- IT industry in Ukraine
- Industry overview
- System integration
- Leading system integration companies
- Establishments and institutions
- List of references
1. IT industry in Ukraine
In recent years IT services industry has solidified its position
as an important part of the Ukrainian economy.
Following the dramatic downturn caused by the financial
crisis, Ukrainian IT market increased by 40% in 2010 and
by approximately 35% in 2011.
In 2011 its value reached USD 3.3 bn, which is higher
than the level recorded in 2005 but is still lower than the
peak volumes reached before the crisis.
Driven by the availability of large skilled labor pool as well
as relatively low personnel costs, Ukraine was the fastest
growing IT market in the whole CEE region before the
financial crisis. Developments in the coming years will
show whether it will regain this status.
However, in Ukraine IT industry is still underinvested in
many areas. The low level of IT expenditures and low
share of IT services and software sales in the total market
value means a high potential for further growth.
An important feature of Ukrainian IT market is relatively
high proportion of IT outsourcing work (as opposed to
development of customized software), which sometimes
is viewed as a relatively low-value adding activity.
Despite the significant impact of the financial crisis, the
overall structure of the market remained unchanged. Big
names still do business in Ukraine and have stayed despite
the crisis (although many of them curtailed the volume
of their activities).
The main clusters of Ukrainian IT industry are IT outsourcing
and software development as well as systems integrations.
Market experts expect that the volume of Ukrainian IT
market will continue to increase, both with respect to domestic
sales and export of IT services. Participation of
non-Ukrainian companies in Ukrainian IT business is also
expected to increase.
The main consumers of IT products are in financial sector,
telecommunication sector, trade, industry as well as the
2. Industry overview
There are different interpretations of the IT industry, with
various approaches being used by players and market
specialists. However, when speaking about Ukraine,
the following two major segments are most broadly discussed:
outsourcing and software development – outsourcing
of personnel and development of software based
on the customer’s requests. Currently this is mostly
export oriented and low-margined subsector, with its
main driver being outsourcing of qualified and comparatively
inexpensive pool of IT specialists.
- System integration – opposite to the first segment
system integrators are oriented on the internal market
and their main business is in incorporation and installation
of complex IT solutions for customers. Supply
of hardware is also a major revenue source for system
integrators. It is mostly resale of hardware from
vendors to customers, however supply of hardware
produced by system integrators themselves may also
It is commonly known that Ukraine has inherited its
scientific base along with various technological and
scientific establishments, mathematical schools and
centers of computing technologies from USSR. Ukraine
is conspicuous among the international IT community,
especially in the outsourcing field. This trend is going
strong with Ukraine being listed in many organizations’
attractiveness surveys as for example being included in
the five most attractive outsourcing destinations among
Western countries according to the Global Outsourcing
The main advantages of the Ukrainian IT market are the
labor costs, coupled with opportunities
to decrease payroll taxes;
- Highly qualified staff: confident knowledge of research
and development, as well as well-experienced
in the development of integrated programs
Government supports the development of IT industry
Over the last decade Ukraine has gained huge interest
from the western countries for provision of outsourcing
services in the areas of Informational Technology.
While it might be difficult for Ukraine to compete with
the Asian giants like China, India or Vietnam in terms of
market volume and cost effectiveness, it’s fort is in solving
complicated problems that need creative solutions
at reasonable prices. Ukraine is 1 hour behind of most
European capitals and can be reached with just 2 hours
flight) makes Ukraine extremely important as outsourcing
destination for European market. Today, Ukraine is
the world’s fifth IT services exporter with the biggest labor
pool in CEE (Central and Eastern Europe) region.
As a result, Ukraine has been recognized by outsourcing
experts as the top destination for ITO (Information
technology outsourcing) in 2011. The country has won
the nomination “Outsourcing Destination of The Year” in
the frames of European Outsourcing Excellence Awards.
Ukraine has also consistently achieved high ratings in
the Central and Eastern Europe (CEE) IT Outsourcing
Review, being places first in terms of the volume of outsourcing
services, the number of IT outsourcing companies
and the number of IT specialists in 2008, 2009 and
Annual turnover/income of the sector, market figures in dynamic
After a significant decline in 2009 IT products and services sales bounced back. As economic recovery started in
Ukraine after the financial crisis, demand for IT in the country grew by 40% in 2010 and almost by 20% in 2011, reaching
USD 3.3 bn in 2011.
