United front: how Ukraine’s IT sector is staying open for business
Developers are working from barracks and bomb shelters in a determined effort to continue supporting clients, the national economy and the war effort
Despite having joined the army to defend his native city of Odessa from Russia, Eugene Lata, head of marketing at Lemon.io, still participates in company meetings on Slack between patrols.
Staff at the Ukrainian IT services firm have stayed at work since the invasion on 24 February. Some of Lata’s colleagues have managed to continue coding from their bomb shelters.
Such examples underline the assertion of the IT Ukraine Association’s executive director, Konstantin Vasyuk, that the nation’s tech industry is “the most resilient business sector, with a huge potential for further growth after the war”.
The trade body represents more than 100 tech firms and about 75,000 IT specialists in Ukraine. He is keen to stress that, despite the grim situation, the sector remains open for international business.
Speaking over the wail of an air-raid siren, Vasyuk says: “During the first two days of the war, while most citizens were in a state of shock, one of our members was facing a client deadline of 26 February – and it still got the work done. It’s that type of reliability and determination that drives us.”
How IT companies have continued operating in Ukraine
That is not an isolated case: the latest survey of IT Ukraine Association members has revealed that 85% are still meeting all their commitments to clients. Vasyuk describes the finding as “a good indicator of the industry’s capability and collective responsibility to customers”.
For many firms, the greatest disruption came at the start of the war, as they acted swiftly to relocate staff to safer parts of the country. For instance, software development outsourcer N-iX evacuated 600 of its employees, most of whom were in Kyiv, in the space of two days.
The company’s chief strategy officer, Nazariy Zhovtanetskyy, says: “A week after we resumed delivery, we were back to 85% capacity. We’ve been at 95% for the past three weeks.”
Many businesses gave their employees an advance when the war broke out and are continuing to pay staff who have since joined the army. Lemon.io has started paying salaries fortnightly to help employees with their cash flow.
The country has a proud history of nurturing IT talent. More than 285,000 Ukrainians work as tech specialists. The export of their services added more than £5.2bn to the country’s economy in 2021.
As well as supporting many companies in Europe, the Ukrainian tech industry is the IT outsourcing destination of choice for more than 100 of the Fortune 500. Ukraine is also home to R&D centres for Samsung, Oracle and Google.
At the outbreak of war, there were fears that several such clients would sever their ties with Ukrainian IT companies for fear that they wouldn’t no longer be able to fulfil their obligations. But the mass exodus did not come to pass. According to the IT Ukraine Association, only 5% of contracts have been cancelled since the invasion.
Although Zhovtanetskyy admits that the pipeline of potential new clients at N-iX is weaker than it was before the war, the firm hasn’t lost any existing ones and has recently secured three new contracts. Both his company and Lemon.io are still planning international expansions this year.
Daxx, a Netherlands-based firm that helps tech companies hire developers in Ukraine, notes that Ukrainian IT services remain relatively cost-effective. It reports that the average minimum pay rate for developers in Ukraine is £20 an hour, compared to £30 in neighbouring Poland, for instance.
“The big price difference between Ukraine and Poland is driven mainly by different taxation levels,” Zhovtanetskyy explains. “So those customers that looked at Poland initially as a contingency option have since returned to Ukrainian businesses, because they’ve seen how we’re continuing to deliver.”
International trade sanctions against the Putin regime have also meant that many western firms have cancelled their contracts with Russian developers. This has created a deficit of IT specialists on the global market, according to Vasyuk, who reports that a growing number of US companies are seeking recommendations for alternative providers in Ukraine.
“This is giving Ukrainian companies a chance to gain contracts from companies that have ended relations with Russian IT providers, which is good news for us,” he says.
This doesn’t mean that using Ukrainian IT providers isn’t riskier than it was, of course. Even though many of their workers have relocated to safer territory, either at home or abroad, the biggest threat to continuity of service concerns connectivity.
Ukraine’s telecoms infrastructure has been relatively undamaged so far, but a recent deal agreed by its minister of digital transformation, Mykhailo Fedorov, and SpaceX boss Elon Musk enables the latter’s Starlink satellites to be used as a reserve channel should Ukraine’s fibreoptic networks be disabled.
“We are quite optimistic about the basic conditions for tech businesses to continue operating in Ukraine,” Vasyuk says. “Customers understand the situation and companies have tried to reduce risk as much as possible.”
What businesses can do to support the Ukrainian IT sector?
Oleksandr Stukalo, a content writer for Lemon.io, reports that nearly all of the firm’s customers have been forbearing. “Our clients have tended to be heartfully empathetic. They have been understanding of any pauses in delivery and have offered support wherever they can,” he says.
International businesses have offered practical assistance in a range of ways, from financing the relocation of developers to providing office space in safer territories.
But the most obvious thing they can do, according to Zhovtanetskyy, is “continue paying your invoices and so help keep Ukrainian businesses growing”.
The importance of the sector to the economy isn’t lost on its workers, many of whom see themselves as fighting Russia on an economic front. Several businesses have donated profits to the war effort, including Lemon.io. Members of the IT Ukraine Association gave nearly £14m to the armed forces and humanitarian causes in the first 10 days of the war, for instance.
“We’re carrying on because we understand that we’re in the vanguard of this conflict on the tech front, so we keep working and we keep offering our talents,” Stukalo says. “If the business is able to continue, it’s making money that can go to the army. Without the army, there would be no IT business here.”