It is safe to say that many nations were caught off-guard by the events unraveling at the end of February 2022. Many expected Ukraine to decline massively, especially in economic terms. However, to everyone’s surprise, some Ukrainian industries, specifically the IT sector, illustrate remarkable resilience and hope for the best six months into the turmoil.
How the Ukrainian IT industry handles all the challenges shows the importance of digitalization in general. Yet, specifically in Ukraine, the resilience of the IT sector is a direct representation of the strength of Ukrainians. Let’s investigate the case of the Ukrainian IT industry and portray several factors that allowed the sector to recover after its challenges and flourish.
Bright Future Ahead
The central hypothesis presented in this article — despite the war, Ukraine’s IT Sector faced all the challenges with utmost effectiveness and managed to create the conditions allowing the industry to flourish despite all the odds. As a result, the numbers show Ukraine’s IT service market will continue to grow shortly (see Fig. 1).
Figure 1. Ukraine’s IT Services Market: Export Volume & Talent Pool
Many IT companies managed to preserve their contracts and find new clients. Global investors look forward to using the services of Ukraine’s IT professionals. AmCham indicates that 96% of companies plan to continue operating in Ukraine in 2023. Furthermore, 85-95% of IT sector professionals managed to return to work duties despite the war. Finally, only 1% of all IT companies in Ukraine cannot pay their employees’ salaries.
These numbers prove that the Ukrainian IT market not only managed to survive the events of the past six months but also found a way to flourish despite everyone’s expectations. How is that possible? As we see it, and our vision is supported by evidence, several vital factors helped the IT industry take the challenges head-on.
- Strong pre-war foundation
- Global trust
- The Ukrainian IT sector is proving itself
- High proficiency and expertise
- Focus on innovation
- The correct response to Feb 20, 2022 events
- It is all about companies and people
We believe the abovementioned factors prove the hypothesis and grant an understanding of Ukraine’s IT sector resilience.
Pre-2022 IT Sector Overview
Since 2013, Ukraine’s rate of IT services exports has been rising steadily, reaching its peak in 2020 (see Fig. 2).
Figure 2. Ukrainian IT Export in M USD
While many nations faced a decline linked to the COVID-19 pandemic, Ukraine’s tech hubs located in Kyiv, Lviv, Kharkiv, and Dnipro saw their exports reaching up to 20% growth.
Before February 24, 2022, there were 285,000 IT professionals, 858 IT services companies, and $5 billion in IT services export in Ukraine. For a country with a 41.2 million population. In addition, with 661 higher education institutions operating in Ukraine, more than 23,000 new IT professionals enter the industry each year. Finally, Global Sourcing Association labeled Ukraine as the #1 IT-outsourcing destination in 2021. As a result, before the war started, Ukraine’s IT segment had a strong foundation and favorable business climate for the sector to grow.
Industries
One of the aspects linked to the strong foundation is all about many industries Ukraine’s IT segment focuses on (see Fig. 3).
Figure 3. Industry Focus among Ukrainian Software Development Companies
The reason for such a broad outreach of Ukraine’s IT services is linked to the fact the tech sector in the nation is the most exported service. Its share was about 8.3% of the country’s total $60,4 billion exports. As a result, the more industries use Ukraine’s IT services, the greater demand, and higher resilience.
Growth Factors
Ukraine created favorable conditions for its IT industry to flourish for only one decade. The nation has a favorable business climate, highly educated professionals, and many industries looking for IT services. However, some pre-2022 government actions opened new horizons for Ukraine’s IT segment.
- Massive deregulation with more than 450 outdated regulations canceled
- A new Privatization Law and a more transparent VAT refund system
- The creation of the High Anti-Corruption Court of Ukraine
These were among government-based actions aimed at improving the business climate triggering the IT segment’s growth. Keeping that in mind, with general factors considered, let’s plunge into more specific aspects of making Ukraine’s IT sector resilient, starting with global trust.
Global Trust and Companies Operating in Ukraine
One of the best indicators of a flourishing IT segment with an undermining appealing business climate is the number of multinational corporations having their R&D operations in the given nation. In the case of Ukraine, the number of global companies is impressive and is growing (see Fig. 4).
Figure 4. Global Companies with R&D in Ukraine
Moreover, along with more than 4,000 tech companies operating in Ukraine, 18 are listed among the 100 TOP outsourcing businesses. The nation works with 100 out of Fortune 500 clients, and this list will likely grow further. These numbers show there is global trust in Ukraine and its IT segment. In such a case, it is time to proceed to the next factor, the one about Ukraine’s urge to prove itself with some notable names on the market.
Ukrainian IT Sector Proving Itself
There are several Ukrainian unicorns people recognize and use around the world. However, not many know that these valuable IT companies originate from Ukraine. More specifically, we speak about the following:
- Ring. In 2018 Amazon paid about $1 billion to buy Ring. While being integrated into the package of Amazon services, the Ukrainian-based company managed to become a massive find for millions of users.
- GitLab. This DevOps platform is believed to be the first Ukrainian unicorn. As an open-source platform, it is used by thousands of organizations and has approximately 30 million
- Grammarly. Founded as a small grammar checking tool for students, Grammarly grew into a massive AI-powered writing assistant that hundreds of millions use daily. Now, the company is worth $13 billion.
