Expanding businesses into mid-sized cities

We reached out to two long-term Beetroots who have been part of the process for changing our outlook. What we actually mean is, they got us to change our gaze from the traditional IT hubs in Ukraine and encouraged us to look into smaller cities around the country. The reasons for moving away from expensive metropolitan areas can range greatly, from cost-savings, to convenience through to reducing competition, yet the core motivation in our case has been to unlock a previously inaccessible and potentially huge workforce. This workforce holds the budding possibility of being quickly tuned and trained to international standards that can cope with high volume needs. A mid-sized city in this text is defined as having a population of around 200,000, and examples include cities such as Kramatorsk, Ivano-Frankvisk and Poltava.

Find below two independent conversations we had with both Uve Poom, Partnership & Fundraising Manager at Beetroot Academy, and Andreas Flodström, Beetroot and Beetroot Academy Founder & CEO.

What is Beetroot doing in mid-sized cities?

Uve: Basically, we open IT academies and teach people. From an individual perspective, we create new & professional opportunities. The economies in mid-sized cities are outdated and salaries are too low. So from the global perspective, if we want to modernize the economy, we have to modernize people’s skills in all of our cities. It is a well-known fact that the modern economy is digital and knowledge-heavy, so we are helping underdeveloped towns make this leap into the new age. We work as a catalyst to the marketplace. Since we entered new cities we bred new blood in the IT industry. We created a talent pool using practical and quick education. And we work as a link between old and new. We bridge between bulky higher education and fluctuating market needs; between the old way of doing things and our new economy.

Andreas: What we aim to do is to create new job opportunities by developing local IT fields. But the whole thing is much more complicated. If you think about Maslow’s pyramid, there is a basic layer there, right? That’s what we do at first – we give people a job and decent salaries to buy items of necessity. But then we go further, to the next level of the pyramid. We give them purpose, we teach them to think of the big picture and not just about making money. Today in Ukraine you can easily find expensive things and cheap things – but nothing is in between. We teach people to want to create the middle ground, strive towards developing a better lifestyle.

How leading business in mid-sized cities differs from leading business elsewhere?

Uve: In three ways. Firstly, it’s the cost of doing things. The further you go from the centre, the lower the prices are. So starting a company is cheaper. Secondly, it’s the risk of doing things. The risk is usually higher, mostly because you’re not just trying to start a company, but you’re revolutionizing the whole environment. Thirdly, it’s the impact of doing things. Working in the intense atmosphere of huge cities, surrounded by competitors, startups and innovators, it’s really hard to see your footprint. In smaller cities, you can definitely see the impact of your business and it inspires to do more.

Andreas: Frankly speaking, the outsourcing industry is based on disbalance to a large extent. The same work is valued differently in different locations. For instance, the work of developers in mid-sized cities would cost less than the same work in megalopolises. We don’t pretend that we are saints and aren’t using this to our own gains. But while building a business around this, we also decrease the gap. Just imagine this, now developers in Poltava (a mid-sized city in Ukraine) are educated enough and have good opportunities to compete with developers in Sweden. Actually, they can compete with any developers in the world. It opens up a new field of opportunities for them, chances to change their lives and the lives of their societies.

Why did we start doing this?

Uve: Mostly out of inner strive for balancing the development of the country. Ukrainian business is focused in a handful of cities, while others remain underdeveloped. This creates a vicious circle. People fly away from smaller cities, cities receive fewer taxes and fail to develop, so more people leave them for good. The only way to break the cycle is to provide attractive opportunities in those cities and persuade people to stick around. In broader terms, this applies on the national level as well – so that people wouldn’t need to leave their home country for purely economic reasons.

Andreas: The reason why we are opening academies in mid-sized cities is to develop these places. We come with a very specific offer – practical courses that will land you a job in the IT sphere. We underline that we welcome people not only with basic skills or education but with a specific mindset and values that hopefully make them more interested in developing their societies with us

Uve: By opening a company we obviously generate job opportunities. But it doesn’t stop there. For every new IT job created, a couple of surrounding jobs are also created. In the western countries, the ratio is around 1-2 new jobs for every IT post that’s formed. However, in Ukraine, where the salary gap between the IT industry and other spheres is ridiculously big, every new job in IT creates 3.8 new jobs. The impact is huge!

How it influences IT and the Ukrainian economy?

Andreas: We decided to do this mainly to rejuvenate the middle class in Ukraine. 80% of software development companies in Ukraine are working for export and the Ukrainian economy is much weaker than the ones where it exports. By offering new job opportunities within international companies we create an inflow of currency. We do this not only to strengthen the economic situation but also to change people’s mentality and teach them to take social responsibility.

Uve: We can see that the creation of new openings in mid-sized cities influences the IT industry as a whole. We don’t only increase the talent pool, but we increase competitiveness. We build stronger loyalty from people in smaller cities, which makes a lot of sense from a business perspective. And we actively work with gender discrepancy, because two-thirds of our students are women. Donor funding helps us offer scholarships to engage more women. By doing so we attract a further 50% of the population into the IT industry, shaking up the male dominance that is in play.

What challenges do we face?

Uve: Young people still have a belief that they will have a better life if they move away. Which might be true, of course, and might be not. But it’s hard to find students in mid-sized cities, willing to learn and to stay. Another challenge is the mentality. Big cities, somehow, have a more progressive way of thinking. It can be seen in people’s independence, ability to self-manage and to take responsibility. In mid-sized cities, people seem to have less of an independent mentality. They are still choosing more passive roads, hoping to have someone to tell them what to do. This is a legacy of the Soviet period when the state took care of everything, but also took away individual autonomy. But we think that this will change once they see emerging opportunities and a new way of doing things.

How international business benefits from this?

Uve: I believe that by building new academies in mid-sized cities we acquire huge opportunities to change the way business functions. Let’s think of the existing patterns. For instance, Google decides to open a new development office in Europe. They would partner with local universities to train people for this new function. The process can take three, four or even five years. We are doing something very similar but on a smaller faster scale – our Beetroot customers can partner with Beetroot Academy and can quickly start a four-month course that fits their needs. The companies don’t have to develop their own curriculum now – they just want to hire developers, and that’s what we do. Beetroot with Beetroot Academy commands a powerful talent pipeline. We pick only those people, who are motivated enough to study, and that ensures the quality of future hires.

Andreas: The workforce nowadays becomes more global. What we do with the Academy is create opportunities for gaining enough competence in these locations to join the global competition. In the long-term, we believe that one day there will be a perfect capitalistic world where everyone will compete globally and equally.