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Ukraine tech firms stay calm but ready for Russia conflict

Ukrainian software company MobiDev is ready should the Russia conflict worsen. Nearly 70% of MobiDev's clients are U.S. companies.

As tensions with Russia escalate, Ukraine's tech companies carry on while implementing business continuity plans should the conflict worsen.

Software development company MobiDev has three R&D centers and employees located in Kharkiv, Mykolaiv and Chernivtsi in Ukraine. Nearly 70% of MobiDev's clients are U.S. companies.

MobiDev isn't alone in attracting U.S. business. The Ukrainian tech sector features deep expertise in software engineering, and a significant amount of U.S. companies outsource work to Ukraine, said Anurag Srivastava, vice president of global sourcing at Everest Group, a research firm based in Dallas, Texas.

MobiDev's chief innovation officer Oleksii Tsymbal said the company is keeping calm, but also prepared in case of a worst-case scenario.

We are aware of the Russian troops and the conflict, but there's no panic.
Oleksii TsymbalChief innovation officer, MobiDev

"We are aware of the Russian troops and the conflict, but there's no panic, everything is as usual," he said in phone interview from Kharkiv. The firm is based in Atlanta, but does most of the software engineering work in Ukraine.

It's not the first time MobiDev has been through a time of conflict with Russia, Tsymbal said. In 2014, when Russia invaded Crimea, MobiDev closed one of its offices in the Ukrainian city Mariupol because of the conflict zone, relocating roughly 50 employees overnight to its other R&D locations.

The experience prepared the company and resulted in its current plans that include prior arrangements for transfers out of their Ukrainian offices, with an office located in neighboring Poland for its employees and their families.

Relocating to Poland, Tsymbal said, is a worst-case scenario. For now, all offices are equipped with at least two internet providers to support connectivity. MobiDev also stores its work in the cloud and provides laptops powerful enough for its software engineers to work remotely, making employees mobile and flexible in case the need to relocate arises.

"We still truly hope that there will be no conflict, no open fights," he said. "We really believe that it will be managed diplomatically. Still, as a business, we have responsibilities to our clients and our [engineers] who work with us."

Photo of MobiDev employees
Software development company MobiDev has three R&D offices based in Ukraine, which is currently facing the threat of a Russian invasion.

Company preparedness for potential impacts

It's not just MobiDev that's prepared for disruption caused by Russia.

Everest Group's Srivastava said that when major conflict broke out in 2014, Ukrainian companies like software engineering company Luxoft faced pressure from clients to reduce their exposure to potential harms from Russia.

As a result, many of the major IT players in Ukraine set up new business centers, expanding into neighboring countries like Poland, Bulgaria and the Czech Republic. Luxoft moved its headquarters to Switzerland.

Not only did it help protect the business, but it expanded their talent base and global footprint, Srivastava said. "What it meant was they were giving more confidence to their investors," he said.

The 2014 conflict prepared Ukrainian tech businesses for similar future situations, such as a renewed Russia conflict.

As long as the conflict remains on the borders of Ukraine without reaching the major developers based in Kyiv, the country's capital, Srivastava said he doesn't expect much disruption except to operations for a few days. He said Russia striking Kyiv would be the worst-case scenario and result in a lot of disruption in the Ukrainian tech sector.

For smaller IT businesses in Ukraine without contingency plans and locations outside of the country, Srivastava said the impact could be greater.

"They will face much more questions from their clients and stakeholders," Srivastava said.

Why U.S. businesses outsource jobs to Ukraine

U.S. companies outsource software engineering work to Ukraine for a number of reasons, not the least of which is cost savings.

In Ukraine, software engineers earn a salary between $35,000 and $40,000. Software engineers in the U.S. make four to five times that amount, said Anish Agarwal, senior analyst at Everest Group. The salary difference results in massive savings for U.S. companies, between 60% to 70%, Agarwal said.

"That's one of the big things; you get a deep expertise in an area and also fairly low salaries," Everest Group's Srivastava said.

The IT Ukraine Association pointed out in its 'Ukraine IT Report 2021' that the country employs nearly 300,000 IT professionals, with IT services generating more than 4% of Ukraine's GDP. The country places a significant focus on IT education.

MobiDev's Tsymbal said skilled IT employees are one of Ukraine's competitive advantages.

"Here in Ukraine, we have quite a good technical level of expertise," he said.

Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.

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