The Ukrainian IT market has enjoyed impressive growth in recent years and became one of the key sectors contributing to the country’s economy. The statistics presented by different organizations such as the World Bank, PwC, IT Ukraine, and State Statistics Service of Ukraine vary a bit but all of them demonstrate steep growth of the sector. Interestingly, the industry has accelerated since the beginning of 2014 political crisis when the prices for Ukrainian IT services became even more attractive for investors due to inflation.
According to Wikipedia, the Ukrainian information technology market topped all the other Central and Eastern European countries in 2007 and in 2013. Also, Ukraine ranked fourth in the world by the number of certified IT professionals after the United States, India, and Russia. The latest market research shows that the country has significantly surpassed 2007 indicators.
According to the PwC analysis, the market increased by 150% in the period from 2011 to 2015, and has the potential to reach $5.7 billion by 2020.
In 2016, EBA and PwC presented a comprehensive analysis of the Ukrainian IT industry. The study suggests that the Ukrainian IT services market increased by 2.5 times between 2011 and 2015 and reached $2.5B and over 90,000 specialists.
In 2018, it surpassed 180,000 specialists and is projected to grow to 200,000 professionals by 2020. As a result, the tech industry created 420,000 jobs in IT and related industries.
With the growing role of the IT industry in the country’s GDP, the Ukrainian government is introducing a myriad of reforms to promote its further development. As stated by Petro Poroshenko, the former President of Ukraine, “Our joint goal is to provide maximum support for IT sector”.
Here are a few important things that are being implemented:
IT outsourcing providers constitute the largest share of the Ukrainian IT service market. Although the number of startups (over 2,000 companies) and international R&D centers (over 100 companies) is growing, IT outsourcing companies employ more than 60% of all engineers who live in Ukraine.
The USA and Western European countries remain the largest target markets of the Ukrainian IT service companies. In 2012, the USA was the largest consumer of the Ukrainian IT service exports (81%). Recent research indicates that it is still the main market for the Ukrainian IT export but the share of European businesses has grown significantly over the years.
Ukrainian IT companies cooperate with large and small businesses across the globe. More than 100 companies from the Fortune 500 list are clients of Ukrainian IT firms. As for the key industries, Ukrainian IT vendors primarily specialize in data management, telecommunications, cloud, gaming, e-commerce, media, fintech, healthcare, and others, according to the report by Ukraine Digital News.
Ukraine’s role as the global outsourcing destination has grown significantly since 2009. According to A. T. Kearney Global Services Location Index, the country’s financial attractiveness, people skills and availability, and business climate have improved, so it went up by 13 positions in the ranking in 2017.
Moreover, in 2019, it has become the top 20th outsourcing destination in the Index. The index tracks the offshoring landscape in 55 countries. In 2017, Ukraine came after the USA and Russia with a score of 5.31, and was followed by Estonia and Hungary. While in 2019, Ukraine ranked higher than Poland, Romania, Latvia, Hungary and other popular IT hubs of Eastern Europe.
T. Kearney research covers the hottest issues of the outsourcing phenomenon, in particular automation and its influence on offshore service markets. It suggests that as automation destroys many low-skilled jobs, the focus will shift to higher-skilled jobs. Although automation will eliminate a substantial number of jobs that are currently offshored, offshoring will continue to be important in the future, especially when it comes to high-level tasks. Since complex engineering tasks constitute the largest share of the Ukrainian IT outsourcing market, the country’s tech industry is to take a leading position in the global tech arena.
Businesses that consider Ukraine as a destination for future outsourcing partnerships often include other CEE countries in the decision-making process. Apparently, every location has its benefits, so let’s take a closer look at the factors that influence the quality of software development outsourcing. They, first of all, include the IT talent pool, availability of trusted vendors, domain expertise, business climate, security, and legal aspects.
Comparing CEE countries against these factors, we can see that Poland and Ukraine have the largest talent pools in the region. Poland, Bulgaria, Hungary and a few other CEE countries are members of the EU and this is a big selling point for them. On the other hand, Ukraine and Belarus offer more competitive prices for their IT services.
The biggest asset of the Ukrainian IT market is a vast pool of IT professionals unmatched by the quality of skills. As of Q1 2019, it comprises over 184,700 specialists and experts forecast it will surpass 200,000 by 2020. Most sources suggest that approximately 60% of Ukrainian software developers are currently employed in IT service companies. However, there is a decent share of captive centers in the country, and the number of tech startups is growing year by year.
