Impact of war in Ukraine on the global talent market

In the early hours of February 24, the democratic and sovereign country of Ukraine was shaken awake by missile strikes as Russia initiated a full-scale invasion of the country. Thousands of Ukrainians experienced unspeakable horror as Russian troops advanced through Ukrainian cities. Despite it all, Ukraine’s IT sector is still going strong, generating $2 billion in exports during the first quarter of 2022, which is 28% more than the same period in 2021, according to the National Bank of Ukraine. What’s more, about 98.5% of IT companies in Ukraine reported continuing operations, while 7.8% of respondents noted that business activity had even increased, according to Lviv IT Cluster.

However the Russian invasion of Ukraine did result in some major changes to the country’s tech talent market. Prior to February 24, Ukraine was ranked fifth out of the top 25 global tech talent exporters, with more than 285,000 people working in the Information Technology Industry. Many Ukrainian tech experts, primarily men, went to the frontlines, while others had to flee cities facing the brunt of Russian missile strikes or even occupation. Although many work even in these brutal conditions, the global tech talent gap is only growing.

• According to the IT Association of Ukraine, the Ukrainian tech talent market has grown to include approximately 285,000 specialists since the start of 2022.
• The Ukrainian IT sector generated $2 billion in exports during the first quarter of 2022, which is 28% more than the same period in 2021, according to the National Bank of Ukraine.
• Home to a number of engineering centers for major companies like Google, Samsung and Boeing, Ukraine’s IT exports reached $6.8 billion as of 2021, one third more than the previous year.
• One in five Fortune 500 companies use Ukrainian IT services; among them are Microsoft, Google, Samsung, Oracle, Snap and Ring.
• At the beginning of February, a survey conducted by the IT Association of Ukraine found that companies thought the risks of armed escalation were “low to medium,” but 92% had drafted an emergency plan in case of a possible invasion. Many companies have since helped their employees relocate to other countries, or to safer cities in the west of Ukraine, such as Lviv.
• Many international companies are providing extensive support to those forced to flee the war in Ukraine. India’s largest technology companies like Tata Consultancy Services, Infosys and HCL technologies, as well as gaming startups and SaaS firms employ Ukrainian engineers who moved to neighboring countries like Poland and Hungary.
• The country’s small but growing number of tech unicorns includes widely-used platforms like Gitlab and Grammarly.
• Just over half of all Ukrainian companies are currently operating, according to a survey conducted by the European Business Association in Ukraine.
• As a whole, Ukraine’s economy needs substantial financial support packages to keep operating, and the government has requested emergency financing of $1.4 billion from the International Monetary Fund.

Before the Russian invasion Ukraine had long been a leading outsourcing destination. Companies from Western Europe, North America, Asia and Israel hired Ukrainian tech talent for a multitude of reasons, including their expert knowledge in rare tech stacks, ease of cooperation, affordable prices, great English proficiency and strong technical education.

Ukraine’s IT industry ranks first globally by the number of Unity3D game developers and C++ engineers, and second when it comes to JavaScript, Scala, and Magento developers. In Ukraine, the software outsourcing industry claims the third spot for the number of Node.js, Python, ASP.NET, Ruby, Symfony, and PHP developers. The number of developers is 46%, while QA testers count for 16%, and project managers  5%. The most popular positions among women are HR managers, QA testers, and software engineers; for students, the most common roles are junior software engineers and junior QA testers, according to Dou.ua. As of 2020, the amount of IT companies in Ukraine has grown significantly — from 28% to 35%. The number of outsourcing companies is 45%.

Nearly 141,000 Ukrainian IT specialists work in IT services companies, while others are employed by product companies, local startups, and foreign R&D centers. Only 2% of Ukrainian engineers provide services to domestic customers, while others are involved in outsourcing projects and services. This means that the global economy is likely to take a major blow as a result of any major service disruptions in Ukraine. Some Ukrainian IT workers went to the frontlines to defend their home country, and others had to flee cities facing the brunt of Russian missile strikes or even occupation. It goes without saying that for many Ukrainians working in the IT industry, staying productive these days can sometimes be challenging. Kharkiv, Ukraine’s second largest city, as well as Kyiv, the capital of Ukraine, have been under attack for weeks, with government facilities, residential buildings and public areas aflame or reduced to rubble, despite Russia’s claims to only be targeting military infrastructure.

These days, many people are returning to Kyiv, since the Ukrainian Army successfully managed to repel Russian troops from the region. Ukrainians are eager to resume a normal routine in their day-to-day lives, but air raid sirens still occasionally sound throughout Kyiv, and the sad truth is that for as long as the war continues, no city in Ukraine is completely safe from Russian aggression.

For 56% of businesses that choose to outsource tech services from Ukraine, the volume of orders remains unchanged. Another 13% are in the process of reviewing the scope of their orders, and 31% of potential customers note that they have chosen to go with development centers in other countries instead.

