A programmer employed bu Dutch tech firm Daxx works at his computer in the company’s Kyiv office. Attracted by the talent of Ukrainian software developers and Ukriane’s simplified tax legislation, Dutch information technology companies like Daxx often consider Ukraine as a suitable place for their foreign offices.

The Netherlands are hungry. And what it wants is top tech talent.

This year, the country was ranked the fourth top tech nation in Europe, with 12 “unicorns,” startups worth over $1 billion. And Dutch companies’ demand for IT specialists appears insatiable.
They come to Ukraine to satisfy their craving.

Just a three-hour flight from Amsterdam, Ukraine has turned into a major hub of outsourcing and research and development for Dutch firms. That’s no surprise: The country boasts an 185,000-strong army of tech specialists and wages lower than in Europe.

After more than 10 years operating in Ukraine, some firms have been able to grow exponentially, like outstaffing companies Daxx and ISM, which are focused on e-commerce technologies.

According to Daxx CEO Igor Tkach, before coming to Ukraine, many foreign investors often don’t expect to encounter highly professional Ukrainian IT developers. “But the reality is the opposite,” Tkach says.

Despite the looming economic crisis caused by the unexpected COVID‑19 pandemic, Dutch IT companies in Ukraine continue to reap the benefits of Ukraine’s tech talents, as well as low taxes.

Dmitry Antonyuk, director of another Dutch tech firm, ISM Ukraine, believes that even though it’s still hard to predict what will happen with the industry after the coronavirus subsides, there are “no signs for significant shocks” to Ukraine’s tech scene.

Flexibility and other advantages

Judging by the experience of Dutch firms like Daxx, coming to Eastern Europe and betting on the professionalism of Ukrainian IT specialists is a good strategy for building a sustainable international business.

Established by two Dutch businessmen more than two decades ago in Russia, Daxx moved to Ukraine in 2009. Since then, it has grown from 10 employees working in a badly equipped office in Kyiv to nearly 400 software engineers located in four of Ukraine’s biggest cities.

“It was the right decision,” Tkach says of moving the company to Ukraine.

With nearly half of its clients based in the Netherlands, the company was growing by 20–30% annually before the coronavirus outbreak happened. Such growth, Tkach believes, was due to Ukrainian talent.

Unlike in many other countries — even in the U.S. — it is much easier to find well-qualified IT specialists in Ukraine. If companies spend three to six months on average looking for an IT specialist in western countries, it takes only a month in Ukraine, the executive says.

Plus, in the Netherlands, labor legislation is much more complicated than in Ukraine. Even for a short-term tech project in the Netherlands, a company has to hire employees, pay additional taxes and then dismiss some of this staff (and give a proper reason for worker’s dismissal) to cut the costs.

In Ukraine, however, 90% of the 185,000 IT specialists are registered as individual entrepreneurs and can have much more flexible contracts with companies, according to the IT Ukraine Association. Hired contractors pay only 5% of their income as taxes plus a social contribution of $38 a month.

When the project and contract are over, there is no requirement for the IT company to provide after-project support and nobody has to be fired.

“Flexibility is an advantage of the Ukrainian IT market,” said Tkach.

Lower salaries but grander goals

For the Dutch ISM eGroup, its Zhytomyr-based subsidiary ISM Ukraine is a research and development center. With over 50,000 users globally and giants like Unilever, Electrolux, Philips and Danone among its clients, the ISM eGroup’s 200 Ukrainian software developers are involved in extremely complex tasks.

ISM opened its office in Ukraine in 2005. The country “was chosen among other possibilities,” says ISM Ukraine’s Antonyuk. At the time, Ukraine had just prevented mass electorial fraud during a presidential election, in an event that would come to be called the Orange Revolution. It was seen as a promising democratic country.

Zhytomyr, an oblast capital with 260,000 inhabitants some 140 kilometers west of Kyiv, was a perfect place for the company: there were plenty of engineers, three technical universities and the prices for renting offices were much lower than in bigger Ukrainian cities.

Fifteen years later, the company is still fully satisfied with Zhytomyr and sees many benefits to working with Ukrainian techies there.

Unlike in many other European countries, where workers often want to get to the position of manager, which is viewed as more prestigious, Ukrainian IT specialists often don’t have such an aspiration, according to Antonyuk.

“Many people in Ukraine want to be engaged in technology as their main (professional) goal,” he says.

Even Ukrainian tech specialists with 20 years of experience are satisfied with their position and continue to improve themselves as professionals. “This is why Ukrainian specialists are so valuable on the global IT market,” Antonyuk says.

In addition, when new employees are hired in Ukraine after graduating from the university, companies have a few years until salaries of IT specialists begin to grow rapidly.

The average monthly salary for an entry-level software developer in Ukraine is nearly $1,500, while in the Netherlands it’s almost twice as high.

After 3–5 years, when IT specialists usually turn into senior software developers, the salary jumps to an average of $4,000 per month in Ukraine. At the same time, it costs an employer in the Netherlands around $5,000 to hire such a specialist.

“It gives financial benefits for European companies (working here),” Antonyuk says.
Since the start of global quarantine measures against COVID‑19, individuals and companies developing online services and technologies, including in Ukraine, will have even more opportunities.

Previously online services were just helping regular business activities in offices. Now, clients expect such services to fully satisfy all their operational needs and are asking to expand their functionality.

“IT services will be more in demand for businesses around the world and in Ukraine. The demand for IT specialists will most likely be growing, too,” says Antonyuk.

Bringing Dutch corporate culture

While Dutch investment in Ukraine has proven successful, there are some cultural differences between the countries.

For Ukrainians, hierarchical management styles are perceived as nothing unusual. In Dutch corporate culture, openness and ease of communication are highly valued. When entering Ukraine, Dutch companies bring their management style here.

“Everyone can approach everyone and talk about almost anything,” Daxx CEO Tkach says. “People are the most important value (of our company).”

While managers don’t monitor what every IT specialist is doing “every minute of their work day,” Tkach is sure that employees understand how high the expectations are for them.

“Everyone manages their own time and it is very good that we’ve preserved this culture after founders of the company stepped away from operational management,” he says.

Oleksandr Pashkov, delivery director at tech firm Levi9, says he really enjoys working for this Dutch company and with Dutch customers, who account for 80% of the company’s client base. He says the reasons are largely cultural

“It is straightforward and transparent business communication, a feedback culture and the absence of pronounced subordination,” Pashkov says. He sees the Netherlands as a European Silicon Valley with a large number of IT companies creating “ambitious products, which are competing far beyond the Dutch market.”

Meanwhile, ISM’s Antonyuk believes that Dutch communication culture — both inside the company and with clients — shows “more directness” and a general “positive attitude about life.”

But he’s also sure that Ukrainian IT specialists bring something important to the equation.

“Ukraine can show the Netherlands how to make an excellent technical product,” he says, “as people here are trying to work harder and worry a lot about the success of their product.”