Ukrainian software development industry can outrun metallurgy by 2021

09-11-2017

“Software development industry may grow by 25-30% per year. This means doubling every three years”- CEO of the largest IT company in Ukraine. At such a growth rate IT industry may surpass by 2021 the export of the entire iron and steel industry.

In October leaders of Ukrainian IT outsourcing companies, representatives of government and parliament, as well as the EU Delegation discussed the future of software development market in Ukraine. The event took place at UNIT.city. The occasion – presented by the Better Regulation Development Office (BRDO) a comprehensive analysis of the market and its regulation (the Green Paper). During the meeting, number of interesting facts were voiced by business, experts and authorities. Details – in this article. (The full video of the meeting – at the end of the page).

The market is significant for the country

Ukrainian IT outsourcing has become the third country’s export industry. Despite the fact that in 2013 it was not even in the top five. It is explained by the fact that only 1 of 7 major export industries grew over the past three years – IT outsourcing.

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The same fact was stressed by representatives of the EU, Jocelyn Guitton, Acting Head of Trade and Economic Section of the EU Delegation to Ukraine: “It is not just about perspective, it already creates real opportunities, makes a significant contribution to the country’s GDP.”

The growth potential is huge

In recent years, industry grew – about 15% per year. CEO of EPAM (about 5000 developers in the Ukraine), Yuriy Antoniuk believes that the growth rate of 25-30% per year is achievable. He says that not only as a CEO of the largest IT outsourcing company in Ukraine, but also as President of “IT Ukraine” Association (it unites the largest IT companies of the country).

If we manage to achieve such a growth rate of the industry:

  • it will double every 3 years;
  • 100,000 of new high-paid jobs will be created by 2020;
  • export of IT services may exceed export of the entire iron and steel industry by 2021.

5-consensus issues important for software development market in Ukraine

1. No new regulation for the industry

Representatives of all leading IT companies said that they have plans to grow in Ukraine.

It is important that for the state not to intervene in this process.

The lack of regulation and government intervention in IT industry was a significant stimulus for growth. This was mentioned by Alexander Danchenko – the head of the Parliament Committee on Informatization and Communication and a representative of the EU Delegation – Jocelyn Guitton.

BRDO experts proposed to implement a guarantee of tax conditions stability for IT outsourcing. This will give confidence to companies and their customers, thus, it will lead to a faster growth of the software development market.

2. Competitive tax environment

IT services export market faces global competition.

Taxation of salaries for developers is very important for development of the industry. This was stated by Aleksey Skrypnik, Member of Parliament and co-founder of Ukrainian IT outsourcing company ELEKS.

Importance of taxation is caused by 2 reasons: international competition for programmers and it’s influence on the final cost of IT services.

At the moment, the use of the simplified taxation system allows IT industry to be competitive:

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Maxim Nefyodov, The First Deputy Minister of Economic Development and Trade of Ukraine, also drew attention to this aspect. According to him, Ministry of Economic Development and Trade is definitely a supporter of competitive taxation for IT companies and is ready to insist on this position.

3. Education

Almost everyone said that education is also crucial for the development of the industry. According to business representatives, all IT companies fund development of Ukrainian education, including help to state universities.

Yuriy Antoniuk announced that: EPAM spend on education about $ 10 million per year and 70% of the sum is not related to EPAM employees.

Marina Vyshegorodskikh, a senior adviser to the Board of Directors of Ciklum Holdings said that IT education was included in the top 3 priorities of “IT Ukraine” Association. In the near future they will roll out a new activities in the direction.

Vladimir Beck, co-founder of Sigma Software, Chairman of IT Committee of European Business Association, also said that his company is funding education, not related directly to the company’s employees.

4. Attracting foreigners

Software developers are leaving Ukraine and in general this is not a problem. Firstly, many of them return, and secondly, in the modern world experts migrate between countries.

The problem is that this process is one-sided in Ukraine – Ukrainians are leaving, and foreigners do not come.

BRDO experts stressed that they know how to solve this problem:

  •  to allow foreigners to work in IT as the entrepreneurs;
  •  to remove barriers for official employment.

BRDO has already developed CMU draft resolutions resolving these issues.

5. Development of the internal market

IT services should be in demand not only abroad but also at domestic market. Nikolay Roenko, the founder and President of Miratech, said that today the industry is mostly driven by the international market. The domestic market is very small and has the effect of pent-up demand. According to him, there are countries that show that the domestic market can be a driver of growth. The situation should begin to change.

While, many participants voiced negative examples of state IT projects (eg, declaration the system), as well as their negative impact on image of the industry.

Five-described items were discussed before. The difference of the dialogue is well described Marinoy Vyshegorodskih: “Thanks to the Green Paper for the first time this dialogue becomes data and facts driven. When are the facts and figures are on the table the dialogue has a different quality.”

As the end of the dialogue we fully agree with Igor Beda, Managing Director of GlobalLogic in Ukraine, “Green Paper allows to move from dialogue to actions. It is necessary to implement them.”

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