Outsourcing: the essence and features of implementation in Ukraine
Anastasia Horbenko, МЕ-110і, KNEU
1. Definition of outsourcing; 2.History of outsourcing; 3.Outsourcing in Ukraine; 4.What areas of outsourcing are most in demand in Ukraine; 5.Is it difficult to develop outsourcing in Ukraine?; 6.Why IS UKRAINE CONSIDERED ONE OF THE BEST COUNTRIES FOR IT OUTSOURCING?; 7.Pros and contros of outsourcing development to Ukraine; 8.TOP-3 outsourcing companies of Ukraine; 9.Bright future of IT outsourcing; 10.Conclusion.
1.Outsourcing
(eng. Outsourcing: out – external, outside, source– source) – a concept that is firmly included in our everyday life, means a set of measures aimed at transferring by an enterprise certain processes and functions of another organization that professionally specializes in the field of tasks .
Outsourcing also has a longer nature of interaction compared to one-time services that are requested more situationally.
So, making a strategic decision on outsourcing, the customer gains access to the existing business process, individual systems and infrastructure of external companies, concentrating on conducting the core business in his company, increasing capacity with increasing market presence.
2.History of outsourcing
Historically, outsourcing was first recognized as a business strategy in 1989, although outsourcing tools were used much earlier during the 70s in the automotive industry. Regularly used throughout the 90s, the outsourcing tool has been firmly integrated into international business.
Outsourcing was primarily used in services such as professional security services, logistics, parts manufacturing, cleaning services, catering, infrastructure management, technical and administrative services for facilities, and leisure and hotel services.
A new round of development began in 2009, when, as a result of the global financial crisis, outsourcing became increasingly important in the areas of attracting human resources (HR), the high-tech industry (IT), the operational functionality of white-collar workers, and a wide range of financial services.
Outsourcing is still gaining momentum, introducing changes in the way of doing business in the global market, both locally and globally, while maintaining a growth position over the past decades.
Using companies’ services of external contractors – specialists in a particular industry, helps to simultaneously increase the competitiveness of their company in dynamically developing industries, as well as gain access to the necessary professional resources with a certain reduction in their own costs to solve the tasks.
3.Outsourcing in Ukraine
The use of human resources is the basis of successful outsourcing in the world. The leading countries are India, China, which receive orders from Europe, the USA, and Japan.
At the same time, there is a tendency for the USA to gradually reduce part of orders to these countries, planning to reorient to outsourcing within its own country, if possible. In turn, Japan, on the contrary, is increasing the number of external outsourcing orders that China receives.
Along with this, Japan still has a tendency to distribute a relatively small share of outsourcing orders to the foreign market, focusing in its choice on countries in the Asian region. Outsourcing of customers from European countries often involves contractors in countries of Eastern and Central Europe, China, and India.
Relatively high indicators of market dynamics have been achieved due to the development of offshore outsourcing in countries in the neighborhood with lower resource costs. In turn, Ukraine, as a country focused on the export of its services, supplies its services mainly to the USA, EU countries and Israel.
Ukraine stably maintains its 24th place in the TOP 25 of the Global Services Location Index, GSLI, a global rating that has been prepared by the American consulting company A. T. Kearney since 2004.
The outsourcing potential of each of the 55 countries participating in the rating is evaluated by 38 indicators, comparing financial attractiveness, professionalism and the availability of the necessary human resource, as well as the business environment.
Among the innovative economies of the world, according to Bloomberg, Ukraine this year went down one position and took 42nd place.
When deciding on outsourcing, companies are often guided by the following advantages of outsourcing:
A factor in demand. Attraction of additional labor resources.
• Lower costs. Reduction of payments, as well as the lack of an additional social benefits package that the employer provides its full-time employees, replacement of existing employees.
• Flexibility in cost allocation. It includes drawing up a work schedule, mobility and reducing the permanent staff, attracting temporary labor, depending on the need.
• Access to the best professional skills. Can be achieved by replacing existing employees, access to the local workforce pool and methods available to third independent companies.
• Predictable, standardized (international) processes. Leadership and quality of contract work, the impact on the margin and net profit of suppliers.
• Concentration of capital and rebalancing of regulatory or business risks. Particularly applicable to the financial services sector. Concentration of professional skills, technologies and internal interaction for solving tasks.
4.What areas of outsourcing are most in demand in Ukraine
And in Ukraine, and in any country in the world, company owners are looking for a way to reduce costs and increase profits. For it is a business and nothing personal, as they say.
First of all, the directions in outsourcing are developers, the very first the developer and I think the most popular. Then outsource accounting, lawyers, copywriting (writing content) and completes the call center.
5.Is it difficult to develop outsourcing in Ukraine?
