The Ukrainian software development industry has seen significant growth in recent years and has become one of the leading players in the global IT services market. The primary factor behind the success of Ukrainian IT companies is their effective corporate structures, which allow them to adapt to rapid market changes and efficiently manage resources. In this article, we will take a detailed look at the corporate structures of three leading Ukrainian IT companies – SoftServe, Luxoft, and Ciklum, and compare their similarities and differences.
SoftServe is one of the largest IT companies in Ukraine, with over 10,000 employees working in more than 30 offices worldwide. The corporate structure of SoftServe is a combination of functional and project-based models.
Functional Structure:
Project-Based Structure:
Luxoft, part of DXC Technology, specializes in providing IT services in various sectors, such as finance, automotive, and healthcare. Luxoft employs a matrix structure that combines elements of functional and project-based structures.
Matrix Structure:
Advantages of Matrix Structure:
Ciklum is a leading provider of outsourcing software development services and works with clients worldwide. The corporate structure of Ciklum is based on a project-based model.
Project-Based Structure:
The uncertainty regarding a company’s ability to build effective processes based on a matrix management structure remains during the initial phases of a company’s transformation.
The pitfalls of matrix management and its particular advantages can be explored in detail through the Harvard Review. For those not yet subscribed, I suggest adding it to your publication list. To summarize an excerpt: In practice, however, the matrix proved all but unmanageable—especially in an international context. Dual reporting led to conflict and confusion; the proliferation of channels created informational logjams as a proliferation of committees and reports bogged down the organization; and overlapping responsibilities produced turf battles and a loss of accountability.
Companies typically don’t consciously choose this problematic management form. Historical legacies and swift business decisions driven by investment indicators, often without readiness for in-depth analysis, lead to situations where “matrix management” controls numerous processes for extended periods.
In my professional experience, I’ve faced two types: establishing local representation and acquiring companies. The former, being less complex in terms of management, is more predictable. Although I can’t disclose specific companies, the company was mainly formed by the headquarters. Consequently, issues surrounding the establishment of common goals and a clear hierarchy were almost nonexistent. Management managed to avoid the disadvantages of a matrix management structure almost always, except for highly complex projects complicated further by cultural differences among the offices of a huge company. I’m curious to read future books that discuss how leadership handles such matters.
Acquiring companies leads to relatively long-term friction. Friction should reshape the acquired company. Much depends on how well-established the parent company is and how deeply it is willing to delve into the specifics of the acquired company. Changes in competencies, often significant shifts in goals, confusion in subordination, and uncertainty about the future can paralyze such a company. Hence, in my subjective view, it’s crucial to ‘plug in’ the company to an artificial life support system to stay ahead. I’ve seen changes in the leadership of the acquired company aimed at reducing resistance to changes and enhancing manageability. It’s a radical and common but effective solution. However, it’s essential to remember that such changes require a deep bench. Leaders sometimes leave a company suddenly or change their positions, and having timely replacements for them and their subordinates is crucial. Some leave immediately, needing just a ring, while others might take up to six months before joining competitors.
Transformation takes time, and delaying solutions to pressing issues only exacerbates the situation. Improving transformation is possible through simple steps: a transparent new structure, clear lines of responsibility, efforts towards material and immaterial motivation, achievable goals in the early stages—all of which need support from shareholders, devoid of rose-tinted glasses.
When reviewing materials on this topic, I was surprised by how long this trap has ensnared companies. The problem existed and was localized in the 1970s, in 2000, and in 2020. Like a flytrap, despite its primitive nature, it remains capable of ensnaring quick and more evolved insects.
The pitfalls of the matrix management structure and its particular advantages can be explored in detail through reviews in the Harvard Review. For those not yet subscribed, I recommend adding it to your publication list. To summarize an excerpt: in practice, the matrix proved almost unmanageable, especially in an international context. Dual reporting led to conflicts and confusion; the proliferation of channels created informational logjams, as the multiplication of committees and reports bogged down the organization; and overlapping responsibilities produced turf battles and a loss of accountability.
Companies typically do not consciously choose this problematic management form. Historical legacies and quick business decisions driven by investment indicators, often without readiness for in-depth analysis, lead to situations where “matrix management” controls numerous processes for extended periods.
In my professional experience, I have encountered two types: establishing local representation and acquiring companies. The former, being less complex in terms of management, is more predictable. Although I cannot disclose specific companies, the company was mainly formed by the headquarters. Consequently, issues surrounding the establishment of common goals and a clear hierarchy were almost nonexistent. Management managed to avoid the disadvantages of a matrix management structure almost always, except for very complex projects complicated by cultural differences among the offices of a large company. I am curious to read future books that discuss how leadership handles such matters.
Acquiring companies leads to relatively long-term friction. Friction should transform the acquired company. Much depends on how well-established the parent company is and how deeply it is willing to delve into the specifics of the acquired company. Changes in competencies, often significant shifts in goals, confusion in subordination, and uncertainty about the future can paralyze such a company. Hence, in my subjective view, it’s crucial to ‘plug in’ the company to an artificial life support system to stay ahead. I have seen changes in the leadership of the acquired company aimed at reducing resistance to changes and enhancing manageability. It is a radical and common but effective solution. However, it is essential to remember that such changes require a deep bench. Leaders sometimes leave a company suddenly or change their positions, and having timely replacements for them and their subordinates is crucial. Some leave immediately, needing just a ring, while others might take up to six months before joining competitors.
Transformation takes time, and delaying solutions to pressing issues only exacerbates the situation. Improving transformation is possible through simple steps: a transparent new structure, clear lines of responsibility, efforts towards material and immaterial motivation, achievable goals in the early stages—all of which need support from shareholders, devoid of rose-tinted glasses.
Corporate structures of software development companies in Ukraine are diverse and capable of adapting to rapid market changes. Functional, project-based, and matrix management models each have their advantages and disadvantages, and the choice of a particular structure depends on the specific activities of the company, its size, and strategic goals.
Analyzing the corporate structures of SoftServe, Luxoft, and Ciklum shows that a successful combination of various elements of corporate structures contributes to effective management and company development. All three companies demonstrate high flexibility and result-orientation, which allows them to maintain leading positions in the international IT services market.