Outsourcing to Ukraine

It's been more than a year since Russia, unprovoked, invaded Ukraine and launched an all-out assault on major cities across several regions of the country. In the years leading up to the invasion, Ukraine had developed into one of the most popular locations in the Western world for IT and tech outsourcing. So how has the industry fared since the beginning of the war in February 2022?

In 2017, the Global Sourcing Association (GSA), an organisation that promotes effective outsourcing, ranked Ukraine as the number-one market for outsourcing from the UK. The report highlighted the cost-effectiveness of Ukrainian outsourcing, its vibrant startup market and its location in a European time zone. But what made Ukraine special was its human capital: it’s a large, young nation where English is spoken at a high level, and most importantly it excels in ICT education. The Ukrainian IT and tech industries had gained important recognition in the UK and internationally, and as a result the industries flourished. 

By 2021, Ukraine’s IT outsourcing industry had become one of the largest and most active in Europe. But that progress was threatened in 2022 by Vladimir Putin’s unprovoked invasion of Ukraine. At the time it would have been reasonable to think the IT industry – along with many other segments of the Ukrainian economy – would be crippled by the war. But the numbers throughout 2022 tell a different story. So how has Ukraine’s IT industry fared since the Russian invasion in February 2022?

Starting with the big picture, Ukraine’s IT industry grew in 2022. IT export revenue was $7.3bn (£5.9bn) in 2022 compared to $6.9bn in 2021. 

Outsourcing providers have also been able to maintain the vast majority of their contracts. Smaller outsourcing companies have understandably been hit the hardest, but even those firms have maintained 88% of their contracts in 2022. Some of the most active export markets for Ukrainian IT are the US, the UK, Canada, Germany and Switzerland.

But Ukrainian outsourcing companies are not merely maintaining contracts – they’re expecting continued growth despite the war. Fifty-six percent of IT outsourcing providers expected their business volumes to grow in the 12 months to March 2023. Another 32% thought they would maintain at least 80% of their contracts. Twelve percent believed they would maintain less than 80% of their contracts and only 3% expected to lose more than 50% of their contracts.

And it’s not difficult to understand why the outsourcing industry is thriving. The rankings above are index scores for outsourcing competitiveness in the respective areas. Out of 23 emerging European countries, Ukraine was the number-one market for software development outsourcing. It also ranked third for data analytics and data science outsourcing, behind Poland and Slovakia, and fourth for IT outsourcing behind Poland, Romania and Czechia.

By the latest estimates there are still more than 200,000 IT and tech specialists within the borders of Ukraine and 60% of them work in outsourcing companies. Ukraine also has a relatively experienced ICT workforce. Sixty percent of Ukrainian IT workers have at least three years of experience and 30% have at least six years of experience.

One final thought on Ukraine’s IT industry. Russia amassed military units on the borders of eastern Ukraine for several months before commencing its invasion on 24 February 2022. Four days later, on 28 February, a group of militarised Ukrainian IT specialists hacked the websites of the Moscow Stock Exchange and Sberbank, the country’s largest bank, as well as several other Russian and Belarusian government and media websites. Many of these actors were volunteers and continued their day jobs to some degree while also serving their country. So in addition to their experience and international recognition, the war has taught us that Ukrainian IT and tech specialists are no strangers to multitasking and are accustomed to acting quickly and decisively. Not a bad combination for an outsourcing provider.