Tech companies in Ukraine open economic front in Russian war

Developers and engineers serve as an economic bulwark in the country's battle for survival. The regional reshuffling of talent, meanwhile, could spell higher costs for IT buyers.

Tech companies in Ukraine are fighting their own war -- one that's focused on the embattled nation's economic survival.

With Russia's invasion now in its second month, companies with software engineering and consulting operations in Ukraine do what they can to keep going. Technology businesses continue to deliver services, hire personnel and sign new customers. They view their work as contributing to the national cause.

Sergiy FitsakSergiy Fitsak

"For me, it is like a second front," said Sergiy Fitsak, managing director of Softjourn, a software developer and consultancy based in California that has an R&D center in Ukraine. "The second front is to support the economy of Ukraine. Technology is probably the one industry in Ukraine that is continuing to work in the same range as before the war."

DataArt, a software engineering firm based in New York, has significant operations in eastern Europe, including Ukraine. Alexei Miller, co-founder and managing director at DataArt, said about 70% of DataArt's Ukraine employees are continuing to work.

Alexei MillerAlexei Miller

"Everyone is trying to do their best in working with the now and the present," Miller said. He called the continuation of work "remarkable. I don't know how people do it. It is an outlet and a reminder of normalcy. They use [work] as a chance to earn a living and to remind themselves that there are better days ahead."

Work as a distraction from the tragedy of war is also an undercurrent at Softjourn. Motivation among employees varies, but "some would like to continue to work just to avoid reading the awful news," Fitsak said. Productivity is on a par with, or somewhat better than, pre-war levels, he added.                                                                                                

In addition, Datapulse, a digital services and consulting firm in Ukraine, recently reported that more than 90% of its tech personnel are still working -- most have been relocated to safer locations within Ukraine or other countries, as have other companies with Ukrainian developers. Datapulse said it has hired 30 people during the last 3 weeks.

Technology is probably the one industry in Ukraine that is continuing to work in the same range as before the war.
Sergiy FitsakManaging director, Softjourn

While established firms dig in, new tech businesses enter the fray. Ukraine's Ministry of Digital Transformation reported more than 1,000 private individuals registered businesses, many of them technology-based, through the ministry's Diia e-government app and web portal. Those registrations took place March 30 -- the day Diia relaunched its registration service, which had been suspended earlier in the war. The ministry listed "the provision of information services, IT and retail" as the leading types of newly registered businesses.

Ripple effect on tech wages, as talent is relocated

Enterprises, perennially short of IT talent, have eagerly tapped developers in Ukraine and other eastern European countries, citing high quality and low cost.

But the war and humanitarian crisis in Ukraine, coupled with sanctions in Russia, have created a "massive dislocation of IT talent," Miller noted. DataArt has employees in Russia, but that operation is winding down. 

"It has been overwhelming," Miller said. "The past ways of where people did work, what value means and what [customers] get for their money is thrown out of the picture. Traditional notions of where people are, what you need to pay and how to organize work to be productive have been thrown out for a significant [portion] of the IT workforce. We are at the beginning of a massive reimagining of how all of that work will be done."

Miller said the disruption raises questions regarding customers' ability to find IT talent of a similar quality, price and level of integration into clients. IT workers who have left Ukraine, primarily women, have relocated to countries such as Moldova, Poland and Romania. And from there, some have moved to western European nations such as Spain, Portugal and Germany.

"As people end up in more countries and become part of the supply dislocation, clients will have to get used to the idea of paying more for similar services," Miller said. "The price level for those who have migrated to western Europe will eventually rise. Wise clients are thinking about that strategically. We have not done any price increases yet and will try to work it out together with clients when we understand the true costs. I am afraid this dislocation will not be free for clients."

The relocation of IT talent is also happening in Russia. "We are carefully unwinding the connections there -- it is important to do it in stages so we can help take care of employees," Miller said.

DataArt will support its Russian employees financially and logistically if they want to relocate to another country, but the company is not pushing anyone to leave, Miller noted. Hundreds of DataArt's Russian employees have already moved to Armenia and thousands more across the Russian tech industry could relocate there at least temporarily, according to Miller.

"It is likely not the last stop," Miller said. "It is not a large country. It has great infrastructure and very kind, hospitable people. But it is not easy to put an additional 10,000 people and their families in Yerevan."

Yerevan, Armenia's capital and host to a number of technology centers, is a potential destination of Russian IT firms.

Contingency plan, years in the making, prepared firm for wartime operations

A considerable amount of work, however, continues within Ukraine. Some workers have moved to safer areas in the western part of the country, but Fitsak said some Softjourn employees work in the Kyiv region and in cities such as Odesa, farther south.

Softjourn's resiliency stems from its contingency plan, which it began to develop in 2014 and has continued to evolve. Elements of that plan included moving all IT infrastructure to the cloud, with the exception of employee laptops. The company also sources internet services from different providers and also uses a satellite-based internet service, Fitsak noted. The company also installed backup generators for large offices and, late last year, checked employee laptops to make sure they could run for several hours without electricity.

Similarly, none of DataArt's IT infrastructure is hosted locally in Ukraine, except employees' laptops. Workers in Ukraine use a combination of public cloud infrastructure, client-hosted infrastructure or virtual developer infrastructure hosted in Poland and Latvia, Miller said.

Customers, thus far, have accommodated DataArt's new way of working.

"Right now, clients are exceptionally supportive," Miller said. Some clients have offered their homes to host refugees and others have been willing to pay for DataArt IT personnel, even if they aren't able to work, he noted.

Softjourn, meanwhile, has signed several new customers since the war began, Fitsak said. "We are able to do the work and provide the services at the same level of quality," he added.

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