Growth of outsourcing in Ukraine’s Information Technology sector averaging at 40% annually for four years is a bright spot for Ukraine’s entire economy. In contrast to the apparent political stalemate over the country’s east-west economic trajectory, even Ukraine’s politicians were “quicker than usual” to support provisions to help keep this trend on track. Though still indecisive about its entrance into the World Trade Organization, Ukraine is finally on track to be the 71st country to join the Information Technology Agreement. Established initially by 29 countries in 1996, the ITA covers 97% of world trade of IT products. Primary significance of this agreement applies to zero level tariffs. Joining the ITA reinforces Ukraine’s trend toward WTO accession and brings its leading growth industry equal trade footing with the rest of the world.

There is a direct reciprocating link between the development of Ukraine’s IT industry and proliferation of technology products and services in Ukrainian society. From 2000 to 2005 the number of households with computers in Ukraine doubled from 18 to 38 per 1000 people; Internet usage catapulted from .7% (seven-tenths of a percentage point) to 9.7% and mobile phone service subscribers skyrocketed from 1.7% to 36.6%! The comparatively slow growth of computer ownership relative to Internet access points to the popular functionality of Internet cafes. Internally, Ukraine’s Internet Service Providers demonstrated considerable improvement from 2005 – 2007 by increasing reliability of service and in some cases increasing access speeds while reducing total customer costs for direct broadband service.

Ukraine is known for its relatively low wages, applying equally to its IT industry despite wage increases over the past two years. Overcoming an early pitfall, it is increasingly acknowledged that Ukrainian IT Professionals are and continue to become more proficient at packaging their products and technical documents in English. Cost to benefit and ROI analysis of training, productivity and wages should speak for itself in outsourcing to Ukraine’s IT market. Accessibility is increasing, means of communication are increasing, travel barriers have ceased to exist for coming to Ukraine, while it is gradually becoming easier for Ukrainians to travel abroad.

Unfortunately, all of this good news continues to be undermined by an ongoing political stalemate in Ukraine’s government, slowing the process of the reforms essential to attract investment and new business to Ukraine. While it is certainly within the range of possibility to establish a business in Ukraine, it is not necessarily advisable without first conducting a solid feasibility study, observation and securing solid legal guidance for any company expecting to do more than $100,000 in business annually. Concurrent to this caveat, an understanding of the idiosyncrasies of Ukrainian culture should prompt anyone with a mind for future business in Ukraine to begin establishing the foundation for it now.

From a conservative Ukrainian viewpoint, Ukraine’s slow progress in joining the WTO is a partially justified protection of its market. As seen with the recent round of bank purchases and early trends evident in the development of the Internet in the United States, the same are likely to follow suit here. The size and valuation of most Ukrainian companies in the Internet and IT markets are comparable to the start-up Internet companies in the United States in the mid-1990’s making them prone to acquisition. In the development of Ukraine’s economy, this is ultimately a good thing insomuch as competition equates to opportunities…for better wages, more training, better service, increased accessibility, etc.

In the interim, the relatively high risk associated with acquiring a business without knowing the direction of Ukrainian politics reinforces the value of outsourcing to Ukraine’s IT market. Essentially, the same forces at work in suppressing Ukraine’s domestic development apply directly in the favor of its outsourcing potential. This underscores the viability of project partnering and progressively minded companies will take this time to cultivate the future potential of such strategic relationships. While cost of wages is not a major concern for larger corporations, they are significant issues for small and medium-sized businesses. Ukrainian programmers tend to possess a compulsion for perfectionism applying to quality, are willing to work long hours favorable to meeting deadlines, and universally work for far less than their western counterparts.