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Just a few months ago, analysts predicted a 25% to 30% growth for Ukraine's IT industry in 2020. But now this projection is in question as, amidst the coronavirus (COVID-19) pandemic and a global economic downturn caused by it, IT firms will have to focus on retaining their crews and customers who can still afford their services.
Ukraine's IT sector accounts for 20% of all service exports and is the third top export industry. In 2019, Ukrainian IT exports amounted to $4.2bn. But repeating that performance this year is impossible.
The biggest impact of the lockdown restrictions introduced in Ukraine in mid-March was that most IT firms switched to working remotely.
Konstantin Vasyuk, executive director of IT Ukraine, an association uniting over 50 companies that are responsible for roughly one half of the Ukrainian IT sector's revenue, told Ekonomichna Pravda that all personnel of the association's member companies were working remotely, except for employees in charge of maintaining the tech infrastructure.
ЕPAM Ukraine currently has 98% of employees working remotely, while another local major IT firm, SoftServe, has only 200 people in the office out of its total staff of 7,000.
"We continue to provide services to our customers and we have beefed up our communications as openness and proper communications are vital at a time when everyone is isolated from each other," Yuri Antonyuk, head of EPAM in Central and Eastern Europe, was quoted as saying by nv.ua.
Business as usual (for now)
Industry insiders say they don't expect any short-term layoff or pay cuts, despite the wide-ranging coronavirus pandemic, Ekonomichna Pravda reported.
"I can assure you that the remote work mode and flexibility of operation processes have always been typical for the IT sector," Antonyuk said. "An IT specialist works equally effectively remotely and in the office. This means that our customers will feel no difference in our operation processes."
"We are constantly monitoring the market situation," added Yaroslav Lyubinets, chairman of the board of SoftServe. "So far, we haven't felt a decline in orders, but some customers are delaying [the] launch of their projects."
According to Lyubinets, the head-hunting process at the company hasn't stopped.
"A range of specialisations in the contemporary IT industry is broad, and a search for talent will be always needed," he explains. "However, now vacancies will be mostly filled internally or by optimisation of teams."
Optimisation in progress
Still, the global economic downturn is likely to take its toll on Ukraine's IT industry in the longer term, and companies are already beginning to find ways to cut their expenses.
"We haven't yet felt ramifications of the pandemic," Vasyuk says. "Most likely, it will happen over the next two to three months. But companies are already revising and optimising their operations costs, focusing on strategically important goals."
"We could estimate scenarios of the crisis' impact on Ukraine's IT industry in a few weeks' time," adds Lyubinets."The impact could be significant."
EPAM is already working on cost optimisation, such as negotiating discounts on rent, as some of the company's offices are currently not used at all.
Another Ukrainian tech major, Ciklum, is also looking at ways to save on overheads amidst the lockdown regime.
"Our teams are re-distributing members between projects," the company's spokesman told nv.ua.
While most companies are unwilling to say if they have cut employees' wages or plan to do that in the short term, they hint at possible cuts, as the volume of orders they receive is likely to decline against the backdrop of a global economic downturn.
As the global economy is projected to shrink as a result of the coronavirus pandemic, Ukraine's IT companies are likely to face a decline in demand for their products and services, which, in turn, makes the segment's prospects uncertain.
"The IT business could successfully cash in under three main scenarios, which are the development of new projects, maintenance of existing systems and resolving short-term urgent issues for their customers," IT entrepreneur Alexander Kardakov was quoted as saying by nv.ua, adding that many investment projects are being put on hold, which is anticipated to have a negative impact on the IT industry.
The lockdown measures have also hit IT companies' component supply chains, and many are having trouble obtaining imported components for hardware.
A massive switch to remote work may at first sight look like a major opportunity for IT firms, but potential customers are often too cash-strapped to invest in remote-work solutions.
"True, the [Ukrainian] IT industry is facing fewer problems than other service industries, like tourism or restaurant business," Kardakov concluded. "But we have to understand that, by the end of the year, problems will imminently arise. The majority of investment projects linked to business development and automatisation have been put on hold already."
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