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Revisiting Familiar Territory, Ukraine IT Endures Despite Putin Threat

The first few weeks of 2022 have felt like an unwelcome déjà vu for Ukrainians. 

As Russian forces build up on the country’s eastern border, US President Joe Biden has repeatedly voiced his concern that Russia could invade Ukraine, and backed by other NATO member countries, is sending 3,000 troops to Poland, Romania and Germany in a show of force that he hopes will give Russia pause for thought. Rhetoric akin to old Cold War commentary has begun again, and the world’s focus is on what will play out in Eastern Europe.

Despite simmering tensions and global media coverage, those on the ground, and particularly those involved in the country’s outsourcing industry, is far calmer. 

Iryna Velychko, CEO at Business Contact Center Consulting

Iryna Velychko is the CEO at Business Contact Center Consulting and co-founder and first president of the Ukrainian Contact Center Association. Originally from the easter city of Donetsk, one of the hotspots of tensions, Velychko explains that previous experience means that the country’s population is preparing itself without panicking, as requested by President Volodymyr Zelensky. The difference between Western media coverage and local coverage is stark.

“If you know Ukrainian history, you know that this isn’t the first time we have been in this situation. We passed through the same situation in 2014, but that time it was much more frightening,” she said.

“But the reality is that for outsourcing operations, nothing has changed. The 2014 experience [when Russian annexed the Crimea Peninsula in southern Ukraine] taught us the need to plan and have agility, and Ukrainian contact centers subsequently dealt with Covid-19 and lockdowns much more ably than other parts of the world,” she added. 

“Hope for the Best, Prepare for the Worst”

Outsourcing is big business in Ukraine. In an often unsteady economic scenario, outsourcing is a vital source of job creation. Research suggests 90% of IT services in Ukraine are outsourced to foreign nations, and though the country is primarily known as an IT services destination, sound English-level abilities (the country scored above Costa Rica, Dominican Republic, Chile, Uruguay, El Salvador and Honduras in the recent Education First English Proficiency Index) and an attractive conversion rate has also helped the contact industry grow in recent years. 

“The current tension has not directly affected our business in Ukraine or in other countries,” — Adelina Outsourcing

Though there are several Ukrainian cities of just under a million in population, four cities account the bulk of outsourcing activity. Kyiv, the capital in the center-north of the country is home to 2.8 million people and is the largest outsourcing hub. Next is Lviv, the western capital, is home to around 720,000 and is the closest major city to the Polish border and therefore to a NATO member and the European Union. In eastern Ukraine, and close to the Russian border, the city of Kharkiv, a “student city” with 34 universities, provides a large share of professionals with IT service skill sets related to academia, particularly those involved in data analysis, artificial intelligence, machine learning and so on. In the south is Odessa, close to the Crimean peninsula and just shy of 1 million inhabitants.

Companies in each of these cities, and others dotted across the country, are prepared and are continuing to work without impediment, says Andrew Wrobel, founding partner at Emerging Europe, a market intelligence and consultancy platform. 

Andrew Wrobel, founding partner at Emerging Europe

“It’s business as usual in Kyiv and Lviv, the biggest outsourcing destinations in Ukraine. It’s the same in other outsourcing destinations like Kharkiv and Odessa. There is relative calm and companies are focused on deliverables,” he said. 

Information gathered from the Ukrainian Contact Center Association shows that contact center companies are unruffled by the conflict. 

Contactis, a company of 200 operators based in Kyiv responded to a Nearshore Americas questionnaire by saying that the conflict has had “absolutely no effect, we continue to work normally.”

Adelina Outsourcing, a BPO with 4,000 agents across Ukraine, Belarus, Kazakhstan, Poland, Turkey, and the US, said that it sold its Russian company in 2014 and “closed down direct Russian projects serviced in Ukraine” at the same time but that volumes were quickly replaced with other international projects. 

“The current tension has not directly affected our business in Ukraine or in other countries,” said the company. 

Cooperation and Growth

Nataliya Anon, CEO and President of Svitla Systems

“We hope for the best and prepare for the worst,” explained Nataliya Anon, CEO and President of Svitla Systems, a US-headquartered IT services company with offices in Ukraine, the rest of Europe, as well as Latin America and Asia. 

Flexibility has been key, ever since the conflict’s original spark in 2014. Ukrainian companies have thoroughly revised their logistics, reviewed their infrastructural security and set up satellite offices should the worst happen. Most IT services companies and contact centers work with data centers in Western Europe and the US. Clients, say each of the industry stakeholders interviewed, have been impressed and assured by the companies’ abilities to stay on track during a period of extreme stress.

A large part of the success of preparation has been down to the cooperation organizations have shown in both the contact center and IT services industries, said Velychko. 

“There is constant communication within the contact center industry, both through formal and non-formal channels. For example, we produced and distributed videos to explain to companies how to prepare for remote work practice. We have some Telegram groups with over 600 contact center managers, where we can share problems, and receive quick and accurate advice,” she said. 

Ukrainian IT production has increased by almost 120% over the last five years

Willingness to work together, as well as the country’s talent pool, has driven success. The country has chiseled out a name for itself as a leading provider of outsourcing services in data science. 

According to Emerging Europe’s soon-to-be-released report, Future of IT in Emerging Europe, Ukrainian IT production has increased by almost 120% over the last five years. The growth of the industry despite conflict has generated comparisons with another nation known as an entrepreneurial hub.

“To an extent, Ukraine reminds me of Israel. There is an ongoing conflict in Israel yet Israel it is the startup nation. It’s a small country but has performed better in several areas than the US per capita,” said Wrobel. 

The driver for IT expansion has been Ukraine’s formidable educational system. A consequence of Ukraine’s former membership as a constituent republic of the Soviet Union, its education has traditionally focused on hard sciences and math, necessary components of cutting-edge computer sciences central to outsourcing. 

“Ukrainian developers are very strongly versed in math, statistics, algorithms,” said Anon. “They’re not only able to write code but propose solutions and think proactively. We have a few PhDs in the company and most other developers have not only bachelor’s degrees but also master’s. Ukraine offers top notch technical talent,” said Anon.

A Future Beyond Conflict for Outsourcing in Ukraine

Though Ukrainians are hopeful that the conflict does not escalate further, there is an acceptance that tensions will not be going away soon. Both the country and the outsourcing industry will have to learn to live with it. 

“It’s all about an escalation of negotiation stakes, so to speak, and Russia is flexing its muscles before negotiations. Forces will probably continue to build up on the border and Ukraine will become a modern day Berlin Wall. That’s a reality we’ll probably have to live with,” said Anon.

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Investors and potential clients need not worry about whether Ukrainian companies can deliver, says Wrobel. Ukraine’s outsourcing industry has shown its ability, and ignorance of the country is at the heart of many doubts. 

“A lot of companies in the US or Europe already work with suppliers or IT providers in Ukraine without knowing, because the delivery center is based there,” he said. “There’s a question over whether investors have enough interest in the region to really find out about it. A lot of understanding remains based on stereotypes. A lot of opinions about the region are simply out of date.

Peter Appleby

Peter is former Managing Editor of Nearshore Americas. Hailing from Liverpool, UK, he is now based in Mexico City. He has several years’ experience covering the business and energy markets in Mexico and the greater Latin American region. If you’d like to share any tips or story ideas, please reach out to him here.

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