The Ukrainian IT sector report

Transcript

1. The Ukrainian IT Sector: An Overview of Publicly Available Data and Gaps in Market Knowledge
2. Executive Summary: Overview of existing reports and data on Ukrainian IT Data on the local IT market and industries, which are the biggest consumers of IT in Ukraine. Vertical specialization and cross-specialization of companies in modern technology, the structure of exported IT services. Reliable data on the number of IT companies and their structure. Official figures overestimate actual numbers as one company often combines several legal entities, while experts’ estimates vary substantially. On the other hand, some companies are operating in Ukraine without a registered legal entity. This report identifies available and, respectively, missing data, which would be necessary for evaluating Ukrainian tech ecosystem. This study features all the reports we became aware of and other statistical sources available on the Ukrainian IT market, which were meticulously systematized and compared, along with the methodology behind them. Market participants and stakeholders have already made substantial efforts to present Ukraine’s tech ecosystem. There is a large number of reports available on the IT sector: general, regional, specialized on specific sub-sector ones, maps of different ecosystem components, etc. Overall, more than seventy sources on Ukraine’s tech ecosystem were studied by the authors of this report. We found useful information available on exports, output, and value added of IT industry, investment deals, professionals working in IT companies, salaries, challenges in human resources on the IT market. Profound regional information is available for several active local IT clusters. Still, notwithstanding the large number of reports, in many cases the data on critical elements of the ecosystem is lacking or has significant drawbacks, including having questionable sources and being outdated. Reciting unreliable data from one report to another misleads market participants and stakeholders. The objective of this report is to change this status quo, show the real picture with data about UA Ecosystem, agree among stakeholders on common methodologies and lay good ground for establishing new standards in reporting. Based on our research we identified the following areas which lack sufficient and/or reliable data:
3. R&D: the market defines R&D companies as global in-house centers of large international companies, however, it is not always clear whether these centers are actually involved in R&D. There is a need to agree on the definition of R&D and to clearly distinguish R&D from non-R&D activities. Financial figures: data on profit and profit structure, comparable and detailed data on taxes paid by IT, reliable data on investments structure vary in different sources. Detailed analysis of infrastructure in a meaning of supportive businesses required for IT companies to operate well, is missing. Human Capital and labor market: data on school to work transition for IT specialists, number of IT specialists who work in non-IT companies, migration of IT specialists, amount of switchers, remote work for/from other countries is incomplete. Regional data: while there is a good overview of Lviv, Kharkiv, and, Dnipro, and Kyiv being well covered in general reports, data on other regions is scarce. There is a need to develop the ecosystem mapping featuring key stakeholders on each segment based on the findings of this report. Filling out the gaps where the report has identified missing data is crucial for understanding of the ecosystem needs. Thorough further research is required to cover the existing gaps in the data needed for informed policy making. This report is made possible with the support of the American People through the United States Agency for International Development (USAID) under the Competitive Economy Program. The authors’ views expressed in this report do not necessarily reflect the views of the United States Agency for International Development or the United States Government. Executive Summary: Overview of existing reports and data on Ukrainian IT
4. Table of contents Tech ecosystem and business climate 1.1. Ecosystem structure and market size Ecosystem map Stakeholders, elements of the ecosystem and interconnection chain thereof Characteristics of each element and added value for ecosystem 1.1.2 Local Market Local market size (actual and potential) and market structure Share of IT in GDP Ukrainian industries that are the main clients of IT companies, actual and potential Identify, what is Ukrainian IT: companies, owned by Ukrainians or registered in UA only or any other format? 1.1.3. UA Export Size of export, and main export destinations, actual and potential Main clients (companies) of Ukraine’s IT Main products and services exported in 2019 and dynamics over the last years Main countries of exporting destination and dynamics over the last years Share of Ukrainian IT on the global market 1.1.4. Typology of companies Number of companies registered in UA If possible number (or share) of companies which are not registered in Ukraine and main reasons why companies are not registering in UA Legal types of companies and percent of each type Types of companies by business models and percent of each type Types of companies by number of employees and percent of each type 1.1.5 Scientific potential and innovation Number of research institutes and universities Number of patents issued Size of investments in R&D International cooperation in R&D 1.1.6. International rankings Ecosystem rankings ICT & digital economy indices 1.2 Financial and economic indicators of various types of IT companies 1.2.1. Profits Profit structure of each type of companies 1.2.2. Taxes Amount of taxes paid, distribution to local/state budgets 8 8 8 8 11 12 12 12 15 16 17 17 18 20 20 21 24 24 24 25 25 25 27 27 27 28 29 30 30 31 32 32 32 33 33
5. Table of contents 1.2.3. Salaries Structure of salaries in percent Salary growth trends in the last and coming years by category/position 1.2.4. Capital and Investments Size of investments in the IT sector Types of investments by phase Type of investments by sources Number of exits and M&A Types of investors and investor map 1.3 Infrastructure 1.3.1. Types of infrastructure, required for IT companies to operate well 1.3.2. Broadband internet, 4G and similar indicators in narrow understanding of infrastructure 4G Fixed broadband 2. Human Capital 2.1. Human capital in IT: market overview 2.1.1. Specialists Number of specialists that work in IT sphere in IT companies Number of specialists that work in IT sphere in non-IT companies Types of specialists by maturity level Gender type Language skills, soft skills 2.1.2. Professions Types of professions in IT sector and percent of various professions in IT 2.1.3. Demand Number of vacancies and their structure 2.1.4. Challenges 2.2.1. General numbers 2.2.2 Education market overview. Stakeholder map of education 2.3.1 Existing gaps analysis. comparing industry demand with existing supply (quality and quantity) 3. Country niches for USP positioning and go-to-market strategy 3.1. Specialization 3.1.1 Vertical: percent of companies doing projects in various verticals 3.1.2. International trends: percent of companies having cross-specialization on international trends (AI, AR/VR, Robotics, etc). 3.2 Regional distribution 3.2.1 Share of each region in each element of ecosystem structure 3.2.2. Smart specialization of regions Methodology and uncovered needs for a comprehensive report of the IT Sector in Ukraine and key criteria for comparing Ukrainian IT Sector with other countries References 34 34 34 36 36 36 36 37 37 38 38 38 38 38 39 40 40 40 40 40 41 41 42 42 43 43 45 47 50 51 52 53 53 55 56 56 56 61 63
