IT market is steadily increasing, particularly in the sector of large and medium-sized IT businesses.
In average, the market shows 18% growth annually, but still falls short of Polish and other more evolved IT development markets.
Mainly large companies use mixed models: services plus products. Quite often, in order to develop a product, they build up own development teams or along with the international partners. Previously the companies used to resort to development of internal products with the help of the temporarily idle company’s resources (IT bench).
The marginality level that has already reached 6-9%, raises an extremely important question, which is: How to hold the constant pay increases of the developers? Some companies actively develop own schools, courses, establish academies for the internal education because recruitment cost and expectations of the middle +level candidates bring no economic benefit to the companies.
Another complication is caused by the second year of the initiative aiming to change taxation system for the IT market in Ukraine, it urges most market participants to apply subcontracting, a quite successful and recently popular model in the USA.
Major companies choose to build up entire hubs and own IT infrastructure, but still a growing number of companies prefer a remote cooperation model and highly evaluate the efficiency of external IT resources recruitment directly, as well as via providers of IT outstaffing services.
While hiring an in-house developers, in the first half of 2019 top companies showed an essential engineers’ growth rate, nevertheless it markedly slowed down by the end of the year.
No system changes have occurred, internal market still keeps the level of 5%, new products are not manufactured or marketed. The large businesses are mostly focused on international expensive decisions rather than Ukrainian development products. In the case of small companies and teams, they go for partnership and investments for their own growth and often fail to win the competition for the developers, sales and marketing budgets.
That’s why, small and medium-sized companies would rather transfer a client or involve subcontractors, than build new expertise or develop new competency inside existing team.
More importance is being placed on the technological and business-domain niches, which contribute more to the market of clients’ transfer on the basis of commission with a view to profit from investments in business, development and marketing.
“Developing everything for everybody” is a way of the past, and not only clients benefit in this case, but also IT companies which due to narrow competence create more value and build needed expertise and capacity.
Current non-core projects as well as clients of “not matching” technical stack are subcontracted to the reliable providers on the market which results in a good service level and professional developers’ team for the client.
Subcontract market is also undergoing some changes and getting more “civilised” with a focus on the client’s interests, when the clients are offered necessary developers but not the ones available.
Under this scenario small “friendly groups”, which sell each other instead of providing best options of the market, do not succeed.
The clients, requesting distributed teams, often involve already proven providers whose service includes wide stack of technological capacity, cross-locations, huge variety of specialists of different levels. When so, they get a chance to rapidly engage both individual developers and efficient and cohesive teams.
Generally, the tendency to hire remote experts is growing worldwide, and in 2019 the market leaders of Eastern Europe adopted it, gradually and systematically implementing the tendency in the standard business flow.
An active player in this direction is the leader of Ukrainian and Belarusian market – Epam company, that has launched a new independent cooperation trend with the remote resources and providers. Companies, comprising 1000+ employees, find it difficult to recruit the best developers and are limited to the existing company’s development centres, therefore they often collaborate with the outstaffing service providers.
Canadian and American colleagues often use this approach and request specialists from big providers of IT outstaffing service which meet their requirements in the quantity and technological variety of the resources.
Also, these big providers offer additional services for the clients, such as business trip arrangement, visa issues, local resources in the client’s development centres, equipment purchase, localisation of the developers on a single platform, suitable payment methods, payment delay and other no less important services.
According to AOG.jobs, one of the biggest providers of IT outstaffing services, IT market will keep developing and in 2020 the tendency to engage remote developers will gain more significance, IT companies will place more focus on the key technologies and competencies, and also transfer irrelevant projects to their partners.
Like last year, we apparently won’t witness big M&A due to different approaches of seller and buyer in the evaluation of the multipliers. Majority of merges will not happen “voluntarily”, but out of a state of financial necessity.
The growth of the internal IT market and internal products is quite possible, even small startups’ boom, but everything still depends on the correction and adjustments of the global financial crisis as the traditional sales market for startups and investments is considered to be the USA. However, the “rescue” of the already launched projects can become a primary task.
As they say “Time will tell” but we can draw a conclusion already now: the trend to engage remote resources is not only financially beneficial, it also keeps you up to the times.
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