The Ukrainian IT sector is in a state of crisis. The economic and political uncertainty that began in February 2022 has seriously affected the industry, which was considered one of the most promising areas for employment just a few years ago. Currently, there is a decrease in the export of IT services, a reduction in the number of vacancies and a slowdown in innovative development.
At the same time, the crisis did not equally affect all segments of the industry. Product companies creating their own technology solutions have demonstrated greater resilience compared to service companies. For the first time in history, it was food companies that led the ranking in terms of the number of employees, but even in this segment, a wave of layoffs was recorded at the end of 2024.
The labor market is undergoing transformations. About 20% of Ukrainian specialists now work abroad, which is partly explained by the relocation of offices to European countries, in particular to Poland. Although the pace of job losses has slowed, the overall situation remains tense.
All hope for startups are young companies that create and develop innovative products or services, usually with great potential for rapid growth. They work in conditions of uncertainty, looking for an efficient business model, and often use modern technologies.
The IT industry is supported by defense orders
Currently, Ukrainian startups are gaining momentum and improving their positions in world rankings, which indicates the presence of significant innovation potential. In addition, the new defense sector, in which about a hundred startups are already active, can become an important driver of the industry’s development in the coming years.
However, here too there are some caveats, because the connection between the development of the IT industry and the defense sector is obvious. While the active phase of the war continues, the Ukrainian defense sector stimulates the creation of technological solutions that meet specific military and security tasks. It is about the development of drones, cyber defense systems, software for data analysis, logistics management, etc.
After the end of active hostilities, the demand for military developments is likely to decrease. Direct orders from the state or international partners will decrease, which may lead to a loss of part of the income and a decrease in the funding of defense projects.
The Ukrainian IT industry is experiencing a second year of declining export volumes. In 2023, this indicator showed negative dynamics for the first time, decreasing by 8.5% and amounting to 6.7 billion dollars. In 2024, the downward trend continued as the sector continued to face challenges caused by wartime realities.
The first two quarters of 2024 turned out to be even worse than the same period of the previous year. The total volume of exports of services during this time amounted to $3.21 billion, which is $170 million less than in 2023 and 14.3% (or $535 million) less than in 2022.
The third quarter of 2024 became the most difficult in the entire time of full-scale war. Exports of services continued to decline, reflecting the deepening economic crisis. According to forecasts, the annual export volume of IT services will decrease by another 4% under the optimistic scenario or by 6% under the pessimistic one, reaching 6.3–6.45 billion dollars.
Infographic: IA “FACT”
Why is the industry declining?
Due to economic uncertainty – companies limit investments, reacting to the unstable situation in the country. There is a sign of personnel migration: some Ukrainian IT specialists have gone abroad, which has reduced the availability of qualified labor. Orders are down: International clients are choosing more stable regions to outsource to because of the risks associated with war.
Why do we focus on export indicators? When it comes to exporting IT services, this is important because the major share of the IT sector’s revenue comes from international markets.
The majority of Ukrainian IT companies are oriented towards foreign customers, in particular from the USA, EU, Canada and other countries. Exports generate a significant part of foreign exchange earnings for Ukraine, which is important for maintaining the economy, especially in wartime conditions. At the same time, the demand for IT services in Ukraine is limited by the size of the domestic market. As a result of the war, many Ukrainian companies cut their IT budgets, and some enterprises stopped operating altogether. Therefore, Ukrainian IT companies are forced to focus on exports, where demand is more stable and solvent. The export market is also an indicator of global competitiveness. The volume of export of IT services shows the extent to which Ukrainian companies can compete with service providers from other countries. A drop in exports often signals a decline in global confidence, a loss of customers and a shift in global demand. In the conditions of war, Ukrainian companies are trying to retain customers abroad, which is difficult due to the risks associated with military operations. However, it is exports that allow the IT sector to remain one of the largest sources of foreign exchange earnings.
From 2022 to 2024, the global technology sector will face a slowdown in growth, dubbed the tech recession. This trend affected not only large corporations, but also outsourcing markets and startups, including the Ukrainian IT sector.
Technological recession
Analyzing the reasons for the stagnation of the IT sector for Ukraine, the publication “Economic Truth” calls war and technological recession. If the first reason determines the state of the Ukrainian IT market, the second explains the global trend of decline.
The fact is that in 2022-2024, the technology sector in the world faced a slowdown in growth, which was called a recession in technology. This trend affected not only large corporations, but also outsourcing markets and startups, including the Ukrainian IT sector. What happened?
