18^th Aug 2023

Concern #12: Government Oversight and Regulation

Our series of posts about outsourcing concerns is coming to an end. Today we'll discuss the last major concern — government intrusion. It is our last topic but not the least important one, since government intrusion can destroy a sound outsourcing relationship.

Any business, including the IT business, requires clear “rules of the game” that do not change constantly as well as a certain level of freedom. The goal of government is to establish such rules, enabling business to grow and develop the economy. In countries that go the democratic way, business is viewed as the main engine for economic development, benefitting from a large amount of freedom and legal protection. In contrast, countries that gravitate to totalitarianism impose а high level of control over everything and everyone, including business. Yet others allegedly have fair laws and support for business that don’t actually work in practice due to massive bureaucracies or corruption.

There are many ways in which IT business can be affected by government actions. Government can change taxation rules, complicate visa requirements that affect business trips, block or restrict the Internet access, or even nationalize a private business. Some actions that may sound crazy for democratic countries can be a normal occurrence in totalitarian ones.

When selecting an outsourcing provider, you should research its country’s political system and conditions for business. Even if your chosen provider is professional and reliable, your cooperation can be affected or even destroyed when the government decides to intervene into its business. Your business contract is unlikely to protect you in such cases because government actions are outside of the provider’s control.

We would suggest not to outsource to countries that don’t follow a democratic course, even if the current situation there appears stable. At the very least, avoid outsourcing to such an environment your core projects with long-term plans critical for your business. Otherwise, if the situation in your provider’s country worsens, your business will be at risk.

It’s worth mentioning that software development is a pretty mobile business, and software development companies (or teams of developers) can move to other countries with relative ease. The process is not hassle-free, but for a software development business it is much simpler than for almost all other businesses.

When you consider working with Solead, you should know:

• The Ukrainian government strongly supports the development of the IT industry. Revenue of the IT industry has grown from 3% of GDP in 2012 to 8% in 2022, and is forecast to reach 15% by 2030. Increasingly, the IT industry is becoming an integral part of the Ukrainian economy.
• Ukraine is a highly digitalized country. All the necessary services can be done online thanks to the “The State within a Smartphone” government program. In fact, Ukraine is the first country in the world to have introduced electronic passports.
• Ukrainians are freedom-loving people intolerant of tyranny. Ukraine has strong democratic traditions since Cossack Era in XV-XVIII century and is on its way to joining the European Union. Ukraine was granted with an EU candidate status in June 2022.

Thank you for your time and attention. We were glad to share our experience with avoiding pitfalls and dealing with the particularities of IT outsourcing.