6. List of abbreviations B2B - Business-to-Business B2C - Business-to-consumer BRDO - Better Regulation Delivery Office CEO - Chief Executive Officer CVC - Corporate Venture Capital CTO - Chief Technology Officer EBOPS 2010 - Extended Balance of Payments Services Classification FMCG- Fast-Moving Consumer Goods GDP - Gross Domestic Product GIC - Global In House Centers HR - Human Resources ICT - Information Communications Technology IT - Information Technology M&A - Mergers and Acquisitions NACE - European Classification of Economic Activities NBU - National Bank of Ukraine NGO - Non-Governmental Organization PR - Public Relations R&D - Research and Development SaaS - Software as a Service SME - Small and Medium Enterprises SSSU - State Statistics Service of Ukraine WTO - World Trade Organization UNESCO - United Nations Educational, Scientific and Cultural Organization USAID - U.S. Agency for International Development UVCA - Ukrainian Venture Capital and Private Equity Association
7. Tech Ecosystem and Business Climate 1. 2 Financial and economic indicators of various types of IT companies 1. 3 Infrastructure 1. 1 Ecosystem structure and market size 1
8. By Cerulean Industries 01 Stakeholders, elements of the ecosystem and interconnection chain thereof The purpose of this report is to identify available data as well as gaps in the data for Ukrainian tech ecosystem evaluation. There is no standardized approach to what tech ecosystem consists of. Therefore we present here conceptual framework which we consider appropriate for this purpose. The basis for this model is taken from the OC&C reports on Tech entrepreneurship ecosystems (1). Additional Information is taken from the Export Strategy of Ukraine for the ICT sector. Other materials were also studied. Table below gives a detailed structure of the ecosystem, while the diagram presents software ecosystem framework and interaction of ecosystem elements. 1.1.1 Ecosystem map Ecosystem structure and market size 1 OC&C uses standardized approach and model to analyse tech ecosystems. There are several reports available, one of the examples to illustrate approach is OC&C, 2018. Tech Entrepreneurship Ecosystem in Turkey. Input/Prerequisites Business Markets Output/Results Grants/subsidies/ donors Individual investors Venture capital Public funding Corporate investment (CVCs and M&A) Securities market Debt financing Educational foundations Scientific institutes and R&D centers Think tanks Skills development Attracting local talent to tech entrepreneurship Acquiring international talent FINANCIAL CAPITAL: - Crowdfunding - Angel investors - Personal networks SKILLED TALENT AND INNOVATION - Schools, courses, programs - On the job training Technological Service Providers Product companies Technological Startups Service and System Integrators Vendors and resellers: By types of services: - Outsourcing - Outstaffing - Global InHouse Centers (GIC) (software, including SaaS and other “-as-a-service” product models, and hardware) - Hardware Vendors, - Software Vendors - Internet Providers - Data-Centers USA UK Canada Germany Israel Sweden Switzerland Norway Netherlands Ireland others B2B Corporations SMEs Startups Public clients B2C Various audiences By geographic location: Local Market International Market: By types of clients: Size of tech e-ship: Workforce employed in tech entrepreneurship Growth rate Value creation Global reach ECONOMIC CONTRIBUTION - Revenue - Number of startups - Share in GDP - Revenue, Number - Market cap, Unicorns - Share of int’l revenues - Number of int’l operations 08
9. By Cerulean Industries 01 Input/Prerequisites Business Markets Output/Results 1.1.1 Ecosystem map Ecosystem structure and market size Communities, Associations, Clusters, other IT NGOs, public organizations Mentors and coaches Accelerators / incubators Diaspora networks International linkages Events (inspirational, sharing knowledge, teaming up, hackathons, investors networking) University-industry partnership Tech transfer offices Physical clusters NETWORKS - Co-working spaces - Technoparks Telecom and data- centers Banks & insurance Legal Accounting Recruiting Creative businesses (marketing and PR, media, digital agencies) Event companies Educational Consulting offices etc Kindergartens, Cafes, restaurants, bars, clubs Shops Travel companies etc Adjoining Industry Companies to IT and Tech: Providing B2B services: Providing B2C services: End clients Intermediaries By types of cooperation: Innovation created by tech entrepreneurs INNOVATION CREATION - Number of innovative products, processes, - business models introduced in the country in a given year Tech-influencers, role- models, evangelists, tech bloggers, Media Society’s attitude to entrepreneurship Entrepreneurial aspirations and appetite Promotion of role models / success stories Media coverage of entrepreneurship CULTURE --------------- Tech Giants Scaleups IT SMEs Freelancers By size: Agriculture Manufacturing Construction Metallurgy Logistics Energy Banking & Finance FMCG Air and Space Entertainment & Social Education Health Government By industry segment: Set of regulations, improving: Digital policies Government R&D policies REGULATIONS - Ease of doing business - Compliance - Trading across borders 09
10. By Cerulean Industries 01 Input/prerequisites Business Markets Output/results 10 1.1.1 Ecosystem map Ecosystem structure and market size Digital literacy / readiness Domestic market size Public procurement Local market efficiency LOCAL MARKET POTENTIAL - individual use - cloud migration - digitization of gov’t services - B2B - B2C Foreign Governments, Embassies, Chambers of Commerce, Associations, Communities Foreign Business Foreign Events Foreign Media and influencers Ukrainian Diaspora INTERNATIONAL MARKET POTENTIAL Accessibility and affordability of Internet (mobile / fixed) Cloud & data center experience Electricity Hardware Software Airports, roads ICT INFRASTRUCTURE
11. By Cerulean Industries 01 The core of the IT sector and ecosystem is the business part: companies that create goods (services and products) in IT and Tech sectors and companies that sell to IT and Tech companies. Then, these companies operate on specific markets to generate profits, so markets are the next important aspect of the ecosystem. For the effective work of these two elements: value creation and money flows, there need to exist certain prerequisites that fill the needs and gaps of the business, empower it and allow it to bring results, described in the output section: economic contribution and innovation creation. The prerequisites are: Capital, Talent, Networks, Culture, Regulations, Infrastructure and Markets Potential. Markets potential creates an opportunity for business creation. Talents generate innovation and are executing on the ideas generated, that aim at fulfilling market needs. Infrastructure gives the instruments and basis for their work. Capital gives resources to work before the market pays back. Networks empower talent to share tangible and intangible resources. Culture and regulations establish public and private rules of such interactions. Missing any element will affect the effectiveness of the system overall and the end results - economic contribution and innovation creation. The task of Ecosystem stakeholders - grow the elements of the ecosystem evenly, make sure all parts are represented and grow simultaneously to maximize the results. Further parts of the report represent various data to evaluate the ecosystem and to be used for strategic initiatives on ecosystem development. Source: F. Kon, D. Cukier, C. Melo, O. Hazzan, H. Yuklea, 2015. Conceptual Framework for Software Startup Ecosystems: the case of Israel. Technical Report RT-MAC-2015-01 Characteristics of each element and added value for ecosystem While table above named components of tech ecosystem in detail, scheme below describes interconnection between tech startup ecosystem elements 11 1.1.1 Ecosystem map Ecosystem structure and market size
