Successful outsourcing to Kiev: visiting Levi9 and Daxx

Kiev is a popular outsourcing location for software development, with many companies like Levi9 and Daxx that focus on the Dutch market. We visited both companies to see how outsourcing works in practice.

Outsourcing, offshoring and nearshoring

Outsourcing software development means asking a outside party to take care of software development. In theory it could mean a company next door. In practice most companies look outside The Netherlands for outsourcing, for two reasons:

• To save labour cost. Living and labour costs are lower in many countries
• To have access to additional talent pools. Talented, available developers are hard to find in The Netherlands.

Many companies have indeed tried to not only outsource their development, but to also offshore it to India and other far east countries. Many of these projects have not been successful. Even though the cost per hour does go down drastically, many projects have not been successful. Language issues, culture issues, lack of direct communication, staff turnover and lack of user knowledge have caused many offshored projects to fail. The current trend in outsourcing and offshoring is therefore to nearshore: Move software development to countries that are nearby and have similar culture, such as Poland, Slovenia and Ukraine. Ukraine especially has a thriving software industry.

Advantages of Ukraine

We asked the development teams we met in Kiev, whay they thought Kiev is a popular place for software development. One of the core reasons is the status that IT has in Ukraine: “Every mother wants their child to work in IT”. The most talented people in Ukraine like to work for international companies are therefore attracted to the IT sector. The salaries for experienced IT staff have risen in line with the increased status. Outsourcing is thus not purely about saving cost, but more about access to the motivated talented work force of Ukraine. To understand the full size of the talent pool, look at this analysis by Daxx showing that there are more than 50.000 developers in Ukraine.

The other factor behind the successful IT in industry is the availability of good universities. “Our university system is not exceptional like MIT, but good overall”. The developers learn the same basics as you could learn on a western university.

Ukraine of course has its challenges as well. There is a negative travel advice for Eastern Ukraine due to a conflict with Russia. The light green area in the map from wikipedia is a contested area. As a result, companies avoid the east and stay in the central capital Kiev, or move further west. Levi9 is opening an additional office in Lviv, located in the west close to Poland.

Different models

Anyone considering nearshoring should know that different companies have different working models. These models are all good but work differently. Some companies focuses on recruitment and HR. they search for the right experienced developers for their clients and take care of payrolling and salaries.

A slightly different approach is taken by Levi9.  Levi9 is a Dutch company with offices in Ukraine (and other eastern European locations). Levi9 does not just recruit IT staff, but continuously trains them, has architects that create proposed technology stacks for the teams to use, and actively promotes knowledge sharing and professional development inside the Levi9 office. The office itself is spacious, with open spaces but separate tables for different teams. Each floor is decorated differently in consultation with the teams. One of the new floors for instance has Star Wars based decorations. The bottom floor is more neutral, with the names of the clients the teams are working with at the wall.

For clients, the way Levi9 works appeals to clients that want to buy software rather than hire developers: The company manages the teams for the client so that the client gets regular deliveries of software. As result, Levi9 is a good match for clients that want to outsource software development including team management.

Regardless of the outsourcing model, the preferred development methodology is agile. Especially in outsourcing it is important to organize communication explicitly. Outsourced teams often use scrum to organize daily communication, frequent delivery of software and full transparency on results.

Advice for successful projects

We asked Levi9 what they see as success factors. “The role of the product owner is very important in any project” according to Oleksandr, delivery manager at Levi9. “Teams can work much better if the client provides a product owner that knows the vision behind the software, the way it will be used and that is involved on a daily basis to make sure the team develops the right functions”. Another recommendation is about the technology to use. “In many cases the client asks us to use the technology and frameworks that they already have or already know. This is fine and leads to good systems that are similar to what they know and have. The people here in Ukraine however are very interested in learning and using new development frameworks, new development tools and tools for automated testing. When clients asks us for a new technology stack, we can use our latest knowledge to build a better maintainable, more future proof system.” This last advice is in line with our overall view on outsourcing: outsourcing works best if it is not seen as a cost saving measure, but as a way to build connections to new talented developers.

How ICT Institute helps with outsourcing

With ICT institute we check with and for our clients whether projects are going well and give advice how to improve. In the case of outsourced development, we find it very useful to actually visit the teams, even if they are located abroad. By visiting a team early on in the project, one gets a better understanding who the team members are, how they work and what can be expected at the end of the project. If you are currently outsourcing software development and you have not visited yet, you can ask us to join you on your visit and help you ask the right questions.