Software development outsourcing destinations: Philippines vs Ukraine

The Philippines or Ukraine? Doubt what outsourcing destination is the best for your software development? Let's revise the advantages of outsourcing services and discuss the benefits and drawbacks of outsourcing to the Philippines and Ukraine.

The IT market is always searching for new software pieces, such as mobile apps, desktop programs, and cloud-based applications, to deal with a wide range of business and personal needs. As international competition increases, finding the most cost-effective methods for developing a quality product while meeting rising demand is necessary. You can achieve these goals by outsourcing. Outsourcing software development services allow users to obtain a full-featured app for a great price.

Why outsourcing is so popular today?

The purpose of outsourcing is to reduce costs and increase efficiency by hiring another person or company to perform tasks, provide services, or handle operations.

Simply put, it is having certain job functions performed outside of a company. Firms use the outsourcing strategy to reduce costs and enhance efficiency.

Also, outsourcing is a broad term encompassing a few more narrow definitions. So, let's find out the difference between business process outsourcing, offshoring, nearshoring, and onshoring.

Types of outsourcing

Business process outsourcing

A popular type of outsourcing is business process outsourcing (BPO). It can handle administrative, correspondence, scheduling, and other mundane business tasks.

The BPO industry is vast, generating over $200bn annually and employing millions worldwide.

In 2021, the global business process outsourcing market was expected to exceed USD 245.9 billion. The compound annual growth rate (CAGR) from 2022 to 2030 is predicted to be 9.1%. 

Organizations take full advantage of several key factors that drive the global BPO sector: 

• A more efficient and agile process
• Invest in core competencies
• Cost reductions
• Keep up with ever-changing business dynamics

As a general rule, outsourcing refers to contracting out an external provider to handle parts of business processes. 

There are many ways in which BPO can be viewed, from hiring one employee to hiring an offshore team.

Suitable examples of BPOs are Google and Wells Fargo.

Offshoring

In offshore outsourcing, a part of operations or a department is delegated to an offshore location.

Companies outsource to a different region or timezone to maximize profitability and efficiency. The Philippines, India, and South Africa are some of the famous countries known for offshore outsourcing services.

In offshore outsourcing, you work with a provider that is located overseas. In many cases, it's the best option to save on labor and materials. Moreover, offshore outsourcing gives you better access to a particular skill set for a specific country than anywhere else. Finally, you can avoid regulations imposed in your home country.

The problem with offshore outsourcing is more reliability, particularly when choosing a budget provider. You can avoid this by reading reviews of the provider before signing a contract. The low rates you initially saw may cost you more than you imagined. The distance can also be a big issue. 

A great example of offshoring is Amazon. A part of its operations, particularly customer service and logistics, is offshored to the Philippines as part of its customer-focused service offering.

Onshoring

The practice of onshoring or local outsourcing is preferred by firms that wish to delegate tasks within their country.

Onshoring offers little savings as that offshoring or nearshoring. However, clients prefer this to maintain their branding and satisfy local markets.

The pros of onshoring include a similar or identical working culture and time zone. As a disadvantage, it doesn't significantly impact cost savings since salaries are equal to in-house staff. Plus, you cannot assume that the quality will be higher just because the provider charges more.

Nearshoring

Businesses that want to take advantage of their delegated services without the hassles of time zone differences and cultural differences prefer nearshore outsourcing.

Nearshoring allows companies to work with teams in nearby countries. By keeping local compliance and reducing costs, nearshore offices are more cost-effective than their onshore counterparts.

In this case, you deal with a provider outside the country but still within driving distance. If you live in the USA, nearshore outsourcing is likely to occur in Latin America, whereas offshore outsourcing is likely in Asia.

In outsourcing nearshore, you gain the benefits of both onshore and offshore outsourcing while minimizing the disadvantages of each. In addition to being in a similar time zone, you will also benefit from lower operating costs in another country. Plus, there is a lower risk of delays when shipping products. Lastly, nearshore outsourcing helps enter adjacent markets, often the logical next step for businesses.

In 2022, Ukraine and the Philippines settled the top places on the List of the best outsourcing countries. So, let's compare the features of these two outsourcing destinations.

Pros and cons of outsourcing to the Philippines

According to the latest research, the Philippines settled 5th place on the List of top countries for outsourcing software development.

The Philippines is one of the largest English-speaking countries in the world, with over 92% of Filipinos speaking English. In recent years, they have implemented severe educational reforms and have a specialized STEM high school system.