There are several aspects that contribute to this growth. Number one is the financial factor. The minimum official monthly salary in Ukraine is around $150. In 2018, the average monthly salary amounted to roughly $330, and in 2019 it is projected to reach $370. The average salary in the IT industry is almost 7 times higher. This huge gap is the main reason why so many people are trying to enter the sector, both young graduates and specialists from other spheres. In addition, IT jobs are not as sensitive to economic fluctuations as in the other sectors, so security and stability attract many specialists.
In addition, tech jobs come with a certain social status and prestige in Ukraine. Many people want to become a part of the Ukrainian IT community and enjoy the benefits of a career in tech, including decent salaries, business travel, international working experience, career prospects, and more.
Another factor that drives the Ukrainian IT market is the historically strong tech education in the country. Most Ukrainian universities have engineering faculties and advanced STEM* programs. Today the popularity of tech disciplines is growing, and so is the competition among students for places at the leading educational institutions.
A lot of new programs are launched every year with the support from the biggest IT companies. Therefore, the talent pool is growing both in its quantity and quality. No less important are the positive changes in the Ukrainian legislation and the taxation system. The state is trying to cut on the red tape and introduce economic reforms without putting too much pressure on the developing tech sector.
Last but not least, Ukraine’s geographical location is a major selling point for foreign businesses and investors. As more projects from diverse domains are outsourced to Ukrainian developers, their skill set and expertise are improving.
The profile of the Ukrainian IT Professional
Every year, the largest Ukrainian developer community DOU.ua surveys the Ukrainian IT professionals to provide a detailed overview of the country’s tech talent market. Generally, Ukrainian tech talent is younger than in North America and Western Europe However, Ukrainian software engineers often get their first job while still studying at the university, so they start gaining practical experience sooner. Since most professionals work at IT outsourcing companies that specialize in a wide range of domains and technologies, they get a lot of diversified experience. Also, their main reason for choosing a career in tech is interest in technologies, says the survey. In this part, we explore DOU findings in more detail.
DOU’s analysis has revealed that the average age of a software developer in Ukraine is 21–30. According to Stack Overflow, an average developer in the USA and the UK is 28–29 years old. Compared with the USA and the UK, IT specialists in Ukraine are a bit younger, which can be explained by several factors.
Firstly, the Ukrainian tech market is younger overall. Also, in the recent years, there has been a massive influx of tech graduates on the Ukrainian IT market due to the increasing popularity of IT professions.
Most Ukrainian IT specialists have over 3 years of professional experience (58% of the respondents in total). 29% have 3-5 years of experience, 17% – 6-10 years of experience, and 12% – over 10 years of experience.
In 2015, senior experts with 7+ years of experience constituted 19% of the workforce, and their contribution to the value created by the sector constituted 41%, according to the PwC report. Moreover, in 2013 Ukraine ranked fourth in the world in number of certified IT professionals after the United States, India and Russia. Today the number of certified specialists is growing, as Ukrainian IT companies encourage their employees to get certified and often reimburse the cost of the courses either partially or in full.
Although the number to captive centers and tech startups in Ukraine is increasing, the majority of Ukrainian IT professionals work in IT outsourcing companies. Most sources suggest that approximately 60% of Ukrainian software developers are currently employed in outsourcing.
For Ukrainian software developers, the most important factors in choosing a job include salary and bonuses (78%), interesting tasks (63%), professional growth prospects (61%), comfortable work conditions (28%), flexible working hours (23%), the possibility to work remotely (14%), office location (9%), and an employer image (5%).
The majority of Ukrainian IT professionals (80%) are office workers. Only 8% of respondents work from home, 6% work remotely from different places, and 1% prefer co-working spaces. Open space offices are as popular in Ukraine as everywhere else. Every third IT specialist works in an open space office, and most of them (91%) are satisfied with their workplace.
Many Ukrainian IT specialists work more than 40 hours per week. Top managers and Lead specialists make up the biggest number of workaholics as they put in over 60 working hours per week.
Ukraine is the country with the moderate English proficiency but it improves its position on the English Proficiency Index every year. In its 7th edition, the country’s score was 50.91, and in the newest 8th edition it went up to 52.86 and now holds 43rd place among 88 countries. Other countries with the moderate English proficiency include France, Italy, Spain, Belarus, to name a few.
Ukrainian IT companies are definitely part of this trend as they invest heavily in English training initiatives. Most companies offer their employees either full or partial reimbursement for English courses, others set up their own training centers. Moreover, the requirements to the job candidates English-wise are quite high, so Ukrainians who want to work in tech dedicate much effort to mastering their English skills.
