Ukraine IT’s unparalleled resilience

On the morning of Feb. 24, 2022, Russia invaded Ukraine, escalating a years-long conflict between the two countries. In the year since those first pre-dawn attacks, hundreds of thousands of troops and civilians have been wounded or killed, millions of Ukrainians have been displaced, and cities have been shattered.

The previously rapidly growing IT industry in Ukraine was also rocked by the invasion. In 2021, the country’s computer services exports had more than tripled over the previous five years to $6.9 billion — 38% of the country’s gross domestic product — and the sector employed 289,000 professionals, according to IT Ukraine Association. The IT sector in Ukraine had stabilized after the 2014 Russian incursion with growth accelerating beginning in 2017 and “supercharging” in 2020 and 2021, says Katie Gove, senior director-analyst in Gartner’s Technology and Service Provider Research division.

In the weeks following the invasion, IT services providers in Ukraine worked quickly to relocate thousands of workers or set them up for remote delivery where necessary. One year later, the industry’s remarkable resilience is clear. As Konstantin Vasiuk, executive director of the IT Ukraine Association wrote in a recent report: “It remains the only export industry in Ukraine that operates to its full capacity in wartime.”

Indeed, by the end of 2022, the Ukraine IT industry had delivered $7.35 billion in computer services exports, an increase of 5.8% over the previous year. “Even during the most negative scenarios, they’ve been able to show some growth,” says Gartner’s Gove. “It’s a pretty substantial statement that they’ve been able to not only scrape by, but also make some gains.”

That continued business expansion was made possible by the efforts of IT service providers with delivery centers in Ukraine to first take care of their people, and then to put them in positions to continue to perform their work — largely software development — whether in another part of Ukraine, another country, or remotely at home. But the growth is also attributable, in large part, to global goodwill for the country as well as an ongoing global shortage of highly skilled technology talent.

Immediate response and recovery

In the weeks leading up to the invasion, IT companies with operations in Ukraine, read the writing on the wall and put their business continuity efforts into effect. “This has been a combination of setting up delivery centers elsewhere in Europe, expanding delivery centers in India and other alternative non-European countries, and, finally, leveraging remote work using Starlink for employees who could not leave Ukraine and were not drafted,” says Peter Bendor-Samuel, CEO of IT and business services research firm Everest Group.

While smaller firms or startups may have had only one delivery center, most application development firms, which make up 80% of Ukraine’s computer services export market, have numerous delivery locations. “The pattern has been to establish multiple redundant delivery teams and locations,” says Gove. “All the big companies have been doing this for ages at scale, but even midsize providers have multiple delivery locations.”

EPAM Systems, for example, which had 14,000 employees working in Ukraine, moved about 10% of its Ukrainian staff out of the country and has relocated hundreds more employees and their families to safer parts of Ukraine. The company, initially founded in Belarus with headquarters in the US, also began accelerating hiring at its other locations in Central and Eastern Europe, Latin America, and India.

“They offered all of employees that wanted it,” says Gartner’s Gove. “EPAM had already been invested in expanding talent pools in Latin America and they supercharged that.” (EPAM Systems also ceased doing business with Russia and moved its Belarus operations to Uzbekistan.)

The COVID-19 pandemic had provided companies with extensive experience enabling remote work, which also helped during the transition period. “It was a jumping off point for the ways we work to continue to be viable,” Gove says.

It was a remarkable pivot amid an unspeakably difficult time for the country. “We saw their resilience very early on,” says Gove. “During the first couple of weeks after the invasion, clearly a lot of SLAs were not able to be met. But within several weeks, those SLAs had gone right back up into the 90s.”

Leaving Kharkiv: One provider’s story

Kharkiv-based Aimprosoft, a software development firm with US and European customers across industries such as ecommerce, healthcare, automotive, and telecom, had been in high growth mode throughout 2021. The need to do more work digitally during the pandemic drove demand for greater business process automation, sending revenues 61% higher. “Businesses were going online en masse, and everyone needed specialists who could implement e-commerce solutions, reduce overhead by automating routine tasks, launch telehealth solutions,” says Aimprosoft CEO Maxim Ivanov. “We had even more work to do.”

A month before the invasion, Aimprosoft opened a new office in Ivano-Frankivsk in Western Ukraine near the Polish boarder as a business continuity measure. Some employees transferred immediately while others waited. “Everybody hoped to the last that the new office would become our branch office in the context of business expansion,” Ivanov says.

