We’re an IT outsourcing company originating from Ukraine and a part of the Ukrainian IT community, so time-to-time we post overviews of Ukraine as an outsourcing location.
The full-scale military invasion started by the Russian Federation on the 24th of February 2022 has changed the reality in Ukraine. The business environment for the IT sector wasn’t an exception. And to update the understanding of the Ukrainian IT sector’s present state and the impacts of war on IT outsourcing in Ukraine, we offer our readers an updated overview of how Ukrainian IT companies reconcile wartime danger with business operations.
A spoiler: Ukraine, as a state, functions, IT companies continue to operate, and the IT sector shows growth while joining the fight against aggression.
Predictable escalation and competent response
Ukraine borders Russia historically, and the world has witnessed the Russian government politics, armed conflicts and invasions caused by Russia in different countries. On the contrary, Ukraine’s course is oriented toward freedom and human values protection, and our country paces in the direction of membership in European and international organizations.
Analyzing the situation, every business owner and stakeholder in Ukraine evaluated the risks and had emergency plans long before the start of the conventional war in 2022.
In 2014, Russia launched the first wave of invasion and annexed Crimea and several industrial regions in the east of Ukraine. The first raid's goals were to get control of fossils, coal mines, a sheer number of processing and production plants, the parts of gas pipelines leading from Russia through these Ukrainian territories to the West, not to mention the control over the population of these once most densely populated areas of Ukraine.
As a result, Russia also gained military and economic dominance in the Azov and the Black Seas, severely suppressing Ukraine’s access to the sea trade lines. But since 2015 the war actions were, by and large, suspended and contained within the occupied territories of Eastern Ukraine, regulated by a set of ceasefire agreements (that Russia mostly didn’t observe), effectively leading to a state of a frozen conflict.
Considering intelligence analysis and premonitions of war, every person in Ukraine saw the problem coming, and businesses were preparing to activate their business continuity and emergency plans for the case of the conflict escalation. This is why most of the Ukrainian IT companies, even though they were not expecting THAT kind of full-scale war, acted deliberately in adjusting and adapting to the new reality and business conditions. IT companies applied their BCPs and DRPs as they thought through upfront.
The need for agility: most wanted
Before the full-scale Russian invasion in February 2022, the IT sector was a constantly growing sector. IT export volume increased double-fold from 2019 to 2021. Despite the war and instability, Ukrainian IT businesses preserved their full capacity and volume. According to wartime research, 85% of IT companies sustain their performance, 96% of contracts stay secured and maintained, 77% of IT providers engage new clients, and 56% of companies expect 5-30% growth annually.
When many other economic sectors in Ukraine declined, IT showed growth for the first quarter and first months of the war. Companies applied business continuity and disaster recovery plans, secured processes and saved teams.
From the perspective of contractors and clients who outsource to Ukraine, most of the international partners showed comprehension and a desire to support and help Ukraine in general and IT service providers in particular. However, some companies, like one world-known freelance platform, were warning customers to avoid hires of Ukrainian IT specialists. And another minor part of IT residents and product companies announced team dismissals months before the invasion.
However, the impact of negative processes is minimized, and in the first quarter, the IT business brought to Ukraine USD 2 bln of export earnings. Taxes are one more positive trend that determines the viability of the Ukrainian IT market. The IT industry paid UAH 29.5 bln in taxes and fees to the budget of Ukraine from January to May 2022. And 27% of IT companies paid taxes in advance.
Ukrainian tech companies have earned the reputation and loyalty of their customers over years of cooperation and thanks to result-driven communication. Beneficial relations along with the fast implementation of BCP actions to secure and sustain operations helped the Ukrainian IT market save clients and fulfill contract obligations.
The attitude that IT companies demonstrated regarding social responsibility, taking care of their teams and preserving delivery stability and high quality of services, helped them engage new clients and new contracts. However, the reasons for the losses are also organic. Some companies had to refuse contracts and teams from Russia and Belarus.
The IT job market in Ukraine reflects the global tendencies. Expecting the worldwide economic uncertainty, some European and American tech giants delayed hiring in Europe and some companies announced dismissals. During the war, the number of candidates in Ukraine increased to +240% year-to-year, while the number of job vacancies dropped by -21% year-to-year. These recent changes in the global market and the fear of the overall recession have started to induce a certain cooldown on the local Ukraine IT arena, as well. How severe the consequences will be is yet for us to uncover.
Unbeatable Ukraine and freedom
fighters from the IT
The Ukrainian government reacted swiftly to introduce measures ensuring government and public sectors' uninterrupted operation, financial system stability and initiatives to support people and businesses. The IT sector also stepped in.
Approximately 3% of IT specialists from tech companies joined the Ukrainian army. The cyber army fights on the informational battlefield and above 5% of IT specialists regularly contribute to this challenge. Meanwhile, governmental IT-related initiatives involve 9% of IT companies’ employees.
