“From an attractive field for employment, the field of information technologies in Ukraine has turned into a stagnant one. How far did she fall?”, — write: epravda.com.ua
The Ukrainian IT sector is sinking deeper and deeper into the crisis. Quarter after quarter, research and statistics record a decline in service exports, a reduction in the number of vacancies and a slowdown in the development of the industry. However, not all segments feel the crisis in the same way. Product companies that create their own solutions held their positions and for the first time in history surpassed the service sector in terms of the number of hired specialists. However, even in this segment, significant reductions have occurred at the end of 2024. The labor market is shrinking, although the rate of decline has slowed. About 20% of specialists work abroad, and companies are actively expanding offices outside of Ukraine, in particular in Poland. Despite everything, the Ukrainian startup ecosystem is showing positive dynamics, rising in world rankings. In addition, a new defense sector is being formed with a hundred startups that can become a driver of development. Although the uncertainty that arrived in February 2022 is still weighing on the industry, efforts by companies and the state offer hope for adaptation and stabilization.Advertisement: A persistent sense of uncertainty remains: there is a risk that negative trends will continue in 2025. The uncertainty that arose in February 2022 is increasingly affecting the Ukrainian IT industry. The second year of decline In 2023, for the first time, exports of the Ukrainian IT industry not only did not grow, but fell by 8.5% to 6.7 billion dollars. In 2024, the situation did not improve. The industry continued to struggle with the challenges dictated by wartime realities. The first two quarters of 2024 were worse than the same period of 2023. Companies exported services worth 3.21 billion dollars, which is 170 million dollars. less than in the same period in 2023, and 14.3% ($535 million) less than in 2022. Advertisement: This trend continued in the third quarter, which turned out to be the worst for the industry since the Great War. According to the optimistic scenario, in 2024, exports are expected to decrease by 4%, according to the pessimistic scenario, by 6% (to 6.3-6.45 billion dollars). However, even in such conditions, the share of computer services remains the second largest article of Ukrainian exports after the agricultural sector, accounting for 38%. In the geographical distribution, the USA, Great Britain, Malta, Cyprus, Israel, Switzerland and Germany brought the largest revenues for Ukrainian IT. The leader of the year remains the United States, which provided about 2.4 billion dollars. Over the past two years, interlocutors of the European Parliament assessed the main causes of the recession in different ways: sometimes they emphasized the impact of the war, sometimes – on the recession of the technological sector. In 2024, it was the factor of the great war that became decisive. “The main challenges are the mobilization of key specialists, limited possibilities for booking and travel abroad, missile attacks and the increase in the tax burden,” explains Stepan Veselovskyi, CEO of the Lviv IT-cluster. Read also: There are jobs in IT, but not for programmers. Why companies hunt for marketers and analysts For foreign customers, Ukraine has been in the “red zone” of risk for the third year. It doesn’t matter where the team is located: in Lviv or Kharkiv, because under equal conditions, the choice in favor of Ukraine is rarely made. “The main challenge was to convince clients to start projects in Ukraine, to make the risks of doing business in war conditions imperceptible for them,” – co-founder and chairman of the Board of Directors of SoftServe, Yaroslav Lyubinets, told EP. In addition, customers increasingly pay attention not only to the war, but also to their own financial difficulties, choosing companies from other countries, in particular from India. The internal unpredictability of state regulation also complicates the situation. “Take the sudden termination of e-booking: business understands the importance of minimizing abuses and checks, but it is important that they are carried out without stopping the ability to book key specialists. The increase in the tax burden has created additional challenges for business,” adds Veselovskyi. Talent market Over the past two years of optimism the IT market became less. In 2023, the total number of employees in the 50 largest companies will decrease by 10.7 thousand. persons Although the situation improved somewhat in 2024, it did not change the general trend. Thus, in the first half of 2024, reductions decreased to 2.9%. The main reasons for the reductions are the legalization of workers abroad (Ukrainians who were able to go abroad are registered in foreign offices of companies), a decrease in the number of projects, and the dismissal of specialists who were on the bench. About 20% of Ukrainian IT specialists work