But some experts warn that education system needs improvement.

Well­-known for a relatively inexpensive yet professional work force, Ukraine’s software development business is steamrolling ahead, posting double­digit growth and cashing in on lucrative contracts from both foreign and domestic customers.

However, some software developers are beginning to complain about the deteriorating professional level of information technology graduates and predict industry growth will slow unless the education system improves.

Currently, there are more than 300 companies working in Ukraine’s software development field and growth has been impressive.

According to SoftServe, a Lviv­based software development company, the software market in terms of sales grew by 75 percent, from $175 million in 2005 to $310 million in 2006.

By the end of last year, the industry had increased to more than $350 million, SoftServe said, but other estimates put it at much higher. While growing fast, Ukraine’s software development potential in dollar terms is tiny compared to world leader India, which earns more than $17 billion annually. Yet it competes with Russia, where developers handle some $1.75 billion in contracts.

While Russia has more information technology labor resources, and Western Europe leads in the level of information technology education and infrastructure, Ukraine wins a significant share of international software development contracts because its labor rates are comparatively low.

“The demand for Ukrainian software development services is growing steadily in the West. Our main customers are the United States and Western Europe. In the last several years, the Ukrainian brand has become internationally recognized and there is no doubt that Ukraine is in the top ten software development countries of the world,” said SoftServe’s executive vice president Taras Vervega.

Since independence in 1991, Ukrainian developers have focused much of their effort on landing lucrative foreign contracts. But domestic demand is picking up, as is competition.

“The time of hyper­profits is over and competition in the local market is rapidly growing. In order to keep their market positions, local companies need high­quality software, for example, cost control programs and other IT (information technology) products to solve different economic issues,” Vervega added.

Ukrainian programmers commonly produce information technology solutions for health care, industrial and commercial niches. One of the most promising sectors today is project management and consulting software, according to experts.

Today, seven percent of Ukrainian commercial enterprises have introduced automated business processes designed specifically for them, says Lana Chabakha, business development director at Terrasoft, a customer relationship management software solutions provider.

“The potential in this area is very big. We do not expect the market to reach a saturation point for several years. The interest in customer relations management technology is growing both in small and medium enterprises and in the major Ukrainian companies,” she said.

Despite the Ukrainian software development industry’s cost competitiveness, a new weakness – poor education levels – may dent growth.

“Today about 30,000 young information technology professionals graduate from Ukrainian universities annually, but the skill level is far from the demands of the outsourcing market,” Vervega said. He believes increasing the education budget to 6.5 percent of GDP would solve the problem and brighten long­term prospects.

Liudmila Kuzmenko, the head of human resources at NetCracker, a software company that provides solutions to the industry, believes the weak education standards are already curtailing growth.

“The information technology education system in Ukraine is in dire need of investment from the government and private enterprise. It should be a top priority in Ukraine’s national strategy, because information technology outsourcing is one of the country’s international successful niches,” she added.