What Will Information Technology Outsourcing Bring Ukraine in 2017

NV Business, an online publication based in Kyiv Ukraine, wanted to get a take of what 2017 would bring the information technology outsourcing industry in Ukraine. They selected the top three managers based on the European Business Association’s ranking, and the association’s IT Committee Chairman also added his comments. They put the following question to them: What do we have to do in order to ensure a stable and high growth in the industry and what could get in the way?

Ukrainian programmers at GlobalLogic at work (Photo GlobalLogic)

Ukrainian programmers at GlobalLogic at work (Photo GlobalLogic)

    Taras Kytsmey, Co-Founder of SoftServe 

Last year was fruitful for the Ukrainian IT sector: companies continued to expand their exports and to grow organically. According to preliminary estimates, in 2016 the industry grew by 15-20%, while the market value grew from $2.5 billion to 3 billion. This, in particular, was encouraged by the lack of internal turmoil economically, a calmer situation in the east of the country, tax conditions remained stable for physical persons as entrenpreneurs, and a reduction in the frequency of  searches by tax authorities that have shaken the industry and our overseas clients before.

In the absence of external and internal economic shocks, moderate and predictable regulatory policy, we hope to maintain the growth rate at the level of 2016. The positive reputation of Ukrainian IT specialists and the growing demand for our services in the global market will help us do this.

The President and Prime Minister in 2016 clearly declared the need for support and development of the IT industry as strategically important for the Ukrainian economy. We even saw the first significant results of the dialogue which IT companies are having with government agencies. The real steps in this direction, in particular, were the adoption of the law on export facilitation services for the development of IT-industry, an increasing public demand for graduates of technical specialties.

However, the global and the main objective, which is important not only for IT, but also for the whole national economy is the development and preservation of talent in Ukraine. This can only be achieved through the creation of competitive conditions compared to other developed countries (Western Europe, USA and Canada). Without solving this problem a knowledge economy will not be built in our country.

The disadvantages of living in our country (security, infrastructure, medicine, level of corruption) we have to compensate for flexible employment possibilities or businesses, low taxation, affordable housing, improved education and opportunities for professional development.

Natural ways to provide services in a knowledge economy is through private enterprise. This method has proven successful in the export industry of information technology. We critically need clear, consistent and long-term public policy, winning the competition for talent in the global market.

In addition, the development of the industry is urgent need for education reform, intellectual property protection, simplification of business conditions, clear state strategy on the development of the IT sector. In these matters, like last year, there has been no tangible progress…

  Oleksandra Alkhimovych, Managing Director Luxoft 

 

One of the indicators in 2016 was a start of cooperation with government bodies. The President of Ukraine noted that the IT export industry is one of the most promising for development. The Minister of Economic Development and Trade also said that IT – is the most important sector in terms of exports of services. The growth of the industry in 2016 will be about 9% higher than last year, but significantly lower than in 2013-2014.

The growth of the industry is inextricably linked with the overall political and economic situation in the country. In the world ranking of investment attractiveness of International Business Compass, compiled by the Hamburg Institute of International Economics, our country in 2015 was ranked 89th place out of 174 countries. These are challenges for the industry in terms of strategic development and place in this strategy for the IT industry. High inflation, corruption, the need for infrastructure development, and protection of intellectual property – are also open issues that need special attention.

Ukrainian society should be prepared to move to a new level of perception regarding the value of human talent. Historically high schools in Ukraine prepares professionals at a very high level. In order to maintain the level of training necessary  for specialists there has to be an enhancement of the interaction between the IT industry and the educational system. Promoting the concept of “human capital” will bring a new level of public perception of professions that are in demand today and in which the future stands.

In 2017 much will depend on the interaction between business and government. Increasing Ukraine’s ranking in investment attractiveness, the implementation of a Hi Tech Strategy, the use of IT professionals through contracts, improvement of legislation on intellectual property rights protection, and there is a lot more on the agenda and we need joint efforts to implement all that is necessary for business growth.

  Ihor Byeda, Managing Director GlobalLogic, Ukraine

I expect that by the end of 2016 the market growth of exports of services IT-outsourcing will be at 15-20%. In the future, the growth rate may even be slightly higher. Given the fact that this growth is in hard currency, it is a very positive trend for the industry as a whole.

I do not see any problems for active development potential of R & D-outsourcing for a long time, but I would like, so that in addition it also developed production market. It will be a good stimulus for the development of the industry. The transition from a service to a product model has already taken place in the IT-industry in Israel. A similar development path can take place in the industry in Ukraine as well.

The gradual improvement of the international image of Ukraine helps industry growth . However, political and financial uncertainty, as well as the outflow of talented and highly skilled professionals from Ukraine hinder the market’s development. It is also important to note that our system of technical education strongly inhibits growth, which is simply not keeping pace with market needs. The gap between the level of knowledge and skills that we need in order to hire an individual for a project, and that is which is provided by high schools is increasing.

   Kostyantyn Vasyuk, Executive Director, EBA IT Committee

According to the NBU’s balance of payments for 9 months of 2016, exports have been the following:

  1. Agro-Industial Industry – $ 10.3 billion;
  2. Metallurgy – $ 6.0 billion;
  3. Export IT industry – $ 2.4 billion (according to expert estimates);
  4. Engineer – $ 2.2 billion.
  5. Transportation – $ 2 billion;
  6. Pipeline – $ 1.8 billion.

Thus, one can note, that in 2016 the IT industry surpassed mechanical engineering, according to expert estimates, and presently the volume of IT exports for 2016 totals about $ 3.2 billion.

We expect export growth in 2017 to 15-20% in a financial sense, while maintaining the current regulations of the industry, as well as the condition of creating  20 thousand new high-paying jobs.

Further growth of the domestic economy is extremely important and public policy is importantly weighed on high-tech industries, and in particular the export IT industry. It must be emphasized that we are talking primarily about the preservation of a stable tax environment for IT companies and entrepreneurs who are working to export, and the importance of conservation and development of human capital in the country. Accordingly, ignoring the above factors lead to a slowdown in the IT industry in Ukraine and on the basis of acute competition for talent from our neighboring countries have a chance to create new jobs at the cost of the same Ukrainian programmers.

Source: http://biz.nv.ua/ukr/publications/jakim-bude-2017-rik-dlja-it-autsorsingu-v-ukrajini-prognozi-top-menedzheriv-providnih-kompanij-462548.html