Ukraine’s IT industry continues to function as war rages – EURACTIV.com

Ukraine’s IT industry is currently operating at around 80% capacity compared to pre-war levels, but it is uncertain whether this trend will continue and what the consequences will be both locally and for the Europe. EURACTIV Germany Reports.

The war in Ukraine has had a devastating impact on the local economy and global supply chains. While Europe’s automotive industry, for example, is already struggling with supply bottlenecks, Ukraine’s IT sector, which accounts for around 4% of the country’s economic output, has been very robust so far. .

“Despite the current difficult situation, our industries are doing well,” Konstantin Vasyuk, executive director of the Association of Ukrainian IT Industries, told EURACTIV.

“We have data that IT companies are currently operating at around 80% of their pre-war levels,” Vasyuk added.

Ukraine’s IT sector has been one of the fastest growing IT sectors in Europe in recent years. It had an annual growth rate of between 25% and 30% and around 300,000 employees.

There are several reasons why the country’s IT sector has been able to hold its own since the war broke out.

“We have been in a state of war since 2014, which is why our businesses took precautions before war broke out so that operations could continue relatively undisturbed,” Vasyuk said.

Since Ukraine’s IT sector is primarily based on service exports, it is also much less location-bound than other sectors, which means companies rely on flexible work models like telecommuting. This also means that work processes can be relocated abroad at short notice.

“Many Ukrainian IT companies are located in several countries and, supported by the fairly high mobility of IT experts, can therefore react flexibly to such scenarios, at least in the medium term,” explained Garry Polushkin from the German Economic consultancy. Team. .

Uncertain future

How long and whether the country’s IT sector can continue operations remains unclear.

“The development and extent of economic disruption depends very crucially on the intensity and duration of the Russian attack,” Polushkin told EURACTIV.

But if hostilities continue, investments could be lost and contracts could be cancelled.

Ukraine’s IT sector employs nearly 45% of its workforce through “outsourcing companies,” which act at least in part as outsourced IT services for international companies.

If the Ukrainian IT sector were to collapse, this could also have an impact on European companies. The outsourcing company Krusche & Company, for example, warned as war approaches, the obstruction of Ukraine’s IT services could digitally cripple the West.

However, the importance of outsourced IT services to international supply chains cannot be compared to that of suppliers of goods in other sectors, such as the automotive industry.

“Interruptions in the workflow of IT companies would rather lead to extensions of development cycles, not production interruptions,” Polushkin said.

High liquidity

So far, however, Ukrainian companies still seem to have a relatively high level of liquidity, as evidenced by the aid donations they have made so far.

IT companies actively support the efforts of the Ukrainian government to fight against the Russian invasion. According to a survey by the Association of Ukrainian IT Companies, the companies donated around 25 million euros to humanitarian aid and the Ukrainian army.

According to Vasyuk, this is partly due to the fact that customers of Ukrainian IT companies have not yet withdrawn from their existing contracts despite the ongoing war.

However, this could change if the war escalates.

“We survived the first test. Now it is important that our customers continue to support us and maintain the contracts,” Vasyuk stressed. “We are capable and absolutely ready to provide services at the highest level even under these conditions,” he added.

Cecilia Bonefeld-Dahl, Managing Director of the European digital association DIGITALEUROPE, also launched a plea in favor of the European digital economy.

“In addition to humanitarian aid and technical equipment needed for communication, the business community can help by maintaining and renewing contracts with Ukrainian tech companies,” she told EURACTIV.

[Edited by Alice Taylor]

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