Ukrainian IT Outsourcing 2014: Trends, Initiatives and Expectations by guest blogger Viktor Bogdanov

In the past few years the Ukrainian IT market was largely impacted by such negative factors as GDP drops, corruption, increased fiscal pressures and a deep political crisis in Q4 2013.

As a result of this, the general IT market saw an 8 percent decrease last year, according to IDC research. On the other hand, the IT exports market that had traditionally boasted 20-25 percent year-on-year growth rates since 2008, showed 6 percent increase, while the cloud-sourcing market showed an impressive 176 percent increase from 2012.

No doubt, 2014 is the most tragic year in the modern history of Ukraine, marked with both political and economic turmoil, and a long-standing crisis in Eastern Ukraine, caused by Russia’s aggression. Yet, in spite of many pessimistic views and forecasts, Ukrainian IT Outsourcing (ITO) has managed to not only survive but provide new interesting opportunities for service buyers, globally, especially in the areas of Cloud computing and mobile applications development.

Here’s my summary of the key trends and initiatives on the Ukrainian ITO scene in 2014:

• In Ukraine, ITO accounts for 61 percent of the entire IT market.
• In 2014, the ITO market value is expected to reach $2.4 billion (compared to $2 billion in 2013).
• The Ukrainian market for cloud services (SaaS, IaaS) is projected to grow to over $7 million from last year’s $5.7 million, which marks 35 percent increase.
• The Ukrainian government and IT community have launched the Brain Basket Foundation, a project aiming to triple the national IT workforce from today’s 30,000 to 100,000 specialists by 2020 by reforming IT education and aligning it with the actual business needs.
• Supported by TransparentBusiness.Com, Ukrainian US Embassy and some Congressmen have launched the “Cloud-source to Ukraine” initiative aiming to help Ukraine compete for 10 percent share of the $288 billion global ITO market (and make $30 billion annually in revenues from ITO).
• The ITO market has seen some high-profile M&A deals this year (e.g., Chicago-based Intersog has acquired Odessa, Ukraine based SoftTechnics for $2.5 million, Ukrainian provider Softserve has acquired German provider UGE Gmbh for $2 million).
• Large outsourcing providers start investing in / supporting high-tech startups (e.g., Danish provider Ciklum has launched its own Startup Incubator).
• The average gross monthly salary in the Ukrainian ITO has dropped from $2,600 to $2,100.
• Ukraine ranks #3 among the Top 10 Freelancers Countries, according to elance.com.
• Ukrainian software developers are most loyal to startups (over 70 percent) and out-staffing companies (60 percent), according to survey by douua.org.

On October 26, 2014, Ukraine elected a new government. While the final election results are yet to be announced, the preliminary results show clearly that the pro-Western forces outrun the conservative and pro-Russian ones with a big gap. It suggests the new parliament will have a lot of lobbies of IT prioritization and development. As such, we expect a major overhaul of the entire IT market and upgrade of the existing IT legislation in the upcoming months to foster more FDIs, better meet global ITO buyers’ demand for software development resources, and facilitate doing IT business in Ukraine.

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Viktor Bogdanov is a brand journalist and head of online marketing / PR at Intersog, one of Chicago’s Top App Developers and UK’s Top 10 Android Developer (as of June 2014) with R&D Centers in Ukraine.