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War has crippled much of Ukraine’s economy, but the exception is the IT sector. As of November, the industry’s annual export revenue hit a record $5.5 billion — up 13 percent from the same period last year.
After Russia invaded in February, 58% of Ukrainian tech companies processed new orders from customers. Despite brutal attacks, martial law and general agitation, 85% of business activity has returned to pre-war levels. That’s according to Lviv IT Cluster, a community of companies, universities and local authorities.
“Ukraine’s technology industry is showing more than full capacity and growth,” said Stepan Veselovsky, the group’s CEO. “Exports of IT services grew by 9.9% compared to last year and generated more than $6 billion in revenue, an increase of $542 million in 2021.”
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This victory over adversity was important to Ukraine. While conflicts devastate the country’s coffers, the sector provides workers’ wages, taxes the economy, and provides technical support for the war effort. The tech provides encrypted communications, UAVs and cyber defenses for the military and digital IDs, air raid alerts and online payments for civilians.
IT will be critical to post-war recovery – but getting there will be difficult.
It can be mutually beneficial.
A summer study by the Lviv IT cluster found that more than 50,000 IT workers relocated after the invasion, while another 7,000 joined the armed forces. Those that remain now face the risk of extinction due to attacks on infrastructure. As war weariness sets in, some fear that consumer sympathy will wane.
As the challenges mount, assistance from overseas will become more critical. But the benefits of philanthropy go far beyond altruism.
“Philanthropic work is good, but you can work with companies,” says Oleksandr Yasenko, managing partner of the Kiev-based investment firm BRISE Capital.
Indeed, Ukraine’s tech ecosystem has a unique mix of assets. The developed history of the country laid the foundation for a developed sector in computer science. Today, it includes more than 200,000 IT professionals and one of the world’s greatest tech talent pools. It includes a compelling package of stellar programming skills, a high level of English, and a time zone that overlaps well with both the US and Europe.
These characteristics have made Ukraine a global IT outsourcing hub. Now the country wants to transfer its know-how to local tech giants.
President Zelensky’s administration has taken bold steps to bring these aspirations to reality. This future. In 2019, his government established the Ministry of Digital Transformation. In the year By 2024, the department aims to put every public service online, expanding access to high-speed internet. Teach digital skills to 6 million Ukrainians and increase technology’s share of GDP to 10 percent. It currently accounts for around 4.5%.
Industry has become one with the government.
To reach these goals, the government has promoted business-friendly policies: lower taxes, less paperwork and greater oversight, along with anti-corruption reforms and financial support initiatives, such as the Ukraine Startup Fund.
This program is strengthened by cooperation between the government and private sectors. The war made both sides appreciate each other’s support.
“The world should know that the industry is one with the government and that they help each other,” said Ivan Babichuk, Chairman of the Supervisory Board of the Lviv IT Cluster. “And it does [Ukraine] A safe and secure place to do business – despite the general security issues in the country.
War problems have added more features. Ukraine’s digital infrastructure and economy are remarkably resilient after a full-scale invasion, while its workforce has found extraordinary resilience and adaptability. New skills in crisis management, leadership, teamwork and efficiency are developed in conflicts.
“Most companies have retained their customers and the size of their contracts,” said Alex Bornyakov, Ukraine’s deputy minister of digital transformation. “Ukrainian developers have shown that they can perform their work well even in difficult conditions. This is an indication to the whole world that Ukraine is a reliable partner and an attractive investment destination.
We’ve become more active—and stronger.
Some tech businesses thrived after the invasion. In the year Take Mosqitter, which won the prestigious IT Arena startup competition in 2021. As the conflict escalated, the company expanded its team and created a new product line.
“Challenges bring opportunities and opportunities for growth,” says Olga Diachuk, the company’s COO. “It shows who you really are, what you’re made of and how smart you are.”
Digital businesses also typically require fewer physical resources—making their revenues important to Ukraine. For example, brick-and-mortar stores are more likely to close due to security concerns than e-commerce sites.
However, technology companies face their own challenges. Overseas investment will be a vital part of their future wealth.
“It’s very important to keep external support for the local tech ecosystem, as Western funds do,” says Joachim Lacuere, general partner at VC firm Acrobat Ventures.
“Technology has been an important force for a long time. Now we are seeing the first successful companies breaking the ground. Even in times of war, these companies can solve problems that are not limited by borders.
Those who have invested in Ukraine will note that war is fostering a unique set of skills. For example, thousands of volunteer hackers have joined the IT army that defends Ukraine against Russian hacking groups.
The team members had an unparalleled experience. The country’s minister of digital transformation, Mykhailo Fedorov, described the resulting conflict as “the world’s first cyber war.” The volunteers want to share their current knowledge with international partners.
“Ukrainian tech companies are strengthening their cyber defense capabilities, and it can help other countries better understand the nature of modern cyber attacks,” says Veselovsky, CEO of Lviv IT Cluster.
The first world cyber war. The first IT army in the world. 270K Angry IT-Cyber Frontline Warriors. Closing Rutube. AI Tech and Identifying War Criminals. And many more issues that will be revealed after the victory. By the way, you are free to join. pic.twitter.com/3PDP075nU5
– Mykhailo Fedorov (@FedorovMykhailo) May 26, 2022
Despite these strengths, the potential of Ukraine’s technology sector can only be realized with support from the international community. For Veselovskyi, the easiest way is to cut all ties with Russia.
“The next step is to motivate your local governments to support Ukraine and participate in Ukraine’s fundraising initiatives,” he said. “The future security and economic prosperity of Europe depends on victory on the battlefield in Ukraine. You can start working with Ukrainian companies today through our B2B platform Lviv Tech.”
To predict the future of the sector, Veselovsky’s team conducted a survey of more than 5,000 representatives of the technology industry. In the most positive scenario, which envisages European integration and economic liberalization, 78% of respondents remain in Ukraine. Another 12% will try to go abroad, while another 10% have not yet decided.
The best way to help Ukraine is to invest in Ukraine.
This result could provide the foundation for the industry that flourished after the war. Continuous support from Europe will be necessary to build this. Government officials have tried to spread this message at IT events around the world.
“We tell them one thing: the best way to help Ukraine is to invest in Ukraine,” said Bornyakov, Deputy Minister of Digital Transformation. “Work with Ukrainian companies, fund Ukrainian startups and hire Ukrainian freelancers if you can.”
The damage is very high. IT remains the only industry still showing growth in Ukraine. If it goes down, the whole country will suffer. But if expanded, the sector would help Ukraine not only survive, but thrive.
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