How the Russian War on Ukraine Will Impact Global IT Sector

Putin’s war on Ukraine has had an unprecedented impact on the world economy. The IT sector is no exception: with Russia now becoming the world’s most sanctioned country, and Ukraine affected by war, we are destined to witness the fundamental changes in the ways IT companies operate, build and support their products and services.

In this blog, we will give you a brief overview of the changes which are currently taking place, and how the Ukrainian IT sector is surviving the Russian aggression.?

Tech Companies Cutting Ties With Russia

Because of sanctions imposed on Russia over its invasion of Ukraine, companies are faced with a difficult choice - losing the vast Russian market and revenues or putting their reputation at stake for supporting the invader bombing another country's peaceful cities. Most of the companies, even the ones whose ties with Russia date 20-30 years back, opt to leave Russia.

Below is a brief list of the tech companies which have plans to exit the Russian market offer have already stopped providing products and services in Russia.

Microsoft has recently announced that it is suspending the distribution of its products and services in Russia. Also, it will de-rank the content sponsored by the Russian government on Bing.

Apple has also stopped the sale of its products and the delivery of services to Russian customers. It has also temporarily disabled some of its location services in Ukraine for fear that they may be used by the aggressor’s troops.

Cisco, the major producer of network equipment, has suspended its operations in Russia for an indefinite time span, while simultaneously offering free services in Ukraine.

PayPal has recently announced its exit from the Russian market and the start of operations in Ukraine.

Meta has suspended its payment-based YouTube and GooglePlay services in Russia.

Oracle, the business software manufacturer, has also halted its operations in Russia until the conflict is resolved. Its main competitor SAP has done the same.

Moreover, Russia has been banned from using popular streaming services Netflix and Spotify, and social networks Twitter and TikTok. Russian authorities recently labeled Facebook and Instagram as extremist organizations and banned them.

These are only just a few examples. The list of tech giants is impressive but smaller and less renowned companies are also leaving the Russian market. Qualcomm, the US chip producer is no longer working with Russian companies, Docker no longer collaborates with clients in Russia and Belorus, Slack suspended accounts in Russia, and companies issuing SSL certificates for websites are no longer serving the belligerent country.

Having said that, the scope of the exit reaches far beyond the suspension services within Russia. A great number of Russian software companies sell products and services to the United States, Asia, and EMEA. Lots of firms worldwide are using their products and services, lots of consumer iOS and Android apps are of Russian origin. To comply with sanctions, companies will have to search for viable alternatives.

Some US firms go as far as firing remote development teams based in Russia and closing R&D centers in the country. Some companies request to check the geolocation of every member on their teams in order to ensure they are not working with Russia-based developers. Some outsourcing companies are opening offices in countries like Georgia, Turkey, or Kazakhstan and offering their Russian employees relocations to other countries.

Surely, outsourcing companies have to take carefully thought-out measures to fully stop operating in Russia: they have to reset their systems, transfer data, and settle legal matters. The full relocation of businesses is a complex process, yet most companies are not willing to give their physical and intellectual property up for ‘nationalization’.

Even though some services, such as Patreon, are not planning to boycott Russian users, the situation spells skyrocketing unemployment rates for Russia and the loss of billion-dollar revenues for tech companies worldwide.?

The Impact of War on Ukrainian IT?

Over the last two decades, the Ukrainian IT sector has become one of the country’s most thriving industries. According to the latest surveys, the IT industry employs more than 300,000 professionals. In December 2021, the country received $ 6,8 billion in export revenue from the IT sector.

The Russian invasion has forced the companies to quickly adjust to operating under pressure. All in all, Ukrainian development firms are being faced with three major challenges:

1. Survival and physical integrity

It’s no secret that Ukraine has been one of the world’s most thriving outsourcing havens, with major R&D centers in Kyiv, Kharkiv, Lviv, and Odesa. Now that most of the major cities are facing threats from Russian air raids and cruise missiles, people have to handle the stress of working under the air raid sirens and being ready to quickly move to the shelters.

A lot of companies, however, have already evacuated or continue to evacuate their specialists with their families from the most dangerous hotspots into Western Ukraine and abroad. Due to the Covid-19 pandemic, companies are accustomed to remote work and distributed teams have already become ubiquitous in 2020-21. After several weeks of adjustments and accommodation, employees are ready to get back to work. Admittedly, though, the situation is extremely difficult for small and medium IT companies many of which will be driven out of business.

2. The employee challenge

According to the recent stats, about 2% of Ukrainian IT specialists have joined the Ukrainian armed forces after Putin’s assault on Ukraine. While a lot of companies are paying full salaries to employees who are fighting to defend their country, organizations are being faced with the necessity to re-allocate resources, distribute their tasks among other employees, or work longer hours.

Recently, however, the Ukrainian Ministry for Digital Transformation has appealed to the Ukrainian government to reconsider the process for drafting IT specialists to the armed forces. The reasoning is simple - IT is the only segment of the Ukrainian economy that has maintained integrity in these turbulent times. Currently, Ukrainian Armed Forces are in no urgent need of soldiers, and Ukrainian IT is able to continue working to support the country’s economy and help it meet the strategic goals during warfare.?

3. The clients’ trust

The concerns about the integrity of personnel, data, and the fulfillment of business goals under these circumstances are perfectly understandable. At this point, many of the international customers are refraining from launching new projects. Yet, according to the poll carried out by the IT Ukraine Association, 92% of companies have implemented and executed Business Continuity Plans to continue working in extreme conditions. The clients have welcomed these measures and are continuing to trust Ukrainian developers with ongoing projects.

Our teams at VARTEQ are fully operational.? Our company is directly involved in supporting the army, defense forces, and civilians who have become casualties of war. VARTEQ has never done business with Russian clientele and has never hired specialists from the aggressor’s resource pool.? Proud of our decisions made many years ago when Russia started the war in 2014, we urge the world to follow suit.?

We are grateful to our clients for their support and continued loyalty. Feel free to contact us if you need qualified software developers or have any questions.?