How the War in Ukraine Has Affected the Offshore IT Market 

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How the War in Ukraine Has Affected the Offshore IT Market

How the War in Ukraine Has Affected the Offshore IT Market 

November 4, 2022 0 Comments

Our world was turned upside down on February 24, calling into question our faith in peace, common sense, and diplomacy in the twenty-first century. A cruel and senseless war has had a massive impact on the global economy, in addition to humanitarian and social consequences. The IT industry is no exception.

What do the most recent statistics and trends say about the effects of the war on the offshore IT market?  

For many years, numerous western businesses, particularly those from the United Kingdom, the United States, and the European Union, have outsourced software development work to Ukraine. With more than 300 000 tech professionals, the country boasts one of the largest developer communities in Europe. The region has been often compared to Silicon Valley, and the software development market was thriving.   

 As a result of the Russian invasion, one of the largest talent pools for software engineers has been put in danger of being cut off, which could have significant implications for high-tech Western businesses. However, the worst predictions haven’t come true so far. According to a recent study by the Ukraine IT Association, the IT industry of Ukraine keeps growing even after eight months of war.   

The results of the first nine months of the current fiscal year show the national IT industry has maintained positive growth dynamics and remains the only export industry that consistently generates foreign currency income for Ukraine’s economy under war conditions. Ukrainian businesses have continued to operate, implement projects, pay taxes on time, attract investments and new customers, and actively participate in the global market.  

According to the National Bank of Ukraine, during the nine months of 2022, the volume of computer services increased by 13% and amounted to almost USD 5.5 billion.   

During this period, the IT industry paid more than $1 billion in taxes and fees. Such indicators were possible due to the industry’s large-scale and rapid reformation during the war; most companies were able to effectively implement anti-crisis plans for business continuity support (BCP), switch to flexible work models, relocate teams, and diversify offices both in Ukraine and abroad. Companies constantly adapt their own infrastructure to the realities of wartime, particularly by installing key systems in the Cloud, diversifying their Internet provider network, including through the “Starlink” global satellite system, and equipping office premises with generators to ensure backup power supply. The Ukrainian IT industry has done everything possible to ensure maximum readiness for any eventuality.  

Regardless of the challenges, Ukrainian IT specialists are still widely recognized and sought after in the global tech market due to their high expertise and required skill set.  

In the coming months, there are several important trends to monitor.  

• Companies are encouraged to go global to maintain and expand their client base, teams, and business because of martial law and mass migration of professionals.  

• Following the recovery of operational activity and a return to pre-war productivity levels, the Ukrainian IT industry is betting on the diversification of offices and markets and utilizing a flexible business model.   

• The remote-work model used prior to the war during the coronavirus is gradually transforming into hybrid work formats, including virtual offices.  

• 45% of IT companies relocated offices and teams to safer regions of Western Ukraine and abroad. 55% of companies did not relocate, but mostly transitioned to a remote work format. 42% of companies carried out partial relocation abroad. Another 37% of companies are considering a combined relocation abroad and within Ukraine by the end of 2022.  

• New offices and development centers have opened in over 30 countries across Europe, Latin America, Asia, and the Middle East. Top relocation countries: Poland, Germany, Spain, Romania, Portugal, Bulgaria, the Netherlands, Turkey, the Czech Republic, Moldova, and Croatia.  

• There is a significant shift toward IT services and products for military purposes, including high-tech and complex weapons, information and cyber security, various types of integrated systems, and unmanned technologies. Such expertise, combined with practical experience provides significant advantages to Ukrainian developers in these sectors.  

• A powerful volunteer movement is widespread among Ukrainian IT specialists.  

• The Ukrainian labor market continues to generate highly qualified IT specialists who are distinguished by high expertise and broad specialization and offer complex and creative solutions.  

• According to DOU, mid-level and senior professionals remain the most sought-after group of employees. The amount of job postings for the most experienced has even increased compared with pre-war indicators.  

Meanwhile…A full-scale war against an independent country can’t go unseen. Everything related to Russia is now seen as toxic, and the majority of international corporations and brands have already severed their business relations with Russian companies and specialists.   

• Most Russian banks are now barred from using SWIFT, making international money transfers extremely difficult. On top of this, Western Union, PayPal, Revolut, PaySend, and Apple Pay have stopped their work in Russia.  

• Leading credit card operators Visa, Mastercard, and American Express have suspended operations in Russia.  

• Apple, Samsung, and ASUS have left the Russian market. IBM, Intel, and Qualcomm have also stopped their business in Russia, cutting off the country from the latest technologies.  

• Companies including Microsoft, Intel, Apple, Netflix, and Meta’s Facebook and Instagram have removed or limited their services to Russia.  

• Many software providers have left or significantly reduced the number of services available to Russian users. Slack, Atlassian, AWS, Adobe, Microsoft, and Google Cloud are among them — essential services for software development teams. Furthermore, many service providers have stopped selling and revoked active SSL certificates for Russian and Belarus-registered websites.  

• Individuals can no longer use International freelance platforms including Upwork and Fiverr.  

• Global technology companies have left the Russian market, closed R&D centers, and terminated contracts with local vendors. The Belarussian IT market has been less affected, but it is still having problems.  

• Large numbers of IT professionals have or are leaving Russia and Belarus, heading primarily to Armenia, Kazakhstan, Turkey, and Georgia. It might boost the IT sector in these regions in the future, however, the transformation will not be quick.   

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