12. By Cerulean Industries 01 Share of IT in GDP - which exact economic activity is covered by this indicator in IT part Most of the reports show the share of IT in Gross Domestic Product (GDP) at 4% in 2018 (National Investment Council of Ukraine 2018, UNIT.City and StrategIst 2017, UkraineInvest, 2020). This corresponds to Information and communication category in GDP data reported by the State Statistics Service of Ukraine. PwC reports different figures, but their adjustments and methodology are not presented in the report (EBA and PwC 2016). Data on the local market size is scarce. Development of the local market, as well as reliable data regarding it, are essential as local market cross-fertilizes the tech ecosystem. Currently, the IT sector is mostly export-oriented as the local market does not have a substantial demand for IT services. The source that presented local market size and structure was the report by the Aequo, International Data Corporation (IDC), Baker Tilly and SI BIS (2017) Information technology industry in Ukraine. Total consumption of IT services (intermediate and final) can also be estimated using State Statistics Service of Ukraine IO tables. It constituted in 2017 $1.8bn including intermediate consumption in the IT sector. 1.1.2 Local Market Ecosystem structure and market size Local market size (actual and potential) and market structure 12 Source: : AEQUO, IDC, Baker Tilly, SiBiS, 2017. Information technology industry in Ukraine as cited in the National Investment Council of Ukraine, 2018. IT industry of Ukraine: Creating value on the global scale, page 7
13. By Cerulean Industries 01 J 58 Publishing activities J 59 Production of film and video films, television programs, sound recordings J 60 Radio editing and television activities J 61 Telecommunications (telecommunication) J 62 Computer programming, consulting and presentation of their work J 63 Presentation of information services 58.2 Software publishing, 62 Computer programming, consultancy and related activities, 63.1 Data processing, hosting and related activities; web portals. 63.9 Other information services are also often used in the IT sector. 26.1 Manufacture of electronic components and boards 26.11 Manufacture of electronic components 26.12 Manufacture of loaded electronic boards 26.2 Manufacture of computers and peripheral equipment 26.3 Manufacture of communication equipment 26.4 Manufacture of consumer electronics 26.5 Manufacture of instruments and appliances for measuring, testing and navigation; watches and clocks 26.51 Manufacture of instruments and appliances for measuring, testing and navigation 2651 26.52 Manufacture of watches and clocks 26.6 Manufacture of irradiation, electromedical and electrotherapeutic equipment 26.7 Manufacture of optical instruments and photographic equipment 26.8 Manufacture of magnetic and optical media More detailed information can be found in input output tables produced by State Statistics Service of Ukraine (SSSU), but they are available with a lag (latest available 2017). It contains balanced data on output, export, import and value added. 1.1.2 Local Market Ecosystem structure and market size Information and communication category contains both IT and non- –IT activities: At the same time, IT services are presented in the following categories: Hardware production is contained in 26 Manufacture of computer, electronic and optical products: 13 NACE codes (2) 2 Industry standard classification system used in the European Union
14. By Cerulean Industries 01 Code Publishing activities; production of film and video films, television programs, sound recordings; radio and television broadcasting activities 14 Unbalanced but even more disaggregated data is available in the Structural survey of the enterprises. It is more recent (latest available is 2018). On the other hand, this data goes through several stages of adjustment to construct input-output tables, including adjustment for consumption level, i.e. partly includes shadow economy. Value added for IT sectors (58.2 Software publishing,62 Computer programming, consultancy and related activities, 63.1 Data processing, hosting and related activities; web portals) constituted 2.6% of total value added J58-J60 J61 J62-J63 C26 Title Telecommunications (telecommunication) Computer programming, consultancy and information services Manufacture of computers, electronic and optical products Value added UAH mln Import UAH mln Output UAH mln Share in GDP, % Export UAH mln 14 982 29 994 877 -4 302 10 149 0.3% 58 778 8 297 -11 201 32 948 1.1% 136 887 73 269 -16 869 67 199 2.3% 9 104 -85 882 4 403 0.1% Source: State Statistics Service of Ukraine, input-output tables, 2017 Source: AEQUO, IDC, Baker Tilly, SiBiS (2017) gives the following statistics on IT consumption structure in Ukraine in 2016 In the tables mentioned above the following information is available. 1.1.2 Local Market Ecosystem structure and market size
15. By Cerulean Industries 01 15 Ukrainian industries that are the main clients of IT companies, actual and potential Data on the Ukrainian traditional industries that are the main clients of IT companies scarce in the literature. Two available sources are hard to compare as they have different methodology and purpose. However, very different results suggest that more in-depth analysis is required. Analysis and forecasts on Ukrainian sectors which can be potential clients of IT companies are unavailable. AEQUO, IDC, Baker Tilly, SiBiS (2017) gives the following statistics on IT consumption structure in Ukraine in 2016 Source: AEQUO, IDC, Baker Tilly, SiBiS (2017) gives the following statistics on IT consumption structure in Ukraine in 2016 1.1.2 Local Market Ecosystem structure and market size
16. By Cerulean Industries 01 Intermediate consumption of IT services in Ukraine is available in input-output tables of State Statistics Service of Ukraine. Over 70% of IT services are consumed by IT sector itself. 8.5% is consumed by trade. Other intermediate consumers include advertising, scientific and technical activities, activities in the fields of law and accounting etc. Intermediate consumption of Computer programming, consultancy and information services (NACE codes 62-63). Identify, what is Ukrainian IT: companies, owned by Ukrainians or registered in UA only or any other format? Data is unavailable Some of the reports state that they focus on companies registered in Ukraine (SaaS Nation, UNIT.City, Center42 Innovation Agency 2019), though most of the reports do not mention which companies they cover. 16 Intermediate consumption of Computer programming, consultancy and information services (NACE codes 62-63) 1.1.2 Local Market Ecosystem structure and market size
17. By Cerulean Industries 01 Ukrainian IT is a highly export oriented industry. The limited size of the internal market, lack of financial resources, digital literacy and management maturity of local companies stimulates extensive export of IT from Ukraine. Ukraine imports a comparably limited amount of IT services while the key share of IT import remains hardware. Over the past 10 years, IT exports increased significantly, growing on average by 20.7% annually (Export strategy IT sector 2019- 2023). Compared to 2013 Export of ICT services increased almost twice (based on NBU data). Data on exports vary based on the source. The sources include State Statistics Service of Ukraine, National Bank of Ukraine, international organizations (WorldBank, WTO). According to State Statistics Service of Ukraine, export of ICT services amounted to USD 2.1 bn in 2018, including USD 1.6 bn of computer services. National bank of Ukraine (NBU) uses banks’ reporting on operations with non-residents (NBU resolution 129 as of 01.03.2016) for more precise figures. NBU figures for ICT exports amounted to USD 3.5 bn in 2018 and USD 4.3 bn in 2019. World Trade Organization (WTO) database corresponds to NBU figures and also gives statistics on services trade for other countries. PwC estimates Ukrainian IT export (USD 3.6 billion in 2017) based on cost models and data provided by market participants (IT Ukraine and BRDO 2018). IT market stakeholders also publish the figures on exports. For instance, figure of USD 4.5B is widespread in reports (National Investment Council of Ukraine, 2018; Ni-X, 2019; Unit.City, Western NIS Enterprise Fund 2019) but it is a forecast for 2018 made in 2017 by PwC. Computer services have already become an important component of Ukrainian exports. Overall Ukrainian merchandise exports constituted USD 46 bn in 2019, while exports of services amounted to USD 17bn (27% of total trade). IT services amounted to USD 4.3 bn (all based on NBU data). Export of computer services was the second-largest services export in 2019 after the transport services and demonstrated high growth of 30% year on year in 2019. Source: State Statistics Service of Ukraine 1.1.3 UA Export Ecosystem structure and market size Size of export, and main export destinations, actual and potential 17