In 2020, the company had developed robust processes for remote work. “It may sound paradoxical, but COVID gave us the advantage. We’d had enough time to get our processes up and running for delivery from anywhere,” says Ivanov. “The pandemic taught us to be flexible and work effectively remotely. The war showed we could make internal moves across Ukraine without losing productivity.”

The company’s cloud-based infrastructure is hosted in Germany, with its infrastructure and customer code stored in one data center and backups of both in another. “An old rule of thumb, ‘to make a copy regularly,’ has proven to be excellent,” Ivanov says. “This distribution is reasonable and helps protect your business from force majeure accidents like war, natural disasters, or fire, which are less predictable.”

Reliable access to power was also a consideration. Aimprosoft set up its office in Western Ukraine with everything necessary for continuous delivery: Starlink internet terminals, power generators, and fuel reserves. “Having autonomous power facilities will make you more resilient,” Ivanov says.

The biggest challenge was explaining to customers outside the country that the company could continue to work at the same level of productivity “when there is a full-scale war in your country, how we could work when bombs are flying, and we are promised conquest in three days,” says Ivanov. But the company’s leaders had confidence, having even signed a contract with a new customer the day of the invasion. “I never stick my head in the sand. Being a leader means being able to be responsible and having a contingency plan,” Ivanov says. “I was lucky because our team is made of people who can be relied upon and have lived up to their expectations. Some employees worked standing in traffic jams while relocating to safer regions of the country.”

The first month was the hardest. “We all had to come to terms with the fact that what we all feared and didn’t want to be had already happened,” Ivanov says. “However, we had a plan B, and we took advantage of it, took a breath, and quickly adapted to the new reality.” The safety of employees and their families came first.  “We didn’t force anyone to work at 100% capacity in the first days,” says Ivanov. “But the demonstrated responsibility illustrated that our team was incredible. No one gave up and ran away. We didn’t fire anyone.”

Within a month, the company was recruiting new hires. And twelve months later, the company’s service levels give little indication of the ongoing turmoil in other parts of the country. “The war changed us,” Ivanov admits. “But what remains unchanged is our responsibility to our relatives and clients.”

Good will and a global talent shortage

In the early days, there was some impact to new business for IT providers in Ukraine. “Clients moved work to other destinations and often other firms,” says Everest Group’s Bendor-Samuel. “However, there has been a strong sentiment amongst the clients to support these firms, and much of this work has now returned.”

The impact of good will for Ukraine — not just from customers but from the broader global community — can’t be understated. “There’s been a lot of stickiness and lots of support for Ukraine,” says Gartner’s Gove. “It’s been pretty remarkable.”

The impact of positive sentiment for Ukraine is reflected in the fact that the IT industry in Belarus and Russia, which has a similar profile to Ukraine, has not fared well.

“Belarus and Ukraine have similar talent pools with both IT service providers and enterprises sourcing there for tech talent for a long time because of their academic tradition and focus on math an engineering,” says Gove. “But Belarus has taken a dip because they’re so connected with Russia.”

The US and UK are by far the largest market for Ukrainian IT services, following by Malta, Israel, Cyprus, Switzerland, and Germany, according to the IT Ukraine Association. “Most [clients] worked to hedge their bets and set up alternative delivery, but if the Ukrainian providers proved they could continue to deliver, they tried to keep the work with them or returned the work or added other work as the new delivery came online,” says Bendor-Samuel.

Aimprosoft has been working with some customers for more than a decade and others for a much shorter time when the Russian invasion took place. Swedish ecommerce consultancy Koalitionen had been working with Aimprosoft for two years. “Our main concerns prior to the conflict was of humanitarian sort: Would the company be able to provide safety to their employees?” says Koalitionen CEO Amir Mofidi. “For us, the uncertainty of not knowing if the staff were safe was the most difficult part. We were relieved when we found out that the people that we work with were safe.”

Aimprosoft felt supported by its customers. “Our clients are amazing,” Ivanov says. Some paid the company’s developers on their days off. Others offered personal bonuses to Aimprosoft employees. Others sent pics of their children baking cookies to raise money for Ukraine. “It touched us to the core,” Ivanov says. “This empathy once again underscores the fact that business is built not only on numbers but also on human relationships.”

