Political uncertainty in Ukraine may cripple one of the country’s fastest-growing sectors, information technology (IT) — but not if entrepreneur Ihor Pidruchny has anything to do with it. He is launching a media campaign this week to convince the world that the standoff between Russia, Ukraine, and Western nations is not hurting the world’s fourth-largest IT industry.
Ukrainians have got a lot of energy and inspiration to do new things. We can be a self-sufficient partner in the economic world, and we can develop great software. … We just need some support and some belief from the U.S. companies.
Ihor Pidruchny, also an assistant to one of the leaders of the Ukrainian parliament’s majority, Oleh Tiahnybok, is touting Ukrainian IT companies this week to U.S. and Canadian companies through a social media campaign on Facebook, Twitter, and LinkedIn.
Over the weekend, he spoke to IT specialists in the Ukrainian city of Lviv who gathered for an international forum on IT outsourcing. Pidruchny is trying to foster collaboration between IT activists and the new Ukrainian government.
He’s also been promoting reforms that would ease regulations on IT startups, a mission he’s had for a year working for one of the three parties that have now formed a majority, Svoboda. That mission is only now becoming fruitful because “before the revolution … the government was not interested in development at all. They were only interested in stealing,” he said.
Setting up an IT company in Ukraine currently takes an average of three to four weeks, a process Pidruchny knows from experience founding what’s now known as Letzgro in 2003 and renaming it in 2012. The company now has about 50 employees in Kiev, Lviv, and Ivano-Frankivsk. Pidruchny wants to speed up and simplify the registration process and ensure Ukraine’s IT education programs can compete with those in other countries. He was also involved in protests against Ukraine’s former government, and “a lot” of friends in the IT industry donated money to the revolution, he said.
Despite the nation’s relatively small population, Ukraine’s IT industry ranks fourth in the world for number of employees, behind the U.S., Russia, and India, according to an annual report published last April by the country’s leading IT association, Ukrainian Hi-Tech Initiative.
About 25,000 Ukrainians worked in IT in 2011, making the industry one of the fastest-growing sectors, though with the country’s overall labor force of 22 million people, the IT sector has much room to grow, according to research from IHS Global Insight. Precise data on more recent employment is “very difficult” to give, Lilit Gevorgvan, senior economist for IHS, said.
“The country has been successfully championing its image as an IT services outsourcing destination, although the brain drain has remained a persistent problem for the sector,” Gevorgvan said.
This year Ukrainian companies will export IT services worth $764.2 million, up last year from $464.2 million, according to the Central and Eastern European Outsourcing Association. The group predicted last year that the Ukrainian IT industry would grow 20 percent in 2014, but the evolving political landscape may alter that growth.
With Russia’s annexation of Crimea, IT companies there must decide whether to move to Ukraine’s mainland or figure out how to operate under the Russian government. Many are choosing Ukraine, and many IT employees are fleeing Crimea to work for Ukrainian companies, according to Pidruchny.
But he insists business in Kiev, where he lives, is normal. Without office space in Kiev, where only a handful of Letzgro employees work, Pidruchny and his colleagues often work from a co-working space in Maidan Square. The violent unrest there earlier this year didn’t affect business, and people have continued working normal schedules, he said.
Especially in the IT industry … in the IT industry, we always understand that our efficiency is important. Our industry supports the economics of Ukraine.
Thomas O’Malley, CEO of digital focus group facilitator Convetit, outsources IT operations to Pidruchny’s Letzgro from Palo Alto, Calif., and said services have continued normally in recent months.
O’Malley used to outsource to India, risking power outages rather than a Russian invasion, but “they say yes to everything, and you’re never really sure what’s going to happen,” he said.“In Ukraine, you get very straight answers, whether or not you’re going to like it.” And the young men he speaks with in Ukraine are passionate about the projects for Convetit, sometimes taking their work home, he said.
Pidruchny has been chatting on Facebook with Ukraine’s minister of economic development, Pavlo Sheremeta, whom he met 12 years ago at Kyiv Mohyla Business School. Sheremeta is friendly to the proposed reforms for the IT industry, Pidruchny said, giving him hope that the new government can improve the business climate and reduce corruption.
“When I think of Ukraine I have this analogy with Israel,” Pidruchny said. He sees a parallel between the oppression the Jewish people have experienced in the Holocaust, and the independence they gained, and the oppression Ukrainians have experienced, invaded by countries for centuries and dying from famines during Soviet rule before gaining independence.
“If we can continue that history and go in the similar way where Israel made education one of their priorities and generated a new generation of people that are now the startup nation … that would be good,” he said.