18. By Cerulean Industries 01 Telecommunications services Computer services consist of hardware- and software-related services and data processing services: Information services are divided into Research and development services: basic and applied research, experimental development of new products and processes Professional and management consulting services: Technical, trade-related and other business services: Computer software and Other computer services News agency services Other information services Legal, accounting, management consulting and public relations services Advertising, market research and public opinion polling Architectural, engineering, scientific and other technical services Waste treatment and de-pollution, agricultural and mining services Operating leasing services Trade-related services Other business services n.i.e. BRDO (2017) states that the World Bank classifies other business services as part of ICT services trade. We do not consider it as a widespread practice. According to Extended Balance of Payments Services Classification (EBOP 2010) ICT services consist of: Other business services consist of: What should be in ICT services exports (3): Overall Ukrainian merchandise exports constituted $46 bn in 2019, exports of services amounted to $17bn, of which IT services amounted to $4.3 bn (all based on NBU data). Export of computer services is the second largest services export in 2019 after the transport services and demonstrates high growth - 30% year on year in 2019. Main clients (companies) of Ukraine’s IT There are two sources that name clients of IT companies, one is AVentures, Aventis Capital, Capital Times (2019) and AVentures Capital & Ukraine Digital News (2016). AVentures Capital & Ukraine Digital News (2016) presents companies by regions, while AVentures, Aventis Capital, Capital Times (2019) gives a smaller overview for Ukraine overall. 18 9.1 Telecommunications services 9.2 Computer services 9.2.1 Computer services - Computer software 9.2.2 Computer services - Other computer services 8.3 Licenses to reproduce and/or distribute computer software 1.1.3 UA Export Ecosystem structure and market size 3 United Nations Conference on Trade and Development (UNCTAD), 2015. International trade in ICT services and ICT- enabled services. Proposed Indicators from the Partnership on Measuring ICT for Development. UNCTAD Technical Notes on ICT for Development N˚3
19. By Cerulean Industries 01 Delphi - Motorola, EMC2, Nuance, bwin.com AMCBridge3E - 3D Space Pro, Albitech Ltd, jaccomo, aPriori, Exadel, TaskPoint Archer - room2care.corr, Musketeer, Renault, Volvo, Phone and Pay Rimed, Columbia Law School Viseven - Novartis, Strato, Abbott, Teva, Sanofi, CodeSters, GaraioLabs Master of Code - Mercedes-Benz Bank, Acton Institute, IDG Links, CNS, YouVersion Yalantis - Voki, Street EASY Sam Solutions - Zerolag, PrintSafari.com, Craft Kidisto.de NIX Solutions - Cengage, Learning, zoodog, FlipClips, Yandex, Fiat, Thomson, Reuters, Connecture, Meanbee Sigma Software - Aol. Collective, Fortum, Gtech, Formpipe, JLoop, SAS, Viaplay QArea - Microsoft, RebelMouse, Givelife, BuzzFeed, The Huffington Post iTeam - international Telenor, Bond, BullsEye, Telecom, ITC, iTeam, Network Altexsoft - Microsoft imshealth, Fareboom, Scientific Games Telesens - Kcell, Kyivstar, NEC, Ukrtelecom CodeIT - Brewed, Gem II NI, Omega Media, RedApple, Rankly, SST Net, Teknas Inc/ It should be noted that the list of clients changed considerably over the time covered in these two reports mentioned above. Luxoft – Continental, Alcatel Lucent, Boeing, Bosch, Aepona, City, Harman, Dell GlobalLogic - Brady, Converse, BMC Sky Oracle, LinkedIn Ciklum – Google, Jabra, Micron, Berlingske, OpenText, ThomasCook, Augaroo Infopulse – Allianz, Gorenje,Bics, Quantum, British American Tobacco, Bosch, Evry, ING Softengi – Boeing, Enviance, Kyivstar, Intel Daxx – Euretos, Kwebbl, Viber, Vliegtickets.nl Adyax Sony, Johnson & Johnson, LVMH, Slate. EC, United Nations, McDonald's Itera – Schibsted, Santander, Bluegarden, Storebrand Lohika – HP, Cisco, Twilio, EMC2, Microsoft, Oliver Wyman, Monster, BuzzFeed Innovecs – Elementum, edX, WB Turbine Softserve – Unilever, IBM, Johnson & Johnson, P&G, Kimberly-Clark, Costco, Pearson, Tripadvisor Eleks – Xceedium, Xyleme, States of Jersey, Autodesk, Havas, Eagle, tip.ly, Phoenix Intellias – Adswizz, Magix, SEP, Core Banking, e-fon, Soreco, FTS, Swissclick.com Consensia – Spar Nord, Saxo, Zentuvo, Systematic, Kamstrup CoreValue Health decisions, Recyclebank, Xtiva Logs Network, Rolls-Royce N-iX – Currency cloud, Streamserve, Anoto, b-to-v, HotSchedules, Novell, Cure Forward GeeksForLess - Deluxe, Hostopia, EMC2, BriskMobile, EXG Provectus – Vegaster, Selectica, Qwyrk, Men’s Wearhouse Intersog – CDW, SAMLearning, Mitsuishi, VideoMedisine, Innomos. Travian Games, Neustar Envion Software – Adobe, Atex, Chase, AOInternational, Quark Dnipro Kharkiv Kyiv Lviv Odesa 19 1.1.3 UA Export Ecosystem structure and market size
20. By Cerulean Industries 01 Ciklum – ThomasCook, Just Eat, Jabra, Kantar Retail DataArt Nasdaq, Travelport, Ocado, Betfair Daxx – Studytube, Pricena, Oktopost, Kwebbl Epam – Amazon, Adobe, SAP, Hotels.com Infopulse – Vodafone, ING, Microsoft, Allianz, Bosch. Intellias – KIA, Playbuzz. Every Matrix, RTL group N-iX – Lebara, Currencycloud, Anoto, HotSchedules, Sigma Software – SAS, Volvo, Viaplay, Oath IBM, Fiducia & GAD, PTC, Atlassian Corporation, Dassault Systemes, Oracle Corporation , Autodesk, Inc, Microsoft, CISC, NASA, Manchester City FC, Siemens, Obamacare, Deutsche Bank, TOYOTA, Nissan, Jaguar, Mercedes-Benz, Peugeot , Toshiba , Infinity, Nestle, L’Oreal, Land Rover, Signal Iduna Source AVentures, Aventis Capital, Capital Times, 2019. Software development in Ukraine, Poland, Belarus and Romania IT Dnipro Community, Sociological Agency Fama, 2019. IT Dnipro Research 2019. Main countries of exporting destination and dynamics over the last years Main products and services exported in 2019 and dynamics over the last years Product companies and startups do not constitute a significant share of Ukraine’s exports so far but there is great potential for growth in the near future provided favourable conditions are created for such growth. IT Services Export: 70% development, 30% consulting, R&D, analytics, and other services (Tech ecosystem guide to Ukraine 2019, Unit). An absolute majority does web and mobile application development, followed by architecture consulting and testing services No data on exports in the sectors such as data management, gaming, e-commerce, etc. The US market is the main destination with an estimated more than 50% (2019 INNOVATIVE UKRAINE, Unit) or 80% (Invest in Ukraine Now Innovation and Opportunities, 2018) volume of exported services. The UK is in second place (2019 INNOVATIVE UKRAINE, Unit). Ukrainian companies also have a long record of cooperation with Germany, Canada, Israel, Sweden, and Switzerland. Despite positive trends the Ukrainian market still cannot boast a large amount of orders. According to the State Statistics Service of Ukraine, key export markets for Ukrainian ICT services are EU (including UK, Cyprus, Germany, the Netherlands, Ireland, Sweden), USA, Russian Federation, Switzerland, Norway, Israel, Canada and South Korea. 20 1.1.3 UA Export Ecosystem structure and market size
