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HomeNewsHow Russia's invasion of Ukraine threatens the IT industry

How Russia’s invasion of Ukraine threatens the IT industry

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The invasion of Ukraine by Russia is having a significant effect on the global IT sector. Ukraine is well-known in Europe as a technology powerhouse and a major supplier of IT outsourcing services. Before the conflict, the country’s IT sector contributed roughly 4% of the GDP. It is due to the country’s strong technology education foundation.

Behind the United States, India, and Russia, it had the fourth-highest number of certified IT professionals as of March 2013. Over 20,000 IT students graduate annually, according to the IT Ukraine Association, and theN-IX IT Market Report 2019 lists Ukraine as a top destination for software development and a major exporter of IT services to Europe. Additionally, Ukrainian outsourcing firms take pride in their excellent adherence to international IP protection laws.

Organizations that contract with Ukraine for IT support are at risk due to the disruptions brought on by the conflict. The decreased operational capacity may result in fewer bug fixes, less customer support, and fewer security patches as both Ukrainian and foreign businesses scramble to protect their respective populations. Additionally, Ukraine experienced communication blackouts as widespread internet outages put national security and productivity 

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The invasion’s effects are unquestionable throughout Ukraine’s larger tech ecosystem, which not only includes hundreds of startups and established companies. It also provides R&D facilities for some of the biggest technology companies in the world.

The disruptions caused by the conflict endangers organizations that outsource IT support to Ukraine. As Ukrainian and international businesses scramble to protect their employees, reduced operational capacity may result in fewer bug fixes, customer support, and security patches. Ukraine also experienced communication blackouts as internet outages blanketed the country, threatening safety and productivity even further.

It is not simply a matter of quickly switching providers to fill the gap for outsourcing customers. According to Michael Hart, managing partner of Merit Outsourcing Advisors, switching IT providers takes months of planning and discussions and is rarely done at the drop of a hat.

It often takes a year to 18 months to find and choose the service provider for an outsourcing contract, and another few months to negotiate a deal that is acceptable to both parties and consistent with the original sourcing strategy.

The situation is already affecting Canadian businesses. One unnamed company told CIO Jim Love of IT World Canada that it had to cancel a “mission-critical” project after its Ukrainian employees left to join the military. “We have four months to develop specifications and train developers on how the system works.” That is all gone now.”

The effect of the war on Indian IT business

The Indian IT sector was in trouble during the invasion of Ukraine by Russia. Europe is the second-most important client geography, accounting for 20–25% of the total business, according to data from the top Indian IT companies. 90% of this business is generated in Western Europe. 

However, Indian IT companies are increasingly relying on the Eastern region as a strategic delivery hub because of its proximity to client offices in Europe. Besides that, Indian IT service providers are thinking about shifting their service/delivery locations from Eastern Europe to India, though no decisions have been made as of yet. It will have an impact on how services are delivered and on the local Ukrainian economy.

Additionally, many Indian engineering firms started purchasing Eastern European companies in the banking, utilities, and energy sectors to increase their delivery capacities. Many of these businesses deal with supply issues as a result of ongoing conflicts, which see an important effect on operations and even result in deals falling through. Even if already-signed contracts are unaffected, new ones might be put on hold as European companies reevaluate their business plans and financial situation. It has ramifications for Indian IT companies looking to develop the ecosystem of software start-ups.

On the other hand, the situation is worrying from both an employment and financial standpoint. For the foreseeable future, European IT service providers are likely to pause or reduce hiring, potentially leaving many talented Indian candidates unemployed or competing fiercely for India/US-based jobs. At the same time, many global IT projects that were previously outsourced to Ukraine and other East European countries (which are rapidly gaining a reputation as a hub of tech talent) are most likely to be moved to India, driving up demand.

“As more work shifts to India, there will be an immediate increase in demand for local talent,” a reputable research firm recently stated.

How Russia's invasion of Ukraine threatens the IT industry

What can the Indian IT sector do to assist?

IT firms are currently concerned about the long-term impact of the Russia-Ukraine conflict. The leading companies have all reaffirmed their dedication to upholding high standards of customer service which also supports those affected by the conflict. Giving Ukrainian employees professional and personal support while ensuring ongoing service delivery is of utmost importance.

For instance, businesses with a presence in Europe can set up offshore delivery hubs in and around Ukraine to accommodate workers displaced by the conflict. However, they can also collaborate with Ukrainian vendors to create safe alternative channels for product transport and delivery to keep business flowing. From a humanitarian standpoint, much can be done, including financial assistance to displaced workers and emergency supplies to employees, service partners, and their family members currently residing in Ukraine.

The Final Word

The invasion was met with harsh condemnation from the United States, the European Union, and NATO allies, with broad, unprecedented financial and diplomatic sanctions against Russia promised, sanctions that are likely to have an impact on regional business, trade, and finance. The cyberattack began with floods of internet traffic and data-wiping malware directed at Ukrainian government departments, followed by ground, sea, and air incursion. 

On the other hand, the invasion’s effects are undoubted across Ukraine’s broader tech ecosystem, which includes hundreds of startups and larger tech firms but also research and development offices for some of the world’s most prominent technology brands. However, the IT industry has been impacted a lot during the Russia’s-Ukraine war.

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