IT market in Ukraine: trends and prospects
There are no oversaturated niches in the IT market and more and more businesses need IT services. Our experts tell about trends and vectors of IT development in Ukraine.
Ukrainian IT sector is a driver of the global industry. Yulia Izonina, engineering director of GlobalLogic claims that several facts prove this idea. On the one hand, it is proven by the growth of the domestic market: before the pandemic this industry constituted 20-30% of the Ukrainian market and on the global market it comprised 6%. In 2016, Ukrainian export of IT services amounted to almost 2 bn dollars, in 2019 this figure increased twofold and amounted to more than 4 bn dollars. Thus, this industry ranks second in our country in terms of services export and it left behind the export income from gas transportation system. On the other hand, the world IT expertise is concentrated in Ukraine – around 4000 IT-companies operate here. Moreover, some world digital business giants such as Oracle, Samsung and Amazon, opened their R&D offices in Ukraine.
Volodymyr Pohoida, general director of Unicorn Systems UA has a different opinion and claims that IT market “is falling behind significantly”. He says that the training of the specialists is on such a low level that they all need additional studies to have a value in the IT market. Fiscal law is not perfect, communication of business and state leave much to be desired, the copyright law needs improvement as well. Due to all these factors the most popular services of IT companies are the least technological: specialists outsourcing or execution of orders for foreign customers. No big companies opened an innovation center or SW development center in Ukraine, not to mention that no company intends to move strategic projects here. Thus, it’s all ahead for the Ukrainian IT-industry.
“Ukrainian IT industry is the hope of the Ukrainian economy, which is developing dynamically. Exactly in IT we have a chance to make headway due to the scope and speed of the companies’ growth and their income. IT has unicorn phenomenon – companies the price of which may reach up to 1 bn in a short period, up to 5 years”, believes Natalia Veremieieva, director of TechUkraine platform. She thinks that when IT market started moving to global outsourcing and outstaffing markets – models based on which development services are rendered pursuant to orders, this market generated the pool of entrepreneurs and developers with the experience of cooperation with Western customers and working in Western markets. Now it’s the turn of the next stage – development of product companies. And this stage has already started.
Natalia Veremieieva claims that IT industry ranks third in terms of the scope of export, it involves approximately 200k developers and the ecosystem is developing actively – conferences, educational courses, IT clusters, associations, etc. At the same time, on the global scale we cover not more than 1% of the global market, which is not a great result for the country of this size and with our potential. We have definitely much room for growth.
The USA is among the main customers, as before. The share of orders from this country amounts to approximately 50%, the second are the European countries (approximately 35%), Canada (8%), Asian countries (5%) and orders from the domestic Ukrainian market (2%).
In terms of the main trends, Volodymyr Pohoida notes that everything related to business processes automation, more efficient use of resources and new post-COVID-19 realities of life – online education, online medicine, use of AI in medicine, autopilots, smart grid electricity systems, etc. will be in demand. Natalia Veremieieva added to this list of trends Internet of Things, robotics, AR and VR, big data, neural networks, machine learning and AI.
Yuliia Izonina outlined separately another trend - Digital Transformation, i.e. transformation of business operational model into digital format. She says that their company receives many projects related particularly to digital transformation. GlobalLogic developed for such companies application TAO that allows to assess the readiness of the potential customers’ business for such transformation, as well as define the next steps.
Ukraine operates based on the service model and in this relation adopts the trends, which are inherent in the countries that are leading in the development of digital products – USA and Europe. If the company develops a certain product, the demand for such product in the global market may be assessed immediately. Petcube and Grammarly, the most successful IT products developed in Ukraine, were from the very beginning oriented on the global market, underlines Yuliia Izonina. Natalia Veremieieva also noted for us that “under the circumstances in the local market, entering the global market is the key aspect of the commercial success of the product/company.”
The portfolio of GlobalLogic company, where Yuliia Izonina works, includes the development of solutions for medicine, motor vehicle industry, retail trade industry, transport and logistics, robotics industry, education etc. “Ukrainian companies have projects in every industry”, she claims. Almost every day people face technologies, in the development of which Ukrainian engineers were involved. For example, nearly half of the engineering (SW development and testing) for American company Avid has been for many years in a row provided by Ukrainian IT specialists. Today, due to Avid programs more than 70% of all commercial music is created in the world. Soundtracks to Hobbit films and Game of thrones TV shows were made using the solutions of this company. It should be also noted that contactless ordering panels in McDonalds, which are used throughout the world, were developed by the specialists from GlobalLogic.
Our experts claim that it is too early to speak about the oversaturation of certain niches, the market is rather big. We rather feel the lack of developers, despite the fact that 23k IT specialists graduate from the Ukrainian universities every year. “Perhaps, we should start inviting specialists from abroad – in Ukraine we have a range of benefits”, claims Yuliia Izonina. Such advantages are the low tax rate and relatively low living costs in comparison with Europe and the USA. The salary of local specialists is comparable to the salary of specialists from neighboring countries – Poland and Slovakia. The second possibility – remote cooperation. Now companies may extend their geographical footprint and involve engineers from other regions into their companies even if they do not have own office there.
Volodymyr Pohoida thinks that IT industry went through the corona crisis pretty well, since the majority of specialists are mobile, work successfully at home and are used to that team members are located in different geographical regions. More damage the crisis has done to their customers that appeared not able to pay for IT services. It proves that IT industry is ready for the lockdown.
Due to the pandemic, quarantine, movements and logistics limitations a part of IT companies lost their share of business in Ukraine. On the brink of the possible, new lockdown companies should concentrate on the diversification – search of customers in the areas, which were not affected at all or were mildly affected by the crisis. In particular, telecommunication and products for online cooperation, medicine, especially, telemedicine and products for remote communication with patients and doctors.
It is important to provide as quick and convenient as possible switching of the team to remote mode of work and grant secure remote access to the services and software products, which are used inside the company.
As regards new possibilities, Natalia Veremieieva believes that “we need to concentrate on the currently growing sectors. This includes everything related to remote work, online education, conference communication, management of remote allocated teams in general, as well as online entertainment – games, video content. Tendencies for remote work and online educational formats will remain and will be growing in future.”
In terms of the crisis in Belarus, our government managed to respond immediately and provided the specialists an opportunity to transfer their business from Belarus to Ukraine for the period of the crisis. The creation of such technological hub, involvement of international talents will have a significant positive effect on the entire sector, since due to this mix new ideas emerge, partnerships are concluded, financing is received. Currently, Ministry of Digital Transformation works on the project Diia City (https://city.diia.gov.ua), which is about all the above-mentioned things.