21. By Cerulean Industries 01 21 The global information technology industry is on pace to reach $5.2 trillion in 2020, according to the research consultancy IDC. CompTIA (4) projects the global information technology industry will grow at a rate of 3.7% in 2020. The United States is the largest tech market in the world, representing 32% of the total, or approximately $1.7 trillion for 2020. BOP6 - SI -Telecommunications, computer, and information services Share of Ukraine in global ICT services export BOP6 - SI1 - Telecommunications services BOP6 - SI2 - Computer services BOP6 - SI3 - Information services 2018 2017 2015 2016 0.45% 0.48% 0.52% 0.57% 0.44% 0.34% 0.29% 0.26% 0.47% 0.54% 0.61% 0.67% 0.15% 0.09% 0.06% 0.06% Source: WTO database (BOP6) Share of Ukrainian IT on the global market 4 CompTIA, 2019. IT Industry Outlook 2020. Taking the Next Step. Viewed 3 Apr 2020 Source: CompTIA, 2019. IT Industry Outlook 2020. Taking the Next Step. Overview of trends and demand in global markets (potential niches for our companies) 1.1.3 UA Export Ecosystem structure and market size
22. By Cerulean Industries 01 22 While emerging technologies currently account for only 17% of the overall global revenue, they are expected to drive nearly half of the growth in new revenue. At the same time, while emerging technologies will be the driver for growth, they must be used in conjunction with more established technologies to create innovative solutions. Global Market structure: Source: CompTIA, 2019. IT Industry Outlook 2020. Taking the Next Step. Source: CompTIA, 2019. IT Industry Outlook 2020. Taking the Next Step. 1.1.3 UA Export Ecosystem structure and market size
23. By Cerulean Industries 01 23 So the biggest and most promising niche for our companies are emerging technologies and focus on providing solutions, rather than resources. More detailed overview of the niches in the area of emerging technology is provided below. Source: CompTIA, 2019. IT Industry Outlook 2020. Taking the Next Step. 1.1.3 UA Export Ecosystem structure and market size
24. By Cerulean Industries 01 Data on the number of companies registered in Ukraine vary among sources. According to SSSU there were 16465 legal entities in the IT sector (58.2 Software publishing,62 Computer programming, consultancy and related activities,63.1 Data processing, hosting and related activities; web portals) plus 2894 legal entities in other informational services (63.99) often used in IT sector. However, all sources agree that this is not reliable data for a number of IT companies as many companies can operate several legal entities. In addition, a part of companies can be not active on the market. According to SSSU there were only 6241 of economically active legal entities in IT in 2018 plus 976 in other informational services (63.99). Most sources rely on experts’ estimations of IT companies in Ukraine in general (not focusing on the fact whether company is registered in Ukraine or not). And these estimations vary widely, including: bureaucratic restrictions on accepting payments, inability to process smaller and numerous payments for applications from the App Store and other sites, absence of electronic money and consequently no PayPal or similar method, lack of planning security checks, limited protection of IP rights, complicated processes of managing a company. Reliable data on the number of IT companies registered in Ukraine is missing, while experts’ estimate vary substantially Number of companies registered in UA 1.1.4 Typology of companies Ecosystem structure and market size 4000 IT companies in IT Ukraine Association, BRDO, Forbiz, EU4Business report (2018). Only 2309 IT companies were active on the labour market 1650 IT companies in 2016 in IT Ukraine and BRDO report (2018). 1000+ IT outsourcing companies and 2000 startups in 2016 in AVentures Capital & Ukraine Digital News (2016) and National Investment Council of Ukraine (2018). 750+ IT service companies in AVentures, Aventis Capital, Capital Times report (2019). More precise estimates can be found in regional reports, though they do not cover Ukraine overall. Number (or share) of companies which are not registered in Ukraine and main reasons why companies are not registering in UA Legislative limitations, which are the main reasons not to register in Ukraine are summarized in Export strategy for information technologies sector for 2019-2023 and include: 24
25. By Cerulean Industries 01 25 Outdated or nonexistent laws to adapt and use the latest information technologies hinder sector expansion at the national level. A number of laws are either not in place, as is the case with electronic money (very limited regulation and extremely inefficient, which makes this instrument dormant), or outdated, as is the case with labour legislation that comes from Soviet times and restricts the IT sector development to a significant extent. In addition, there is a worldwide competition of jurisdictions that compete for the opportunity to attract as many technological startups and mature companies as possible, and Ukraine is currently losing it to primarily systems with Anglo–American law, because they have a lot of experience and reliability in dealing with intellectual property. (page 34) Legal types of companies and percent of each type Not available Types of companies by business models (outsourcing, product, startups, etc) and percent of each type Data is based on the survey of IT specialists, not clear whether the sample is representative Based on 9387 responses of IT specialists DOU (5) gives the following distribution of workforce: IT outsourcing company 45% IT product company 28% IT outstaffing company 9% non IT company 5% Startup 3% Freelance 3% IT Ukraine Association, BRDO, Forbiz, EU4Business (6) (2018 ) based on their sample of companies state that “around 70% of companies provide services to a broad range of clients (EPAM, GlobalLogic, Netcracker and others), around 15% work as Global InHouse Centers (GIC) for one parent company (Wargaming.net, Ring, Samsung R&D Institute Ukraine, Oracle) and 15% create their own product (Genesis, EVO, Terrasoft)” (page 5-6). 5 DOU, 2019. Portrait of IT specialist in 2019. Infographics. 6 IT Ukraine Association, BRDO, Forbiz, EU4Business, 2018. Розвиток української IT- ндустр ї. In addition, the strategy states the following: 1.1.4 Typology of companies Ecosystem structure and market size
26. By Cerulean Industries 01 Types of companies by number of employees and percent of each type No updated data on companies by size for Ukraine overall. 245 companies employ 50 employees and more (out of 750 total (AVentures, Aventis Capital, Capital Times 2019) DOU in its TOP 50 report states that 17,9% of respondents work in companies with 1000+ employees». (7) Ukrainian Hi-Tech Initiative (2012) (8) estimated the following distribution of companies (6) 7. DOU, 2020. Labour market in 2019: 20% growth and hype over taxes 8. Ukrainian Hi-Tech Initiative., 2012. Exploring Ukraine - IT outsourcing industry. 9. IT Dnipro Community., Sociological Agency Fama, 2019. IT Dnipro Research 2019. 10. Kharkiv IT Cluster., PricewaterhouseCoopers Advisory., 2019. Kharkiv IT Research 11 Lviv IT Cluster, 2019. IT RESEARCH 4.0 12 Lobova O., Sudolskiy R., 2018. Game Development in Ukraine, Industry Guide. Achievers Hub, UNIT.City 13 SaaS Nation, UNIT.City, Center42 Innovation Agency, 2019. SaaS industry in Ukraine 2019: Key trends and tech companies, operating on a subscription business model. 14 MarTech Made in Ukraine, 2019. Marketing and Advertising Technologies created in Ukraine. Less than 10 employees – 18% 11-50 employees- 38% 51-100 employees- 16% More than 101 employees- 27% More precise data is presented in IT clusters reports (Dnipro, Lviv, Kharkiv) and in sector reports, such as Game development, SaaS, MarTech. <20 - 20% of employees (250 companies) 21-80 - 28% (95) 81-200 - 22% (23) 201-600 - ~19% (8) >600 - ~11% (2) Dnipro claster (9) <20 -141 companies 21--80– 270 81-200 – 44 201-600 -23 >600 – 5 Kharkiv cluster (10) <10 -3.6% (142) 11-50 – 23.5% (243) 51-250 – 27.2% (67) 251-400 -2.5% (2) >401 – 43.2% (7) Lviv cluster 11) >500 – 3 companies 100-500 - 5 50-100 6 10-50 - 22 <10 - 32 Game Development (12) >100 - 16.2% of companies 61-100 - 8.6% 41-60 - 8.6% 21-40 - 21% 11-20 - 20% 1-10 - 25.6% SaaS (13) >100 - 8.4% of companies 61-100 - 1.68% 41-60 - 19.33% 21-40 - 23.53% 11-20 - 11.76% 1-10 - 36.13% MarTech (14) 26 Big difference on what usually is reported in market overviews as R&D and what is state statistics on R&D 1.1.4 Typology of companies Ecosystem structure and market size