- ai. This is the most recent Ukrainian unicorn that received a more than $1 billion valuation. It uses AI-based tools to help businesses make their revenue operations more efficient.
- Reface. In 2020 this app was in the top five on Google Play. With more than 8 million downloads per month, the company behind Reface managed to raise hundreds of millions in several years.
These companies are all created by talented Ukrainian ICT professionals. It proves that Ukraine has highly skilled IT experts who can make products that global users love.
Proficiency and Expertise
The next factor standing behind Ukraine’s IT sector resilience is the proficiency and expertise of people working there. ICT professionals from Ukraine use JavaScript as their first choice, with 41% naming JS as their additional programming language. In addition, Ukrainian IT professionals work with Python, TypeScript, and Kotlin.
When it comes to key areas of the Ukrainian IT market, one should note the following:
- Software development
- Software maintenance
- Quality Assurance (QA) testing
- Research & Development
At this point, as the top 1 outsourcing destination, Ukrainian IT professionals proved themselves as experts in applying JS, Python, TypeScript, and Kotlin. Moreover, they provide a range of services helping go through all the cycles of software development with further support and testing of the product.
Innovation and Moving Forward
Now, we see that the resilience of the Ukrainian IT industry stems from the global trust it acquired, the international products it presented, and the broad expertise Ukrainian IT professionals offer. Yet, in addition to promoting its global outreach, the Ukrainian IT segment supports innovation as a part of the national agenda. In such a case, bringing the IT segment even further is delivered through projects like the following:
- Diia City. It is a massive project establishing a free economic zone for IT companies and creative representatives. Propagated by the Ministry of Digital Transformation, Diia City is expected to become an enormous platform where domestic and international tech firms can open businesses and R&D centers in just several clicks.
- IT Generation. This program is dedicated to preparing new ICT professionals. The goal is to find Ukrainian talent and fuel the growing IT industry with new experts.
- IT Cluster. There are various IT clusters in different tech hubs across Ukraine. These communities include Ukrainian IT companies, educational institutions, and local authorities. Their core goal is to integrate technologies into projects directed at local, regional, and national development.
The projects mentioned above illustrate how the Ukrainian IT industry looks into the future. The nation constantly works on means to attract investment and reduce barriers for the tech sector to flourish. This helped Ukraine’s IT segment withstand the challenge of February 24, 2022.
Direct Response to February 24, 2022 Challenges
Along with the factors mentioned previously, the fact that the Ukrainian IT industry is the one prospering despite all the odds is all about the correct and timely decisions made within the sector as soon as the great turmoil started. The first such decision is linked to t companies’ relocation actions in the first month of the war.
Relocation
As of May 2022, about 35,000 ICT professionals moved from the Kharkiv region to Zakarpattia Oblast alone. What is more, Ukraine’s western tech hub Lviv has seen an increase from 30,000 to 90,000 ICT experts due to relocation. In such a case, only 2% of Ukrainian IT companies were forced to cease their operations because of the successful relocation. Considering the scale of the war, such a percentage is minuscule.
One of the keys to relocation’s success is that many IT companies were preparing for the relocation before the war took place. Many businesses established evacuation routes and presented contingency plans. As soon as the war started, the central part of the Ukrainian IT industry managed to move from the Western to the Eastern part entirely intact. It shows that Ukraine’s IT segment is shock-resistant and can handle almost anything on its way.
General Approach
In general, several additional factors helped ease the impact of the war on the Ukrainian IT industry. These are the following:
- Cost-efficiency. Compared to Western Europe, the cost of living in Ukraine is much lower. It helped to make relocation easier, with many ICT professionals able to afford accommodation in safer regions.
- Due to its location, Ukraine has common hours with many clients. In such a case, the relocation of IT companies did not thwart the steady provision of services, and many companies managed to save their contracts and get new ones.
As a result, the timely answer to the war in terms of properly planned and executed relocation of IT companies helped the Ukrainian IT industry to remain operable and competitive regardless of the turmoil.
It Is All about Companies and People
However, the very nature of Ukraine’s IT sector resilience stems from its people, both employees and managers. Notably, during the first months of the war, about 80% of IT companies managed to reduce the effects of the war and offer their employees all the means they needed to work in safe environments. In March 2020, up to 96% of IT exports were preserved, higher than the last year’s indicator for the same month. Only 10% of all IT companies lost their contracts. As to the prospects, 77% of Ukrainian IT companies seek to expand their client pool and are already on the way to doing so.
Key Takeaways
All in all, Ukraine’s IT sector is resilient. There is sufficient evidence to verify the initial hypothesis and indicate that Ukrainian ICT professionals have all it takes to deliver high-quality services even during the war. It is a unique situation showing that Ukraine established a firm foundation for its tech segment, gained global trust, presented some widely recognized IT products, and had highly skilled experts standing behind the industry’s resilience and flourishing. One can be sure that the future of Ukraine’s IT segment is bright, and if it manages to overcome the challenges triggered on February 24, 2022, it can deal almost with anything on its way.
