55% of IT companies in Ukraine did not relocate: study

Under the pressure of the war, Ukraine's IT landscape is changing.

55% of IT companies in Ukraine did not relocate: study

Valentyn Ihnatiev

29.08.2022 | 07:31

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How gradually this is happening, how many companies have decided to relocate within the country or abroad, and whether the relocation of business in the digital sphere will continue - the study of the IT Ukraine Association and the law firm Sayenko Kharenko helped answer these questions.

The relocation factor becomes decisive in determining the prospects for further development of the Ukrainian IT market. This is stated by the Executive Director of the IT Ukraine Association Konstantin Vasyuk, who noted that today a new map of business placement in the country is being actively formed.

After the outbreak of a full-scale war, the industry started to face new challenges. Some companies diversified offices, while others relocated to other regions or abroad. Some partly turned off the business.

How many IT companies have carried out a forced relocation

As the study showed, almost 55% of IT companies operating in the Ukrainian market decided fully or partially to switch to a remote work format instead of relocating. Some of these companies have already partially returned their employees to the office.

Where is the IT business moving?

Among the companies that have chosen relocation as their own path, the share of business relocation within Ukraine prevails, namely 45%. Another 42% of the surveyed companies partially relocated abroad, and only 5% were forced to close part of their offices in Ukraine.

None of the surveyed companies plans to completely close their business in Ukraine. Moreover, by the end of 2022, 63% of companies are not going to partially or completely relocate their business. Only 14% of companies are considering a partial or full relocation abroad before the end of this year. Another 23% are going to combine relocation within Ukraine and abroad.

Market representatives take a balanced approach to solving the issue of relocation and when relocating abroad, they most often choose countries in which they already have offices - 43%. Also, 22% of companies rely on the advice of tax consultants and lawyers, and another 22% choose on their own, to assess the costs of doing business in a particular country.

The study showed that mainly companies from Ukraine moved their business to Poland, Spain, Romania, Bulgaria, Portugal, Germany, Turkey, and Croatia.

Among the relocated organizations, all companies with more than 1 200 employees, as well as 64% of companies with 200 – 1 200 employees, will open new offices. Potential countries for opening new offices are Romania, Spain, Portugal, Poland, Great Britain, and Croatia.

Why companies refuse to relocate

Companies note that the most frequently constrained movement of business abroad is:

  • impossibility of specialists' travel outside Ukraine;
  • desire to work in Ukraine and pay taxes here;
  • lack of desire on the part of the majority of the team to move;
  • high costs of doing business in other countries compared to Ukraine.

It is the last point that is decisive for a third of companies.

Movement of workers in IT

Back in May, the Association conducted a study that showed that the largest share of relocated workers is in IT companies with a staff of more than 1 200 people - 32%. In companies with teams from 200 to 1 200 employees, the percentage of relocated employees is 24%, and in companies with a staff of up to 200 people - only 14%.

What are the challenges faced by relocated companies?

In the first months of the relocation, companies faced several serious challenges:

  • Decreased competitiveness against the backdrop of a forced increase in the cost of works and services due to rising business costs – 21%;
  • Lack of living conditions for all employees - 20%;
  • The need to create a local company - 18%;
  • Increase in the tax burden - 15%;
  • Language and cultural barrier - 13%.

Relocation results for companies

Despite the difficult process of moving a business, 93% of relocated companies were satisfied with the results. They have successfully adapted to work in the new conditions and cope well with all the challenges. At the same time, 53% of companies relocated within Ukraine are still looking for ways to further move their business abroad.

The abolition of martial law and the return of the military situation to at least the conditions that were in the country before February 24, 2022, will help change the situation - this is how every third company answers. Under such conditions, 80% of companies are ready to return their business to Ukraine. And only 7% of companies claim that they do not plan to return their business to Ukraine.

Several factors will help stabilize the further development of the IT industry in Ukraine. First of all, we are talking about permission for the temporary departure of specialists on a business trip outside Ukraine. It is also important to provide an effective mechanism for reserving IT specialists. Companies also note the need to address issues of NBU policy regarding the procedure for foreign exchange settlements and liberalize tax legislation.

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