Why Google, Samsung, Boeing, as well as So Many Startups Have Opened Their R&D Offices in Ukraine

The technical prowess and digital transformation of a nation like Ukraine has a lot to do with Ukraine's history – and the many tech pioneers who emanated from the central Eastern European innovation powerhouse. It's easy to see why so many foreign companies flock to conduct remote R&D in Ukraine; its history is steeped in the spirit of invention. As part of the USSR, Ukraine formed the technological backbone of an empire following WWII. 

During the 20th Century, Ukraine was full of inventors and innovators like rocket scientists, mathematicians, computer engineers, and quantum physicists. That led to discoveries in data handling, the first-ever lunar orbit rendezvous, countless mathematical theorems, pioneering x-ray and medical imaging, and multiple advances in rocketry and jet propulsion.

Igor Sikorsky, the man who conceived the first mass-production helicopter, was born in Kyiv in 1889 and attended the city's Polytechnic Institute. He went on to build the Sikorsky F-4 in the United States just before World War Two. Computer scientist Kateryna Yushchenko was born in central Ukraine and attended Kyiv University before gaining a Ph.D. at the Institute of Mathematics in the Ukrainian Academy of Sciences. She invented Address Programming Language in 1955, which powered Soviet computers to facilitate progress in fields like aviation and space exploration.

Yet, if a present-day Ukrainian ever felt the need to boast, they likely wouldn't feel the urge to mention such a proud history of Ukrainian technology achievements. That's because Ukraine's here and now is one that attracts some of the world's foremost technology and engineering players – and is filled with thriving home-grown enterprises, too.

The Digital Transformation of Ukraine

Ukraine boasts more than 110 remote R&D centers run by multinational corporations, contributing to a digital transformation resulting in more than 140,000 patents getting registered and utility models being developed since 2007. The country is on target to generate $5.5 billion from IT service exports in 2020, and that's set to rise to $8.5 billion by 2025. About 30% of that revenue comes from R&D, consulting, and analytics, while the other 70% gets generated from development. That output places Ukraine in first place among Europe's elite IT exporting countries.

Startups: Achieving Cost-effective Innovation Via Dedicated Teams

In addition to its rich innovation history, Ukraine has established itself as a remote R&D location because it appeals to companies no matter their size or status. For bootstrapping startups, innovation is a requirement. Yet, they can't always afford the infrastructure required to support R&D. Many lack the financial resources to invest in the physical space needed to compete. They also come up short when attempting to attract top local talent. Turning to specialists in locations like Ukraine means getting dedicated teams of engineers for a fraction of the cost of doing R&D at home.

The US is Ukraine's biggest partner when it comes to exporting IT services, making up 45% of the country's revenue from the sector. That's perhaps not so surprising when you consider that a software engineer in the US earns an average salary of $101,000, while their Ukrainian counterpart costs between $24,000 and $48,000. Factor in the recruitment costs of in-house staff, taxes, paid vacation time, along with benefits like insurance and health coverage, and you have a strong case for Ukraine. Add the cost of maintaining office space in the US, and models like outstaffing in Eastern Europe get even more attractive.

Ukraine's Booming Home-grown Startup Scene

That history of innovation shines through in Ukraine's own startup economy. That healthy culture makes Ukraine a natural destination for startups from overseas, and it helps that the events and infrastructure necessary for innovation to occur are already in place. Innovation as an export gets supported by the government too, at both city and national levels. However, what's helping to drive the startup scene in Ukraine is largely what established the country as a center for cutting edge R&D too: there's a rich, well-educated talent pool, supplied and reinforced by a thriving educational sector. In addition to that, many Ukrainian developers speak English and the language is widely learned among locals. Once upon a time, Ukraine formed the most Western border of the Soviet Union, and that legacy shows through to this day in the rather West-facing culture of many of its cities.

Digital Transformation – Household Names

Cost savings are cost savings no matter how big you are, which is evidenced by the number of household names that run dedicated teams for R&D in Ukraine. Samsung has been doing remote R&D in Ukraine since 2013, and it operates out of two centers in Kharkiv and Kyiv, keeping more than a thousand specialists busy on projects. Boeing runs an engineering center in Kyiv conducting remote R&D in aircraft construction, thought to be connected mainly with its work on commercial airplanes.

As recently as January this year, Google added Ukraine to its remote R&D locations when it acquired CloudSimple, another US company. Google opened its first Kyiv office in 2006 but hadn't been conducting R&D in the country. With the new office set to work on R&D connected with security, cloud-based products, and data analytics development, that's changing.

Remote R&D, But Not Remotely as Expensive

For overseas companies looking to run dedicated teams remotely, the attractions of Ukraine are pretty clear. Yet, there's more to its cities and regions than just lower wages and excellent IT infrastructure. Success gets based on an ever-expanding, specialist talent pool, backed by an educational infrastructure that's second-to-none in Europe.

R&D costs less in Eastern Europe – and emerging models for running remote R&D like outstaffing further reduce the costs, both in terms of time and money. That's why startups and multinationals flock to Ukraine, and why it continues to grow as an IT services exporter. If you'd like to learn more about tapping the talent pool and cost benefits of Ukraine, get in touch, and we'll show you how Agile Fuel helps companies grow and innovate for a fraction of the costs elsewhere!

Let's launch things.