5 Huge Reasons Why You Should Continue to Outsource IT Services to Ukraine
We all read the news, we all know, what’s going on in Ukraine now. There is a war. Russia openly attacked Ukraine and on February 24th life changed severely. Since then, over 11 million citizens of Ukraine were forced to abandon their houses and flee. More than 5 million of them, mostly women, children, and the elderly, have left for neighboring countries. Business and economics, in general, were stunned for almost a month because of shock, uncertainty, and constant air strike alarms. We would like to write some cliché like, “you know how it feels”, but, hopefully, you don’t.
So, big companies, which were relying on IT outsourcing to Ukraine, now think, should they continue to cooperate with Ukrainian specialists. Not that it was risky for companies somehow, but they are concerned about the stability of the service being provided in the first place. This can be easily understood. Therefore, we want to give several weighty arguments why still worth it to outsource IT services to Ukraine. Our industry has unique traits, that help it to successfully get through these darkest hours.
Despite all the horrors of war, the economic and humanitarian crisis, Ukrainian IT companies continue to work. Because not only the success of the business but also the lives of people depend on their work. If you want to know how they cope, read this article.
- High level of digitalization
- Ukraine is full of IT talents
- Big Money in Ukrainian IT industry
- Ukrainian IT sector is agile and adaptive
- The global IT industry is interested in Ukraine
1. Level of digitalization – Ukraine is an IT State
“Over the past 25 years, the Ukrainian IT sector has made a quantum leap forward. Starting almost from scratch, it has turned into a highly intelligent industry, employing almost 300 thousand professionals and growing by 25-30% annually.”
Executive Director, IT Ukraine Association
Modestly speaking, Ukraine is one of the most digitalized countries in Europe. Banking apps, digital public services, instant digital transport tickets purchase, widespread use of bank terminals and payment terminals with contactless payment (NFC). Widespread e-commerce with express delivery through the country-wide delivery company, each network of retail stores, and many trading companies have their own branded mobile application, instant money transfers, and many, many more examples. In Kyiv, you can easily spend weeks without using any cash. Such a level of digitalization requires a lot of specialists. And Ukraine has them.
For young (and not only) Ukrainians the IT industry became more than a chance to get a high-paid job. It became fashionable. Yes, it is highly paid, it can’t be denied, for Ukraine. But in comparison, this is way less, than IT specialists from the USA or EU are paid. Sometimes it’s even twice as less. Ukraine is a place, full of talented specialists who are happy to work for Ukrainian salaries because they are more than competitive.
Due to the multiple reports, the global IT industry suffers quite an intense tech talent shortage. It fuels the interest of people in developing countries, like Ukraine. The demand for IT services along with relatively high salaries leads to a significant increase in the number of IT talents in Ukraine. The IT industry actively attracts young people.
80% of specialists are young men between 18 and 32. Before the war, Ukrainian statistics said there are nearly 300000 specialists employed, and the 2021 forecast predicted 80 thousand bachelor’s degree graduates in a period from 2022 till 2025. Due to the survey, 54% of Ukrainian high school students want to work in IT in such majors as “Computer Science” and “Software Engineering”.
Ukraine ranks 47th out of 189 according to the UN Education Index. Three-quarters of IT employees have technical higher education. More than half have a complete higher education directly related to IT. In addition, 8 of 10 speak at least intermediate English, and 60% have at least 3 years of experience.
The demand for new IT specialists has been significantly exceeding the capacity of Ukrainian higher education institutions. Statistics show that there are many more specialists that have appeared on the market, than the graduates in the last 4 years. As a response to such high demand, companies started offering intensive training courses for new specialists.
Of course, a high percentage of those taking these courses dropped out. But those who remain become a real finding for the industry. Non-formal education prepares 10-12 thousand new IT specialists yearly, with a perspective of increasing up to 20-25 thousand per year. Also, the IT business is an interested stakeholder in the education system of Ukraine. 80% of companies fund the additional education for their employees and constantly strive to improve the quality of their work.
“At the same time, companies continue to invest in education and training for their personnel, new modern educational platforms are emerging, and the number of graduates with IT-related majors is growing rapidly. Meanwhile, from the government, we expect a favorable tax environment for the IT sector.”
Executive Director, IT Ukraine Association
Also, there are a significant amount of so-called “switchers” in the Ukrainian IT – people, who left their previous careers and decided to become IT specialists due to the COVID-19 crisis or personal unsatisfaction with their jobs. Employment of the switchers become a norm for Ukrainian IT. 82% of companies are already hiring or planning to hire switchers. All these factors create a large supply of resources for expansion. At least to fuel the galloping demand of the modern IT market.
As of 2021, Ukraine has one of the largest labor markets in Europe, and it’s growing rapidly. Maybe Ukraine has 2-4 times fewer IT specialists per 100 thousand people than in competitor countries. But that means, there is a huge potential for expansion.
According to expert estimates, as of 2021, there are 5,000 legal IT companies, over 2000 of them are service companies, and 1500 startups. Over a third of the general quantity of IT companies in Ukraine have their unique products, related to Cloud, Big Data, and AI technologies, many of which are in use not only in Ukraine but all over the world. For example, popular startups like GitLab and Grammarly are Ukrainian creations.
Over a hundred companies on Fortune 500 list, like Google, Samsung, Oracle, and eBay, work with Ukrainian IT specialists and create development and research centers in Ukraine. Investors are interested in working with Ukrainian IT. Before the open war started, every year, on average, deals on the total amount of 300-700 million dollars were concluded. Most of the deals involved investments and grants for startups getting their operations off the ground, but most of the funding is plowed into several largest companies.