With these factors combined with the Philippine peso's low global value, the Philippines is among the top outsourcing destinations in the world, with Manila being ranked as the second-best outsourcing city according to the Tholons Globalization Index.

The Philippines is an English-speaking country

One-third of the world's population speaks English, which has always posed a barrier to some great outsourcing destinations like China.

Filipinos, however, do not suffer from this problem. The English language is well understood by them and their accent is neutral. As a result, western companies can train them in specific accents more easily.

So, in the Philippines, you won't just find cost-effective talents to work with, but also people with good communication skills and soft skills that are easy to integrate with your internal staff. This makes Filipinos seem like natural English speakers. When you listen to them speaking comfortably, rapport is quickly established. Good command of the English language makes the process of outsourcing easier.

The Labor costs

In some cases, outsourcing costs is a good choice. Filipino workers earn less than their Western counterparts. The Philippines' workforce is lower than many of the countries of Asia since they can attract more skilled workers than many countries can. Labor is the most considerable expenditure in your business. Cutting them will save your company a lot of cash. Outsourcing companies in Filipino regions can reduce labor costs without damaging the quality of their products or services.

High-quality and excellent services

Filipino education has maintained a western standard, and its talent is world-class. Quality is recognized internationally. Many manufacturers are outsourced. Industry talent pools have a comprehensive service package. The range includes a wide range of manufacturing parts and the sale of finished products. Manufacturing contributes about 24 % to the Philippine GDP. The country can cater to the needs of a large number of manufacturers.

Flexible, skilled, and world-class employees

Filipinos, in general, have remarkably creative talents. The adaptability displayed by these people in different job roles saves the company much effort in unnecessary supervision. Filipinos have cultural tolerance. They are prepared to consider clients' demands when they ask for them. The same goes for work; it is up to them to be happy and satisfied with the clients.

Also, Filipinos are quick adapters at any timezone. You only want the time that fits your schedule. Filipinos work hard, have extraordinary resources, focus on handling the core competencies of their business, and require little supervision.

Over 200,000 software specialists make up the Philippines' IT talent pool, which is vast for enterprises to choose from. Western companies often face this major software outsourcing challenge when hiring programmers or other IT talent.

Additionally, the nation's wide talent pool has a wide age range, making IT outsourcing to the Philippines easy.

BPO is a government-supported industry

Since 2013, the Philippine Council of Industry, Energy, and Emerging Technological Research and Development (PCIEERD) has offered training programs for BPO workers.

In order to prepare for the BPO demands after graduation, students can take advantage of eLearning solutions such as the Learning English Application for Pinoys.

Additionally, the IBPAP focuses on innovation and government support to enable the IT-BPM industry in the Philippines, an organization dedicated purely to improving the industry.

IBPAP continues to further and maintain the country's global competitiveness by providing higher-value services. This allows Filipinos to remain efficient even with AI and automation.

Pros and cons of outsourcing to Ukraine

Ukraine has the second-largest developer population in Eastern Europe, with over 240,000 tech specialists. The gender equality of Ukrainian software developers is also noteworthy. Over the past nine years, GlobalLogic research shows that the number of women in Ukrainian IT has tripled - from 7% in 2013 to over 22% in 2021. The share of female IT professionals has increased at an average annual rate of 15%. Furthermore, companies are always looking for ways to meet their sustainability goals and ESG standards.

Also, education is a crucial priority for the Ukrainian government, which has nurtured a thriving tech industry. Across all HackerRank challenges, Ukraine developers scored an average of 88.7%. Ukraine is also home to the most significant number of C++ programmers globally.

80% of their IT community speaks English, so communication barriers are minimal since English isn't widely spoken among the general population. The time zone of Ukraine partially overlaps that of the United States and the United Kingdom, and its work culture prizes competition and challenge.

In Eastern Europe, Ukraine has become one of the biggest and fastest-growing IT hubs. It cooperates with global tech leaders, including Google, Microsoft, and Oracle, and is a reliable partner for thousands of foreign companies of all sizes.

Engineering and Mentality

Ukrainian developers are undeniably positive and determined. Ukrainians have earned a strong reputation as hard workers. Custom software development positions are well-suited to their perseverance. Being one step ahead of the competition and becoming Ukraine's best software developers requires them to invent innovative digital solutions constantly.