Ukraine has enforced digital transformation of state and governmental services and set a goal for a paperless state. Even before the invasion, Ukraine hosted 49th place in the Global Innovation Index and 54th place in World Digital Competitiveness ranking, which is 11th place in the Eastern European region.
The Ministry of Digital transformation released the platform Diia, modernized and opened several data sets, registers, records and catalogs required for simplification and speeding up of procedures. With a click on their mobile, Ukrainians within minutes can issue bank cards, schedule a doctor visit, get e-documents, including electronic IDs, COVID certificates and so on.
Diia app, the platform intended to digitize governmental services and create a paperless state, has won Creative Business Transformation at Cannes Lions Awards 2022. And then there is Diia City — yet another initiative for IT companies aiming to create a special tax and legal environment and promote the IT sector's development and growth.
The National Bank of Ukraine has also done a great job of stabilizing the economy and helping sustain business processes from the first invasion in 2014 and up to now. The international bank foreign exchange reserve of Ukraine has slightly declined but not critically, from USD 29 bln to USD 25 bln. At the same time, expenditures for the Ukrainian Armed Forces have been increased nine times. IT service providers are typically paying entire compensation to those who changed their laptops to battle-order. Taxes are paid in advance to support the economy of Ukraine.
People and businesses from all over the world are now supporting Ukraine in different ways: contracting teams, raising funds, hosting refugees, supporting medical or educational services, even in unexpected ways, like renting Airbnb premises of Ukrainian owners just to help them financially. Ukraine’s Ministry of Digital Transformation has engaged Elon Musk and Starlink to help the Ukrainian army, railroads and institutions of critical infrastructure stay connected. Boston Dynamics will donate their Spot robots to help clear mines off Ukraine’s territory.
IT associations are volunteering and supplying the military and displaced people. Developers, Big Data engineers and Machine learning specialists work on projects intended to help rebuild Ukraine after the war and collect donations for multiple purposes, including military, medical and humanitarian needs:
- UNITED24, the initiative of the President of Ukraine to collect donations for multiple directions, including defense and demining, medical aid and rebuilding of Ukraine.
- Digital4Freedom, the project within the UNITED24 initiative, intends to drive economic growth and engage investors through digital transformations.
- Ukraine Recovery Plan, a list of national programs and projects to recover Ukraine and an invitation to share investment ideas and plans.
- Rebuild UA, support for Ukraine’s recovery
- IT Generation, free IT education for Ukrainians
- Diia.City, a unique economical and legal framework for IT
- Spend with Ukraine, a list of great products made in Ukraine
- The War, the project to help foreigners understand the war in Ukraine 2022
- The NFT-Museum of the war of putin's russia against Ukraine
- Leleka, Arts by kids from Ukraine
Fundraising and crowdfunding from individuals have reached an extraordinary level and drawn wide public and international reactions. Just to illustrate the volunteer movement and crowdfunding power, let’s mention some of the astonishing initiatives. The media resource Developers of Ukraine, together with the Come Back Alive fund, announced the fundraising for an unmanned aerial vehicle and closed the deal of UAH 30 mln in one day. The next wave of big crowdfunding targeted three Bayraktar UAVs. In seven days, Ukrainians have raised UAH 600 mln (approx. USD 20 mln). Such an enthusiastic approach touched the manufacturer of the UAVs, and the Baykar company will donate three vehicles to the Ukrainian Armed Forces. Volunteers in Lithuania, Poland and Norway joined the effort in raising funds for UAVs in favor of Ukraine, too.
Summing up, despite the war, the IT market in Ukraine has not only survived but, essentially, has shown growth. We assume you can find relevant information, inspiring stories and useful sources in our updated overview of the wartime reality of Ukrainian IT outsourcing.
We welcome you to read some more details on the IT outsourcing topic in our earlier blog posts and articles.
- IT Universities in Ukraine and Making the Decision on IT Outsourcing to Ukraine
- IT Outsourcing. Why Is Ukraine the Solution for Your IT Projects? Overview of the Market, Providers and Services
- Offshore Software Development: Should One Outsource His Related Business Analysis Needs Too?
- Nearshore Software Development Outsourcing: When Is It a Suitable Option?
- The Process of Forming a Remote Development Team. From Your Inquiry to The Working Team
- List of Catalogs Where to Find a Software Development Company
The IT sector responded to challenges quickly and restored its performance to at least 85% of the pre-war capacity. Tech companies relocated offices and teams to safer places and continue to operate. The implementation of business continuity plans helped IT service providers secure operations and preserve service volumes. To make a long story short, the Ukrainian IT market adjusted to the wartime reality and continues to show stable performance and growth.
SYTOSS also has applied BCP, secured processes, relocated teams and opened a new European location. We continue to operate and are ready to discuss your needs for IT services. Stand with Ukraine, donate to our fight and contact us to get your tasks solved.