In 2022, there was a notable upswing in the export of computer services, with a year-on-year growth of 5.8%. The figures soared from $6.9 billion to $7.35 billion, reflecting Ukraine's IT industry resilience and adaptability. The russian invasion of Ukraine initially posed challenges to the IT export sector. However, the industry quickly regrouped, taking prompt corrective actions to mitigate the impact and ensure a steady recovery. Further, we will investigate the condition of the Ukrainian IT market in 2023, what helped this sector to stand the full-scale invasion, and why it is worth considering investing in despite the war.
What are the Ukrainian IT market conditions as of 2023?
Over time, Ukrainian software developers have garnered a well-deserved reputation for their:
exceptional technical expertise
strong language proficiency
However, the full-scale russian invasion in 2022 posed significant risks to the sustained growth and longevity of the IT sector in Ukraine. In recent years, particularly amidst the COVID-19 pandemic, the local tech market has experienced remarkable growth, with a nearly twofold increase in the number of employed specialists and leading companies offering virtual team services.
With the beginning of a full-scale invasion, the industry prioritised the safety and well-being of its employees, fulfilled contractual obligations to clients, and supported the country's defence efforts. Despite these challenges, the 2022 review report indicates that hiring experienced only a modest decline of 13%. Considering the extraordinary growth rates during the pandemic years and the magnitude of the full-scale war, these results are undeniably impressive.
On a positive note, in 2022 alone, approximately 59,000 new candidates registered and activated job search accounts, indicating a heightened influx of technical talent. While the year presented many challenges, the Ukrainian IT sector adapted in various ways, maintaining its appeal as a sought-after contracting destination for global markets.
As of 2023, numerous Ukrainian IT companies have been engaged in software development for the Armed Forces of Ukraine, gaining invaluable expertise in constructing versatile products. This relates to drones, communications, cybersecurity, air target recognition, and accounting systems. As a result, they have acquired unique and precious insights from wartime circumstances.
The exigencies of war have influenced customer demands, prompting IT companies to adapt and enhance their solutions. Despite some attrition, many customers, particularly those in non-regulated sectors like hospitality, transportation, travel, and entertainment, continue prioritising service delivery from Ukraine.
What helped Ukrainian IT companies withstand the russian invasion?
Restructuration before the war
In the lead-up to the war, the IT industry underwent significant restructuring to adapt to the changing landscape. This regrouping was driven by various factors, such as market demands, technological advancements, and shifting business environments.
Recognizing the need to stay competitive and meet clients' developing needs, IT companies embarked on a journey of enhancing their capabilities and expanding their service offerings. They invested in upgrading their infrastructure, fortifying cybersecurity measures, and fostering a culture of innovation through research and development.
Adoption of more agile and flexible work practices
With the emergence of remote work options, companies tapped into a broader talent pool and improved operational efficiency. This transformation also prompted a renewed focus on continuous learning and upskilling to keep pace with rapid technological advancements.
Partnerships & collaborations
Furthermore, strategic collaborations and partnerships became a key priority for IT in Ukraine. By joining forces with other organisations, they aimed to leverage collective strengths, ultimately delivering more comprehensive solutions to their clients.
During the initial month of the war, most technology companies successfully ensured the uninterrupted flow of their business processes despite the extreme pressure of uncertainty, especially in regions with active hostilities. They maintained productivity levels at around 85-90%. As time passed, starting from April, they restored positive growth trends.
Working under pressure
The IT industry in Ukraine encountered various challenges resulting from the war. According to the available data, approximately 34.3% of companies effectively assimilated to the new reality, while the majority, comprising 61.3%, encountered obstacles but managed to maintain stable operations overall.
The significant difficulties faced by these companies include:
Relocating employees and their families, as well as transferring company facilities
Restrictions on international travel for IT professionals
Conscription of IT professionals into the military
Retaining clients and minimising risks associated with client relationships
Dealing with currency regulations and restrictions imposed by the National Bank of Ukraine
The rapid and extensive reformation efforts undertaken during the war made the industry's positive performance indicators possible. Many companies successfully executed their business continuity plans, adopted flexible work models, relocated teams, and diversified their offices in Ukraine and abroad.
These organisations operate without interruption, executing projects even during power outages. They fulfilled their tax obligations promptly, attracting new customers and actively expanding into the global market.
Retaining a high level of customer trust
Despite the war, IT in Ukraine has the conditions to deliver exceptional services, ensuring customer trust and satisfaction. As of the beginning of 2022, the country has established a robust foundation for its technology sector, earning global confidence and recognition through the development of renowned IT products driven by highly skilled professionals who have contributed to the industry's resilience and success.
Despite the significant migration of companies and talent to western regions of the country and abroad, local experts continue to fulfil their roles and responsibilities, thanks to their preparedness for flexible and decentralised work arrangements, reinforced by the challenges posed by the COVID-19 pandemic.
Ready to work from home
Right before the full-scale invasion, the Ukrainian IT sector massively moved to the work-from-home option, transferring all the business operations to the cloud. So, evacuating to another country or city wasn't hectic, and employees continued doing tasks with no significant interruptions.
