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We follow the development of the market and understand that in the era of IT business development it is necessary to keep pace with progress.

Only the lazy do not deal with real estate – a top phrase a decade ago in Ukraine. Today, one can almost say the same about the IT sphere. At least, most Ukrainians are either “deep in the subject”, or their neighbor works in an IT company, or somewhere in the middle.

Let’s think about the development of the IT industry in Ukraine, analyzing many facts.

IT business in Ukraine and the world. The market in 2018

1. Revenues from the export of IT services in 2018 according to the data НБУ: $ 3.204 billion, an increase of 29% compared to 2017.
2. Revenue from exports of IT services in 2018, according to the State Statistics Service: $ 1.578 billion, an increase of 20% compared to the previous year.
3. The number of staff in the export of IT services in 2018 according to the data DOU: 159,687 technicians at the end of the year, an increase of 26% since the beginning of the year. Total registered FOP for the provision of IT services at the beginning of 2018 – 125,000.

Taking into account the difference between receipts and income, as well as the fact that part of the business is in the shadows, we estimate the income from the export of IT services in 2018 on our fingers:
1. Average number of employees: 143,385.
2. Average hourly rate of staff: $ 25.
3. Average number of hours sold per year with a 30% discount from working hours: 1 344 / person.
4. Estimated income: $ 4.8 billion.

Conclusions:
1. IT business continues to optimize taxes in Ukraine through FOP and work with non-residents. The difference between statistics and real income is up to 70%.
2. The growth of the industry is visible in various independent metrics (income, receipts, personnel) and at the end of 2018 is in the range of 20-29%.
3. Total receipts from exports of goods and services in 2018 according to НБУ – $ 59.117 billion, i.e. the share of IT receipts was 5.4%. For comparison, the export of transport services brought in $ 5.923 billion (10%).

Let’s pay attention to the global indicators and trends in 2018.

1. Total IT market size and growth rates (excluding Hardware: Enterprise Software, Data Center Systems, IT Services, etc.):
– according to Gartner, $ 3.699 trillion, 4.5%;
– according to IDC , $ 3.779 trillion, 5%.

2. The size of the IT services market and the growth rate:
– according to Gartner, $ 987 billion, 5.9%;
– according to IDC , $ 1 trillion, 4%.

In general, the share of Ukraine in the global IT services market can be calculated as 0.5%. On the other hand, realizing that the main part of Ukrainian IT services is an outsourcing model, while outstaffing and product development models occupy a small share in terms of the number of programmers, I propose to segment ourselves as follows.

Market size ITO (Information technology outsourcing) in 2018 according to Statista: $ 62 billion with a slight drop of 3%.

In this segment, India is the main leader and, in particular, TataConsultancy Services with the number of personnel of 335 thousand people and income of more than $ 15 billion.Ukraine in this segment at the end of 2018 took 7.8%.

Conclusions:
The global growth rate of the overall IT market is not high – up to 6% per year (consumption). But Ukrainian companies have found their own formula for success. The dynamics of 2018 20-29% increase in sales and the forecast of its stable continuation in the coming years suggests that:
– growth occurs at the expense of competitors;
– Ukraine’s share is still small in the global IT market, and due to its increase, it is possible to support the stable development of IT business in Ukraine in the next 5-10 years.

Participants of the Ukrainian IT market. Where are 160 thousand technicians concentrated and what do they do?

According to DOU, in the first 50 IT companies with a staff of general specialists from 380 to 6 600 technical specialists in January 2019 – 45 471, or 28.47% of the total number in Ukraine.

What are the sizes of the first 208 IT companies in Ukraine? 5 companies – with a staff of more than 1500 employees, 13 companies – with a staff of 800-1500, 67 companies – 200-800, 122 companies – 80-200.

Out of 208 companies, about 30 are grocery companies, the rest are outsourcing and outstaffing companies.

In 2018, the number of technical specialists increased by 32,697, while the annual output of 38 technical university s of Ukraine – about 16,000. The difference was formed due to:
– IT academies and schools of large IT companies;
– many courses and retraining of personnel from other areas;
– return of specialists to Ukraine who had previously left the country.

Conclusions:
Despite the fact that the main part of technical specialists is not concentrated in large IT companies, they are the driving force behind the development of the IT industry in Ukraine, creating new opportunities.

Opportunities and prospects for the development of the IT industry

Market analysis shows signs of rapid development of the Ukrainian IT industry. The main ones are:
1. The growth rate of sales of Ukrainian IT companies exceeds the overall global rate by 5 times.
2. The international positioning of Ukrainian IT companies is improving: attracting investment in new startups, large M&A deals, new well-known contracts with IT giants, increasing positions in world rankings.
3. Clients seek to diversify the number of concurrent IT service providers, thereby increasing the opportunities for new sales of Ukrainian companies.
4. Clients are shifting focus from traditional IT outsourcing to IT solutions for business problems. Ukrainian companies are picking up this wave by attracting business analysts to the industry.
5. The state is more involved in the development of the IT industry, using the topic as part of the state international PR program.
6. IT companies integrate with Ukrainian University, creating a demand for specialists and adjusting educational programs.
7. Large IT companies develop their own academies.
8. IT clusters have been formed in 17 cities, locally uniting market participants.

The main threats to development

Are there any threats to continued growth and what are they?
1. Most IT companies are not ready for faster growth due to insufficiently developed in-house management systems.
2. Under the current client demand, it is not always possible to hire and retain personnel of the required qualifications.
3. The rapid growth of IT companies significantly reduces operational and financial efficiency, making the business low-profit.
4. The IT outsourcing market is saturated with players, and competition among them is intensifying. Indian and Chinese companies with a lower price and more resources, internal IT departments of corporations, consulting companies expanding their service portfolio.
5. Customers are moving away from the model of working with one IT service provider, which threatens the decline in current sales.
6. Risk of losing customers due to inability to quickly adapt to changes in technologies, methodologies and new standards.
7. On the market USA, the main consumer of IT services, the introduction of anti-outsourcing legislation is being considered, which could lead to a significant decrease in sales.
8. European requirements for the protection of personal data complicate the provision of IT services from Ukraine.
10. Ukraine will restrict or prohibit the use of FOP to optimize taxes, which will increase costs.
11. University produce fewer technicians than the market demands. Staff shortages limit growth.

Is it worth investing?

It is obvious that the IT industry in Ukraine is one of the most attractive for investors. The question is in choosing a strategy, because each time has a different order of actions. Now there is a global trend for business ecosystems, when consumers, suppliers and competitors are partners in a business model. And those who have learned to manage cooperation will receive the greatest benefits with minimal financial investment.

It was a side view.

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