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Benefits of opening an R&D department in Ukraine

The latest trends in the world economy indicate the need to fight for survival. Now the optimization of business processes comes to the fore, which is why the format of opening R&D departments in Ukraine is becoming popular. We decided to discuss the effectiveness of such relations with the Head of outsourcing for IT of the leading BPO provider of Ukraine. Smart Solutions Maryna Chikalovets.

What does the opening of the R&D department give to the foreign IT business

By forcing companies to be flexible, the crisis led to the need to optimize processes and preserve the budget by outsourcing part of the work. Grand View Research estimates that $232.32 billion worth of deals have been made in the global business process outsourcing market. According to forecasts, these numbers will continue to grow. Adapting to modern conditions, the world concentrated on reducing operating costs and shifted attention to the main tasks.

Grand View Research, report Business Process Outsourcing Market Size, Share & Trends Analysis Report By Service Type

Foreign companies have long understood the advantages of opening an IT representative office in Ukraine. This is beneficial, because here you can find people who are ready to work, who know how to go beyond their duties. It is also worth mentioning the financial component. A simplified taxation system is another plus for foreign companies. In addition, if you pay developer fees above the market, it often turns out to be cheaper than hiring a staff of specialists, for example, in America, if the main office is based there. At the end, the company receives a quality product, having spent a smaller budget. From our practice, according to some estimates, the savings are from 30 to 70% depending on the country. At the same time, creating R&D; departments in Ukraine, they outsource non-core processes, focusing on their main direction.

International companies that have opened R&D departments in Ukraine

Benefits of opening an R&D department

Working in Ukrainian realities, companies face risks when the tax authorities do not allow the amounts spent, for example, on team building, corporate events, and marketing expenses to be attributed to expenses. Since the outsourcer will transfer the money, he takes everything upon himself.

Rejecting inflated states, you can register as a sole proprietorship, which gives 5% of the required tax instead of taxes on the fund and withholding from wages for a total of 41.5%. As well as income taxation, VAT, tax on dividends in case of opening a legal entity, responsibility before tax authorities, risk management. At the same time, the work model of the R&D department is as transparent as possible, because the representative processes everything in accordance with the current legislation, and the customer does not deal with red tape and regulation of processes.

There is no need to register a legal entity on the territory of Ukraine, it is enough to register a trademark. This will allow hanging a sign with the name of the company, but will not impose an obligation to pay taxes.

For full-scale work in Ukraine, there is no need to import large capital. And this makes it possible not to worry about problems with financial monitoring and eliminates currency risks.

< figcaption>Why is it profitable to open an R&D department in Ukraine

The experience of many companies and their managers confirms practically the main benefits of transferring non-core processes to outsourcing.

“In the conditions of the digital market, we could not rely only on the classic sales channel and shifted our focus to an online platform for working with orders from distributors and consumers directly. We needed to build a DevOps department for software development in Ukraine from scratch. And the fastest way is to outsource the construction of the department. This gave us 3 main advantages over our competitors:

  • there was no need to establish an official representative office here and deal with its maintenance;
  • handover all administrative processes under control, namely, hiring and registration of employees, calculation and payment of wages and deductions, provision of IT equipment, document management;
  • focus on our product and its goals.

We saved a lot of time at the stage of creating a team, and due to the fact that all administrative issues are handled by an outsourcing company, we can be fully focused on the development of our product and specific tasks”, Oleksandr, DevOps manager (( beer industry).

The nuances of the R&D outsourcing model in the interaction of FOP

The specificity of the work of IT specialists in Ukraine is that they often do not want to be employed, to be on a schedule, to follow job instructions. Therefore, most often, labor relations appear in the form of a contract with the FOP. This carries the risk of recognizing them as hidden, since Ukrainian legislation is not so progressive and is not ready for such situations. Thanks to outsourcing, the company does not need to conclude direct contracts with FOP.

The same situation has a risk at the international level. On the way to attracting investments or promoting new markets, the company will need an audit. When it is carried out, there will be direct contracts with FOP in the risk list, which automatically reduces the value of the firm on the market. Running the R&D department by the Smart Solutions company helps to get rid of the need to delve into Ukrainian legislation and engage in service operations.

How it works in practice

Benefits of outsourcing with Smart Solutions BPO are that the company does not waste its energy on secondary tasks, but focuses on the main ones. After signing just one contract, the client only has to accept the issued invoice once a month and engage in product development. At the same time, the customer company needs only one representative who will monitor the allocation of the budget. At this time, the outsourcing company performs the following tasks:

  • concludes contracts with IT specialists as FOP or hires them to the staff with appropriate registration;
  • pays remuneration to the FOP or salaries to the specialists of the R&D Team;
  • supports accounting for the FOP;
  • helps with personnel selection;
  • purchases equipment, inventory;
  • organizes legal support;
  • concludes contracts with providers of communal and other services, accepts acts of completed works, pays for them;
  • resolves the problems of small ongoing repair of machinery, equipment, premises, communications;
  • arranges on the supply of food and drinks;
  • engages in communication with authorities that control organizations;
  • maintains accounting, management and tax records;
  • rents an office for the R&D team:
  • deals with its cleaning and full maintenance;
  • ensures labor protection;
  • makes contracts and conducts payments of a marketing nature, conferences, team building; landscape and all related necessary services for team activity and development.

This is far from a complete list of tasks that the head of the representative office will have to solve on his own, if he does not entrust them to an outsourcer. Smart Solutions customers only need to appoint one representative who will send applications with information about the required benefits and services.

What does the head of the R&D representative office do
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And what about Ukrainian companies?

And it’s time for them to catch up with foreign companies, because it is not necessary to deal with all business processes independently. If local firms don’t want to get bogged down in current business operations instead of focusing on the product, they need to outsource them. In the opposite case, if they cease to be competitive in the market, lag behind in the speed of development, they will also not be able to implement their ideas quickly. Ultimately, they will be pushed out of the market by a more successful foreign business. Already now, thanks to outsourcing, foreign companies, which are on equal terms with Ukrainian ones, are progressing faster.

Ukrainian business is gradually beginning to understand the benefits of outsourcing and is trusting it with more and more operations. The reason for such slowness is the habit of relying only on oneself, developed over the years, when entrepreneurship was just beginning to form and was often reduced to obtaining short-term profit at the expense of unfair play. However, today the situation has changed a long time ago: business is better protected at the legislative level and oriented towards long-term cooperation.

Smart Solutions works completely transparently: it concludes official contracts with suppliers, prepares the necessary primary documentation. All reporting is conducted online and allows you to control the movement of funds using special platforms.

< figcaption>Benefits of outsourcing for Ukrainian companies

What is the result

The opening of R&D departments in Ukraine, following the example of Smart Solutions customers, allows for quick and inexpensive business scaling. One of the main advantages is budget savings. There is no need to inflate the staff at the expense of accountants, lawyers, maintenance staff and finance it when professionals can handle it.

Thanks to outsourcing, managers begin to feel more effective managers, managers get the opportunity to fully devote themselves to the company’s mission and values. After all, it is enough to hire only one person who would understand who, when and for what needs to be paid, and Smart Solutions will do the rest. The need arose – the payment went through, that’s all. It remains to conduct business by directing the resource in the right direction, because the possibility of realization is wonderful.

27 july 2021