Creative and qualified professionals
Ukraine boasts a wealth of highly skilled and innovative technology specialists adept at delivering top-notch products and services. This talent pool consistently rises to the occasion, devising unique solutions to intricate challenges. Remarkably, nearly half of these IT specialists hold Master's degrees, with some possessing solid scientific backgrounds. The typical career trajectory often begins at prominent outsourcing companies, where individuals gain valuable experience before transitioning to boutique consulting or product-oriented companies.
The allure of competitive salaries, surpassing those offered by many other industries, plays a significant role in attracting exceptional talent to the IT sector in Ukraine. Moreover, the country boasts 17 esteemed colleges and universities that offer computer science degrees or related programs, resulting in an impressive annual output of 20,000 technology graduates.
Flattering taxation policies
Diia City, established just before the outbreak of war, aims to propel Ukraine into becoming the leading IT hub in Europe. Recognizing the crucial role of technology in sustaining the country's economy amidst the conflict, the government has thrown its full weight behind it.
The Ministry of Digital Transformation is providing unwavering support to the industry and has created a free economic zone within Diia City, explicitly catering to representatives of the creative economy. This initiative allows local and international tech companies to operate in Ukraine under simplified regulations, including a distributed 10% tax system, all under the law.
The latest data on residency in Diia.City indicates that collaborating with a Ukrainian company is viable and appealing. Due to the declaration of martial law in Ukraine on February 24, 2022, most government registers have been temporarily closed, except for Diia.City.
Why should global businesses outsource software development projects in Ukraine?
Prospects of Ukrainian IT
Despite all the global economic fluctuations, outsourcing projects is still crucial for companies worldwide. The numbers are promising. As of 2023, global outsourcing may reach an impressive $731 billion.
Ukraine should be at the top of your list when choosing the right outsourcing destination for your software development project. Boasting a vast pool of skilled IT professionals and experiencing impressive year-on-year growth of 23%, the country has emerged as a highly sought-after destination for IT outsourcing worldwide.
Even with the challenges posed by the ongoing war, Ukraine's tech industry has not only weathered the storm but thrived. As per the IT Ukraine Association, in 2022, amidst the conflict, IT service exports soared to a record $7.34 billion, marking a substantial increase of $400 million from the previous year. Remarkably, Ukrainian IT companies retain approximately 96% of their contracts, ensuring the smooth continuity of projects. By considering it as your outsourcing partner, you can tap into this dynamic tech landscape and leverage the expertise of its talented professionals to drive your software development project to success.
It's remarkable how Ukraine, with its vast pool of over 200,000 skilled engineers armed with nothing more than a laptop and an Internet connection, has shown incredible resilience in the face of adversity. Despite the challenges posed by russia's attack on its civilian infrastructure, the country has remained operational without any prolonged power outages.
Organisations are doubling down on hiring and training tech professionals, ensuring a robust workforce. Ukraine's well-developed fibre optics network, which has proven its strength during the year-long conflict, serves as a reliable backbone. Additionally, many companies have taken proactive measures by deploying Starlink as a backup connection system.
Moreover, businesses are strategizing further employee relocation and redistributing workloads across international delivery centres. The optimism about the future hasn't made them complacent. They are continuously safeguarding their software delivery procedures. For this reason, we see a trend of many companies opening new offices in the Western part of Ukraine. The cities like Ivano-Frankivsk, Lviv, and Uzhgorod are far from the collision line, making them potentially secure bases for operations.
However, some companies are taking extra caution and establishing delivery centres in other countries as well. This diversification of locations adds a layer of protection to ensure uninterrupted service.
Business benefits of cooperating with Ukrainian IT
When discussing Ukrainian IT companies, a major hurdle they face is the reluctance of foreign investors to engage in collaborations due to ongoing war conditions. However, it is essential to recognize that dismissing the potential of Ukrainian companies during these challenging times is a significant mistake. Trust becomes the most valuable asset for local businesses, and they take this responsibility very seriously, offsetting any risks involved. Firms genuinely cherish the confidence placed in them and are committed to delivering excellent results on time.
"Despite the uncertainties caused by external factors, the developers have proven themselves reliable partners, consistently providing high-quality services. Their unwavering commitment to excellence sets them apart and ensures businesses can confidently rely on them for ongoing projects."
Head of Digital Transformation, JEVERA
In today's dynamic and unpredictable world, having a dependable team of professionals is crucial for businesses aiming to thrive in the long run. Ukrainian developers' capacity to navigate difficult situations with exceptional skills and professionalism makes them an advantage for any forward-looking company. Even under challenging conditions, their commitment to maintaining quality work further solidifies their reputation as trustworthy and reliable collaborators.
The Ukrainian IT industry has shown remarkable resilience and adaptability to the challenges posed by the russian invasion. The export of computer services experienced substantial growth, reflecting the industry's ability to regroup and recover swiftly.
The industry's success can be attributed to its well-educated and skilled workforce, commitment to continuous improvement, and strategic investments in infrastructure and cybersecurity.
The Ukrainian IT sector has become a sought-after outsourcing destination for global businesses due to its competitive advantages, including:
a vast pool of talented professionals
strong language proficiency
The prospects for the Ukrainian IT industry look promising, with companies expanding their operations, diversifying locations, and investing in their workforce. Businesses can confidently consider Ukrainian IT companies as reliable partners for software development projects, benefiting from their dedication to excellence and ability to deliver high-quality services even during challenging times.