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4:57 AM Tuesday, June 27, 2017
Tech
​Israeli Techs Turn To Ukraine for Outsourcing Needs
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Ukraine's service exports to Israel are up 15% this year and growing, but needs a stronger startup culture.
image/svg+xml Kyiv Lutsk Rivne Zhytomyr Lviv Ternopil Khmelnytskyi Uzhgorod Chernivtsi Vinnytsia Chernigiv Sumy Kharkiv Poltava Cherkasy Kirovohrad Lugansk Dnipropetrovsk Donetsk Zaporizhzhia Mykolaiv Odesa Kherson Simferopol Sevastopol Ivano- Frankivsk

KYIV -- Israeli tech companies increasingly turn to Ukraine fulfill their outsourcing needs, according to business representatives from both countries.

"Ukraine has changed course in a positive direction," said Yevgeniy Shulgin, founder of London Issuing, an organization that helps post-communist countries access global stock markets. He spoke at a recent conference here celebrating 25 years of diplomatic relations between Israel and Ukraine.

"Five to seven years ago, the phrase 'high tech' did not exist in Ukraine," he added. "Now, Ukraine has shown itself to be a potential world partner [in developing tech startups.]"

Up nearly 15 percent this year

In the first nine months of this year, Ukraine’s service exports to Israel grew by 14.8 percent compared to the same period last year - from $106.7 million to $122.5 million, according to Ukraine’s State Statistics Service and Ukraine’s Embassy in Israel,

In a lopsided trade relationship, service imports from Israel to Ukraine declined from $19.5 million to $13.5 million in the first nine months of 2016, compared to the same period last year.

Several Ukrainian outsourcing companies told the UBJ that tech services are the key demand of international companies. Ukrainian programmers, developers and other tech experts work largely for countries in Eastern and Western Europe, the US and Israel.

Ukraine is a major outsourcing center due to the high level of skills here, according to Maxim Yacover, founder of Chasopys, which provides office and meeting space for startups. Israel went through a similar phase in the 1990s, he said.

Needed: startup culture

But, he added, the startup culture isn't strong in Ukraine, where professionals are far more risk-averse than in Israel. This is a barrier preventing Ukraine from growing from an outsource center into a real hotspot of tech startups.

"Many Israeli tech companies are opening branches in Ukraine," said Shulgin. "Unfortunately, for now, the reverse is not the case."

Yacover and other analysts said that with increased cooperation, Israel may be a good partner to bring Ukrainian companies to the international market. Both countries have a reputation for technical expertise and Ukraine has a competitive advantage in low wage rates.

Despite the partnership prospects, Israel's direct investment in Ukraine remains quite low - just 0.1 percent of total FDI, according to the state statistics service.

For comments and story tips, please email UBJ Correspondent Igor Kossov at this address: igor.kossov@theubj.com

Photo: Ukrainian IT workers are in high demand, and Israel’s entrepreneurial service-sector economy has been quick to take advantage (Credit: Jacob Munk-Stander.)

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