The global tech market was already experiencing an acute talent shortage, but now it is expected to get even worse due to Russia’s war in Ukraine. This shortage is predicted to have consisted of 85 million people with a loss of $8.5 trillion in possible revenue. According to Peter Bendor-Samuel, Founder and CEO of Everest Group, the extra stress put on the global tech market by Russia’s invasion of Ukraine will ease over nine months, but it’s hard to make any certain predictions due to the uncertainty this war has introduced into day-to-day life However, one thing is certain — replacing Ukrainian tech talent, which is vital to so many global companies, is no easy task. The global market can expect a skyrocketing cost increase regarding talent costs and the production of technology.

The global tech market and Ukraine’s IT sector are quite dependent on each other. The demand for IT professionals is only increasing, and many of the 500,000 to 800,000 tech vacancies in the United States are distributed around the world have been filled by Ukrainians.

So what can be done going forward? Well, there are few things companies can do to help Ukraine minimize the horrific effects of the war. Outsourcing companies from all over the world should be understanding of potential service delays, and appreciate the quality of work they continue to receive from Ukrainian developers. Continued support is a great motivating factor for Ukrainians as they continue to persevere against Russian aggression.

If your company has been working with businesses that have Ukrainian employees, do your best to maintain and develop those partnerships. Supporting them with your business not only helps keep morale high, but it also provides a critical influx of capital into the country during these difficult times.

If your start-up needs talented tech experts to help, opt for Ukrainian developers and engineers. Although it’s hard to predict what will happen next with the Russian invasion, one thing is certain – Ukrainians have a robust work ethic and many Ukrainian companies operating internationally want to continue their contributions to the global tech market.

The consequences of Russia’s war in Ukraine can already be felt by more than just the global tech industry. The International Monetary Fund predicts a further decline in global economic growth in 2022 and 2023, specifically due to Russia’s war in Ukraine. The possible recession will affect 143 countries, which account for 86 percent of the world’s gross domestic product (GDP), said IMF chief Kristalina Georgieva.

According to the US Energy Information Administration, Europe is one of the key destinations for Russia’s energy exports. Almost 25% of all energy comes from natural gas, meaning that stopping projects like the Nord Stream 2 Pipeline will be a tough task. Russia has threatened stopping the flow of gas to Europe, so the region’s economy will have to adapt.

But what’s going on with the Russian talent market? The country’s tech talent are primarily leaving for Turkey, the United Arab Emirates, Armenia, Georgia, and the Baltics. According to a New York Times article, the Armenian government estimates that more than 80,000 professionals entered the country in March alone, while between 20,000 and 25,000 have entered Georgia.

Many companies, including Meta’s Facebook, Microsoft, Intel and Netflix, have either completely pulled out or limited their operations in Russia. These business shifts, along with harsh economic sanctions and further isolation of the Russian market have prompted young and educated tech professionals to flee the country in search of other places to live and work.

Grid Dynamics proactively supports all of its Ukrainian employees. Since the beginning of the Russian invasion, the company has taken a number of measures to help its colleagues from the Eastern regions move to safer places. Among other things, Grid Dynamics has:

• organized dozens of evacuation buses from Kharkiv, Kyiv and Dnipro;
• evacuated more than 70% of its employees;
• developed a bot for employees to easily provide updates on their location status;
• facilitated colleagues from Moldova and Poland to accompany women and children coming from Ukraine;
• organized a refugee camp in the Lviv office;
• provided paid accommodations for its employees (prioritizing families with children);
• and closed its operations in Russia.

Russia’s war against Ukraine has spared no industry. The Ukrainian IT sector, no matter how strong it is, has suffered from pervasive project closures, cancellations,  the absence of orders, and the loss of customers and funding. Still, many customers continue to support their Ukrainian service vendors. Ukraine’s capital, Kyiv, is a major administrative, cultural, and scientific hub,  and normal life is slowly returning to the city. Kharkiv, Ukraine’s second largest city and another major IT hub, is gradually moving back towards full operations, although a greater threat of shelling still persists there.

A lot of Ukrainians who fled the country want to return home. The border crossing authorities report a significant number of Ukrainians returning as the war continues on. Most experts, as well as the ordinary citizens, are helping Ukraine as best as they can. More than 80% of surveyed professionals have already resumed working full time, according to DOU. While the Armed Forces of Ukraine are fearlessly protecting the country and its people from Russian invaders, Ukrainian IT engineers are working hard to provide customers around the world with timely, quality services.

Grid Dynamics has left the Russian market and closed its offices in Saratov and St. Petersburg. The exit plan was put into motion immediately after the full-scale Russian invasion of Ukraine in late February.

We are opening new offices in Timisoara, Romania, along with the Swiss city of Zug, and the Armenian capital Yerevan. Our presence in Switzerland will allow the company to gain access to the DACH region, facilitating further opportunities in Western Europe.

The Yerevan office now has more than a hundred engineers, but plans to grow several times over by the end of 2022.

There has never been a better time to invest in Ukraine than now!