abroad. Their legalization may indicate the active expansion of offices of Ukrainian IT companies in other countries. According to the study IT Research Ukraine 2024, 51% of company managers plan to expand their representative offices and more than a third of them intend to open offices abroad. Poland remains the most popular choice for this. 6% of managers announced plans to close their offices in Ukraine. Read also: Baltic IT Republic. How Estonia became a technological leader in Europe Under such circumstances, the rules on the market began to be dictated by employers. For most of the people of Haiti, the situation looks like this: it is possible to find a job, but it is difficult. The leaders in hiring workers are food companies, but they are not usually looking for programmers. Due to the shortage of personnel, the positions of marketer and analyst are becoming more difficult to close. The search for non-tech specialists resembles the recent struggle for programmers. In December, 4,584 vacancies were posted on DOU – 573 less than in November. This is one of the lowest indicators for the year, which is explained by the approaching holidays. In the second half of 2024, the market showed growth: +9% vacancies, the most among remote (+12%) and international offers (+26%). In Lviv, the dynamics are also positive (+3%), while in other cities, in particular, Dnipro and Odesa, a decline was recorded. The number of vacancies for specialists without experience increased the most (+33%), as well as specialists with more than five years of experience (+11%). The decrease in activity is noticeable even among candidates: there were 2.7 thousand fewer responses to vacancies than in November. The average number of responses to a vacancy in December decreased to 24.6 – the lowest level in two years. Stability of food companies Despite the general negative trends, the situation in the industry is heterogeneous. For the second year in a row, product players show the greatest growth among IT companies. According to DOU, in the first half of 2024, 18 companies showed growth in the number of specialists: nine food companies, five hybrid companies, three service companies and one outstaff company. The biggest increase is in Ajax Systems (417), Genesis and SKELAR (300 each), which indicates revival in the industry. Read also: “Every second Ukrainian startup that moved to Poland wants to return.” Minister of Digitalization of Poland Product IT companies were an example of stability. They create their own solutions that they sell directly to customers. This gives a more stable income and greater autonomy even in conditions of global economic recession or war. In 2024, this trend became particularly noticeable: for the first time, the number of specialists in food companies almost equaled the number of workers in the service sector. Despite the general growth of the food sector, some companies (Grammarly, airSlate, MacPaw, RIA.com, Reface) cut a total of 620 specialists tives However, this is not a trend, but the specifics of individual companies seeking to improve efficiency. Attempts to save the situation Outsourced IT firms, one of the largest in Ukraine, are looking for non-standard solutions. “Companies are innovating to adapt to modern conditions. According to IT Research Ukraine 2024, 53% of firms optimized processes, and 50% mastered new segments or met new needs of existing ones,” Veselovsky notes. One of the trends has become the use of artificial intelligence to improve work efficiency. At the end of 2023, SoftServe co-founder and board member Taras Kytsmey said at the Future of Ukrainian Exports conference that generative AI can increase the productivity of development teams by up to 45%. More and more companies are using AI. Thanks to it, says Lyubinets, the productivity of specialists increases, operational processes are optimized. At the same time, according to him, it is too early to assess the direct impact of AI on financial indicators. Read also: Hardware-IT report: which companies from Ukraine produce high-tech products In 2024, several strategic agreements with the acquisition of foreign companies to expand services and strengthen market presence also took place. Intellias acquired UK-based NorthLink Digital, which is engaged in IT consulting, and US-based C2 Solutions, which specializes in digital medicine and technologies for medical equipment. CEO and co-founder of Intellias, Vitaly Sadler, predicts global growth of the company by 10-20% in 2025. The state also decided to help Ukrainian companies. In November 2024, the Ministry of Digital and Lviv IT cluster launched the CodeUA platform. The initiative is designed to help foreign clients find Ukrainian contractors. CodeUA is a B2B platform that connects proven Ukrainian technical contractors with international clients for project implementation. Through the platform, you can order software development, IT consulting, cyber security, data analysis, design, and technical support services. Later, the Minister of Digital Transformation, Mykhailo Fedorov, said