IT market in Ukraine
Depending on the estimates, there may be up to 4,000
IT companies operating in Ukraine, with the total number
of professionals employed ranging between 40,000
and 50,000. The most developed IT centers are concentrated
in the large cities gravitating towards educational
centers. Such cities are: Kyiv, Kharkiv, Dnipropetrovsk,
Lviv, Odesa and Vinnytsia.
The main specialization on IT-market labour in Kyiv
IT outsourcing and software development
During the last years Ukraine remained a leader among
the “free development” software in Central and Eastern
Europe. Based on the Gartner’s research, Ukraine is in
the TOP-30 list of countries software products of which
were in high demand all around the world for last several
years. And according to Datamonitor, 7 of 10 leading
software companies in Central and Eastern Europe
are either based in Ukraine or have Ukrainian branches.
High software quality is traditionally based on the high
qualification of the IT professionals and the high maturity
of the IT community.
Approximate volume of the Ukrainian IT outsourcing and
software development market exceeded USD 1 bn as
could be seen below, according to rough estimates.
IT outsourcing and development market in Ukraine
About two thousand small and medium enterprises are
engaged in the development of programs and applications
in Ukraine. The number of IT specialists employed
in Ukrainian companies providing IT outsourcing and
software development services should fall within the
range of 20,000-25,000.
A few thousands of private developers work directly
with foreign customers via Internet. According to Correspondent,
the IT market of Ukraine is among the ten
countries that are major suppliers of software in the
The annual average wages of the Ukrainian local IT-specialist
depend on office location and seniority. Approximate
average salary of a developer equals USD 20 thsd
per year, while for a project manager this figure would
amount to 37 thsd. These figures are significantly lower
than in the majority of European countries. Wages tend
to be higher in Kyiv, the capital of Ukraine. Approximate
salaries by positions of software developers are presented
Gross wages of the Ukrainian IT-specialists per month
Many production companies and financial institutions, both foreign and domestic are using outsourcing services of
In 2011 Ukrainian IT companies either maintained or increased number of employees.
TOP 5 Software companies by quantity of employees in Ukraine, 2011
3. System integration
Another significant component of IT market is the system
integration subsector. Opposite to the software
outsourcing this sector is oriented on the internal market
and is mainly engaged in delivery of hardware and software
solutions (usually purchased from foreign suppliers)
to local companies as well as related integration and installation
The segments of system integration market are the following:
- IT infrastructure;
- IT service management;
- Monitoring and management systems;
- Business continuity management.
IT infrastructure has long ago become a pivotal part of operational
system of any enterprise. As a matter of fact, it is
the foundation of any up-to-date business. This foundation
should be correctly designed and have a great margin
of safety. It should take into consideration the strategy of
enterprise development for several upcoming years. All of
this is expected to support the necessity for system integration
services for the years to come.
Education and workforce
Ukraine is widely considered to have a very strong educational
system for development of IT specialists. Ukraine
was featured among TOP 10 countries with the most certified
IT professionals following the United States, India
and Russian Federation in Global IT IQ Report.
Each year the number of IT-specialist studying in universities
that have their tuition fees paid by government
grows. About 13,000-14,000 IT students graduate each
year. Currently 3,000-4,000 are employed in companies
that provide professional IT services. This provides another
opportunity for industry growth, through attracting
more qualified talent to the industry.
There are about 880 universities and technical colleges in
Ukraine that prepare IT specialists.
According to Internet portal focus.ua, the most notable
universities with the biggest number of graduates are the
- National Technical University of Ukraine “Kyiv Polytechnic
Institute” graduates up to 2,000 qualified
specialists for the IT market. The University prepares
the specialists to work with SAP, as SAP Ukraine and
Incom Corporation with support of Sun Microsystems
provided the university with an access to educational
- Kharkiv National University of Radio Electronics.
Each year the university prepares approximately 600
specialists for IT companies. The University cooperates
with the leading companies in the development
and software outsourcing;
- Taras Shevchenko National University of Kyiv. Roughly
600 students graduate each year from the Department
of Cybernetics. 15% of the students interned in
the national payment system UkrCard and remained
working there after graduation;
- Ternopil Ivan Pul’uj National Technical University established
partner program with Cisco that enabled
400 students to benefit from participation in Cisco
Networking Academy Program and receive a certificate.
