The ICT sector is very promising. Recognising the country’s highly skilled workforce and its comparatively lower costs, A.T. Kearney ranked Ukraine 38th in its Global Services Location Index of the best destinations for outsourcing activities. There are over 4,000 IT companies and more than 300 Internet providers operating in offshore development centres in Kharkiv, Kyiv and other Ukrainian major cities and employing approximately 100,000 programmers, administrators and consultants. Around 30,000 students graduate every year from the country’s 20 education institutions specialising in IT. Besides, a significant number of Ukrainian specialists have international education or job experience abroad.
With only one fixed telephony operator and a mobile penetration rate exceeding 100%, the telecom industry is a more difficult market to enter. On the other hand, the Internet market continues to offer many opportunities since the penetration rate is only 33%.
Strategic direction/ specific schemes and incentives
The government launched several initiatives to increase access to communication services and reinforce the country’s innovation capacity:
R&D and innovation considered as priorities in the “Programme of Economic Reforms” for 2010-2014: increased budget for basic and applied research, development of PPP in the R&D and innovation sector, improvement of the innovation infrastructure, support to innovative activities, negotiations for the accession to the European Research Area;
National project Technopolis: high tech park to be developed in Kiev on a PPP basis for a total investment of EUR 60 million;
National project Open World
: development of a broadband network servicing 20,000 secondary schools and up to 5 million subscribers with high speed internet (further details in ‘Business opportunities’).
Other interesting initiatives were launched by international organisations or NGOs active in Ukraine:
National project Open World
: development of a 4G broadband network (up to USD 350 million), implementation of an educational portal (up to USD 20 million) and equipment of secondary schools with computer devices (up to USD 80 million), with a payback period of 7 years and an IRR of 12%;
Outsourcing: IT services and support, contact centres, back-office support;
Development of IT products and services for the advertising sector: web development, softwares, etc.;
Software development and programming;
Establishment and acquisition of Internet providers and cable operators.
Some success stories
EVRY (Norway), formerly known as EDB ErgoGroup, is the second largest IT services company in the Nordic region. In 2007, the group acquired 2 leading Ukrainian software development and IT outsourcing companies: Infopulse Ukraine (650 employees) and Miratech (220 employees).
Ciklum (Denmark) is an innovative IT outsourcing company specializing in nearshore software development in Eastern Europe, Ukraine and Belarus. The company offers businesses to establish their IT department in one of its nearshore and/or offshore development centers or to outsource, completely or partially, their software development. Established in 2002, Ciklum has 6 development offices in Ukraine, 1 in Belarus, and 2 in Pakistan. It employs more than 1,700 IT specialists worldwide.
Providence Equity Partners (USA) is a private equity investment firm focused on media, entertainment, communications and information investments. In 2007, the firm purchased Volia, Ukraine’s leading cable operator. In 2010, it acquired the Ukrainian operations of FiberNet. These assets include SDS Falstap, the largest cable operator in Dnipropetrovsk.
Siemens (Germany) established a 100%-owned subsidiary in Ukraine, which supplies products, services and solutions to Ukraine’s energy, industry, transport and healthcare sectors.
EPIC (Austria) is the investment house which acquired a 92.79% stake in Ukraine’s largest landline telephone provider Ukrtelecom in 2011 for USD 1.3 billion.
Useful links and contacts
Ukrainian Chamber of Commerce and Industry
European Business Association