The Ukrainian IT Industry during the War: The Dominating Trends

Ours is the time of major upheavals. The unprovoked and ruthless war that Russia supported by Belarus is waging against Ukraine has shaken the very foundations of modern civilization. It spells not only a monstrous tragedy for the Ukrainian people. In fact, Russian atrocious aggression is putting to test the integrity of the Western world as a champion of democracy and the efficiency of the entire global security system. 

Like any large-scale event in the history of the planet, the Russia-Ukraine standoff has many more dimensions than the most obvious military one. The conflict sent repercussions to a number of other spheres not in ripples but in waves, causing the disruption of conventional trade routes and radical changes in virtually all international industries. The IT sector is not an exception given the profound involvement of this region of the world in the global economy.

The Pre-war Condition of the IT Industry in Ukraine: Telling Numbers 

The pre-war decade can be called a golden age for the Ukrainian IT realm.  Its value approached $1.3 billion with the entire software market estimated at the breathtaking $5.5 billion manifesting a spectacular annual growth of 150%. Such indices were possible both thanks to the lenient tax regime established by the national government and due to the committed effort of approximately 200,000 developers employed by almost 12,000 IT companies.  

It is the Ukrainian talent pool of software engineers that could claim the credit for propelling the country so high in all professional rankings. They are fluent in English and display top-notch skills in various IT domains including app and solution development  in gaming and gambling, fintech, edtech, healthcare, IoT, e-commerce, telecom, and other digitally-powered industries of the early third millennium. Although being high-profile experts proficient in all major programming languages (from the most widespread JavaScript, C++, and Python to rather exotic Kotlin and Objective-C) they charge quite moderate prices for their services – generally, $25-35 per hour – which is a very attractive price/quality ratio for Western customers.

Such a flourishing state and robust progress that by all accounts was envisaged for the IT industry in Ukraine for years to come was suddenly cut short by the vicious attack of atrocious hordes from the East.   

The Impact of the War on the IT Market of Eastern Europe

February 24 – when Russian bombs and missiles indiscriminately hit schools, hospitals, churches, residential houses, and key infrastructure in Kyiv, Kharkiv, Mariupol, Sumy, and dozens of other peaceful cities and towns – became a gruesome divide for millions of Ukrainian families, splitting their life into “before” and “after”.

The iniquity of this cruel attack caused a tectonic shift in the position of the world community which had been inclined to turn a blind eye to the annexation of the Crimea and proxy war fed by Russia that was smoldering in Eastern Ukraine for eight years. Now most civilized countries finally know Russia for what it is – a shameless aggressor led by the senile war criminal who would stick at nothing to hold its sway over a neighboring 40-million nation. 

This recognition spurred governments into action and they launched drastic sanctions against the perpetrator and Belarus – its ally from the territory of which Russian troops invade as well as shell Ukraine. Such sanctions amount to the mass exodus of European and American brands from the Russian market and the cutting of all trade and financial ties with Russian enterprises. Western IT companies move in the wake of this total isolation drive, withdrawing their offices and breaking contracts with the aggressor and its minion. 

IT outsourcing market has suffered a similar fate when Western partners stop cooperation with Russian and Belarusian vendors en mass, dealing the niche a mortal blow from which it is unlikely to ever recover. In addition to severing long-established ties, sanctions sped up “The Great Russian Tech Brain Drain”. Many software specialists had been fleeing both countries for quite a time realizing the absence of any future under the existing totalitarian regimes but after February 24 this flight is turning into an avalanche. 

As a result, foreign IT services consumers start looking for a competent but affordable replacement and set their searching eye on Ukraine software outsourcing in which is considered to be among the top Eastern European  destinations. The country has a high reputation as an IT powerhouse whose software engineers laid foundations of PayPal, Whatsapp, Affirm, Grammarly, and other blue-chip brands of the realm. However, many Western customers are afraid of investing in a ravaged country that has become a war zone where nothing works, as they erroneously believe. Why is it a misconception?

First of all, Ukraine has been an arena of low-intensity was since 2014 but thanks to the valor of the Ukrainian armed forces Russian proxies were kept at bay on a limited territory in Eastern Ukraine, which allowed most of the country to pursue its regular activities elsewhere. Many foreign investors didn’t even realize this fact and considered for their projects in software development Ukraine as the most favorable location. 

Second of all, even the escalation of hostilities at the end of February didn’t become a death sentence for the economy of the nation. The Ukrainian Army is putting up a staunch resistance to the invaders, shielding most of the territory where people have a chance to lead a close-to-normal life. After the shock of the first week of the war, banks and financial system have resumed robust functioning, infrastructure facilities are largely left intact, and food supplies are timely delivered to the population. 

It would be wrong to claim that in terms of IT outsourcing Ukraine is unaffected by the war but it is increasingly taking the situation in its stride and displaying astonishing resilience in adapting to the new conditions of operation.

5 Trends Symptomatic of the Current IT Industry in Ukraine

What are the hallmarks of the Ukrainian IT domain today?

• Stable functioning of the business environment. In spite of the war, the staff of most companies enjoys all modern amenities such as unbroken electricity, water, and heating supply necessary for an uninterrupted working routine. Internet access is steady as well, which enables electronic payments across the greater part of the country. Moreover, the quality of web connection is sure to improve significantly after the satellite-powered network of Starlink terminals was launched in Ukraine. 

• Renewal of operation after overcoming the initial hiatus of the last week of February. IT companies report that the overwhelming majority of their personnel have resumed their regular responsibilities. At EPAM and DataArt this number equals 75%, at N-iX and Sigma Software – 84-85%, at Genesis – 90%, and at Intellias – 97%!

• Switching to remote mode. This trend appeared with the outburst of the global pandemic two years ago and the current situation has made this working model relevant again.

• Transporting employees and offices to Central and Western Ukraine. The war rages mainly in the parts of the country adjacent to the borders of Ukraine with Russia and Belarus whereas other regions are comparatively safe (except for occasional air strikes). That is why the majority of IT companies located in Kyiv, Kharkiv, Odesa, and other cities close to the frontline move their employees to the central and western provinces of Ukraine. Lviv, Ivano-Frankivsk, Khmelnytsky, and Chernivtsy are quickly turning into IT hubs thanks to the influx of developers from the traditional centers of the industry.

• Relocating employees abroad. Some companies prefer to seek complete security for their workforce, transferring the personnel to Ukraine’s neighboring countries – primarily Poland, Slovakia, Hungary, Czech Republic, or even farther – to Germany and Sweden. However, the number of such foreign-based employees of Ukrainian software companies doesn’t exceed 20% (for smaller vendors it is even fewer – 5-7%).

These are the major trends characterizing the current state of the industry but each IT vendor from Ukraine follows its own pattern of addressing the challenges the country faces.

How Ukrainian IT Companies Modify Their Practices 

Different software vendors introduce significant changes into their regular workflow. Some of them (like Aimprosoft, Bringg and Corefy) allow their personnel to work part-time with the percentage of such employees fluctuating around 40-45%. Others (for instance, Qubstudio) suspended their activities but continue constant communication with their staff to keep track of their movements and whereabouts (SQUAD and Dev.pro even developed a special bot with this purpose). Still others (namely, OLSOM L.L.C.) recruit a psychologist to help the staff overcome the stress caused by the war.    

The relocation drive has become a mainstream for most IT companies who are trying to weather the storm. For example, IDAP moved some of its employees to the safer regions of Ukraine or abroad (to Poland and Bulgaria) where it plans to open an office. Such flexibility allows Ukrainian vendors to keep afloat in hard times and continue functioning, employing their expertise to deliver top-notch products to consumers all over the world.