In Ukraine, Europe and the world, nishoring is gaining popularity – the transfer of production and business processes to geographically close countries. The trend is natural, because it is caused by the desire of companies to optimize costs while maintaining cultural and time compatibility. Combined with outsourcing, offshoring, insourcing and strategic partnerships, nishoring creates effective business strategies.
Nishoring vs outsourcing, offshoring and insourcing
If outsourcing allows companies to delegate certain business processes to third parties regardless of their location, nishoring focuses on cooperation with neighboring countries where cultural, language and time differences are minimal. These approaches complement each other: nishoring offers local flexibility, outsourcing – global opportunities.
Insourcing involves the performance of key functions within the company. Instead, nishoring allows companies to maintain control by collaborating with partners in neighboring countries. This is an approach for companies that want to combine internal control and external efficiency.
Unlike offshoring, which focuses on distant countries with cheap labor, nishoring offers the advantages of proximity. For example, European companies can move production facilities to Ukraine, gaining access to highly qualified personnel regardless of time zones.
Netshoring helps companies find a balance between efficiency, flexibility and control, and thus optimize operations, reduce costs and minimize risks. This business strategy is particularly popular amid geopolitical instability and disruptions to global supply chains.
Netshoring is gaining more and more popularity among European companies. Ukraine, thanks to its highly qualified and relatively cheap labor force, attracts foreign investors, especially in the fields of mechanical engineering and light industry. Let’s consider specific examples of such cooperation between European and Ukrainian businesses.
Nishoring in the IT sector
The leading Ukrainian IT company SoftServe develops software, provides consulting and manages IT infrastructure. To maintain operations during the war, the company moved part of the infrastructure to Western Ukraine. Their main clients are Europeans who value a close time zone and highly qualified specialists. It was in the format of nishoring that it turned out to be convenient for SoftServe to expand cooperation with European clients, offering IT services remotely.
Ukrainian startup Grammarly creates tools to check grammar and text style. The company actively works with European and American customers, thus expanding markets, attracting investment and developing new features even during wartime.
During the war, the international IT company EPAM Systems expanded its development centers in Ukraine, particularly in safer regions. The company attracts Ukrainian specialists to serve customers from Germany, the UK and the USA. EPAM actively supports Ukrainian specialists and their families, providing humanitarian aid and helping with relocation. In particular, the company allocated $100 million to support employees and their families.
Nishoring in manufacturing industries between Ukraine and the Eurozone
Ukrainian enterprises, especially in Western Ukraine, receive orders from European partners for the production of parts and equipment. This helps develop local industry and integrate Ukraine into European production chains. Austrian company Voestalpine, known for its innovations in metallurgy and technology, is actively expanding the geography of its presence. In Ukraine, the company has an office in Kyiv, which provides communication between local customers and Voestalpine production units.
Nishoring often becomes the basis for long-term partnerships, where companies see mutual benefits due to close geographical location. For example, the transfer of part of the production of European companies to Ukrainian enterprises in light industry strengthens economic ties and creates new jobs.
In particular, Polish and Czech companies actively cooperate with Ukrainian manufacturers in the tailoring of clothes and textiles. This helps foreign companies reduce costs while maintaining high product quality. An example of such successful cooperation can be the Polish company LPP (owner of the Reserved and Cropp brands), which has a representative office in Ukraine and cooperates with local partners for the production of clothing. This allows LPP to increase production efficiency, and Ukrainian partners to obtain economic and technological advantages.
Moving business from the EU to Ukraine
Western Ukraine is actively developing as an industrial center, attracting foreign investments and creating favorable conditions for economic growth. One of the examples of successful investment is the activity of the company Leoni, which opened its first plant in the city of Stryi, Lviv region, in 2022. The company produces cable networks for global automotive brands. The plant has become an important employer in the region, contributing to the development of the economy and increasing employment.
In 2017, the Leoni company opened another plant in the city of Kolomyia, Ivano-Frankivsk region. This became the largest investment in the region over the last quarter of a century, amounting to about 20 million euros. The plant creates up to 5,000 jobs and introduces modern technologies into production, contributing to economic growth.
International cooperation of Ukrainian farmers with Polish and Romanian partners
In order to transport goods faster, in particular grain and metal, new ones have been opened between Ukraine and Poland points pass at the border. This reduces queues and increases logistics efficiency. Investments in the ports of Gdańsk and Szczecin help process Ukrainian exports that were previously transported through Black Sea ports. These ports are modernizing their infrastructure to receive Ukrainian cargoes, ensuring the stability of exports.
Such domestic agricultural companies as “Kernel” play a key role in the export of grain to world markets. After the termination of the Black Sea Grain Initiative in July 2023, which limited access to Black Sea ports, cooperation with Polish and Romanian partners became crucial for Ukrainian business. One of the main routes for the export of Ukrainian grain passes through the port of Constanta on the Black Sea. The “Kernel” company redirected a significant part of its exports through this port. Grain is delivered by rail and through such Danube ports as Reni – to Constanta, and from there it is sent to world markets.
In order to increase the efficiency of exports, in February of last year, the company “Kernel” purchased a river terminal “Danube Agro Prom” in the port of Reni. This made it possible to significantly increase the volume of transshipment of grain and oil across the Danube and strengthen the company’s logistics capabilities.
Polish ports, especially the port of Gdansk, have become an important alternative for the export of Ukrainian agricultural products. This makes it possible to reduce dependence on Black Sea ports. Poland actively supports this cooperation by investing in agricultural projects in Ukraine.
Polish companies create joint ventures with Ukrainian partners, investing in land cultivation and processing of agricultural products. This helps to introduce modern technologies and increase the efficiency of agricultural production in Ukraine.
In addition, Poland supports the development of industrial parks in Ukraine, which creates favorable conditions for new investors and contributes to the economic growth of regions.
Industrial parks for investors
As of May 2024, 15 industrial plants were registered in the Lviv region parks with an area of more than 400 hectares. One of the main advantages that attract investors to industrial parks are tax benefits that reduce the financial burden on business and promote the development of new companies. In addition, industrial parks provide investors with ready-made infrastructure – electricity, water supply, gas and other necessary communications. This creates favorable conditions for the deployment of production and reduces initial costs.
In addition, the favorable geographical location of the parks allows easy access to key transport routes, which facilitates logistics and reduces costs for product delivery.
These advantages attract foreign capital, create new jobs and increase the economic potential of the regions. Industrial parks are developing especially actively in Western Ukraine, which helps integrate the country into the European economy and stimulates innovation in industry and production.
Tetyana Viktorova
