On April 8, Vitaliy Sedler, President of the IT Ukraine Association, had an online meeting with journalists. Topics for discussion were IT development trends in Ukraine and the world, as well as a special legal regime Diia.City. We share the main theses of the meeting:
IT in the world: how the coronavirus crisis has affected the industry
- Coronavirus has caused a global economic change. According to stock indexes, the world economy collapsed by about 30% in the spring of 2020. According to consulting firm McKinsey, the coronavirus crisis is the largest since World War II.
- The coronavirus crisis immediately affected the IT industry, but the industry quickly orientated itself. This was evident in the rapid transition to remote operating mode, reduction of investment and operating costs, diversification of client portfolios.
- Before the coronavirus crisis, we saw an annual increase in IT by an average of 25-30%. From March 2020, some clients began to reduce or stop projects and, consequently, costs. Ukrainian businesses have also suspended investment in development, frozen salary reviews, and some have been forced to cut staff.
- The travel and event industries, as well as the Transport & Logistics industry, have suffered the most from the coronavirus crisis. Some companies lost up to 80% of their profits.
- Already in the second half of 2020, the IT industry returned to pre-crisis levels, including the number of vacancies, and began to grow. Businesses realized that it was possible to live in a pandemic, and began investing in new business models. A delayed global demand for technology solutions appeared, and we took this opportunity.
Ukrainian IT during the coronavirus crisis
- Ukrainian IT companies quickly adapted to the new working conditions, including due to the rapid transition to work from home. For example, it took Intellias a week to transfer 1,500 of its specialists to remote, while maintaining productivity.
- There is a demand for digital solutions, and competition for the talents of development engineers has increased. The result was a jump in the salaries of IT specialists. On the one hand, this is good, because the business is growing and gaining momentum. On the other hand, there is a new challenge - to build appropriate business relationships with customers.
- Companies switch to hire anywhere regime and start hiring employees without being tied to the location of their offices. IT companies will hire engineers globally.
- 2021 will be a year of active growth of the industry: we expect the usual 25-30% growth of the Ukrainian IT market. Today, the information technology industry is one of the main driving forces of the Ukrainian economy, so it is necessary to create the most favorable conditions for its development.
- Now it is quite difficult to predict when specialists will return to the offices. We estimate that about a third of professionals will want to work in the office, and ⅔ employees will choose a flexible working format. Currently, some of the company's office space has been given up, which is quite logical - there is simply no need for it.
- It is quite difficult to predict further salary growth in IT, but I think that in the perspective of 6-9 months the trend of salary growth, which we see now, will level off a bit and will be the usual 4-5% per year.
- The following industries are most actively developing in IT: cloud migration, everything related to remote interaction, online retail, etc.
Diia.City: what to expect?
- The concept of Diia.City has more questions than answers. At present, it is difficult for businesses and developers to understand how it will actually help the IT industry. It seems that the reform itself will bring more risks than opportunities.
- Discussions on the special legal regime of Diia.City revolve mainly around the issue of taxes. We hope that the personal position of Deputy Prime Minister Mykhailo Fedorov on maintaining the current tax conditions for IT will be adhered to.
- We emphasize the following "critical lines" to be taken into account in Diia.City:
- stability of tax legislation,
- opportunity for companies to cooperate with both private individuals and gigs for at least three years,
- protection of non-resident companies of Diia.City from potential tax and administrative pressure,
- to exclude companies from Diia.City there must be a court decision, also the audit conditions for small and medium-sized businesses needs to be removed.
- No one understands the concept of "gig" for sure - there is currently no legal framework or practice for it.
- IT Ukraine, together with the largest business associations EBA, ECC has made considerable efforts to ensure that many critical comments from the IT industry are taken into account. Bill 4303 has taken these recommendations into account, and we are grateful to the Ministry of Digital Transformation for the dialogue. If our "critical lines" are taken into account, we will be able to discuss the support of the Diia.City regime.
- The tax bill is currently in the works. Based on how all the processes are happening now, the active launch of Diia.City can be predicted for next year.