topics, and we’ll be glad if you are interested in other topics.

If you have any questions or have an idea about hiring a team of professional developers in Ukraine, we would be glad to fuel your business idea with our services: contact.us@gointeractive.co