For now, yes, the war “flooded the oilfield”, but “water” will go away anyway. Ukraine will win it inevitably, and the amount of international aid Ukraine is getting and will get in the following years will not only help to rebuild everything damaged but to build much more new. Including the IT sector.
3. It’s profitable – there is Big money in the Ukrainian IT sector
The IT sector is mainly export-oriented and is steadily and rapidly growing, and for the last five years, the export of computer services from Ukraine increases on average by 27% annually and in total tripled since 2016 to almost $7 billion.
For the last 4 years, the receipts have doubled, and this trend continues. The main growth drivers are the USA (40% of exports) and Great Britain (10%). In 2020 the IT sector generated twice as much export revenue as the Ukrainian gas transportation system, 1,5 times more than the mechanical engineering industry, and about a quarter of the amount of the agricultural sector. No need to remind, that Ukraine is in the top-10 of the world’s biggest agricultural exporters.
The Ukrainian State Statistics Service in 2021 gave a forecast, that the IT sector could double its export revenues in four years, and provide nearly $40 billion. Of course, the forecast was written in 2021 and war brings its changes, but we are sure, they won’t be so substantial, because here come the unique traits of the Ukrainian IT industry.
4. Adaptivity – Ukrainian IT is mobile and flexible
It’s quite diverse – 86% of Ukrainian IT companies have less than 80 employees, 11% more have 80-250 employees, and only 3%, that left, could be called “big companies” with 200-800 employees or more. In a summary, the IT sector in Ukraine is a sector with thousands of small collectives, like an infantry company. At present, military metaphors come in handy. One of the keys to the Ukrainian Army’s success is mobile defense with numerous small squads using “hit & run” tactics, not large armies. Relatively small collectives are easier to move in any meaning, including relocation to another city. This trait of the Ukrainian IT business played well when the COVID-19 hit in March 2020. Many businesses were forced to switch their employees to remote work, not speaking about firing a substantial part of the staff. Despite the general economic downturn, despite the fall in national GDP by -4.2%, the IT sector made more than 20% growth. One of the reasons is there was no need to massively suspend big offices. Partly because there were no so many of them (not so many big companies), and partly because plenty of people in the IT sector have been working remotely already. Many developers admit that even before the COVID-19 pandemic, they have been working remotely from home for a long time.
This is the Ukrainian IT industry’s perk – numerous small teams, startups, and companies simply don’t have offices due to several reasons: renting a posh office in some huge tower in the city center will eat a huge part of the budget; developers often prefer to have a particular work atmosphere to keep concentration, and office buzz often distracts; team members often live in a suburb or even in different cities. Code Harbor is not an exception – our team members are scattered all over Ukraine (fortunately, safe regions far from front lines) and even other countries in the EU.
So, a comfortable armchair and good connection speed are enough for many IT specialists in Ukraine. Connected online from various locations, the Ukrainian community is mobile and flexible, although massive structure. Structure, which is revived after a month-long shock and freeze, and now, after relocating, regrouping, and reconsidering, continues to work as hard as it can. Learn “How Ukrainian IT companies work in wartimes” in our fresh article.
5. The world is interested in cooperation with Ukraine
War is horror and tragedy. It’s a force-major, but not a death sentence. The civilized Western world stands for Ukraine and sees its potential. The level of international support guarantees that the amount of investment in the Ukrainian economy will be mind-boggling. Recently, the President of the European Commission Ursula von der Leyen made a speech on the post-war reconstruction of Ukraine, addressing Volodymyr Zelensky and all Ukrainians:
“The time will soon come for the reconstruction of Ukraine. In fact, it is already beginning in the liberated areas of Kyiv and elsewhere… This is a huge effort, and we must mobilize all available resources to rebuild Ukraine… We will help you rebuild your country and go with you on your European path.”
For the last weeks, thanks to the bravery of the Armed Forces of Ukraine, fearless volunteers, and invaluable support of foreign partners the situation become more controllable. The capital region was released and life start returning to the streets. Many companies, including IT, if they have a possibility, started working remotely. Despite the ongoing war, business needs to work to keep the economy’s bloodstream in shape. Also, a lot of businesses are motivated to work because of intentions to make money and help UA Army.
When the war will be over, the rebuilding of infrastructure will cause an unimaginable flow of investment. Tax pressure on businesses will be eased; entrepreneurial initiatives and economic growth with it will skyrocket. As a result, post-war Ukraine will become a new land of possibilities and the fastest growing economy for the next 5-10 years at least.
Is it worth it right now to restore cooperation at full capacity – this is at the discretion of the management of foreign companies. We can be 100% sure, that cutting off cooperation with Ukrainian teams completely, even if they are in safe places, might hit back even harder. Yes, the Ukrainian economy will lose a lot without IT export, but such a move would worsen the global tech talent shortage with dire consequences for the world IT industry. For example, severe slowing down the development tempo, lack of resources for a proper level of maintenance, etc.
There are also more global implications to consider. As was said before, Ukraine is one of the biggest agricultural exporters in the world. Lack of tax income from IT outsourcing will affect the volume of food production and not only. Unpleasant domino effect for all the industries.
So, dear companies, which were using or continue to outsource IT processes to Ukrainian teams – doing that, you invest in the Ukrainian economy. You are helping People. That’s right, with a capital letter. You give a job to professionals, which can sustain their families, then spend their money on local businesses. Businesses pay taxes, taxes spent on the army. You got it. Your decision not to refuse cooperation with the Ukrainian IT specialists can literally help save lives and get and defeat the Russian occupiers.