Ukraine’s booming IT sector is good news despite the war

A plain Soviet-era office block squats on a residential street in the beautiful historic city of Lviv, Ukraine. The lobby is dimly lit and there is no seating, only a stern guard who points to the elevator to access local software engineering firm N-iX.

The doors part and the offices are an orange and white oasis, with lofty ceilings and light and young people working at clusters of desks.

This is Ukraine, a country of stark contrasts. Old Ukraine is stuck with antiquated businesses, methods, and corrupted leaders. New Ukraine is sunny, prosperous, and talented despite war in the east and scandals galore.

N-iX, for instance, employs 200 talented and world-class software developers who are working on projects around the world in offices in Lviv, Stockholm, and Sofia. I met its CEO and founder, Andrew Pavliv, in Silicon Valley two years ago and visited his operation in 2015.

“We are very proud of our company and our projects,” he said.

And he should be. He and the rest of the IT sector in Ukraine have become Europe’s largest software development industry. There are 100,000 Microsoft certified software professionals in the country and aggressive plans to double this number by 2020.

N-iX is rooted in Lviv but its market is global. Its cool offices could be in San Francisco or New York City and its workforce is just as brilliant. Walls are decorated with irreverent cartoon figures, funny quotations, and many flags representing their multinational clients.

There is also a large attractive kitchen and eating area, a gym, and recreation area with foosball and other games to provide a gathering place and break from intensive projects in multiple time zones.

During a tour of the premises, N-iX spokesman Halyna Dumych said that “Ukraine is now fourth in the world in the number of IT professionals after the United States, India, and Russia.”

Sanctions have cost Russia IT business and many have opted for Ukraine instead. In other words, Ukraine is winning the IT “war.”

Three recent and significant deals have turned the tech world’s attention toward Ukraine. In September, Snapchat paid $150 million to buy a two-year-old Ukrainian startup in Odesa called Looksery. The previous record was $45 million paid by a Google mobile division for Viewdle.

In November, financier George Soros made a big bet when his Ukrainian Redevelopment Fund acquired a stake in Ciklum Holding Limited in Kyiv, a successful IT firm with 2,500 professionals. “It is a very dynamic company in an industry that represents the future of Ukraine,” said Soros.

Analysts estimate that there are more than 2,000 startups in the country’s major cities. And some have already made their mark. Ukrainians are behind global success stories such as Grammarly, an online writing enhancement software, and Paymentwall, an online platform dedicated to selling digital goods and services.

Both those companies, like 100 other multinationals, have huge research and development operations in Ukraine such as Siemens, Samsung, Oracle, Cisco, SoftServe, Procter & Gamble, and Bioclinica.

Ukraine’s IT sector is proactive and is determined to transform the country from the world’s bread basket to the world’s “brain basket,” says Yevgen Sysoyev, managing partner of AVentures Capital in Kyiv.

In February, he published “IT Ukraine” that listed the sector’s growing achievements and impressive client base. To reach its goal of 100,000 more IT professionals with proficiency in English by 2020, the sector is signing on universities, local governments, and companies.

For instance, the Lviv IT Cluster, an organization run by Stepan Veselovskyi, has linked three universities, the city council, and thirty-four companies to build incubator facilities, host a large conference annually, and develop IT House, the first of several seventy-two-unit condo buildings on low-cost city land to help IT professionals relocate from war-torn areas or smaller centers. The first building sold out immediately last year.

There is a distinctive Ukraine advantage: A pool of talent well-versed in math and sciences, a desire to get ahead, and a competitive advantage for export of services because salaries are 40 percent to 50 percent lower than in the West. To boot, these companies are paid in foreign currency.

Young people are flocking to the industry because an IT software developer is the “highest paid job in Ukraine,” said Dumych. For instance, she said a railway engineer in Britain makes 1.5 times more than an IT software developer there, but in Ukraine a software developer makes 15 to 20 times more than a railway engineer.

Kyiv and Lviv are the main centers of activity but a robust tech sector exists in most of the country’s cities. But Lviv is growing quickly because of its location, furthest from the violence in the east, as well as just three hours flight from Vienna or Warsaw.

“The headlines look bad, but this is an exciting time for entrepreneurs,” said Lenna Koszarny, CEO of private equity firm Horizon Capital in Kyiv with hundreds of millions invested in the country in many sectors. “We are bullish about Ukraine.”

First published Atlantic Council website Feb. 26, 2016

About author:

Diane M. FrancisSenior Fellow Atlantic Council Eurasia Section, Adjunct Faculty Singularity University in Mountain Vie the National Post in Canada, Professor at Ryerson University, author of 10 books

Source: huffingtonpost.com

UVCA: aggregate estimate of Ukrainian product IT companies exceeds $2.5 bln

DAVOS. Jan 26 (Interfax-Ukraine) – The sector of Ukrainian product IT companies thanks to a rapid growth in recent years in terms of cost became comparable with the sector of outsourcing IT companies and has a significant potential of growth in the light of experience accumulated, the formation of an appropriate business environment and a high interest of venture investors, head of the supervisory board of the Ukrainian Venture Capital and Private Equity Association (UVCA) Andriy Kolodiuk considers.

“There appear more and more product companies. My total evaluation of product companies exceeds $2.5 billion: one deal with Looksery is $150 million, but we also have a full list of 3,000 start ups and companies in Ukraine. Therefore I am confident that the aggregate value of them has already exceeded $2.5 billion,” he said in an interview with Interfax-Ukraine on the sidelines of the Ukrainian lunch organized by the Pinchuk Foundation in Davos.

Kolodiuk, being also a venture investor, founder and managing partner of AVentures Capital, noted that venture investors invest only in product companies and do not invest in outsourcing.

“Large funds such as (George) Soros Fund, Horizon Capital invest in outsourcing – this is another story. And we invest in product companies because this is the exit [the possibility of selling to the very high profitability], on which this business is built,” he said.

According to him, among the projects available in the portfolio of AVentures, for example, Petcube will cost at least $600 million, and this success encourages other investors to invest.

Ukrainian IT industry employs 100,000 people

The Ukrainian IT industry now employs 99,940 people — up from 89,300 last year — according to the latest report of DOU.UA, an authoritative industry resource. The figure includes programmers, QA specialists, project managers and other IT-related professionals.

Almost half of these professionals live in Kyiv (Kiev). Others are inhabitants of such other major Ukrainian cities as Kharkiv (Kharkov), Lviv (Lvov), Dnipro (previoulsy known as Dnipropetrovsk), and Odessa.

With its Ukrainian offices in Kyiv, Dnipro, Lviv, Kharkiv and Vinnytsia, US-headquartered EPAM is the biggest employer in the industry. Among other industry leaders are such companies as SoftServe, Luxoft, GlobalLogic and Ciklum, if judging by the number of employees, says the report.

With monthly salaries reaching or exceeding $3,000 for certain specialties, remunerations in the Ukrainian IT sector are high or very high by local standards.

Women are becoming more interested in the field. This year the share of female specialists now reaches 15%, up two percentage points from last year.

Ukrainians have shown growing hunger for IT education, according to the study. In 2015, almost 30,000 Ukrainians attended IT courses.

Among the organizations supporting the educational effort is the BrainBasket Foundation, a Ukrainian NGO. Earlier this year George Soros offered his personal support to BrainBasket’s Technology Nation program through the International Renaissance Foundation.

Ukraine’s IT work force could double to some 200,000 by 2020, according to a recent report on the Ukrainian IT outsourcing and software devemopment by Ukraine Digital News and AVentures Capital.

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