Outsourcing in Ukraine

Outsourcing in Ukraine — is a widely used type of services in Ukraine.

Most often, outsourcing services are provided in the IT sphere, but they also are popular in the spheres of logistics, marketing services, recruiting, accounting, processing and systematization of information, medical services, administration etc.

IT outsourcing

IT outsourcing is the practice of the partial or complete using an external service provider to deliver some or IT functions required by a business. Most common services include managing infrastructure, directing strategy, business process outsourcing, software development, running the service desk etc.

In 2017 Ukraine emerged as the top outsoursing destination of the year according to the Global Sourcing Association. By the year 2017, there were 13 R&D centers of global companies located in Ukraine. According to the IT sector report 2019 Ukraine is the largest exporter of IT services in Europe and ranks among the 25 most attractive countries for software development worldwide. Particularly, Ukraine is an European leader in the number of outsourcing companies in the field of artificial intelligence.

According to research, 90% of Ukraine's IT services are outsourced to other countries. IT outsourcing is most actively developing industry on the outsourcing services market and Ukraine ranks second after India in terms of growth of this segment of IT in the world. As for 2019 the number of IT specialists involved in the IT industry of Ukraine reached 172,000 people. The share of IT industry in Ukraine's GDP is 4%. According to DOU’s annual job market research, conducted by the end of each year, over the last 2 years, the IT sector in Ukraine has grown by 60%. It is clear that most of this percentage is IT outsourcing. In 2003, the IT outsourcing market in Ukraine amounted to $110 million, in 2007 — $544 million, in 2011 — $1.1 billion, and in 2014 it reached nearly $2.4 billion. Such growth, in turn, shows one more positive dynamic — job openings in the sector have grown by almost 50%, from 37,742 available positions in 2017 to 55,438 in 2018.

There are some reasons why information technology developed so fast in Ukraine: good educational system in technical and mathematical discipline with good knowledge of English, cheap and accessible internet as well as cheap and quality services.

Outsourcing economic impact

The level of development of IT outsourcing in Ukraine allows to achieve positive macroeconomic effects that affect the economic development of the country. In the long term, these effects are capable of causing structural transformations that will shape new trends in the Ukrainian economy. The effects of the development of IT outsourcing in our country include:

- improving the structure of the labor market;

- inflow of foreign currency and improvement of the balance of payments;

- increase of domestic demand in the consumer market;

- overcoming the stratification of the population and the formation of the middle class;

- strengthening the financial security of the state

Legal regulation

The concept of “outsourcing” in Ukrainian law has no definition, so it can be regulated solely in the context of analogy to certain legal rules. At the same time, the legislative field defines economic interaction through the conclusion of contracts, as well as the fact that everyone has the right to engage in business activities that are not prohibited by law. However, in the National Classifier of Ukraine, outsourcing is defined as an agreement according to which a customer delegates certain tasks to a contractor, in particular, the part of the production process or the whole production process, provision of recruitment services, and support functions.

According to Art. 6 of the Civil Code of Ukraine "The parties have the right to enter into an agreement that is not provided for by the acts of civil law, but is consistent with the general principles of civil law", further in Art. 627 this position is extended "the parties are free to enter into a contract, select a contractor and determine the terms of the contract, taking into account the requirements of this Code, other acts of civil law, customs of business, the requirements of reasonableness and fairness." This allows the parties to determine the nature of the contract at their discretion and to include outsourcing work in it.