While getting education most of the students start to
work within their specialty or in a similar field to gain valuable
practical experience. Among the senior students of
IT specialties freelancing is widespread, as is permanent
or part-time employment.
Ukrainian IT specialists constantly seek to improve their
skills to stay up-to-date with world’s best practices using
self-education a lot. In addition to self-education, there
are many IT communities, training and certification centers
for education and training of IT
Trends and developments
Market participants define the following key trends of
the Ukrainian IT market:
- Growth of IT services exports;
- Increase in outsourcing services consumption in the
- Growth in the number of providers with foreign capital
or partly funded by foreign capital;
- Growth in IT support services volume (IT infrastructure
The increase of demand for outsourcing of computing
and network infrastructure support should be called
one of the major trends of recent years.
Another trend is an increase of IT infrastructure in Ukraine.
The contract between “Ukrsotsbank” and IBM at the cost
of USD 200 m, announced in early February 2012, is another
proof of this trend. More and more companies prefer
to focus on their core business and outsource its IT
infrastructure to specialized companies.
In 2012 Ukrainian IT market is expected to maintain its
dynamic growth. The UEFA EURO 2012 football cup, industrial
cooperation projects with Russia as well as the
recovery of the banking system are expected to boost
economic growth and, as a result, demand for IT services.
Two years of crisis led to an accumulation of significant socalled
postponed demand for information systems, which
is going to influence IT market next year. The managers of
Ukrainian IT companies have also recently become more
optimistic and confident in the sales growth in 2012.
All of the above factors are going to make Ukrainian IT market
even more attractive for foreign investors and based on
the opinions of some market players, acquisitions or initial
public offerings of top Ukrainian IT companies may become
a trend for the next few years. EPAM Ukraine was the
first major IT company to file for an IPO in February 2012.
Other big names may follow.
Leading Software companies
The biggest players on the IT outsourcing and development
market are mainly represented by subsidiaries
of the international companies as well as several major
companies headquartered in Ukraine. They have created
the pool of the outsourcing of personnel and develop
the software based on the customer’s requests
received from worldwide clients.
These companies are usually export-oriented, with the
major part of their client pool based in the USA and, to
some extent, Western Europe.
However, small and medium sized domestic companies
also play an active role on the Ukrainian IT market, operating
on a slightly smaller scale but still offering qualified
and comparatively inexpensive pool of IT specialists.
Based on publicly available information, the biggest IT outsourcing companies operating on the Ukrainian market by
total income were the following:
Ukraine is one of largest (by some accounts – the largest)
Ukrainian IT-company with an attractive corporate culture
and a unique creative organization of working space. The
company is involved in software development for telecommunications,
wireless products and mobile devices. Clients
of GlobalLogic include: AOL, Avid, BSkyB, IBM, Lombardi
Software, Medtronic, Microsoft, Motorola, Telcordia.
The company employs more than 1,900 people and is represented
in Kyiv, Lviv, Kharkiv and Mykolayiv.
EPAM Systems is a global service provider. On February
7, 2012 EPAM Systems has successfully carried out an
IPO and became the first company, which is partly based
in Ukraine, to be presented on the New York Stock Exchange.
EPAM’s major clients include technology leaders such
as Microsoft, BEA Systems, SAP, Hyperion and SUN, as
well as global industry leaders such as British Telecom,
Reuters, London Stock Exchange, AeroMexico
The company operates in Kyiv, Kharkiv, Vinnitsa, Lviv and
Ciklum is a Danish innovative IT outsourcing company
specializing in nearshore software development in Eastern
Europe. Ciklum serves more than 150 global clients.
Ciklum is rated Best Large IT Employer 2010 & 2011 in
Ukraine by DOU, the Ukrainian Community of Software
Developers. Ciklum operates in Kyiv, Kharkiv, Vinnytsa,
Odesa, Donetsk and Dnipropetrovsk.
SoftServe is the biggest of those companies on the list
that are headquartered in Ukraine. The company started
its operations in Lviv and has expanded in Ukraine as
well as abroad, serving a number of leading global companies.
