IT potential of Ukraine and investment: how much is needed and how much is possible

How much investment does Ukrainian IT require?

According to IT Ukraine Association's calculations, IT-service export grew from about $3 billion in 2016 up to $3.6 billion in 2017. The forecast of export growth for the current year is $4.5 billion, and by 2025, the industry predicts growth almost twice.

The key to the success of the Ukrainian IT-industry, as well as any other business, lies in skilled personnel, favorable conditions, good management and ability to dispose of resources. 

Historically, Ukraine has always been the center for software development, technology solutions for data analysis and processing. An important role here is played by the level of technical education that has been developing in our country for decades. Today, we have about 16 thousand graduates of technical specialties annually and take the leading position in the world in the number of certified IT professionals. And leading Ukrainian universities with business support launch educational programs on the most promising areas of information technology - Data and Computer Science, Artificial Intelligence, Internet of Things. 

Specialists employed in the field of information technology (excluding the staff of support centers, managers and representatives of other non-technical specialties), which are now about 116 thousand people - practically, it is the largest number of developers in Central and Eastern Europe. 

The demand for information technology services is growing worldwide. And here we can observe an ideal situation for the market when demand and supply are fully in line with each other. A high level of education, as already mentioned above, and the European mentality favorably distinguishes us from competitors. 

The internal conditions that have a positive impact on the development of IT in Ukraine include the non-interference in the sector by the state over many years. Good or bad, but simply technology and innovation powers did not cause any special interest industry nobody interfered, leaving it to develop on its own. Now, this situation is changing in a positive way - the positive signals from the first people of the government are getting bigger. 

An important factor of success for the industry is the fiscal policy - the presence of the "third group" for private entrepreneurs replaces the methods of stimulating the industry that have long existed in our neighbors. 

The main consumer of Ukrainian IT-services is the United States. This country accounts for about 70% of the industry's exports. The second-largest market for our industry is the EU. 7% falls to the UK and Germany, and another 7% to other European Union countries. A separate line can be distinguished also by Israel, which supplies 5% of the total volume of Ukrainian IT-services exports. The remaining 4% is distributed among other countries of the world. 

According to the results of the current year, the vast majority of industry representatives expect a significant increase - 20-30%. This is also confirmed by the results of the PwC study, which the industry thinks most accurate. Together with the growth of financial indicators, the number of specialists employed in the industry will increase from 116 thousand to 144 thousand people. 

According to current data from the Insoft Capital investment fund, which specializes in investments in outsourcing companies in Ukraine and Eastern Europe, the key parameters that potential investors value ITO (IT Outsourcing) segment are the sales volume, the number of employees in the company or the volume sales per employee, EBITDA margin, client portfolio and diversification, company specialization, volume and age of accounts receivable, management level and quality of business processes. 

These parameters are extremely representative and will not lose their relevance in the coming years. Of course, since the market is developing dynamically, the changes will take place in the benchmarks to which the investor will be guided, and which will be the comparison of companies for investment. 

The most interesting cities for investors today are Kyiv and Lviv, because the largest number of IT companies is concentrated there. Kharkiv, Odessa and Dnipro are also interesting for investors. 

Unless there are unforeseen regulatory barriers and the domestic political situation is stable, the Ukrainian IT-market is expected to grow. By 2020, the number of engineers will almost double - to about 200 thousand specialists, and the number of foreign exchange earnings, according to PwC, will be $5.4 billion (by 2017 this figure was $3.6 billion). Of course, there will also be a development of product lines – this will contribute both to the development of startup-culture, as well as a large number of foreign investment in this sector. 

Positive impact on the industry can provide preferences from the state. Here, the decree "On the Development of the Digital Economy", not so long ago signed in Belarus, can be a good example. Such an event will provide many new opportunities for the development of information technology in Ukraine. 

An important role in the development of the industry will be played by how we can promote Ukraine as an attractive brand in the international arena. Despite all the successes of the domestic IT-industry in the world, there are "white spots" and unjustified prejudices in the representations of potential foreign partners about Ukraine. 

One way to fix this situation is to actively talk about yourself within the framework of major international events and venues. For example, this Wednesday, January 24, during the World Economic Forum in Davos, representatives of the domestic IT-industry will speak with a panel dedicated to the expertise of Ukrainian developers in Data Science. 

Today, our IT-companies are actively strengthening their positions in the most promising technological areas: Data Science, AR/VR, Machine Learning, Artificial Intelligence, and can boast of a large number of successfully implemented cases in these areas. Such stories will have a positive impact on the image of Ukraine as a country with high technological potential, which will definitely lead to the development of the industry in the long term for several years.