How the human factor is boosting Ukraine’s promising IT export sector
Ukraine’s export IT segment showed an increase of 15 per cent in 2016, and continued to occupy the third place, by volume of total country exports, after agriculture and metallurgy. While we are speaking about the rates of growth, there are very solid grounds to expect that this positive tendency will be maintained and will grow to an optimistic 20 per cent in 2017.
As for today, an efficient IT ecosystem has been already been created in Ukraine and the exporting IT companies are operating on a global market, which continues to grow, so interest in our IT products and services will also increase in the future.
This success is stimulated by a disciplined performance formula, which is especially appreciated by customers: the best product (high quality and innovative) at a lower price.
One of American news periodicals characterised Ukraine as “a country of talents” in its publication about the convenience of choice for contractors among Ukrainian IT companies. This is an excellent and ample definition. In particular the human capital: qualified IT professionals who can conduct creative activities and create innovation, is moving forward towards a new country economy.
For these reasons, IT education has been actively developed in the country: educational programs at IT companies and market leaders, private lessons and schools are being opened; the state order for IT professionals and students admission for the IT areas both have been increased. All these with the object of promoting the demand in the labour market and increasing the concentration of human capital in Ukraine.
The second important factor is lower prices. Most IT professionals in our country are in commercial relationships with companies (contractual work), using a model of simplified taxation at the rate of five per cent. In other words, under these tax conditions, Ukrainian professionals services are cheaper in comparison with the same experts from the US or Europe, but more expensive when compared to India and China.
Within the context of future prospects for the export sector, the results of last year’s study by PwC, which was initiated by the IT Committee of the European Business Association of Ukraine, should be taken into account. They clearly layout all the possible development scenarios for the IT industry until 2020 including changes in the tax burden and the operating (business) environment. The presentation included three scenarios: optimistic, realistic and pessimistic.
The industry is ready for any scenario, but the perfect one would be a winning option for both sides — a win-win strategy for the IT business and the state. In order to implement it, a long-term projected growth for the state IT market has been already prepared and an optimal taxation model has been elaborated, in order to achieve the best results for private entrepreneurs from the IT industry. A strategy of development for high-tech industries’ has been formed at the country level, where the IT industry is in favour of a development activator.
The export-oriented segment of the IT services’ market grew two and a half times over the past five years (according to PwC research). In other words, the carried out by IT companies through the previously described actions. The stability of new orders, from foreign companies, has been demonstrated in recent years, which has also provided quantitative and qualitative growth in the segment.
On the other hand, Ukrainian IT companies are ready for new projects. Top service’s IT companies which actively develop education and foster the development of human capital are showing excellent results. For example, they are applying the principles of mentoring and teamwork so that promising newcomers can develop confidence and can grow while working on projects.
Undoubtedly, the dynamics of the IT industry, including the export segment, is influenced by internal (tax rate, business transparency, development of IT-education, etc.) and external (political, legislative) factors. In this context, one positive fact is an open recognition of the importance and value of export IT segment, at the state level in Ukraine, by the president.
Currently there is more stability in the IT industry than there was one-two years ago and there is reason to believe that the on-going dialogue with the government will result in the implementation of positive legislative changes. For example, this could be in the protection of intellectual property rights and private capital. The export-oriented IT services market segment not only provides the potential for development, but it also acts as the driver of the domestic economy.
Vladimir Beck has been Chairman of the European Business Association IT Committee since its inception and is the founder and a board member of Sigma Software, an IT consulting company which is a member of the Scandinavian Sigma group of companies. Sigma Software unites over 700 specialists in Ukraine, Poland, and the USA. Vladimir has more than 25 years of experience in software development. He started his engineering career by participating in development of control systems for nuclear power plants and information systems for the airline industry and telecom sector. Later Vladimir took on executive roles as CTO and CEO. He has a degree in technical sciences in the field of Project Management.
This story first appeared in Emerging Europe.
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