Russia-Ukraine Conflict and Its Impact on Outsourced IT Services

Ever since the Russia-Ukraine conflict has taken global attention, there are aggressive debates on concerns around energy supply and prices. But there is another major impact to talk about, i.e., outsourced IT services.

Ukraine stands as one of the world’s leading suppliers of outsourced IT services, experienced programmers, and other types of IT professionals. Ukraine’s outsourced services are offered to thousands of companies all over the world, especially in American and European markets. With the upraising Russia-Ukraine conflict, there is a fear that it will undermine IT services and related projects all over the world. Therefore, this article emphasizes the ongoing conflict and its impact on outsourced IT services.

Ukraine IT Market

Ukraine holds a strong IT market that has a key impact on the country’s export figures. Just in the year 2021, the Ukraine IT market generated 36% more sales revenue compared to 2020. As per IT Ukraine Association, the market managed to generate $6.8 billion in export compared to $5 billion in 2020 and $4.2 billion in 2019. The association also highlighted that the IT specialists count also rose to 285,000 in 2021 compared to 244,000 in 2020.

There are many software companies and developers that have emerged from Ukraine, such as MacPaw, Grammarly, etc. Owing to being one of the global hubs of IT services, Ukraine also serves as the headquarters of at least 13 of the world’s top 100 outsourcing service providers, as per the International Association of Outsourcing Professionals (IAOP). Overall, there is no doubt in acknowledging the fact that almost all the big IT companies in the USA and Western Europe are somehow linked with IT outsourcing services or IT developers from Ukraine.

Russia-Ukraine Conflict and Its Impact

With Russia’s invasion of Ukraine, the whole IT services of the country are experiencing disruption, as the professionals don’t have the proper environment to work and the internet is also causing a lot of trouble. Those companies that have headquarters in Ukraine are also facing a serious service disruption crisis.

Impact of Non-Availability of IT Professionals

As per Forbes, the impact number is massive because the ongoing war in Ukraine and the sanctions imposed on Russia are/will cause severe disruption of services. For example:

• There are over 50,000 individuals working with outsourced service providers in Ukraine, Belarus, and Russia with clients in the healthcare, automobile, banking, and retail industries.
• There are over 30,000 individuals working in Global Business Service (GBS) centers in Ukraine, Belarus, and Russia.

Now imagine the disruption of services caused by these 80,000+ professionals who are/will unable to deliver their services at the right time. The 80,000 number figure might seem a small number compared to the total count of IT professionals in the world. But you should know that most of Ukraine’s IT professionals are senior talent, so they have a major influence on the global IT market.

Impact of Talent Shortage and Service Pricing

The Russia-Ukraine conflict is triggered at a time when the world is already experiencing a talent shortage. The global talent shortage as of 2021 counted to 40 million skilled workers across the world. If this trend keeps going further, then it is anticipated that companies across the world could lose $8.4 trillion in revenue by 2030 just due to the talent shortage.

Now combine this talent shortage with the ongoing Russia-Ukraine conflict and project where the service pricing will go. With minimal access to skilled developers, the service charges are already growing aggressively. Moreover, the inflation pressure combined with war influence is also triggering the rise in service pricing even further.

Impact on Future Contracts and Hiring Shift

Undoubtedly, most of the American and European companies that are linked with Ukraine’s outsourced IT services are facing some sort of disruption in services presently. Moreover, since the war situation is still uncertain, there is a fear that such companies will shift to other outsourcing alternatives. Countries like India, Mexico, Brazil, Malaysia, and similar others are also known for offering the outsourced services companies need. So, it is also expected that IT services providers in such countries will likely get more hiring chances. This will impact the sales of Ukrainian IT companies, further worsening the situation for them.

How Long Will This Disruption Last?

The Russia-Ukraine conflict is a major event, which is casting its impact across the globe. But just like every conflicting situation has a solution, there are strong hopes that the situation will get better gradually. However, the ceasefire will not be enough to bring the market back to its war-prior state. It will take some time for the market to absorb the whole disruption just like the world’s economies, which are absorbing the impacts of the COVID-19 pandemic till today. In short, considering the market trend and current position, it is anticipated that the market will need at least 3-6 months to recover after the ceasefire.

Diversification – The Key to Overcome Such Black Swan Events

A black swan event is an unpredictable event that occurs every 3-5 years in different shapes, such as flood, war, disease, etc. The Russia-Ukraine conflict is also one such black swan event that the world is facing currently. But companies could have easily absorbed its impacts if they had adopted the simple principle of service diversification.

Often companies concentrate to get services from one location, instead of diversifying their service locations. So, any unusual event in that location will cast a severe impact on service delivery. This is exactly what companies involved with Ukraine, Russia, and Belarus are facing today. And now, such companies are either shifting their workers to safer locations or looking for alternative services.

Therefore, the key to avoiding major disruption in services at present time is to practice service diversification. For example, if you are outsourcing your IT needs, then you should divide those needs and then look for outsourcing services in different locations. This way, even if you face disruption in one location, you can stay assured that the rest of your services are active and running.