In Ukraine, SoftServe currently has its development
centers in Lviv, Dnipropetrovsk, Ivano-Frankivs`k, Rivne,
Sevastopil and Chernivtsi.
Infopulse Ukraine, a part of EDB Ergo Group, is one of the
leading Ukrainian software development and IT services
companies. Since its foundation in 1991 the company
has grown significantly, currently serving such clients
as Alcatel-Lucent Ukraine, Gorenje Ukraine, Goverment
Joint Stock Company “Khlib Ukrainy”, Kyivstar, Kraft
Foods Ukraine, MTS Ukraine, Raiffeisen Bank Aval and
Infopulse Ukraine operates in Kyiv, Vinnytsia,
Zhytomyr and Lugansk.
4. Leading system integration companies
Opposite to the IT outsourcing and software development,
companies engaged in system integration are
oriented on the internal market and their main business is
in incorporation and installation of complex IT solutions for
customers. Ukrainian company Incom holds leading position
in the segment of system integrators. Local systems
integrators predominantly offer solutions developed by
major global companies. However, some companies also
offer custom made solutions.
Based on publicly available information, the biggest systems
integration companies operating on the Ukrainian
market by total income were the following:
For many years Incom has been a leader on the Ukrainian
market of information technologies. The basis of its success
is a team of highly–qualified consultants, engineering
specialists, sales personnel.
The company has development centers in Lviv, Dnipropetrovsk,
Rivne, Ivano-Frankivs`k, Chernivtsi, Sevastopol.
Sitronics is one of the largest high-tech companies in
Russia, CIS and Europe, specializing in telecommunications,
information technologies and microelectronics.
Sitronics is an affiliate of JSFC Sistema — the largest diversified
public financial corporation in Russia and CIS,
serving more than 100 million consumers.
Sitronics’s major clients include such companies as MTS,
Beeline, Life, Sberbank etc.
BMS Consulting is one of the leaders at the Ukrainian
market of information technologies in sphere of system
BMS Consulting is one of the few IT companies in Ukraine
which has its business concentrated on the corporate
The main clients of the company are: Kyivstar GSM,
Ukrtelecom, VTB, State Treasure of Ukraine, Pension
Fund of Ukraine, Kyiv City State Administration, Raiffeisen
Bank Aval etc.
S&T Ukraine is a company of the S&T System Integration
& Technology Distribution AG (S&T AG). With approximately
2,200 employees and sales of EUR 411 million
(2009), S&T AG is the leading provider of comprehensive
consulting, outsourcing, systems integration and IT services
in Central and Eastern Europe.
S&T’s Ukraine major clients include such companies as
MTS Ukraine, Kyivstar GSM, Nadra Bank, Prominvsetbank,
Software is protected from unauthorized use under
the Law of Ukraine “On Copyright and Neighboring
Rights” (The Copyright Law). Generally, the disposal
of property of copyright is made based on corresponding
outsourcing agreements with independent Ukrainian
companies or directly with individual programmers. There
are three types of such agreements:
- agreement on transfer of the copyright,
- agreement on ordering and use of a computer program, and
- agreement on creation and transfer of property rights to the computer program.
As a rule, when ordering a computer program, a contract
on creation and transfer of property rights for computer
program is used. This type of the contract is not directly
provided by the Civil Code of Ukraine. However, according
to Art. 6 of the Civil Code of Ukraine, the parties may enter
into an agreement which is not regulated by legislation,
is consistent with the general principles of law. Under such
agreement, the developer creates a computer program
and transfers the proprietary copyright thereto.
There are three main controlling authorities in this industry:
- tate Special Communication and Information Protection
Service of Ukraine;
- State Service of Technical Regulation of Ukraine;
- State Intellectual Property Department of the Ministry
of Education and Science of Ukraine.
Current Ukrainian legislation allows establishment of free
economic zones, where additional privileges and benefits
may be granted in respect of foreign investments in
IT sector. Also, Ukraine continues the process of signing
Treaties on the Mutual Protection of Foreign Investments
with various countries.
Ukrainian Tax Code is the main document governing tax
issues in Ukraine. Some duties are also governed by
other legislative acts such as Customs Code and Unified
Social Contribution Law.
There is no special tax regime for IT Industry compared.
