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The Ukrainian software industry has held its own so far but how much longer can it hold out?

The Ukrainian software industry has held its own so far but how much longer can it hold out?

In 2022 the Ukrainian economy will shrink by almost a third due to the war, but the software industry has fared much better than other sectors so far: exports have grown by 23% and only 2% of the 5,000 companies it closed. But will this also be the case in the near future? The Economist article

According to the country's central bank, in 2022 the Ukrainian economy will shrink by almost a third due to the war. But one sector has fared much better than others.

The Ukrainian IT Association, a Kyiv-based technology industry body calculates that in the first six months of this year, software exports grew by 23% compared to the same period in 2021. Only 2% of 5,000 software companies companies closed its doors this year. Why has the sector been so resilient and what next for the country's programmers? asks The Economist .

Although the entire IT sector accounts for only about 4% of GDP, Ukraine regards the software industry as a national treasure. Monthly salaries often exceed $3,000, five or six times the national average. Software development work that is outsourced from wealthier countries feeds the Ukrainian startup ecosystem. Having cut their teeth on projects for clients abroad, many workers start companies that develop their own products. Oleksandr Bornyakov, Ukraine's deputy minister for digital transformation, says the government's vision is to "build the largest IT hub in Eastern Europe".

Part of the reason industry weathered the war relatively well is clever planning. Before the Russian invasion, GlobalLogic, a US company with about 8,000 programmers in Ukraine, planned to relocate employees to safer areas of the country and conducted week-long trials working from the western city of Lviv.

Vitaly Sedler, CEO of Intellias, a Ukrainian software company, has adopted a similar strategy. Four hours after Russian forces crossed the border on Feb. 24, chartered buses began ferrying its developers and their families from Kharkiv in the northeast and other cities close to Russia to relative safety in the west of Ukraine. N-iX, another Ukrainian software developer that quickly relocated its employees, reports that productivity was back to pre-invasion levels by the end of March and has remained largely unchanged since. Trade associations have helped programmers holed up in offices, bunkers and apartments pool resources, sharing satellite links and backup power systems.

But headwinds are making themselves felt. Methodical Russian attacks on critical infrastructure have caused widespread water and electricity outages in recent weeks. According to President Volodymyr Zelensky, 10 million Ukrainians were without electricity on 17 November. For Ukraine's IT sector this could be "devastating," warns Andrei Drobot, a professor at the Kyiv School of Economics, speaking from an apartment without electricity. Conscription is a minor issue. An estimated 3% of Ukrainian software workers are currently fighting in the military.

This year's growth may have been aided by what Ihor Kostiv, a GlobalLogic executive in Lviv, calls “emotional support” from sympathetic Western customers. Such altruism is unlikely to withstand larger blackouts. IT exports, most of which are software, have already slowed. Growth between July and September this year was 13%, according to Konstantin Vasyuk of the Information Technology Association of Ukraine, well below the rate for the first half of the year.

In the long run, the "huge risk," according to Bornyakov, is that more Ukrainian IT companies will move to Poland or elsewhere in Europe. Of the roughly 285,000 technology specialists in Ukraine earlier this year, more than 50,000 – mostly women – have moved abroad, according to a survey by the Lviv IT Cluster, an industry association. To stop the brain drain, Ukraine will need to keep its infrastructure running. And, ultimately, it will need the fighting to stop.

(Excerpt from the foreign press review by eprcomunicazione )


This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/lindustria-ucraina-del-software-finora-ha-tenuto-botta-ma-quanto-potra-ancora-resistere/ on Sun, 27 Nov 2022 06:08:24 +0000.