Professional relationships in Ukraine are more about building long-term relationships than making quick money. As a result, Ukraine tends to attract the world's biggest technology companies to open R&D centers there.

Ukrainians are known for their independent thinking, freedom from stereotypes, and agility. Their mentality is closer to that of the West. However, Ukrainian programmers may not have the same social skills as their Western counterparts. This may be because they are not experienced enough in communicating with clients from other countries. Nevertheless, Ukrainians are open-minded and adapt to new soft skills quickly. A person who holds a leadership position acquired it through their ability to communicate with clients and negotiate contracts. The growing number of management courses and schools, including MBA programs, indicates the growth in communication skills.

Resourcefulness

A Ukrainian's passion and resourcefulness are essential traits when outsourcing software development. To meet strict deadlines, it often takes a level of ingenuity that only comes from a truly dedicated service provider.

World-class employees

Another core trait associated with Ukrainians is their strong sense of responsibility. Software developers in Ukraine will treat your project as their own. They want to do their job right and will take any steps necessary to build world-class software products that will make your project successful.

As for personal qualities, EcDev Studio clients often mention that Ukrainian developers are very straightforward, direct, and honest. They do not beat around the bush and get right to the point.

You can find more information about working with distributed teams from EcDev Studio in our case studies. And if you want to join forces with top-performing Ukrainian software developers or set up a dedicated international team — you know where to find us.

English proficiency

When hiring developers from other countries, English proficiency is one of the clients' top concerns. Communication is vital for a team, and that shouldn't be a surprise. This requirement is well-known to Ukrainian tech specialists. IT Ukraine Association research shows that 80% of IT workers speak English at an intermediate or upper-intermediate level. Furthermore, 13% of participants have advanced or higher levels of English proficiency.

Developer salaries

In general, salaries depend on a developer's seniority and tech stack. An average senior software engineer's salary in Ukraine is $4,000, going up to $4,550 for Tech/Team Leads and $5,600+ for System Architects. Mid-career developers typically earn between $1,500 and $2,600 per month, or $18-33K annually, significantly less than the $88,700 in Finland or $118,000 in the United States.

Ukrainian outsourcing companies typically charge developers $25-$50 per hour. A comparison with neighboring Poland and the Czech Republic shows that outsourcing rates are between $40 and $56 an hour and between $34 and 53 an hour, respectively.

IT industry in Ukraine nowadays

Many Ukrainian outsourcing companies were able to relocate their projects quickly with minimal disruption and loss of development speed for their clients and maintain jobs for their employees who fled their homes. As remote work becomes the 'new normal' nowadays, companies have learned to be flexible in their operational practices. And the war forced them to develop their skills.

Since the beginning of the war, almost 2% of IT professionals, mainly with military experience, have joined the Armed Forces, according to a survey conducted by the IT Ukraine Association. A 20% rate of specialists joining the military was recorded in small companies with up to 200 employees.

Most IT companies had anti-crisis business plans, which enabled them to adapt quickly to new conditions. Many specialists were relocated from the eastern regions just before the war. Currently, more than 70% of IT professionals work in safe areas in Ukraine, while 16% work abroad.

Anyway, many global companies still work with us and cooperate with us despite the current situation in Ukraine.

Final thoughts

Considering the substantial IT talent pool and favorable business climate, the Philippines and Ukraine are excellent destinations for outsourcing software development services. Due to cultural and time differences, outsourcing to the Philippines can be challenging. Despite this, Eastern European countries, including Ukraine, are more familiar with doing business and communicating. Ukrainian outsourcing software development agencies are more convenient to work with since there are minor time differences, and they are located in suitable areas.

Reforms are still needed to close the gap between Philippine software developers and engineers in other nations. Hence, it is one of the best countries to outsource software development if you have a simple project in mind, but if your task is more complicated, you'd better consider Ukraine instead.

The Ukrainian IT market has vast potential, spread over different country cities. Business owners can choose which option suits them better based on the size of their projects, budget limits, and the desired programming languages and technologies.

It's no wonder that the most prominent cities, including Kyiv, Lviv, and Kharkiv, offer the most diverse talent pools, technology stacks, and travel opportunities. However, they suit best for projects with big budgets because the salaries of local developers are higher than in other cities. When you want to save money on software development or your project is small, you can confidently outsource to smaller towns like Ivano-Frankivsk, Vinnytsia, or Poltava. Dnipro and Odesa are also great options because many programmers live in these cities, yet local salaries are equal to those in the first three cities.