The end of 2022 was full of headlines, with the IT industry being the only industry that managed to boost exports during the full-scale invasion. The positive dynamics of development in the field of information technology are certainly pleasing, but such reports are a bit of a misconception about the real situation. Thus, by default, an associative series of “information sector” – “economic growth” – “absence of problems” is constructed in the public consciousness. Actually, this is just the tip of the iceberg. Therefore, it will surprise many that the 2023 forecasts are not particularly optimistic.

The transformation of the Ukrainian IT sector was the main topic of a recent discussion by the Center for Economic Strategy and the German Economic Team. What conclusions were reached by its participants – read on.

NO FILTER PICTURE

According to the National Bank of Ukraine, in 2022, the IT sector provided the Ukrainian economy with a foreign exchange return of 7.34 billion dollars. The export volume increased by 400 million dollars compared to the pre-war 2021, the increase was 5.8%. Considering that the indicators of many other export-oriented sectors consist of only negative numbers, this is a pretty good result. In addition, the number of IT specialists in Ukraine reached a record 300,000 people.

It looks pretty encouraging. However, to rationally evaluate this information, we note that in the period 2015-2021 computer services exports increased by an average of 26.8% per year. Therefore, we are currently observing a rather unfortunate picture – a significant slowdown in the growth rate of the IT industry.

Overall, in 2022 Ukrainian IT companies provided about 44% of all service exports to the state. However, as early as January 2023, revenues from IT services decreased significantly, bringing $223 million less than in December last year.

According to pessimistic forecasts, the field of information technologies will not grow at all in 2023, or even shrink. Under these conditions, there is a risk of disrupting trends in Ukrainian IT that have been going on for more than two decades. A more positive scenario is considered, though. Some experts predict the industry will grow by about 6%. Everything will depend on how quickly the war ends.

“Actually, there is a perfect storm going on right now and it has several components. First, it is an absolutely full-scale invasion and war in Ukraine, which has a huge impact on the sector (unfortunately it can take a long time). Second, the crisis of the economic situation in the world, because resources are more Third, artificial intelligence that is already after. ChatGPT writes code faster than a good programmer. All these are great challenges for the IT industry in the world in general, and in Ukraine in particular. Personally, in the domestic IT field as long as there is a war in our country I believe it is naive to expect at least some significant growth”, – the vice president and chairman of EPAM Ukraine shared his vision. Stepan Mitish.

The same opinion is expressed in the Ministry of Digital Transformation. “…Growth was not only relative, but also absolute: the industry grew by $400 million over the previous year (in 2022). But, in fact, to a large extent, the dynamics were lost. We expected 40-45% growth but in reality it was only 6%. And I can’t predict how much it will be in a year. Much will depend on the tide of the war: If it ends in the middle of the year, that’s a guess, if not, then another,” said the Deputy Assistant Secretary of Digital Transformation for IT Development. Oleksandr Bornyakov In an interview with Interfax.

UNDERWATER STONES DURING WAR

It should be understood that relatively good indicators in the IT industry for 2022 are due to international agreements signed even before the war. Now the question is whether foreign companies will continue to cooperate with Ukrainian companies and hire Ukrainian specialists. After all, active hostilities and enemy shelling and mobilization leading to power outages do not contribute to the stable functioning of business. The negative consequences of Russian armed aggression are steadily reducing the number of foreign customers in the domestic market, and the general trend of layoffs in global IT companies only deepens the problem.

According to the Ukrainian job search site for IT specialists Djinni, the number of open positions has almost halved during the year, while the number of applicants, on the contrary, has doubled. This indicates that the candidate’s market has now become the employer’s market, with supply significantly outstripping demand. Overall, hiring of IT staff decreased by 13% in 2022, with startups being hardest hit, i.e. startups with little or no experience. The number of jobs they can apply for has decreased by 70% compared to last year and competition has more than tripled.

