This marks the second consecutive year of reduced growth for the industry amidst ongoing challenges posed by the full-scale war.
Projected Decline in IT Service Exports
The study highlights that the export volume of IT services, which began to decrease in 2023, is expected to continue this downward trend in 2024. Under an optimistic scenario, exports are projected to fall by 4%, while a pessimistic scenario forecasts a 6% decline. The anticipated export figures place the IT sector as Ukraine's second-largest exporter after food products, contributing 38% to the total services exports.
“The decline in the volume of exports of IT services, which began in 2023, continues. Under the optimistic scenario, by the end of 2024 it will decrease by 4% compared to 2023. Under the pessimistic scenario, this figure will reach -6%. We should expect $6.3-6.4 billion. So, in 2024 the technology industry will not show growth for the second year in a row compared to last year,” stated IT Research Ukraine, conducted by the Lviv IT Cluster.
Composition of the Ukrainian IT Industry
The Ukrainian IT sector is comprised of 2,118 companies, with 50% categorized as service providers. Among these, 47% are involved in outsourcing and 3% in outstaffing. The remaining 31% are product companies, while the rest operate under a mixed business model.
Future Plans of IT Companies
A survey conducted by the study revealed that:
- 45.7% of IT company representatives do not plan to open new representative offices in the short term.
- 17.1% intend to open offices within Ukraine.
- 34.3% aim to establish offices abroad, with a majority favoring Poland.
- 6% of CEOs are considering closing their offices in Ukraine.
Workforce and Compensation Trends
The IT industry workforce in Ukraine is expected to decrease by 1.6% in 2024, totaling 302,000 specialists. Of these, 238,000 will remain based in Ukraine, while the number of Ukrainian specialists working abroad is projected to drop to 62-64,000 from 65,000 in 2023. The average age of Ukrainian IT professionals is 31.5 years, with a significant majority (68%) not having children.
Income and Living Costs
The median income for IT specialists in Ukraine is anticipated to decrease by 1.7% compared to 2023, settling at approximately $2,590. Concurrently, respondents noted a rise in expenses related to housing rental, food, and other basic needs, impacting their overall living standards.
Support and Contributions to Ukraine’s Defense
Despite the economic challenges, the IT sector remains a pivotal contributor to Ukraine’s foreign exchange earnings and defense efforts:
- 97% of IT companies are actively donating and implementing projects that support Ukraine’s victory.
- 67.6% have mobilized specialists to assist in defense operations.
- IT companies are committed to supporting their employees who serve in the Defense Forces of Ukraine, ensuring job security and providing financial compensation.
Challenges and Strategic Adjustments
The decline in IT exports can be attributed to several factors, including:
- Operational disruptions caused by the ongoing conflict.
- Economic instability and increased living costs impacting both businesses and employees.
- Reduced demand from international markets amid global economic uncertainties.
To mitigate these challenges, Ukrainian IT companies are exploring strategies such as:
- Diversifying client bases to reduce dependency on specific markets.
- Investing in training and development to enhance the skill sets of their workforce.
- Adopting advanced technologies to stay competitive in the global IT landscape.
Future Outlook
While the projected decline poses significant concerns, the resilience and adaptability of Ukraine’s IT sector offer a foundation for recovery and growth in the coming years. Continued support from international partners and strategic investments in technology and infrastructure will be crucial in navigating the sector through these turbulent times.
“Despite the challenges of a full-scale war, the technological industry in Ukraine remains one of the key ones and provides significant foreign exchange earnings,” the study notes, emphasizing the sector's enduring importance to the national economy.
Conclusion
The forecasted 4-6% decline in IT service exports for 2024 underscores the ongoing impact of the conflict on Ukraine’s most vital economic sectors. However, the IT sector’s significant role in foreign exchange earnings and support for national defense highlights its critical importance. Strategic efforts to stabilize and grow the industry, coupled with international support, will be essential in reversing the decline and fostering sustainable growth in the future.
