Information Technology
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Industry overview Information technology ear Reader, favorable geographic position, vast D It is my great pleasure to introduce you A consumer market, ample resources to our new publication about attractive sec- and high level of education – all these fac- tors of Ukraine, made in partnership with tors ensure great investment potential for Deloitte. the economy of Ukraine. We developed these brochures to make in- At present, Ukrainian market is at the devel- formation about sectors of Ukraine acces- opment stage. There are many niches and sible and easy to understand. The booklets opportunities for introducing new players provide analysis of economic attractiveness, and strengthening the positions of existing as well as comparative characteristics and ones. However, most of Ukraine’s indus- undiscovered opportunities. tries lack investments, though international investors are highly interested in them. We Ukraine enjoys a long industrial tradition, ro- believe that foreign investments will be very bust transportation and technical infrastruc- successful and promote economic growth if ture, rich natural resources, strong second- a favorable investment climate is created in ary and tertiary education, a broad network Ukraine. of research and development institutes, and a large pool of technically skilled labor. As a To assist you in determining the most prom- WTO member since 2008 and having signed ising areas to invest in and get an insight International Agreements for the Avoid- into Ukrainian market, Deloitte experts in ance of Double Taxation with 63 countries, cooperation with InvestUkraine have con- Ukraine is a fair player in the business world, ducted this research. a transparent and predictable partner. We hope that this overview will be useful InvestUkraine offers individual support to in- and interesting for all companies interest- vestors and is here to assist potential inves- ed in investing in various industries of our tors with setting up production in Ukraine. country. We offer professional support in obtaining information and analysis, legal advice, site visits, site selection services, assistance in communication with local authorities, and an aftercare program. Vladimir Vakht, I encourage you to consider Ukraine as a Managing Partner place for your future business and discover Deloitte all the benefits of locating your company’s operations in our country. I look forward to welcoming you in Ukraine. Sergiy Yevtushenko, Head InvestUkraine State Agency for Investment and National Projects of Ukraine 4 1. IT industry in Ukraine 5 2. Industry overview 5 Advantages 5 Annual turnover/income of the industry, market figures in dynamics 6 IT outsourcing and software development 7 3. System integration 8 Education and workforce 9 Trends and developments 9 Leading players Leading Software companies 10 4. Leading system integration companies 11 5. Legislation 12 6. Taxation 13 7. Establishments and institutions 13 IT Ukraine (http://www.itukraine.org.ua/) 13 The Association of Information Technology Enterprises of Ukraine – APITU (www.apitu.org.ua) 14 Ukrainian Hi-Tech Initiative (www.hi-tech.org.ua) 14 8. List of references 14 5 1. IT industry in Ukraine n recent years IT services industry has so- An important feature of Ukrainian IT market is Ilidified its position as an important part of the relatively high proportion of IT outsourcing work Ukrainian economy. Following the dramatic (as opposed to development of customized downturn caused by the financial crisis, Ukrain- software), which sometimes is viewed as a rela- ian IT market increased by 40% in 2010 and by tively low-value adding activity. approximately 35% in 2011. Despite the significant impact of the financial In 2011 its value reached USD 3.3 bn, which is crisis, the overall structure of the market re- higher than the level recorded in 2005 but is still mained unchanged. Big names still do business lower than the peak volumes reached before the in Ukraine and have stayed despite the crisis crisis. (although many of them curtailed the volume of their activities). Driven by the availability of large skilled labor pool as well as relatively low personnel costs, The main clusters of Ukrainian IT industry are IT Ukraine was the fastest growing IT market in outsourcing and software development as well the whole CEE region before the financial crisis. as systems integrations. Developments in the coming years will show whether it will regain this status. Market experts expect that the volume of Ukrainian IT market will continue to increase, However, in Ukraine IT industry is still underin- both with respect to domestic sales and export vested in many areas. The low level of IT expen- of IT services. Participation of non-Ukrainian ditures and low share of IT services and software companies in Ukrainian IT business is also ex- sales in the total market value means a high po- pected to increase. tential for further growth. The main consumers of IT products are in finan- cial sector, telecommunication sector, trade, in- dustry as well as the public sector. 