Thursday, April 25, 2013

Will Bionic Hill Turn Kyiv into Eastern European Bangalore? by guest blogger Viktor Bogdanov

In the mid-1980s the Indian government launched an ambitious “Software Technology Parks of India” program that envisioned tax-free use of land for construction of high-tech parks and freeing all IT companies from income tax and VAT. That is how one of the world's poorest countries managed to build a powerful high-tech industry - now the key driver of the whole Indian economy.

Ukraine has started realizing its own IT potential only recently and is yet to fully realize it in the years to come. Last year's hot topic on the Ukrainian IT arena was construction of the first Live-Work-Learn-Play Technology Park in the outskirts of Kyiv, the capital city and biggest IT hub of the country. Bionic Hill – that is how the project was called – had been initiated back in 2011 by UDP, one of Ukraine's leading investment companies and supported by the Kyiv municipal administration. In August 2012 the state-funded “Technopolis” project that aims to foster innovative IT infrastructure development within the country included Bionic Hill in its agenda. In November – December 2012 the project went on road show and was presented at Stanford University (California), Washington, Chicago and Toronto. The Bionic Hill project team spent some time in the Silicon Valley to borrow best practices of the tech parks' construction, functioning and management.

The Bionic Hill will be similar to any other innovation park and will include a huge business center to host both domestic and foreign IT companies, business incubators and tech labs, venture funds, banks and other service providers, and own “University”. The latter is said to be a joint effort of Bionic Hill, Kyiv Mohila Academy (one of the oldest and most respected higher education institutions in Ukraine) and leading IT companies. I wouldn't really call it so pretentiously as it's only going to be an IT training center for JAVA specialists, testers, cloud, iOS and other technologies as well as client service management and foreign languages. That said, the “University” will supposedly fill in the gaps that currently exist between technical education and real-life business needs.

The project promises significant benefits for the national economy such as 35,000 new workplaces, $900 million in annual revenue from the resident companies, over $600 million in value-added software products export, more direct investments, access to cutting edge technologies, stimulation of innovation clusters in industries other than IT (e.g., energy, biotechnology, etc.) and regular cash inflows into the state and local budgets. Sounds like a true dream town, doesn't it? If we believe the promises, of course...

Some Ukrainian IT leaders and C-level execs are very optimistic about the project outcomes and view Bionic Hill as a panacea for today's issues facing IT industry actors in Ukraine. Roman Khmil, COO of Ciklum, a Danish based company with operations in Ukraine, believes that even though Bionic Hill won't be able to fully solve the brain drain problem, it will provide a next-gen level of comfort for Ukrainian IT geeks. “IT industry has grown immensely in the last 10 years,” says Khmil. “When I returned to Ukraine [from US] in 2002, the average salary was $500, now it's $2,500. IT specialists' wellbeing is a way better than the average national rate. However, there're very few good business centers downtown with a good price – quality ratio. Freelance model works well for small projects only. Big project teams of 30 people and more should be stationed together and managed properly. Now only big and experienced outsourcing companies can afford to host such teams. Therefore, outsourcing to freelancers accounts for no more than 5% of the market. ” In his opinion, Bionic Hill will be able to provide excellent conditions for work, leisure and learning.

Igor Fedulov, CEO of Intersog, a global provider of mobile apps and games development services with 3 development centers in Ukraine, is less optimistic about the project. “My opinion is that techno-parks are a myth and they don't work. Most other attempts to start a high-tech park in Russia, Belarus or Kazakhstan didn't produce any marginal success. If you're modeling against Silicon Valley or MIT or Cambridge you need to have one major recipe for success. One. It's called government spending on actual innovation that happens in those parks. I'm talking about major government spending, close to 80% of entire park revenue. Without this any attempt to realize synergies from the fact that the commercial firms will have direct access to the talent which is taught at the same location is a pipe dream.”

Construction of Bionic Hill is set to start in Q2 2013. Phase 1 including a business center, residential real estate and social infrastructure objects is planned to be commissioned in Q1 2015, while the ultimate completion of Bionic Hill is expected in 2020.

I personally think Ukraine has already lost its chance to benefit from high-tech parks. We'll never reach the level of Silicon Valley or India. We don't have any conditions for creating high quality techno-parks due to several obvious reasons. Firstly, we can't physically build them around the tech universities (parks like Silicon Valley have grown organically around the biggest universities) or as modern oases amidst ubiquitous poverty (like in India's case). Secondly, in Ukraine IT business isn't consolidated at all, IT companies are disseminated across the major IT locations such as Kyiv, Lviv, Odessa and Kharkiv and it makes no sense to bring them under the same roof. Instead of investing in such mythical parks and creating new ways of money laundry, we'd rather improve our foreign investment climate and IT education...IMHO.

(Roman Khmil's quote in Russian is available here.)

Viktor Bogdanov, PR Manager, INTERSOG (global provider of mobile apps and games development solutions), twitter @Intersog, link to profile -


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