In July 2022, the IT Ukraine Association in collaboration with the Sayenko Kharenko law firm conducted a joint “Relocation. The new IT landscape of Ukraine" research. We collected and analyzed data on the relocation of IT companies both within Ukraine and abroad. Sayenko Kharenko experts have developed a separate research methodology.
Undoubtedly, the factor of relocation of companies and teams becomes decisive for the future industry development. A new IT map of the country and new technological hubs are being formed. Some companies are relocating abroad and diversifying their offices. The industry faces certain challenges and tasks for the further development of the IT market. However, we count on an open dialogue with the government and the solution of urgent issues for the industry, which will allow us to preserve and develop its potential within the country. This research turned out to be representative and detailed. We wanted to track the dynamics of relocation, summarize the experience accumulated by companies and identify possible scenarios, Konstantin Vasyuk, Executive Director of the "IT Ukraine" Association, stressed.
According to the results of the research, it turned out that more than 50% of the surveyed IT companies did not relocate and switched to remote work. Some companies have already partly returned to the office work.
Among the IT companies that relocated, relocation within Ukraine prevails (45%). 42% of companies partially relocated abroad, including those 5% only that closed part of their offices in Ukraine. None of the surveyed IT companies carried out a complete relocation abroad. Relocation is largely considered by IT companies as a forced step for the period of the War, or at least its active phase
Among the surveyed IT companies, none has the intention to completely close down business in Ukraine. In the perspective until the end of 2022, the majority of IT companies (63%) do not plan partial or full relocation. Only 14% of respondents are considering relocation abroad by the end of the year partly or in full. Some companies (23%) plan to combine relocation abroad and within Ukraine. So overall, a total of 37% of companies consider relocation by the end of this year as a possible option. If the situation in the country does not change significantly, we can expect that this indicator will increase.
According to the May research of the Association the May research of the Association, the largest percentage of relocated employees is among companies with 1,200+ employees (32%), in companies with 200–1,200 employees this figure is 24%, in companies with up to 200 employees - only 14%. The main countries of relocation were Poland, Germany, Spain, Romania, Portugal, Bulgaria, the Netherlands, Turkey, the Czech Republic, Moldova, and Croatia. At the same time, all large companies (1,200+ employees) and 64% of companies with 200-1,200 employees plan to open new offices. Instead, 75% of companies with up to 200 employees are not planning to expand. Among the potential countries for opening offices: Poland, Romania, Spain, Bulgaria, Portugal, Croatia and the UK.
The results of the survey show that IT companies approach the issue of relocation quite carefully, analyzing and calculating the consequences of each option, as well as giving preference to those countries in which they have already had offices (43%), 22% rely on the recommendations of lawyers or tax consultants, another 22% make a choice independently based on an assessment of the costs of operating business in the country of potential relocation.
The companies noted the impossibility of IT professionals going abroad, the desire of IT companies to pay taxes in Ukraine, the reluctance of most of the team to move, and the higher costs of operating business outside of Ukraine as the main deterrents for relocation, in particular further relocation. At the same time, for a one-third of IT companies, the latter becomes the main restraining factor of relocation. This group includes not only IT companies from the "less than 50 IT professionals" group. Companies from all groups chosen for the survey, including companies with 1,200+ IT professionals, calculate the "price" of relocation. This data also correlates with companies' responses to key challenges they faced with during the first months of relocation. Thus, the main challenge for companies (21%) was a decrease in competitiveness, as they are forced to increase the cost of jobs/services for customers due to increased costs of operating business. This is also influenced by the need to create a local company (18%) and an increase in the tax burden (15%). The lack of sufficient housing for employees also became one of the key challenges for both internal relocation (33%) and relocation outside Ukraine (20%). It is interesting to note that for the vast majority of IT companies, there are no difficulties with understanding how to conduct business outside of Ukraine.
In general, taking into account the results of the survey, the relocation process will continue systematically. The vast majority of IT companies are satisfied with the relocation (93%). This shows that IT companies are successfully adapting to new business conditions and are able to respond to challenges arising from relocation. However, 53% of companies that have relocated are still looking for options for alternative further relocation abroad to minimize costs.
The abolition of martial law and a significant improvement of the situation in Ukraine (for every third company) or at least a return to the pre-War state (until February 24, 2022) and the absence of active hostilities in Ukraine for several months (this is important for the majority of surveyed companies) can significantly change the situation, which has already relocated). Under such conditions, 80% of companies plan to bring back business to Ukraine. Today, only 7% of companies do not plan to return (relocate back to Ukraine).
For greater stability of the IT industry and its further development, it is important for companies to:
- Provide an effective mechanism for the reservation of IT professionals.
- Resolve the issue of the policy of the National Bank of Ukraine regarding the procedure for currency settlements.
- Allow temporary departure of IT professionals on business trips outside of Ukraine.
- Liberalize tax legislation.
The survey confirmed that the IT landscape of the country is changing, but it is happening gradually and quite carefully. Companies deliberately approached both the decision not to relocate and the decision to relocate within Ukraine or abroad. Without a significant improvement in the situation, the gradual relocation will most likely continue, but it is fundamentally important that none of the surveyed IT companies answered that they have completed a full relocation and are closing down their business in Ukraine. The point of no return (from relocation) has not been passed. IT companies are waiting for the situation to improve and are ready to return, Oleg Klymchuk, Sayenko Kharenko adviser, who was actively involved in all stages of the research, comments.
Please follow the link to find the results of the survey in more detail: "Relocation. The new IT landscape of Ukraine" Research.
IT Ukraine Association IT Ukraine Association is the largest specialized Ukrainian community for service and product companies of various scales. The Association represents the interests of 120 companies and over 82,000 IT professionals. Our mission is to provide favorable conditions for the sustainable development of the field of information technologies in the country, to promote the brand of Ukraine as a leading technological nation.
Sayenko Kharenko is one of the leading law firms of Ukraine that provides comprehensive support in all major sectors of the economy. We act as a legal advisor to more than 1,800 clients from more than 60 countries. More than 100 times, Sayenko Kharenko has been recognized as the No. 1 law firm in all major areas of law and more than 30 times as the "Firm of the Year in Ukraine" by the most prestigious professional publications.