27. By Cerulean Industries 01 IT sector reports define R&D centers as captive centers of international companies. Reports usually state that there are 90-110 R&D centers in Ukraine (AVentures Capital & Ukraine Digital News 2016, Unit.City, Western NIS Enterprise Fund 2019), though it is not actually known whether they do R&D or just provide services to their companies as Global InHouse Centers. In terms of number of employed IT professionals, the most popular industries for R&D in IT are telecommunications, e-commerce, gaming and other software (AVentures Capital & Ukraine Digital News 2016). Ukrainian patenting is well described in Innolytics Group, SingularityU Kyiv Chapter, Unit City and DLA Piper, 2018 (16) . Data covers 2007-2017 years. Number of patents registered abroad with priority in Ukraine amounted to 4 096 in 2007-2017, including 152 patents in computer technologies. In comparison, patents registered abroad with foreign jurisdictions only (i.e. without priority in Ukraine) amounted to 4 633, including 1079 patens in computer technologies. The National Academy of Sciences counts R&D organizations in another way. Data is collected based on statistical forms for enterprises, scientific organizations, educational institutions. Number of organizations which conducted R&D activities was 950 in all sectors in 2018 and this number decreases steadily over years (SSSU 2019, page 12)(15). Number of employees in R&D activities amounted 88.1 thousand, Out of 950 organizations in R&D, 457 were in the public sector, 351 in business, 142 in higher education and 0 in the private non- profit sector. Number of research institutes and universities 1.1.5 Scientific potential and innovation Ecosystem structure and market size 15 State Statistics Service of Ukraine(SSSU), 2019. Scientific and innovation activity in Ukraine in 2018 (in Ukrainian). Statistical digest. 16 Innolytics Group, SingularityU Kyiv Chapter, Unit City and DLA Piper, 2018. Ukraine in the Global Innovation Dimension Report 2007-2017. Number of patents issued This implies that patents in computer technologies are focused on foreign markets. Patenting of IT sector is summarized on the figure below (see Innolytics Group, SingularityU Kyiv Chapter, Unit City and DLA Piper 2018, page 26). There was no significant increase in patent activity over 2014-2017. 27
28. By Cerulean Industries 01 Total natural sciences technical sciences medical sciences agricultural sciences social sciences humanities 28 16 773.7 100% 3 457.0 21% 10 678.6 64% 616.1 4% 976.0 6% 687.9 4% 358.2 2% Total R&D expenditures amounted to UAH 16.8 bn in 2018, including 3.8 bn on fundamental research, 3.6 bn on applied research, 9.4 bn on experimental development.R&D expenditures constituted 0.45% in 2017 (0.47% of GDP in 2018), compared to 2.06% in EU- 28, 1.03% in Poland, 1.29% in Estonia, 0.51% in Latvia, 0.89% in Lithuania, 0.50% in Romania. For more details, please see SSSU 2019 or World Development Indicators database by the World Bank. SSSU gives the following distribution of R&D expenditures by sector (SSSU 2019, page 54) Size of investments in R&D Source: Innolytics Group, SingularityU Kyiv Chapter, Unit City and DLA Piper, 2018. Ukraine in the Global Innovation Dimension Report 2007-2017, page 26 UAH mln Share, % 1.1.5 Scientific potential and innovation Ecosystem structure and market size
29. By Cerulean Industries 01 29 Ukraine’s largest partner for joint R&D activities in IT remains the United States, followed by the EU countries, Israel and others. (AVentures Capital & Ukraine Digital News 2016). Out of 96 R&D centers in the report, 44 were from the US. International cooperation in R&D Source: AVentures Capital & Ukraine Digital News, 2016. IT Ukraine. IT services and software R&D in Europe’s rising tech nation, page 145 1.1.5 Scientific potential and innovation Ecosystem structure and market size
30. By Cerulean Industries 01 Overall, Ukraine usually scores higher in education (due to the higher education rollover ratio), skills and knowledge output and lower on macroeconomic stability, institutions, and business environment. 1.1.6 International rankings Ecosystem structure and market size Ecosystem rankings StartupBlink Startup Ecosystem Rankings (17) A.T. Kearney Global Services locations (18) 31/100 Financial attractiveness 20/50 People skills and availability 3 Business environment 33 Digital resonance 47 34 30 17 StartupBlink, 2019. Startup Ecosystem Rankings Report 2019 18 A.T..Kearney, 2019 Digital resonance: the new factor influencing location attractiveness. The 2019 Kearney Global Services Location Index
31. By Cerulean Industries 01 Ecosystem rankings Global Competitiveness Index (19) 85/141 Institutions Infrastructure ICT adoption Macroeconomic stability Health Skills Product market Labour market Financial system Market size Business dynamism Innovation capability 104 57 78 133 101 44 57 59 136 47 85 60 Bloomberg Innovation Index 2019 (21) 56/60 R&D Manufacturing value added Productivity Hi-tech density Tertiary efficiency Researcher concentration Patents 57 57 57 35 48 49 36 The Good Country Index (22) 76/153 Science & Technology Global Contribution Culture World Order Planet & Climate Prosperity & Equality Health & Wellbeing 1 55 131 41 87 103 Global Innovation Index (20) 47/153 Output rank - Knowledge & technology outputs - Creative outputs Input rank - Institutions… - Human capital & research - Infrastructure - Market sophistication. - Business sophistication 32 28 42 82 96 51 97 90 47 19 Schwab K. (ed.), 2019. The Global Competitiveness Report 2019. Geneva: World Economic Forum. 20 Cornell University, INSEAD, and WIPO (2019); The Global Innovation Index 2019: Creating Healthy Lives—The Future of Medical Innovation, Ithaca, Fontainebleau, and Geneva. 21 Ukrinform, 2020. Ukraine down in Bloomberg Innovation Index. 22 The Good Country Index - Results". Goodcountryindex.org. 2019 23 IMD World Competitiveness Center, 2019. The IMD World Digital Competitiveness Ranking 2019. 24 Portulans Institute (2019): Network Readiness Index 2019, Washington D.C., USA. 25 The ICT Development Index 2017. Ukraine. IMD World Digital Competitiveness (23) 60/63 Knowledge Technology Future readiness 40 62 62 Networked Readiness Index (24) 67/121 A. Technology pillar B. People pillar C. Governance pillar D. Impact pillar 71 63 67 65 The ICT Development Index (IDI) 2017 (25) 79/176 ICT access sub-index 2017 ICT use sub-index 2017 ICT skills sub-index 2017 71 161 15 ICT & digital economy indices 31 1.1.6 International rankings Ecosystem structure and market size
32. By Cerulean Industries 01 Global Competitiveness Index (15) Year 2018 The volume of production* (SSSU)/ Turnover/FAMA) 6580 Source SSSU Ukraine 427 SSSU Dnipro 435-452 FAMA 647 SSSU 658-718 FAMA Lviv *NACE codes 58.2, 62, 63 32 1.2.1 Profits Financial and economic indicators of various types of IT companies Profit structure of each type of companies Data on profit and profit structure of each type of Ukrainian IT companies is not covered in the literature. Still there are estimates of the turnover and economic impact of the industry (impact on GDP), mainly conducted by FAMA. The turnover of the industry was calculated with the help of the Income Approach and the Production Approach. Production volumes can also be provided by the State Statistics Service.
