Everyone knows that Ukraine is famous for a large number of good specialists and, at the same time, low cost of labor and residence. Therefore, in recent years, companies have become increasingly interested in business process outsourcing and the opening of their own R&D office in Ukraine. As the analysis of information from widely available sources shows that in some cases this option of doing business even exceeds the conditions of outsourcing and outstaffing. In this article, we will try to figure it out how the opening of R&D departments in Ukraine can be of interest to Western companies.
First of all, it is necessary to say that everything described in the article is not just a theoretical data, but a real working business. Among the companies that have already opened their offices in Ukrainian regional centers are such giants as Oracle, Samsung, Magento, Ubisoft, sysIQ, Aricent, NetCracker, WarGaming, Gameloft, Siemens, Yandex, Huawei, ABBYY, SimCorp and a huge number of others. All of them found the conditions for doing business or establishing a startup in Ukraine to be the most profitable option for both economic and other reasons. Now, let us talk about them in more detail and compare outstaff vs new office development best practices.
Why Open R&D Centers in Ukraine?
The biggest strengths of Ukraine are low costs of accommodation renting, taxes and wages. Firstly, they all gave Ukraine a steady position in the global outsourcing market, but unfortunately were not widely used to promote another useful business such as remote development centers (R&D). Now the situation changes, as more companies search for cheap R&D departments and opening office in Ukraine. There are the areas of the biggest profit for such a business:
Ukraine is rich on IT talents
IT professionals in Ukraine occupy a leading position in Europe and consist of 100 thousand professionals, while many other countries such as USA, Israel, and Germany experience IT talent shortage. In case you want to open R&D department here, you will be able to hire top-notch specialists without any problems and sustainable financial investment.
Comparatively low wages
Despite the salary of Senior specialists in Ukraine is not much different from the salary of the same specialists in developed markets, the salaries of Middle and Junior developers here are nearly a half lower than those of their USA and European colleagues. Taking into account the number of young professionals prepared by universities annually, recruiting in Ukraine for further training at companies seem to be quite profitable, even despite it requires an initial investment. Here, such a form of cooperation will easily and quickly pay off.
Low taxation and staff flexibility
Most of the Ukrainian IT companies register their staff as private entrepreneurs. This is a widespread legal trick making possible to significantly reduce the tax burden on the employee and pay high salaries. There are more legal advantages of running a remote department in Ukraine:
- no mandatory conversion to currency proceeds;
- the money from importing services that have been transferred to the foreign representative office account can be transferred abroad;
- there are tax and customs facilities for foreign offices;
- no need to form a charter capital, as representative offices of foreign firms do not have the status of a legal entity on the territory of Ukraine.
Cheap office registration
As it is widely known, Kiev is one of the most budget-friendly capitals in Europe and the whole world. The cost of living here is nearly three times cheaper than in New York and twice cheaper than in Amsterdam or Tel Aviv, let alone the other large Ukrainian cities like Kharkiv, Lviv, and Odessa. Isn’t it a serious motive for Western companies to develop business in Ukraine?
Fees for a company office registration in Ukraine:
The state payment for foreign office registration
Notary fees and translation of documents
Legal address in Kiev
up to $300 (depending on the area)
Summary: Outstaffing or R&D Center?
If summing up briefly, all the conducted research clearly shows that in all the financial aspects a company that plans to be on the market for more than one year will prefer to open its own R&D center or back office, which will become a logical extension and a shift to the new level of a company’s development. For the time being, Ukraine has quite interesting conditions for potential IT-sector growth and can provide not only technical assistance but also customer support departments, call centers, account and product development centers. On the other hand, clients who do not want to oblige themselves in a long routine work on their office registration can make use of our outstaff services. DNA325 is a global IT company specialized in outstaffing, outsourcing, and recruitment in Ukraine, connecting Ukrainian prominent specialists with global IT market. Whatever option you would prefer, we are always ready to help.