Lviv company Softserve Ltd. one of several firms using Ukrainian software masters to fill Western programming needs
The western Ukrainian city of Lviv, with its narrow cobbled streets and old architectural treasures, might not seem the obvious place to witness a hi-tech economic revolution in progress.
But the city is home to Softserve Ltd., a custom software development and information technology consultancy firm. Softserve is one of a new breed of firms that, through the Internet, are proving that the mobility of a workforce is less and less of an economic factor in the electronic age.
Indeed, companies can benefit from employing people half a world away, as labor costs are much lower in Ukraine and India than in the United States.
Softserve has not only excelled in the local Ukrainian market, but it has succeeded in establishing a stable clientele from the wealthy Western hemisphere.
And according to Softserve president Taras Kytsmey, it’s this experience that makes them stand out among other Ukraine-based computer technology firms.
“Our firm now has seven years of experience with foreign companies,” he said. “We know how to manage such projects and maintain quality control.”
The company saw its beginnings in the early 1990s when Rensselaer Polytechnic Institute graduate Mark Kapiy, an American software engineer of Ukrainian descent, met up with several Lviv-based computer specialists. The Ukrainians were visiting the United States for training at Rensselaer.
The group quickly realized the mutual benefits of establishing a Ukraine-based software development company to serve western clientele.
But getting the first clients would be the hardest part.
Enter Warren Brugeman, a retired vice president of General Electric. The group made contact with Brugeman through his Ukrainian born wife and convinced him to support the project. Brugeman, himself a Rensselaer graduate, was also a member of Rensselaer’s Board of Trustees. With much in common, the group was quick to obtain Brugeman’s support for such a project.
In 1993, Brugeman helped coordinate the establishment of a Rensselaer-sponsored small-business incubator center at Lviv’s Polytechnic University.
“Through the program, two Americans ended up coming to Ukraine and played a big role as consultants and partners in the early development of Softserve,” Kytsmey said.
According to Kytsmey, while the actual original owners of the company were Ukrainian, the Americans and the connection with Brugeman played a big role in finding the company’s first western client – General Electric.
It was not a big contract, but it did help the company to break into the western market.
By 1995, Softserve landed its first long-term western contract with Data Council, a U.S. based accounting systems firm.
“To this day … we have about five people working on their projects at any moment,” Kytsmey said. “Since accounting laws are constantly changing, constant updates are needed to keep the system up-to-date.”
Kytsmey said that Data Council remains one of their biggest contracts to this day bringing in about $100,000 annually – big money in Lviv.
Several years later came Shaker Computer & Management Services, a company which specializes in accounting systems for the construction industry. It has also remained a big client, with about 450 orders per year for Softserve to develop custom version of Shaker’s original accounting system.
A quote on Softserve’s www.softserve.lviv.ua Web site by Shaker project manager Mine Usluel, illustrates how the two companies work with each other.
“I send an assignment e-mail and then the work magically gets done in couple days, and the finished programs appear in our system,” Usluel said.
Recently, Shaker has entrusted Softserve with the job of creating a new accounting program from scratch.
“They hired us to create a totally new accounting system,” Kytsmey said. “Now we won’t just be updating their old system which we ourselves did not design.
The new system will be based on JAVA technology and will be fully compatible with the Internet.
Kytsmey was quick to point out that while Data Council and Shaker are among their biggest and most stable clients, the company has many other big clients – both inside and outside Ukraine.
DHL Australia is a notable international client, and on the local Ukrainian market, the company recently developed cash-register and inventory computer systems for Intermarket, a large super-market chain in Lviv.
All the same, Softserve looks to the West for its most lucrative contracts.
Recently, the firm has averaged about 15 contracts a year from U.S. companies.
Softserve marketing director Taras Vervega says lately business has been good and the company is rapidly growing.
“In the last two years our business has reached a level of stability,” he said. “Now, we’re growing.”
A few years back, Softserve had about 25 employees. Today, the company can have anywhere from 75 to 100 employees, some working on a contract basis.
Yet the company’s core employees remain a tight knit group. Most trace their educational roots to Lviv’s Polytechnic University, and most are either professors, instructors or graduates of Lviv Polytechnic University.
Vervega and Kytsmey, two of the four Ukrainian owners of the company, said that the company continues to send representatives abroad for both work and training.
As a result, western business jargon such as project management, proposal, development and delivery have become part of their everyday working vocabulary.
With stability achieved, Kytsmey says that the Softserve’s goal is to expand its marketing and project management operations abroad with its own representative offices in countries like the United States. Rather than simply acting as sub-contractor workhorses for software service companies, Softserve wants direct contact with its own clients.
And while companies from other nations such as India have long adapted such a strategy, Kytsmey says that the western market is hardly tapped.
The United States has a huge deficit of quality programmers, he said.
There is fierce competition from the Indians, but Kytsmey believes that Ukrainian firms are fully equipped and capable of succeeding.
But what about Kyiv and Ukraine’s other big cities? Can a Lviv-based firm compete with them?
Kytsmey says they can.
“Kyiv’s information technology firms naturally have an advantage in capitalizing on the Ukrainian market, he says. “But when it comes to the western markets, they hold no advantage over us.”