33. By Cerulean Industries 01 Amount of taxes paid, distribution to local/state budgets Outdated data for Ukraine overall, cluster estimates made by two companies (FAMA, PwC) Based on assessed literature, the amount of taxes paid is estimated by two companies: PwC and FAMA sociologic agency. FAMA estimated taxes paid for IT Dnipro Clusters (26). PwC estimated for Kharkiv (27) and Ukraine overall (28). Results are presented in the table below: 26 IT Dnipro Community., Sociological Agency Fama, 2019. IT Dnipro Research 2019. 27 Kharkiv IT Cluster., PricewaterhouseCoopers Advisory., 2019. Kharkiv IT Research 28 European Business Association (EBA), PricewaterhouseCoopers (PwC). 2016. Export-oriented segment if Ukraine’s IT services market: Status quo and prospects Estimation of Taxes paid by IT industry, UAH mln Year Taxes total Direct taxes Indirect taxes Local budget State budget Methodology Source 5717 7411 9915 12656 10300 Ukraine 2016 2017 2018 2019 2015 2 276 37% 63% Kharkiv 2015 2016 2017 3 581 1 236 2 345 41% 59% 4 937 1 536 3 401 43% 57% 2018 6 359 2 048 4 311 45% 55% Dnipro 2016 2017 953 402 550 43,8% 56,2% 1 290 507 784 46,5% 53,5% 2018 1 565 631 934 46.8% 53,2% PwC macroeconomic model of Kharkiv IT industry, Kharkiv IT Cluster Based on the information provided by the State Fiscal Service in Dnipropetrovsk region IT Ukraine PwC FAMA sociologic agency 33 1.2.2 Taxes Financial and economic indicators of various types of IT companies
34. By Cerulean Industries 01 Structure of salaries in percent, (white, PE, black) Data is based on the survey of IT specialists, not clear whether the sample is representative Salaries size and trends are well covered in the literature. One of the most cited sources is DOU. DOU conducts regular surveys of IT specialists. Based on the latest survey in mid-2019 of 9387 responses DOU presents the following structure of salaries (29) 29 DOU, 2019. Portrait of IT specialist in 2019. Infographics (in Ukrainian) DOU.ua 30 DOU, 2020. Salaries. DOU.ua 31 IT Ukraine Association, BRDO, Forbiz, EU4Business, 2018. Розвиток української IT- ндустр ї. Page 11 Salary growth trends in the last and coming years by category/position Position Jr. Software Engineer Software Engineer Sr. Software Engineer Software Tech Lead System Architect 768 2200 3800 4600 6150 650 2000 3775 4000 5600 800 2000 3500 4500 5050 900 2150 3750 4100 4350 650 1800 3500 4000 4500 Java Java script C#/. NET C++ PHP 700 2000 3950 4000 6000 Python Ruby/ Rails 800 2300 4000 4000 - 10% in envelope or on personal bank card 5% minimal salary + salary in envelope 10% officially employed 70% private entrepreneur No data on coming years in the reports DOU also provide salaries by categories of Senior software engineer, Software engineer, Junior Software engineer by cities and specialization every half a year (30). Average income in IT sector exceeds average salary in Ukraine by 7 times (31) and the difference persists over time. Number of jobs in IT continue to grow. The demand for Ukrainian IT talent exceeds the supply. Amid the growing demand, the salaries have been on a constant rise for the past decade. In Ukraine salaries range from $650 for Junior Developer to $5000 (on average) for a Team Lead (see table below) Average Gross monthly salary in 2019 (in USD) Source: DOU.ua 34 1.2.3 Salaries Financial and economic indicators of various types of IT companies
35. By Cerulean Industries 01 35 As the demand greatly exceeds supply, companies compete not only with salaries but also offer other employee benefits, including modern office spaces, flexible working schedules, appealing food and challenging projects (32). Among Belarus, Poland, Romania and Ukraine, the salary rates are similar with Belarus being a slightly cheaper talent market (33). 32 AVentures, Aventis Capital, Capital Times, 2019. Software development in Ukraine, Poland, Belarus and Romania 33 AVentures, Aventis Capital, Capital Times, 2019. Software development in Ukraine, Poland, Belarus and Romania, page 15 Source: AVentures, Aventis Capital, Capital Times, 2019. Software development in Ukraine, Poland, Belarus and Romania 1.2.3 Salaries Financial and economic indicators of various types of IT companies
36. By Cerulean Industries 01 Size of investments in the IT sector Data on investment in IT comes from two sources: AVentures annual dealbook reports (34) and Ukranian Venture Capital Association and Aventures (35) publications. According to Aventures, investment to tech sector was USD 544 m (compared to USD 323 in 2018). 77% of investment went to three companies Gitlab, Grammarly, People.ai. (AVentures Capital 2020, page 5-6) Investments amounted to USD 510m according to UVCA report (337m in 2018), including USD 460m of M&A deals, USD 6.1m of angel investment, USD 38m of private equity investment. 34 AVentures Capital, 2020. DealBook of Ukraine. 2020 edition. 35 Ukrainian Venture Capital and Private Equity Association (UVCA), Delloitte, 2020. Ukrainian venture Capital and Private Equity Overview 2019. Types of investments by phase (seed, growth, etc) Two sources give the following estimates on funding on each stage. USD m Year Total investment Seed 544 20 Aventures 337 18 337 12 323 30 UVCA, Deloitte 2018 2019 2018 2019 Round A Round B 26 0 18 30 15 0 19 30 Growth Undisclosed deals 498 - 180 87 439 40 244 - Type of investments by sources (UA located, attracted foreign capital etc.) Data vary between two sources Share of foreign capital in 2018: 53% (~11m out of 20) in seed stage and 61% (~16m out of 26m) in Series A. Aventures notes that Ukraine-born companies typically build physical presence in their target markets (US/ EU) and raise Series A-C abroad. As a result, Ukrainian startups compete globally for early stage financing in international financing hubs. According to UVCA Ukranian funds constituted only USD 8m (1.7% of disclosed deals). Main countries of origin are US (423M), UAE, EU etc. Local VC funds slowed down new investments, waiting for exits to raise next funds. 36 1.2.4 Capital & Investments Financial and economic indicators of various types of IT companies
37. By Cerulean Industries 01 Number of exits and M&A According to UVCA and Deloitte (2020), number of exits has jumped to 29 in 2019 compared to 8 in 2018 Types of investors and investor map Maps are not complete Aventures (2020) and UVCA and Deloitte (2020) gives the following information on investors 37 36 Ukrainian Venture Capital and Private Equity Association (UVCA), 2017. Investors Book. Who is who on the Ukrainian investment market. Source: Aventures 2020, page 10 UVCA and Deloitte (2020) cites the following companies: Aventures, Horizon Capital, SMRK VC Fund, ICU, FISON, Overkill, Genesis, Wise Guys, TA ventures, TAAS Capital Fund, Innovation D.TEK. Also in 2017 UVCA published investors’ book Who is who on the Ukrainian investment market with more detailed description of investors (36). 1.2.4 Capital & Investments Financial and economic indicators of various types of IT companies
38. By Cerulean Industries 01 Types of infrastructure, required for IT companies to operate well (interconnections of IT sphere and infrastructure through analysis of cost structure - spending on infrastructure by companies as a share in costs) N/A 1.3 1.3.1 Infrastructure 1.3.2 Broadband internet, 4g and similar indicators Infrastructure 37 BRDO, 2019. 900 MHz band use expands 4G coverage throughout Ukraine within 1.5 year. 38 Boyland P., 2019. The State of mobile network experience. Benchmarking mobile on the eve of the 5G revolution. Opensignal. 39 World bank. Fixed broadband subscriptions – Ukraine.World Development Indicatos, The World Bank Group. 40 State Statistical Service of Ukraine (SSSU), 2019. Communication subscribers as of January 1, 2019 4G BRDO cites unofficial data on 4G coverage. “In Europe, 4G communication is available to more than 90% of the population: in the Czech – to 98.8%, in Sweden – to 100% of the population. In Ukraine, according to unofficial data, this figure goes up to 65% (37). Similar data is provided in Opensignal report “The State of mobile network experience” (38). The report aims to provide comparable data across countries on mobile user experience as 4G Availability for 87 countries. 4G Availability shows the proportion of time Opensignal users with a 4G device have a 4G connection. 