United front: how Ukraine’s IT sector is staying open for business

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.”