Kyiv’s information technology industry is currently experiencing an enormous rise. Because it is the third biggest industry behind agriculture and metal work, it is a pillar of a young state’s economy that is still trying to stabilise. IT Cluster Kyiv brings the capital’s tech companies together and aims to improve their position in Europe and the world by using modern business approaches. Despite the success, the boom brings new challenges to Ukraine.
It all started in 1951 when Sergei Lebedev created the first electronic computer in Europe. It marked the beginning of a future Ukrainian success story. A dense infrastructure of educational facilities trained thousands of specialists during Soviet times, but the business environment was a rather difficult one to work in.
“It wasn’t nice to do business then,” says Nataly Veremeeva, CEO of IT Cluster Kyiv, an industry insider. “It was notorious activities. You were called a speculator, you were stealing from the nation by adding some extra margin.”
Forty years later, after the fall of the Soviet Union in 1991 and the radical shift to a free market economy, new companies arose and explored new business options.
“These so-called outsourcing companies started to go west,” says Veremeeva. “That was a big learning curve for Ukraine. They learned how the rest of the world was working, making money and doing business. They learned the management techniques, approaches and communication. They started to speak English better.”
Supporting and connecting companies in this competitive industry is the role of IT Cluster. Being financed by its members, the NGO aims to enhance their skills in entrepreneurship, management and networking. With strong relationships with the local and national government, as well as company networks abroad, Veremeeva is convinced of supporting the IT industry as a whole, not just single companies.
“I actually don’t like the word competitors. I prefer collaborators,” says Veremeeva. “There is competition, but also cooperation. Combining this, you have innovation, you have new options of working together. This is exactly what we are aiming at.”
“Every city is going to find a niche and specialise. We need to understand what each region has to offer and what their unique set of resources is.”
Kyiv, for instance, is a prime location for the development of artificial intelligence.
“Our biggest success stories of start-ups and product companies are connected to that. One was founded in California, but by Ukrainians. It was bought by Amazon for 1 billion dollars and grew rapidly in Kyiv, from 80 to 800 people last year. There are more companies involving artificial intelligence and we believe that this is our future. Maybe some other things as well, we are still in early days.”
“You can even call it the Ukrainian dream.”
“There’s the American dream and the Ukrainian dream is that if you have the brains and you do IT, then you can earn a decent living, compared to one of European standards.”
In this way, information technology can keep young people in Ukraine, preventing the country from an even further decreasing population. This industry has created a new, wealthy class of people living in Kyiv. Working together with companies from North America and Western Europe has made a drastic impact on the economy, especially on the professionals’ wages.
“Kyiv right now is in the top 10 cheapest capitals to live in the world. The programmers are getting higher salaries over here, significantly higher than the rest of the country.”
“Since there is a strict competition for the resources, the salaries for the IT developers are also on a European level. The average salary in the country is around 300€ or 400€. In IT, the minimum is 1000€ and for good specialists it’s 3000€ to 5000€, which is comparable to the salaries of European software developers.”
The boom of the IT industry and the international partnerships have brought prosperity to a fraction of Kyiv, but major economic and societal challenges have also arisen. The businesses who solely operate in Ukraine struggle to compete for the resources, compared to those who service clients worldwide.
“That creates a lot of tension. Our own industry isn’t able to attract interest of local IT companies because they’re working for the Western clients. It’s unable to develop further. Ukrainian companies start to help local ones because they understand that it’s the basis to help the economy survive and bloom, for the whole country to prosper. This mindset is not quite there yet, but some moves in that direction have already been made.”
Another subsequent issue is that specialists in other industries decide to re-start their careers in the IT industry, due to the higher wages.
“There are business analysts from banks or editors of newspapers who re-qualify to do even simple IT jobs, just because it gives more money,” says Veremeeva. “That’s a potential problem for the economy. Either the rest of the jobs need to get to the higher level, or we need to understand that it’s not a good tendency. Teachers in the universities are underpaid and also tend to go into IT, but then the question is: Who is going to teach?”
There is also an increasing demand for protection of intellectual property.
“We have the legislation in place, but we need to support the judicial system to make sure that we are protecting it.”
“We require more awareness about IT and digital solutions for the local industry. There’s the lack of understanding its value, that you need to pay for IT. It’s not like you can get it for free. Intellectual property also costs money although it’s air, of course. But it’s valuable air, so to say.”
Veremeeva and IT Cluster Kyiv are attempting to tackle the problems that still hinder Ukraine and hold the country back from being a more visible location on the economic world map. It is not only the cheap rents that should attract companies to this city, but also the large pool of highly qualified IT specialists. This industry has been an important factor for the Ukrainian economy and will prove to be a substantial part of the young country’s future.