The Impact of War in Ukraine on the Tech Industry of Europe

The Impact of War in Ukraine on the Tech Industry of Europe and Beyond

The 24th of February 2022 will be forever marked in the hearts of Ukrainians as a day of infamy that saw the Russian federation’s full-scale invasion of Ukraine. Since that day, the war has had a deep impact not only on every Ukrainian at home and abroad but on the entire world. IT professionals are no exception.

It’s no secret that Ukraine has one of the largest pools of tech talent in Europe, so the ripple effect on the tech industry in Europe is bound to be significant when something as momentous as a full-scale war occurs. As the threat to Ukraine is a global threat, so is the threat to the global tech market as well. Let’s review the effect of the war on the software industry in Ukraine, Western Europe, and the USA.

The state of Ukraine’s software development industry during wartime

In our post from April, we reviewed the impact of the war on Ukraine’s software development industry. For a better understanding of our topic, let’s catch up on the recent findings of different research and surveys.

Despite the war, the IT industry of Ukraine in the 1st quarter of 2022 provided a record $2 billion in export revenues, which is 28% more than last year ($1.44 billion).
Nearly 80% of IT companies in Ukraine were able to close new deals during wartime, and nearly 60% plan to grow their operations by 30%.
Merely 2% of all IT companies in Ukraine were forced to discontinue their operations due to the war.
Most Ukrainian developers were able to continue their work from safer locations: 46% of ІТ-professionals relocated since the beginning of the war to safer regions within Ukraine and beyond. 84% of software developers continued to support the projects full-time.
Despite the war, most of the surveyed IT companies in Ukraine retained their clients in full. 52% of companies kept 100% of their contracts, and 32% of companies kept 90-99% of their contracts. Only 16% of companies lost 10% or more of their clients.

Looking at these numbers, we can assume that despite the fact that many IT providers had to adjust to the brutal conditions of the war, it seems Ukraine’s IT sector is adjusting slowly but steadily. The growing IT export volumes show that the tech industry in Europe and the USA can’t do without Ukraine as their biggest partner of skilled and reliable tech talent. However, as the end of the war isn’t far behind, the risk of losing such a valuable source of tech talent as Ukraine remains. Let’s see how such a scenario can affect the global tech market.

Potential impacts of the war in Ukraine on the global software development industry

Before the full-scale invasion, the pool of Ukraine-based tech talent included approximately 285,000 software developers. The largest consumers of Ukraine’s affordable, high-quality IT specialists are Western Europe and North America, including such countries as Germany, the UK, the Netherlands, Denmark, the USA, Canada, and more. In the tech market in Europe, Ukraine’s IT talent stands out as one with a solid reputation for in-depth proficiency in Computer Science, great communication skills, and adequate English. With an attractive budget, it’s fairly easy to build a team of Ukrainian developers quickly. For global software development, losing such a valuable hub of skilled talent can be catastrophic, to say the least, and here’s why.

A significant tech talent shortage

The software development industry in the USA is undergoing a software development crisis due to the lack of local tech talent. According to surveys, up to 70% of employers are struggling to fill many positions, with IT being one of the hardest vacancies to backfill. It’s reported that tech vacancies increased by 7.5% during March 2022, coinciding with the beginning of the war in Ukraine. The unemployment rate for tech occupations is only 1.3%, and the number of tech vacancies is only growing.

In Western Europe the situation is similar. Recovering from the pandemic, the IT sector needs an injection of digital skills to push the tech sector forward. At the beginning of 2020, over 100K vacancies were posted in the UK. Another prominent case is Switzerland, a highly digitalized country where there are 4 vacancies per one IT professional.

Given that software developers are scant in the USA and Western Europe, putting a lid on such a rich source of qualified IT talent as Ukraine can have a significant impact on the tech industry in Europe and the USA.

A growing need for innovation

Tech skills shortage exacerbates another significant problem: The losses associated with the unrealized potential of technology. Many tech projects risk failing due to the lack of talent, taking a significant toll on the economies. For example, the UK can expect to lose £141.5 billion in GDP over the next decade if businesses fail to bring in the needed IT talent. The USA risks missing out on $162.25billion by 2030 due to the same issue.

In the global tech market, Ukraine has a good reputation for software skills needed for developing and implementing innovative solutions, including the support of the digital transformation movement. Working with international teams for years, developers in Ukraine absorbed lots of expertise across many verticals, including Automotive, FinTech, Healthcare, Telecom, and more. There’s no doubt that having constant access to a supply of Ukrainian developers is vital for implementing innovations in both Western Europe and the USA.

Geopolitical risks

As the tech industry in Europe and the USA continues to rely on Ukrainian IT talent, businesses cannot ignore the geopolitical risks imposed by the Russian-Ukrainian war. If companies start to pull out contracts from Ukraine en masse, this will have a far-reaching effect on Ukraine’s IT sector, which is heavily reliant on foreign investments. It may lead to such devastating consequences as the full extinction of Ukrainian IT. Still, the tech industry in Europe keeps supporting Ukraine, as we can see the downsizing is minimal and companies still get new contracts in spite of the war. We can even go as far as saying that businesses across Western Europe and the USA have grown to rely on the support of Ukraine’s tech talent so much that it outweighs the risks associated with the war.

Talent relocation

We are currently witnessing the migration of Ukrainian IT talent to other European countries. According to a recent survey, all large providers of IT talent companies (1200+ employees) have plans to launch offices abroad, whereas more than 60% of mid-size (200-1200 employees) and 25% of small companies (up to 200 employees) plan to relocate abroad aiming to preserve their operations and keep their employees safe. The most popular relocation zones are Eastern and Central Europe, including Poland, Romania, Bulgaria, Croatia, Spain, and the UK.

When joining the tech industry in Europe, Ukrainian software developers will be looking for job opportunities outside their home country, for example, in Poland, Germany, Spain, Romania, Bulgaria, Turkey, and other parts of the world. In March 2022 alone, 15% of IT specialists left Ukraine. This is a chance for Western businesses to work with Ukrainian developers located in Central and Western Europe.

Takeaways: Overcoming the global software development crisis

The global tech market is suffering from a severe shortage of local IT professionals. Shutting down Ukraine as a rich source of tech talent due to the war can make it even harder to backfill IT vacancies in Western Europe and the USA. However, in spite of the war, Ukraine continues to play a major role in replenishing the tech industry of Europe and the USA with fresh talent. In the near future, we are likely to see how deep the impacts of the war have been on global software development.

How can you help minimize the impacts of war on Ukraine’s IT sector? Thanks to continued support from Western businesses, Ukrainian developers, though caught up in the war, are contributing to the global software development projects. If you want to help Ukraine win on the economic front, do not discontinue your ongoing partnerships and even launch new teams if you have such a need. This will help the Ukrainian IT sector continue its operation and contribute to Ukraine’s economy, whereas you will have an ever-green source of skilled software developers. Contact us for more information on how to build your own tech team in Europe.

MARYNA DEMCHENKO