that 220 companies had registered on CodeUA during the first days of work, and another 30 are being verified. Startup ecosystem and miltech Investing in startups is always risky, and doing it in the conditions of a major war is an even bigger challenge. However, 2024 turned out to be more positive than negative for the startup ecosystem. As in large companies, the issue of reservations and the possibility of the team traveling abroad are perhaps the most important challenges. “The Ukrainian ecosystem is recovering from the shock of 2022. We see several initiatives to support startups launched in 2024. In particular, the Seeds of Bravery program that supports Deep Tech (technologies based on significant scientific discoveries – EP),” comments the founder and CEO of the INNOV8 innovation center and Mission Possible venture program Svyatoslav Svyatnenko. In 2024, the Ukrainian startup ecosystem rose from 50th to 46th place in the world ranking. More than 2,600 startups are driving innovation, and the total value of the ecosystem, which includes startup market capitalization and the volume of investments raised, has tripled since 2020. According to Oleksandr Yatsenko, chairman of the board of Techosystem and principal of the SMOK Ventures fund, 2024 can be divided into two parts. The first half of the year was a period of accumulation of potential, the second – a time of caution among investors. He cites the U.S. presidential election, which affected global investment sentiment, as the reason for restraint at the end of the year. Read also: Artificial intelligence is looking for talent. How JobCannon, a startup created by Ukrainians, will change recruiting Despite the challenges, Ukrainian startups have achieved significant success. “In 2024, 100 investment deals took place, the volume of public investments reached $350 million. In addition, ten M&A deals were concluded in 2024, among which the merger of the unicorns Grammarly and Coda is worth noting,” Yatsenko notes. The biggest deal of the year was the attraction of 200 million dollars by the IT company Creatio. at an estimate of 1.2 billion dollars, which made her the sixth unicorn with Ukrainian roots. Creatio grows by 50% every year, increasing the client base and partner network. The basis of this development is constant product innovation and investment in R&D. However, it is difficult to call 2024 a time of active creation of startups. As Horizon Capital investment analyst Andrii Brodetsky explains, due to the unstable situation in the industry, many people do not dare to start their own business. Although this caution did not extend to the defense sector. “About 25% of public deals are in the defense technology sector. Half of the deals in the defense tech sector are non-public. This allows us to conclude that the defense vertical is the leader in the number of deals in the Ukrainian startup ecosystem,” Yatsenko notes. Against the background of large-scale investments in miltech in the US and the EU, these amounts look insignificant. Problems with Ukrainian legislation, especially regarding copyrights, lack of experience of the founders and weak communication with foreign investors remain the main barriers to attracting large investments. However, Yatsenko believes that the growth in the field of defense technologies has a cumulative effect and in 2025 we can expect even greater interest from investors. Ukrainian specialists are increasingly joining technological defense companies. According to DOU, the number of vacancies in the defense sector will increase by 56% in 2024, which indicates a significant increase in interest in this area. Read also: Cheap and risky. Why Western funds do not invest in Ukrainian miltech startups In 2025, the main trend will remain the development of artificial intelligence. “Right now, everything related to infrastructure for AI is in high demand, from data centers to tools for working with models. Unfortunately, there are not so many technical specialists in this field in Ukraine. Instead, many people create simple services, for example, to automate processes in marketing or sales. They are easy to replicate, unlike complex engineering products. As a result, it is difficult to stand out in front of users and investors in such niches due to high competition,” Brodetskyi notes. He adds that Ukrainian engineers should use the experience gained in international companies to develop their own products. A typical pattern is that a person worked on a large-scale product in a service or product international company, saw how the product and the team were built, and then started his own startup. You can look at this from the point of view of supply and demand: interesting opportunities for building and scaling a business open up for founders and investors in areas with a certain threshold of entry, where specialized knowledge is required to build a product. These can be, for example, vertical SaaS solutions (software for the needs of certain industries), tools for software developers (developer tools) or infrastructure for AI.