Ukraine has had more than its fair share of problems. In the twentieth century alone it was starved by Stalin in the 1930’s only then to be obliterated by Hitler’s troops to then return to the hands of the Soviet Union who treated it, somewhat, as a testing ground for poorly thought out policy. Now an independent state once more, it finds itself warily moving towards the European Union as it remains, once again, at odds with Russia.
Struggles such as these have produced a resilient Ukraine and this perseverance in the face of turmoil is something that has been passed to the embattled country’s economy but could it now be about to come out the other side and could its tech sector be the place where it comes from?
Despite its long time associations with being a poor satellite of the Soviet Union, Ukraine is actually a middle income state that has a growing middle class that is trying to push forward its underdeveloped retail sector but where is this growth coming from?
Technology has taken off in a big way in Ukraine and has been seized upon with aplomb. A heavy industry base, Ukraine was where most of the Soviet aircraft, transportation and weaponry were built and when it split from the USSR, the country used this as a starting point for their new economy and invested in newer technologies to keep them competitive in the international market. As such, Information Technology (IT) received a huge boost within the country.
A steadily growing market, the IT sector outperformed all other Central and Eastern European countries in 2007, growing some 40 percent. Now, Ukraine ranks fourth in the world in number of certified IT professionals after the United States, India and Russia. The capital, Kyiv, is already a thriving outsourcing centre because of this IT focus but now there are hopes the country could produce a Silicon Valley of its own.
The Ukrainian tech industry is already worth around $5billion with four distinct sectors emerging from it. The first is the aforementioned outsourcing sector which is by far the most developed with roughly 50,000 engineers in employment across 500 firms. This has come about with large tech firms moving into the area to make the most of the high number of IT professionals in the country. With companies such as Samsung setting up big Research and Development centres in the country this makes up much of the second sector also
The third sector is that of e-commerce which is currently worth around $2billion, which is about the same size as the outsourcing sector, on its own but has the huge potential for massive further growth as it continues to build within the country but the one which has the most potential is the fourth sector which is that of home grown software firms who design, build and market their own products for the global market.
The key difference in this market to say, the American tech industry, is that almost all of the products have a global market in mind. This is because in the American tech sector, the investment, infrastructure and massive domestic market all give it the underlying edge over other domestic markets and so countries like Ukraine have their hand forced into immediately going into foreign markets. For example, were you aware Paymentwall, Grammarly, bpm online, InvisibleCRM, Depositphotos and Jooble are all Ukrainian start-ups?
Another issue for the Ukrainian market is that there is simply a lack of funding. Because of this, start-ups need to find themselves in profit very quickly otherwise they completely disappear which means only the best of the best survive. Because of this extreme competitiveness some of the best tech minds are coming to the fore from Ukraine and there is a school of thought that if only they could secure more funding in that area then it could see a massive boom in the IT industries of the country. With the relative cost advantage of remaining in Ukraine as well, it would take only one big breakthrough company to start a snowball effect and with the six that have already been mentioned all close to becoming billion dollar companies, that eventuality may not be too far off.
So despite conflict zones, which are incidentally quite a way away from the tech centres, and infrastructure issues, Ukraine is one of Europe’s largest and best educated countries with a young, highly motivated and hungry workforce. There is going to be some economic pain on the horizon for Ukraine as it desperately tries to move further towards the European Union but should it succeed in doing so it could open up doors for its tech industry along with major trade routes. Should all of this come together, there is no reason why Ukraine couldn’t contain the next Silicon Valley.
By Vincent JS Wood
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