“In the US IT market, too, we see a significant decrease in the number of offers and open positions, major cuts, budget cuts and staffing. It would seem that the American market is for what? But there is a direct link, as it is also reflected in the orders of Ukrainian specialists working in outsourcing conditions. companies are waiting for a recession. Budgets are followed accordingly, resources are not wasted unnecessarily, and development slows down. The labor market is a derivative of the overall economic situation. Co-founder of job search platform Jooble, if there are orders – there will be jobs, but if not – a whole for searchers in the industry The forecast is disappointing”, – explained the situation Roman Prokofiev.

The pressing problems of the local IT market today are the need to reserve employees and restrictions on crossing the state border. Therefore, foreign companies are reducing orders in the domestic market – it is important that Ukrainian conscripted specialists make sure that they do not leave the team in the middle of the mission. After all, it will be necessary to urgently search for people who can fill the gaps in the business process. Therefore, Ukrainian companies should provide at least some guarantees to their Western partners. And this is extremely difficult to do, because the reservation option is available only to businesses that are critical to the functioning of the state economy.

At the same time, the current legislation does not provide for FOP reservation, the mechanism works only for full-time employees. In addition, the question remains whether this mechanism will be used for medium and small enterprises and start-ups (up to 250 employees). At the same time, according to IT Research Resilience, 88% of IT professionals in Ukraine work as sole traders and almost every second one works in small companies.

The situation is not better with specialists leaving for business trips abroad. After all, for successful interaction and effective communication of Ukrainian companies with foreign representatives, it is necessary to attend various events, presentations and business meetings, make new contacts and look for partners. The “e-Travel” project initiated by the Ministry of Digital Transformation did not work and today the country continues to seek comprehensive approaches to solve the problem of soldiers going abroad.

“There were cases where individual companies came to us and said ‘we may lose the contract, help us with some issues’. Thus, the ministry helped them with reservations, temporary travel abroad, etc. However, it later became clear that it was impossible to respond to every such request. We are a “policy maker,” meaning we collect feedback to systematically regulate all problematic issues at the legislative level so businesses can do their job,” he said. Transformation Oleksandr Bornyakov.

HOPE FOR A BRIGHT TECHNOLOGICAL FUTURE

Despite all the difficulties that the Ukrainian IT industry has faced since the beginning of the full-scale invasion, it turns out that our companies and specialists have enough strength and motivation to face the challenges of wartime. Therefore, one of the trends in Ukrainian IT in 2023 was the development of military technology. The development of unmanned aerial vehicles has gained particularly rapid momentum. Some improvements have already been confirmed and used on the battlefield, and even more are pending.

It is clear that the military technology aspect for Ukraine will be a priority in the coming years. Startups can already receive grants of up to $35,000 for related developments from the Ukraine Startup Fund. Government funding can be used specifically for dual-purpose projects (defense, cyber defense, infrastructure rebuilding, healthcare, education).

“A total of 47.4 million projects were financed in 2022, and the financing of projects under the dual-purpose program is currently 28 million. At the same time, applications are accepted on a permanent basis, the main sectors are cyber security, health, education, defense, infrastructure reconstruction. Thus, the Fund, It continues to grant grants for military technology and finance contracts signed under previous programs.”

Referring to the Minister of Digital Transformation Mykhailo Fedorov, the publication “Babel” reported that in the near future the ministry will launch a military technology cluster on the basis of the Innovation Development Fund. According to Bornyakov, despite the war, Ukraine managed to attract up to $1 billion in venture investment last year. “It is difficult to make predictions for 2023, much will depend on the state of military operations. “But with the initiative we’ve started (mil-tech startups), it may be possible to attract even more funds if everything is done right.”

Ukrainian experience will undoubtedly be invaluable in the world military technology market, so the government is trying to focus its efforts on creating the latest products in the mil-tech industry. We are going through serious tests, but no one should doubt that we will protect our independence and potential. Recently, the IT field in Ukraine has taken one of the leading positions and has all the prerequisites to help the state occupy one of the most promising niches in the world market.

Anastasia KirichenkoKyiv

First photo: EmirMemedovski/Getty Images