2020 Report Uncovers a Strong Outstaffing Trend in Silicon Valley

For years, Silicon Valley has been at the heart of the digital transformation. It’s home to many of the biggest tech companies in the world and many start-ups and entrepreneurs have long held the view that their success relies on them being at its heart. But recent years have seen a huge swing towards outstaffing. And Eastern Europe has become the location of choice for many companies looking to access the burgeoning talent in the area fast becoming the centrepoint of technical innovation. At the heart of this boom, Ukraine is establishing itself as a global tech giant as it increases its talent pool and its expertise at an impressive rate.

The US is heading towards a talent gap in the tech industry

A future of work survey carried out by Korn Ferry shows a bleak outlook for businesses who fail to adapt now to changes which are expected to take place over the next decade. These stark predictions are based on demographics. Looking at the US labor market in 2021, it looks in a relatively healthy state, particularly in view of the unique challenges posed by the pandemic in the past 12 months. But analysts and economists predict a sharp drop off in numbers as baby boomers leave the workforce. And there are already concerns that there may simply not be sufficient numbers of young people to plug that gap. So, by 2030, there is a real risk that the US tech industry will be an employees’ market – meaning fewer employees to fill the necessary positions, increased competition for each post and an inevitable increase in the average salaries being paid. Plus, of course, the risk of top performing talent being poached or having their heads turned by even greater salaries elsewhere.

Amid concerns for the future of work, though, major companies from the US and across the world are starting to look to Eastern Europe, and in particular Ukraine, where the IT sector is booming. Amazon, Google, Reddit, Huawei, Oracle, and Siemens all have operations in the country now. Outsourcing has been on the rise over the past three decades, but now outstaffing is becoming the go-to solution. 

Outstaffing involves employing dedicated teams of remote engineers via a third party. Despite initial concerns about the use of remote teams, 44% of chief intelligence officers now say they are more likely to use offshore technology functions than they were 5 years ago. Add that to the fact that 78% of businesses feel positive about remote engineering and you begin to see why the tide is quickly turning.

Ukraine is in the midst of its own tech boom

Contrast the US picture with that of Ukraine and a very different picture emerges. 8 years ago, the tech industry accounted for just 1.6% of Ukrainian exports. In 2020, despite pressures on other areas of the economy, the Ukrainian tech industry grew by 20.4% to account for 8.3% of exports. Ukraine has embraced the digital transformation and placed itself in a great position to help fill the emerging talent gap in the global tech sector. Indeed, Ukrainian companies fill 11 spots in the top 100 tech companies in the world.

This phenomenal growth has been built on a limited amount of red tape, the quality of the IT talent as nigh on a decade of investment in the industry starts to bear fruit, and a stable industry-wide tax policy.

Experts predict that by 2024, Ukrainian universities will be churning out in excess of 20,000 IT graduates per year, with that figure expected to continue rising as more and more businesses join the outstaffing revolution to take advantage of the flexible talent recruiting strategies through outstaffing, meaningful cost savings, and wealth of highly skilled tech talent available in Ukraine.

The Ukraine tech boom is government-backed

Ukraine’s tech boom has government backing too. The IT Creative Fund has been introduced to grow the amount of IT specialists in the country as the government looks to embrace the country’s growing dominance in the tech sector. With 2020 proving that remote engineering teams can be just as successful as on-site teams, Ukraine is bracing itself for even more large and small companies from across the globe seeking to improve their software development operations by embracing remote engineering as an extension of their local tech teams.

A decade ago, it would have been impossible to imagine that Silicon Valley, the icon of the digital transformation, would face a challenge from Europe. But such is the level of advancement made by the inhabitants of this corner of San Francisco in the past 10 years, that the ability for others to take a foothold in the industry has been afforded to tech companies the world over. In Ukraine, that opportunity has been grasped with both hands and the country is gaining a worldwide reputation for inexpensive excellence. In a similar way, tech companies and start-ups based in Silicon Valley, and across the rest of the world, are embracing this new wave of talent to innovate how they build and scale their software development teams.

Silicon Valley is shifting to outstaffing because its leaders are tech savvy and understand that harnessing the best talent for the job is the route to business success. Agile working breaks free from the constraints of location and opens up a wealth of global talent to business leaders. While others may be reluctant to embrace what is being seen in some quarters as the future of work, leadership teams based in Silicon Valley are, by their very nature, innovators and forward thinkers. They have already reshaped the way the world works, and in 2020 we saw just how effective tech can be in keeping the wheels of business turning in in the most challenging of circumstances. So, the future looks bright; for Silicon Valley, for the Ukraine outstaffing industry, and for those organizations brave enough to follow in the footsteps of the modernizers.

If you want to talk about how outstaffing to Ukraine could help drive improved ROI for your business without compromising on quality, get in touch and let’s talk about the benefits of remote engineering teams.

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