Still, performance is critical. “Then and today, customers’ biggest concerns are that the work process may be disrupted because the employee does not get in touch for some reason, data security caused by power supply issues, which impacts whether their business would work tomorrow if a conflict escalated,” says Ivanov, noting that healthcare and finance customers have the highest requirements for availability and continuity. But Aimprosoft has been able to maintain its service delivery and retain all 100 of its clients.

“We were surprised that the downtime was only for a couple of weeks and since then they have been working without any interruptions,” says Mofidi. “The staff are working as any of our other partners — if not more.”

The global shortage of experienced, high-quality engineering and IT talent has also enabled Ukrainian firms to continue to grow even in the most difficult circumstances.

Ukraine has a long tradition of tech leadership, even in uncertain times. The first computer in continental Europe was built in Kyiv in 1951 during the years of post–World War II reconstruction and closed borders. It was developed in a building that had been restored following significant damage during the city’s liberation in 1943.

The country remains a hotbed of talent in part due to a strong academic tradition that nurtures skills in engineering and software development to the tune of more than 31,000 graduates entering the IT labor market annually. (That total dropped to 27,000 last year as some students were forced to suspend their studies during the full-scale invasion.) Prior to 2022, the Russia-Belarus-Ukraine region accounted for about 5% of the global talent pool, according to Gartner.

The availability of skilled engineers and other professionals in Ukraine led a number of global technology firms to set up software development and R&D centers there, including SAP, Snap, Fiverr, Wix.com, Amazon’s Ring, and Nvidia. Developer platform and services company GitLab started in Ukraine before moving its headquarters to San Francisco.

“Companies want and need this talent,” says Gartner’s Gove. “Businesses lives and dies based on IT. Both providers and private enterprises have been willing to have an increased risk profile because the tradeoffs have been acceptable. It may not be as safe and straightforward as getting talent from Boston, but it’s highly desirable.”

Looking forward

Operating in Ukraine remains challenging, but providers have been able to keep a significant core of Ukrainian talent safe and working while also standing up new delivery options. “Clients continue to seem pleased with the work, and while some are careful of creating too much concentration in Ukraine, they seem comfortable with the new arrangements and willing to continue to support these firms by giving them work,” says Everest Group’s Bendor-Samuel. “It looks to me like the worst is over and the Ukrainian engineering and IT industry is surviving.”

Aimprosoft CEO Ivanov notes that new customers may be less willing to hire specialists in Ukraine than they were a year ago. That’s diminished the country’s previous growth trajectory.

“It’s hard to see Ukraine returning to the same role it played before the war anytime soon. That said, if the war ends soon, it is likely that it will still be a viable destination for the services industry, and over time it may reclaim some of its standing,” says Bendor-Samuel. “However, it has clearly lost momentum, and the establishment of other eastern European centers due to the movement of work will affect the overall picture.”

The global shortage of engineering and IT talent works in Ukraine’s favor. “Given the need for these scarce resources, if Ukraine can rebuild its university programs it will find itself with an attractive export market for services and reestablish itself as a premiere country for delivery centers both with the outsourcing community as well as for global in-house centers,” says Bendor-Samuel.

Gartner forecasts no end in sight for the global talent crunch. “The willingness for companies to take on more risk [to access that talent] isn’t going away,” Gove says. Neither is the good will for Ukraine in the marketplace. “That’s substantial,” Gove says. “It will sustain them and allow them to grow.”

Still, Ivanov prefers to focus on winning the war and beginning reconstruction quickly. Aimprosoft’s employees, forcibly resettled to other parts of the country or abroad, are eager to go home — a sign, Ivanov says, that the IT sector has strong roots. Technology workers donate an average of $270 a month toward the Ukrainian cause, says Ivanov.

“Every day I see how hard and selflessly our employees work, volunteer, and donate. If these people have not abandoned the country now, they are unlikely to do so after the victory.” In addition, Ivanov says, the industry is attracting even more workers with its flexible, remote work model.

“We have been through some of the toughest times. Last year showed that the Ukrainian tech sector is incredibly resilient,” Ivanov says. “The whole world saw that Ukrainians are a nation that adapts quickly to difficult circumstances, and we are an example of that, and so is our business. Modern Ukrainian IT people are successors of their heritage: being hard workers with passion in their hearts.”