In 2020-2021, the COVID-19 pandemic led to a significant increase in demand for technological solutions (remote work, online commerce, cloud services). Companies have massively invested in development and IT infrastructure. In 2022-2023, this demand will, for obvious reasons, decrease, as the market becomes saturated and some customers reduce spending after the end of the “Covid boom”. Rising financing costs have forced companies to review budgets and cut back on IT investments. Share prices of many technology giants (Meta, Amazon, Alphabet) have fallen significantly, forcing companies to change their development strategies and focus on cost reduction.
Investments in start-ups also decreased significantly. Venture capital has become less available due to risks in the global economy. Startups are now forced to work in conditions of lack of funding. Ukrainian startups felt this impact due to the decrease in the number of international investments. Many companies have invested in process automation, reducing the need for human resources. This led to a decrease in the number of vacancies in the industry. Companies like Google, Amazon, Meta, Microsoft and others have announced massive layoffs in 2022-2023. For example, Amazon alone laid off more than 27,000 workers in 2023. This created a wave of instability in the IT job market.
AI reduces the need for a number of IT professionals
The omnipresent AI contributed to the tech recession, too.
AI systems such as ChatGPT, DALL-E and others have significantly reduced the time and resources required to perform typical tasks. This has reduced the need for some types of IT professionals. Large companies have started to use ready-made platforms with built-in AI tools (for example, AWS, Google Cloud, Microsoft Azure), reducing the order for the development of custom solutions from external contractors. Thanks to AI, companies have achieved greater efficiency in working with smaller teams. It also led to layoffs at major technology corporations and a reduction in outsourcing contracts.
According to the results of the study IT Research Ukraine 2024, conducted Lviv IT Cluster, 51% of heads of Ukrainian IT companies plan to expand their offices. More than a third of them intend to open offices abroad, with Poland being the most popular choice for this purpose. At the same time, 6% of managers announced plans to close their offices in Ukraine.
Such intentions indicate attempts to adapt Ukrainian IT companies to new conditions, search for stable markets and opportunities for business development outside of Ukraine. Poland, with its geographical proximity and favorable business environment, has become an attractive destination for business expansion.
Who are they, Ukrainian e-tishniks?
Ukraine boasts a significant number of highly qualified technical specialists: more than 43% of them have more than six years of IT experience, and 9% have more than 15 years of experience. In addition, more than 82% of representatives of the technical field have a qualification level of Middle, Senior or Lead. About half of the people employed in the IT sector have obtained or continue to obtain education in technical specialties related to computer science.
It is interesting that every year the number of graduates of non-technical specialties who start working in the IT industry is increasing. If in 2023 their share was 35.6%, then in 2024 it reached 39.2%. This shows a trend towards a wider involvement of people from different fields, which confirms the versatility of the skills required to work in IT today. This development shows how quickly the sector itself is changing, where not only technical, but also interdisciplinary knowledge is important, which can be useful for solving complex problems.
These figures also demonstrate that the IT field is becoming more accessible to people with different academic backgrounds, which opens up new opportunities for technology development in Ukraine.
An important detail – the majority of IT professionals (91.3%) allocate part of their income to charity. At the same time, 5% of them donate more than a quarter of their monthly income. The average amount each IT professional gives to charity each month is $235.
Career above all else?
A few sociodemographic touches to the portrait.
Most IT specialists belong to the age category from 26 to 35 years. Recently, the average age of IT specialists has increased and is now 31.5 years. Interestingly, almost 68% of them do not have children, which may indicate that many IT people are focusing purely on their careers during this period of their lives.
Regarding the type of companies, the majority of Ukrainian IT specialists (44.2%) work in service companies, although their share decreased by 6.9% compared to last year. On the other hand, the number of specialists working in food companies and startups has increased – their share has increased by 4.2% and is now 36.4%. This trend may be related to the development of innovations and the growth of demand for technological solutions that are created directly in Ukraine, and not in outsourcing markets. Another 17.4% of specialists work in companies with a mixed business model, and only 2% chose other types of companies.
The IT market is oversaturated, which leads to dictates from employers. Due to the high level of competition, it is sometimes the case that companies or individual agencies try to gain financial benefit from the employment process, for example by demanding paid courses or training that supposedly guarantee employment.
Therefore, the threshold for entry into the profession increases, because beginners are forced to spend significant money on additional certifications to meet the requirements of employers. This can create barriers for those who do not have enough resources to invest in their studies, even if they have the potential and desire to develop. As a result, only those who are able to financially prepare for entering the profession enter the market, which does not always accurately reflect the real level of their knowledge and skills. This can cause additional difficulties for young professionals and create unequal conditions on the labor market.
