Nov 30, 2004 (11:11 AM EST)
Did Ukrainian Unrest Disrupt Offshore Work?

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Editor's Note: This story, a version of which originally appeared on InformationWeek.com on Nov. 30, has been edited based on subsequent reporting, and replaces the original version.

The political turmoil in Ukraine made for a tense few days last week for a San Carlos, Calif., software company that lost touch with the programmer to whom it had outsourced application development work.

Two years ago, Carson Media Inc., which recently merged with Collaborative Learning Systems LLC, outsourced development of its internal business software to Outsourcing Ukraine in Sevastopol, Ukraine. Collaborative Learning creative director Brandon Carson says he was anxious to tap the firm's "$5-an-hour database engineers." Last week, Carson said he couldn't get in touch with his lead programmer for several days, and work had stopped on projects for Collaborative Learning, which provides electronic training software for commercial customers such as eBay, Charles Schwab, and IBM.

Carson says he learned that the staffer was attending protests in Kiev. But Outsourcing Ukraine CEO Alexander Turkevych says the programmer traveled to Kiev only for a medical examination and that the company's work for Collaborative Learning Systems was unaffected. Turkevych also claims that Carson was kept fully informed about the situation and that the programmer is back at work.

Carson's experience highlights the complexity of offshore outsourcing and the fact that the economic advantages of offshoring must be weighed against the reality that the cheapest IT labor often is in politically and economically unstable countries. A growing number of customers are willing to forgo some savings to have work performed in a more stable region, says Paul Schmidt, project director for global service delivery at outsourcing advisory firm TPI.

Still, Ukraine offers outsourcing advantages, if the political situation stabilizes. The country provided many top computer programmers to the former Soviet Union's space and military efforts, and much of that expertise has spilled over to the country's private sector. Rates charged for programming in Ukraine are more expensive than in India but cheaper than Russia. Research firm Market-Visio says application outsourcing in Ukraine will grow 43% this year to $100 million.