2. Industry overview here are different interpretations of the IT in- • System integration – opposite to the first Tdustry, with various approaches being used segment system integrators are oriented by players and market specialists. However, on the internal market and their main busi- when speaking about Ukraine, the following two ness is in incorporation and installation of major segments are most broadly discussed: complex IT solutions for customers. Supply of hardware is also a major revenue source • IT outsourcing and software development for system integrators. It is mostly resale of – outsourcing of personnel and develop- hardware from vendors to customers, how- ment of software based on the customer’s ever supply of hardware produced by sys- requests. Currently this is mostly export tem integrators themselves may also take oriented and low-margined subsector, with place. its main driver being outsourcing of quali- fied and comparatively inexpensive pool of IT specialists. Advantages t is commonly known that Ukraine has inher- going strong with Ukraine being listed in many Iited its scientific base along with various tech- organizations’ attractiveness surveys as for ex- nological and scientific establishments, math- ample being included in the five most attrac- ematical schools and centers of computing tive outsourcing destinations among Western technologies from USSR. Ukraine is conspicu- countries according to the Global Outsourcing ous among the international IT community, es- Report. pecially in the outsourcing field. This trend is 6 The main advantages of the Ukrainian IT mar- problems that need creative solutions at rea- ket are the following: sonable prices. Ukraine is 1 hour behind of most European capitals and can be reached with just • Competitive labor costs, coupled with op- 2 hours flight) makes Ukraine extremely impor- portunities to decrease payroll taxes; tant as outsourcing destination for European market. Today, Ukraine is the world’s fifth IT • Highly qualified staff: confident knowledge services exporter with the biggest labor pool in of research and development, as well as CEE (Central and Eastern Europe) region. well-experienced in the development of in- tegrated programs and applications; As a result, Ukraine has been recognized by outsourcing experts as the top destination • Favorable geographical location; for ITO (Information technology outsourcing) in 2011. The country has won the nomination • The Government supports the develop- “Outsourcing Destination of The Year” in the ment of IT industry in Ukraine; frames of European Outsourcing Excellence Awards. Over the last decade Ukraine has gained huge interest from the western countries for provi- Ukraine has also consistently achieved high sion of outsourcing services in the areas of In- ratings in the Central and Eastern Europe formational Technology. (CEE) IT Outsourcing Review, being places first in terms of the volume of outsourcing services, While it might be difficult for Ukraine to com- the number of IT outsourcing companies and pete with the Asian giants like China, India or the number of IT specialists in 2008, 2009 and Vietnam in terms of market volume and cost 2010. effectiveness, it’s fort is in solving complicated Annual turnover/income of the industry, market figures in dynamics After a significant decline in 2009 IT products cial crisis, demand for IT in the country grew and services sales bounced back. As econom- by 40% in 2010 and almost by 20% in 2011, ic recovery started in Ukraine after the finan- reaching USD 3.3 bn in 2011. IT market in Ukraine Source: Investgazeta №8 dated 27.02.- 04.03.2012 Depending on the estimates, there may be up The most developed IT centers are concentrat- to 4,000 IT companies operating in Ukraine, ed in the large cities gravitating towards edu- with the total number of professionals em- cational centers. Such cities are: Kyiv, Kharkiv, ployed ranging between 40,000 and 50,000. Dnipropetrovsk, Lviv, Odesa and Vinnytsia. 7 The main specialization on IT-market labour in Kyiv Source: http://www.luxoft-personnel.ru/labor_market/2_2011/ IT outsourcing and software development During the last years Ukraine remained a lead- have Ukrainian branches. High software qual- er among the “free development” software in ity is traditionally based on the high qualifica- Central and Eastern Europe. Based on the tion of the IT professionals and the high matu- Gartner’s research, Ukraine is in the TOP-30