Hires Eastern European software engineers cheaply and bills Fortune 500 companies in North America and Western Europe at much higher rates.
EPAM Systems recruits software engineers through alumni networks built over decades at Belarus Technical University and equivalent Eastern European institutions, then bills those engineers to Fortune 500 clients in financial services and healthcare at $80–200 per hour while paying Eastern European wages — and the gap between those two numbers is where almost all of the company's margin lives. The custom code those engineers have already wired into client trading systems and hospital records platforms creates switching costs that keep revenue stable, but only as long as EPAM can field enough senior architects to win new work, and that group cannot be grown quickly. When Belarus and Russia were sanctioned in 2022, roughly 30% of the highest-arbitrage tier of that pipeline disappeared overnight, shifting the remaining work to Poland and Hungary where wage floors are higher and the gap is narrower. If EU wage convergence, Zloty appreciation, or further geopolitical restrictions close that gap at the surviving centers, EPAM cannot lower its billing rates to compensate without collapsing the margin structure the whole business is built on.
How does this company make money?
The company bills clients by the hour for engineers working on-site or remotely, at rates between $80 and $200 per hour. It also signs fixed-price contracts for defined projects, typically ranging from $500,000 to $50 million. On top of that, it earns steady income through managed services agreements — multi-year contracts, usually three to five years, where it maintains and supports applications the client is already running.
What makes this company hard to replace?
Custom application code already written into a client's financial trading systems requires a new vendor to spend months learning how it works before changing anything — and mistakes in those systems carry serious financial or regulatory consequences. Healthcare IT implementations go through multi-year regulatory qualification cycles, which effectively lock hospitals into their existing provider for the duration. Any new development team also has to learn how to connect with the client's existing Active Directory and security infrastructure, which adds time and risk that most clients prefer to avoid.
What limits this company?
Senior architects who understand financial regulation or healthcare compliance rules take years to develop — they cannot be hired or trained quickly. The 2022 sanctions cut off roughly 30% of the company's historical engineer supply concentrated in Minsk, the cheapest and highest-margin part of the pipeline, and no replacement source exists at the same wage levels.
What does this company depend on?
The company cannot operate without H-1B and L-1 visas to bring Eastern European engineers to U.S. client sites, continued access to development centers in Poland and Hungary following the Belarus and Russia restrictions, sustained wage differences between Eastern European engineering salaries and Western billing rates, Microsoft Azure and AWS for hosting client applications, and partnerships with Salesforce and Adobe for implementation work.
Who depends on this company?
Fortune 500 financial services firms rely on the company for custom application development — if it stopped, those firms would fall behind on digital projects. Healthcare organizations using it to implement electronic health record systems would face project delays that affect how patient data is managed. Retail clients building or upgrading e-commerce platforms through the company would lose that capacity precisely when they need it most, during seasonal preparation periods.
How does this company scale?
Software development methods and technical frameworks can be applied to new client projects without much added cost, so winning another engagement does not require rebuilding the delivery model from scratch. But the senior architects who understand financial regulation or healthcare compliance are a fixed group that cannot grow quickly — every complex enterprise project has to wait for one of them, and that bottleneck gets worse as the company takes on more work.
What external forces can significantly affect this company?
EU data protection rules require that certain client data stay within specific jurisdictions, which limits which development centers can work on which projects. U.S. immigration policy controls how many H-1B and L-1 visas are available, directly affecting how many engineers can be placed at U.S. client sites. Currency movements between the U.S. Dollar, Euro, and Polish Zloty shift the wage gap the whole pricing model depends on — if the Zloty strengthens or the Dollar weakens, the arbitrage quietly erodes.
Where is this company structurally vulnerable?
If the wage gap between Poland or Hungary and Western markets closes — whether through Polish Zloty appreciation, EU wage growth converging upward, or new geopolitical restrictions cutting off more development centers — the company can no longer charge $80–200 per hour and still cover its costs. The entire margin structure depends on that gap staying wide, and the campus pipeline that justifies the billing rates loses its value the moment the arbitrage disappears.
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