Still, Ukraine with the corporate income tax equaling 21%
in 2012 and going to be gradually dropped down to 16%
starting from 2014 remains attractive jurisdiction from the
An ongoing legislative initiative is supposed to establish
lower corporate and personal income tax rates for IT
companies and their employees. If passed, respective
changes might become effective as of 01 January 2013.
It is also worth mentioning tax holidays for small startups
(newly established companies with annual sales up
to USD 375 thsd. These tax holidays are envisaged until
2016 and taxpayers enjoying this regime are taxed with
the 0% corporate income tax rate.
VAT should apply to domestic suppliers of IT services at
the standard 20% rate (17% starting from 2014). Provision
of IT services to non-Ukrainian clients (primarily –
development and testing of software as well as related
consulting services) should be out of scope of Ukrainian
VAT. This is especially important for IT outsourcing cluster,
given the significant volume of IT services provided by
Ukrainian companies to non-resident Clients.
An important tax benefit in Ukraine is the possibility to
subcontract individual programmers based on the civil
contracts instead of employing them. Such individuals
enjoy the Unified tax regime, which allows them to pay 5%
income tax (instead of the standard 15%-17%). Additionally,
such individuals usually pay minimum allowable unified
social contribution may roughly equal USD 530 per
year), which would be significantly lower than the standard
rates paid by employees in other industries. Adoption
of this option is not entirely risk-free, however, and may
be challenged by the tax authorities.
7. Establishments and institutions
Ukrainian Hi-Tech Initiative, IT Ukraine and The Association of Information Technology Enterprises of Ukraine are the leading
establishments and organizations coordinating and consolidating the efforts of the Ukrainian IT companies in order
to resolve their professional activity problems.
IT Ukraine (http://www.itukraine.org.ua/)
This Association was set up in April, 2004 as the joint effort
of a group of leading Ukrainian software developing
companies. Key objectives of IT Ukraine are as follows:
- promote the further growth of the Ukrainian IT companies
export potential, further improve their positive
international image and attract foreign investors;
- unite the majority of export-oriented companies and
research & development institutions of Ukraine, engaged
in software development.
Some of the members of IT Ukraine are: Softserve, Incom,
Ciklum, Epam, Oracle, Luxoft Ukraine, BMS Consulting,
The Association of Information Technology Enterprises of Ukraine – APITU (www.apitu.org.ua)
The Association of Information Technology Enterprises
of Ukraine was registered on 7 June 2007 in the legal organizational
form of an association of enterprises.
Key objectives of the Association are as follows:
- exercising impact on the government policy in the
IT area, protecting the interests of the Association’s
members and representing their interests in the government
bodies, as well as lobbying laws and regulations
favorable to the industry.
- developing business ethics fundamentals and advocating
their use in IT-companies’ business activities.
Today, the membership of the Association consists of
44 IT companies, among which are: Sitronics, ABBYY
Ukraine, ASUS, Canon, Dell, IBM, Intel, Microsoft, SI BIS
Ukrainian Hi-Tech Initiative (www.hi-tech.org.ua)
Established as a non-profit organization and operating
for over 10 years, Ukrainian Hi-Tech Initiative is a leading
Ukrainian Association of IT outsourcing companies.
One of the main objectives of the Association is to promote
Ukrainian software development companies and
the positive image of Ukrainian IT outsourcing industry in
Key objectives of Ukrainian Hi-Tech Initiative are as follows:
- Establish international relations and contacts for cooperation
in hi-tech industries;
- Establish stable channels for exchanging information
with Western companies.
Some of the members of Ukrainian Hi-Tech Initiative are:
SoftServe, Ciklum, Globallogic, Infopulse, Lizard Soft,
Unicorn Systems UA.
8. List of references:
- IT market in Ukraine // Investgazeta №8, 27.02.- 04.03.2012
- Review prepared by Luxoft, Luxoft - www.luxoft.com
- Central and Eastern Europe IT Outsourcing Review 2010 // CEEOA, 2010
- Wage of the Ukrainian IT-specialists per month in 2011
// it-catalogue.net, - it-catalogue.net/ru/labour-market/-2011.html
- Top 25 IT companies in 2011 (available only in Ukrainian/Russian)
// blog.jobua.com, - http://blog.jobua.com/top-25-it-kompaniy-2011-goda
- Leading Software companies // Investgazeta №2, June-August, 2011
- Leading system integrations companies
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