According to the DOU survey, 81% of the Ukrainian IT specialists have intermediate and higher level of English, and the situation is constantly improving. IT professionals located in Lviv are more fluent in English than, for example, Kharkiv IT professionals (52 and 44%). Female workers have a better command of English — 54% of women and 43% of men have upper-intermediate and higher level of English. Top management, Project Managers and Business Analysts are the most fluent, while UI developers, system administrators and designers know English a bit worse.
Ukrainian software developers specialize in a wide range of programming languages, technologies, and tools. Since over 60% of Ukrainian IT professionals work in IT service companies, they have a chance to work on many different projects and thus possess a versatile tech expertise. Not only do Ukrainian engineers have hands-on knowledge of many technologies but also know how to use them in various domains.
Surveys of the Ukrainian IT professionals demonstrate that 67% of Ukrainian IT specialists live in Kyiv, Kharkiv, and Lviv. IT companies are expanding to new talent markets and are opening offices in new locations. In the last two quarters of 2018, twice as many companies opened new offices as in January -July 2018. New development centers appeared in Kyiv, Lviv, and Rivne. As for the global reach, Ukrainian companies have been opening offices in Malaga, Berlin, Krakow, Toronto, Turin, London, Bucharest, Eindhoven, Sharlot, Chicago, and even in Tokio and Seoul.
43 out of 50 biggest Ukrainian IT companies have offices in Kyiv. 21 companies have development centers in Lviv, and 20 in Kharkiv The biggest company in Kyiv is Epam (over 2,800 people) and in Lviv, it is SoftServe (over 3,000 specialists).
Ukrainian tech companies employ a lion’s share of the country’s IT talent. The market primarily constitutes IT outsourcing companies, IT product companies, and captive centers of global businesses. However, over 60% of Ukrainian IT professionals work in IT outsourcing companies.
In 2017–2018, the number of employees in Ukrainian 50 biggest IT companies grew by around 35% — from 43,000 to 58,000 specialists. Also, two companies surpassed 6,000 professionals. 25 biggest Ukrainian IT firms have demonstrated record growth rate in the last 5 years.
Twice as many companies from the Ukrainian Top 50 opened new offices in the second half of 2018 compared to 2018 Q1 and Q2.
The most popular locations are Kyiv, Lviv and Rivne. As for the global locations, Ukrainian companies started operations in Malaga, Berlin, Warsaw, Krakow, Toronto, Turin, London, Bucharest, Eindhoven, Chicago, etc.
43 out of 50 biggest Ukrainian IT companies have offices in Kyiv, 21 in Lviv, and 20 in Kharkiv.
Open space offices are common in the Ukrainian tech sector. 57% of Ukrainian IT professionals work in an open space office and 33% work in a separate office. Both groups are satisfied with their workplace. According to surveys, the employees of all these types of organizations are equally satisfied with their income. Only those specialists that work for startups are not satisfied with their salaries (around 10%).
Where Ukrainian IT professionals work:
Ukraine houses a wide range of top-notch IT product companies including Grammarly, Readdle, Jooble, Depositphotos, GitLab, TemplateMonster, and others. The Ukrainian startup ecosystem is growing by 500 new entrepreneurs each month. Startup investments are growing too. In 2017, there were 44 deals with the total investment volume of $265M. Although it is not easy for startups to fight for software engineers with large outsourcing vendors, which dominate the Ukrainian IT market, they have several significant competitive advantages. Ukrainian upstarts attract prime tech talent by offering challenging projects,
diverse tasks, and the chance to contribute to product development. In addition, it is a chance to get a lot of experience faster and grow professionally in a dynamic environment.
We have shortlisted several notable Ukrainian startups but there are a lot more successful tech companies that started in Ukraine. Some of them expanded to global markets and moved their headquarters to world business centers and the Silicon Valley, others were acquired by tech giants. For instance, Google bought Viewdle, while Looksery was acquired by Snapchat for around $150M.
IT Service Companies There are currently over 1,600 IT companies in Ukraine, and most of them provide software development services to customers around the globe. Therefore, businesses that look for an IT partner in Ukraine come up against the challenge of choosing among a variety of vendors. The selection criteria often include the company’s size, years on the market, track record of similar projects, references, experience in certain technologies and industry verticals, security practices, etc.
Ukrainian IT service companies stand out among the competition thanks to the convenient geographical location, cultural closeness, good communication, highly skilled talent and, of course, competitive prices.
Therefore, these factors play a decisive role. Most local software development companies are mid-size agencies: 41% of the vendors listed in the report by Ukraine Digital News have 20–99 employees, while businesses with 100–299 staff members make up an additional 18%. However, according to DOU, the number of large IT vendors in Ukraine has increased in 2017–2018 and 50 biggest firms grew in size too.