It is not hard to develop, but outsourcing, like in any other industry, has its own nuances. You need to look for the right people in the team, make informed and thoughtful decisions, be sure to listen and listen to the opinions of the people you work with and then everything will go “like clockwork”.
This is probably a boring phrase, but you need to do what you like, what brings pleasure. For example, This is not difficult, because what you do every day is just another task that needs to be solved.
6.Why IS UKRAINE CONSIDERED ONE OF THE BEST COUNTRIES FOR IT OUTSOURCING?
-AVAILABLE COST OF DEVELOPMENT
Ukraine ranks 6th among the countries with the lowest cost of living. Ten years ago, the cost of labor here was generally the lowest on the planet, but due to market warming, IT professionals raised prices for their services somewhat. But even so, for US or Western European customers, Ukrainian prices still remain very attractive.
By transferring all of its IT production capacity to Ukraine, Western companies can reduce their costs by 40-60%. Kharkov and Dnepropetrovsk rank 3rd and 5th in the ranking of the most profitable cities for IT development.
-HIGH LEVEL OF COMPETENCE
Ukraine ranks third in the world in terms of the number of people with tertiary education, second in the number of holders of the Master’s degree and the fourth in the world in the number of graduated IT specialists.
Ukrainian developers show high results in world online competitions for IT players, with 11 million people from 50 countries. 56 Ukrainians became the first in individual disciplines in different programming languages, web frameworks, databases and graphics.
-Convenient time zone
All times are Ukraine – GMT + 2. It is very convenient for Europe – the working hours are the same. And even for companies from America, Ukraine is a better choice compared to the time zones of Russia, India or China.
– NO THREATS TO NATURAL ACCIDENTS
Ukraine is located on a plain, far from the oceans, volcanoes and other dangers. There is never a tsunami, earthquakes or anything like that.
-ACCEPTABLE ENGLISH LEVEL
Every major outsourcing company in Ukraine has either full-time teachers or contact with the best language school in the city. So IT specialists work on their English at least twice a week.
And if the client wants to communicate with the technical team directly, then all communication difficulties disappear after a maximum of 6 months – the team adapts and self-educates.
7. Pros and contros of outsourcing development to Ukraine
Advantages:
-Good prices.
-High level of knowledge.
-”I know I can trust you.”
Disadvantages:
-The lack of frequent personal meetings makes communication difficult.
-It is necessary to describe in detail each task in writing.
8.TOP-3 outsourcing companies of Ukraine
“EBS”
EBS is a Ukrainian consulting company that was created as a single consulting center designed to support the entry of new players into the market. EBS assists in the development and addresses the day-to-day tasks of Ukrainian companies as well as international investors
“Дмитриева и Партнеры”
Dmitriev & Partners has gained prestige in the legal outsourcing market, both in Ukraine and abroad. The company provides complex services in solving legal, tax, accounting issues to clients from Ukraine and other countries of the world.
Dmitrieva & Partners provides outsourcing services in the following areas of legal support of business: litigation, tax law, labor law, corporate law, investment and currency regulation, foreign economic activity, compliance, etc.
“Finance Solutions Group”
Finance Solutions Group (FSG) is an independent, specialized provider of integrated business solutions. The company was founded by practitioners with different techniques of effective business resource management and project management. The company provides outsourcing of accounting, CFO functions, personnel accounting, treasury, tax, management, financial and IFRS reporting.
9.Bright future of IT outsourcing
Factors that allow Ukraine to occupy a reliable position in the field of IT outsourcing allow Ukrainian companies specializing in IT outsourcing to be confident in the prospects for business development. So, according to the forecasts of the head of the IT-Solutions service center Alexander Yakushko, in 2012, revenues from IT outsourcing will grow by about 30%.
And although Ukraine today does not reach the scale of the provision of services at the level of China and India, Ukrainian specialists compete with the Russians due to the high level of technological expertise, quality of project execution and the ability to solve more complex problems at a more affordable price.
Hence, this fact allows us to say that the peak of the development of the outsourcing services market in Ukraine is ahead.
10.CONCLUSION:
Many types of modern work can be transferred for execution outside the staff. Thus, over time, this will lead to a confrontation between protected employees and free performers, whose labor activity is not regulated at the legislative level.
The world changes much faster with the onset of the fourth industrial revolution (industry 4.0), the labor market is subject to undeniable influence, when most of the work is simplified by technology; one of the consequences is a deviation from the usual regulated labor relations and structures.
Our work environment and the environment we are used to are changing radically today. New forms of cooperation can take legal relations beyond the framework of legal regulation in those countries that cannot adapt their legislation in a timely manner to rapidly developing new business strategies, which often lack the concept of territorial boundaries and predominantly demand talents to effectively solve assigned tasks.
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