4G Availability is not a measure of coverage or the geographic extent of a network. According to the report, 4G is available 66.4% of the time in Ukraine. The Radio-Frequency Resource (RFR) is a key in 4G provision: low frequencies provide a larger coverage range, while high frequencies are better suited for the transmission of large volumes of information. It is costly to provide coverage for the countryside and roads in these bans. In February, the Cabinet of Ministers of Ukraine lifted a prohibition on the use of 4G in the 800-900 MHz bands (Order No. 41 of 05.02.2020), which is better suited for large open spaces and countryside. Fixed broadband World Bank provides data on Fixed broadband subscription. For Ukraine it constitutes 5,405 (39).1 thousand as of end- 2018. This corresponds to 12.8 subscriptions per 100 people, compared to 14.49 world average and 35.02 for the EU in 2018. World Bank data comes from the International Telecommunication Union, World Telecommunication/ICT Development Report and database. SSSU also gives the number of internet subscribers, including 5288.3 thousand of fixed broadband subscribers as of end-2018 (40). 38 Broadband internet, 4G and similar indicators (narrow understanding of infrastructure)
39. Human Capital 2. 1 Human capital in IT: market overview 2 2. 2 Education market overview 2. 3 Existing gaps analysis
40. By Cerulean Industries 01 Junior 27% Middle 36% Senior 19% Lead 11% DOU, Ukraine Total Junior 25% Middle 42% Senior 33% Kharkiv (43) Trainee 3% Junior 24% Middle 45% Senior 28% Dnipro (44) Trainee 3% Junior 26% Middle 42% Senior 30% Lviv (45) 40 2.1.1 Specialists Human capital in IT: market overview Number of specialists that work in IT sphere in IT companies There are different sources on the number of people working in IT sector, but they all give very similar results 41 DOU, 2019. Ринок прац 2019: р ст 20% й аж отаж навколо податк в. 42 IT Ukraine Association, BRDO, Forbiz, EU4Business, 2018. Розвиток української IT- ндустр ї 43 Kharkiv IT Cluster., PricewaterhouseCoopers Advisory., 2019. Kharkiv IT Research. 44 IT Dnipro Community., Sociological Agency Fama, 2019. IT Dnipro Research 2019. 45 Lviv IT Cluster, 2017. Economic impact of IT industry As industry development is very dynamic, even several months lag between the reports results in substantial difference in figures. 191.8 thousand persons as of end-2019 according to DOU estimates (41) (compared to 159.7 thousand in 2018) 192.1 thousand persons according to the State of European Tech Report 2019 by Atomico. Unofficial estimates are very close to official data if number of employees is combined active private entrepreneurs. IT Ukraine Association, BRDO, Forbiz, EU4Business (2018) (42) compared DOU estimates (127 thousands in 2017) with official data for employees (46 thousands) and private entrepreneurs (94 thousand total, but when liquidated individual entrepreneurs are excluded, 80 thousand persons remains) SSSU gives slightly higher numbers: 201 thousand as of end-2018 in IT (both individual entrepreneurs and official employees) Number of specialists that work in IT sphere in non-IT companies This issue is not covered in the literature and is impossible to receive from official statistical sources. 4% of DOU sample work in non-IT companies. Types of specialists by maturity level Based on the online survey of 9387 respondents, DOU presents results for Ukraine overall. Similar distributions of IT specialists are also available in cluster reports.
41. By Cerulean Industries 01 41 Gender type As in previous question, data is provided by DOU and cluster reports DOU survey reports that there are 24% (46) of women in IT. They usually start career as quality assurance, developers, testers, designers, and non-technical jobs such as HR, PR, and Sales. 11% of developers and 38% of testers and project managers are women. Language skills, soft skills 10% of angel investors are women according to the State of European Tech Report 2019 by Atomico Kharkiv cluster reports 28% of women, 72% of men in IT, while Lviv figures constitute 34% and 66% respectively in 2019 Data on English knowledge is usually based on DOU survey as well. It is self-reported by IT specialists: These figures are hard to compare with data from other countries. Therefore, comparison is usually based on English proficiency index (47) , though it is for the country overall, not for the ICT sector. In this index Ukraine is classified as a country with low proficiency (rank 49) and is placed just after Belarus and Russia, compared to high proficiency in Hungary and Romania and very high proficiency in Poland. Ukrainian software developers are culturally close to European and American partners and is usually considered as strength (48) of Ukraine. More peculiarities are described by NIX (49). 46 DOU, 2019. Portrait of IT specialist in 2019. Infographics. 47 Education First. English Proficiency Index. 48 Agile Engine, 2018. Top outsourcing destinations to watch in 2018 49 Serheichuk, N., 2019. An honest look at Ukrainian software developers: cross-cultural communication in outsourcing, Ni-X 2.1.1 Specialists Human capital in IT: market overview
42. By Cerulean Industries 01 50 Kharkiv IT Cluster., PricewaterhouseCoopers Advisory., 2019. Kharkiv IT Research. 51 IT Dnipro Community., Sociological Agency Fama, 2019. IT Dnipro Research 2019. 52 Lviv IT Cluster, 2017. Economic impact of IT industry In addition, IT Ukraine Association, BRDO, Forbiz, EU4Business (2018) gave more aggregate classification in 2017: Developers 53% QA/QC testers 15% Non-technical professions (HR, PR, Sales) 6% Other technical Professions 5% System administrators 3% Business analysts 3% Designers 3% DOU, Ukraine Total Software Development - 56.8%, Quality Assurance - 23.2%, business analysts - 2.5%, Project Management - 7.9%, Kharkiv (50) Software Development 45.2% Quality Assurance 13.8% Other technical staff 7.1% Other non-technical staff 19.7% Project management 7.6%, Top-level Management 6.7% Dnipro (51) Software Development 48,3%, Quality Assurance 18,7%, Other technical staff 4.6% Other non-technical staff 15.9% Project Management Specialist10,6%, Top-level Management 2%, Lviv (52) Engineers (software engineer, quality assurance etc.) 74% Other staff (project managers, business analysts, designers) 15% Administrative staff (HR, PR, legal) 10% Service personnel (cleaners, security men, etc.) 1% Types of professions in IT sector and percent of various professions in IT The table below summarizes available data on the structure of IT processions in Ukraine overall and regional perspective as well. Main programming language JavaScript 28,3% Java 16,2% C#/.NET 15,6% PHP 13,0% Python 6,2% C++ 3,7% Swift 3,6% Kotlin 3,4% Ruby 2,2% Go 1,6% Other 6,3% SQL 60% JavaScript 45% Java 32% C# 28%% C++ 27%% Python 26% PHP 21% Node.js 16% Android/Kotlin 7% Objective-C/Swift 4% Golang 4% Ruby 3% Scala 2% Assembly 1% Other 5% Java 59% C++ 59% JavaScript 51% C57% C# 55% PHP 48% Python 45% TypeScript 45% Pascal / Delphi 39% T-SQL 35% PL-SQL 33% Ruby 21% Objective-C 20% Kotlin 16% Swift 16% The most popular programming languages among IT specialists in Lviv JavaScript 71% C++ 47.8% Java 47.5% C# 44.7% Python 43.4% 42 2.1.2 Professions Human capital in IT: market overview
43. By Cerulean Industries 01 53 DOU, 2019. Labour market in 2019: 20% growth and hype over taxes. 54 Ott M., Tymchenko O., 2020. Who to be: who are employers looking for and what specializations do students choose? (in Ukrainian) VoxUkraine 55 DOU, 2020. Where, how and how much: we analyze hiring of juniors in 2019 (in Ukrainian). Ott and Tymchenko (54) (2020) based on Jooble, report 136 275 vacancies in IT in 2019 (35% of total number), though as Jooble aggregates vacancies across job search websites, double counting of vacancies is not excluded. Front End 7 062 QA 6312 PHP 3979 .NET 3837 Java 3514 Marketing 2654 DevOps 2501 Project Manager 2270 Design 2246 Analyst 2043 Python 1995 Node.js 1854 Sales 1697 HR 1621 Support 1383 C++ 1365 iOS/macOS 1238 Other 1226 Number of university graduates, employed by IT sector DOU reports 5047 vacancies per month in 2019 (53) , total of 60570 vacancies in 2019, growing 9% year-on-year. Android 1067 SysAdmin 934 Data Science 917 Ruby 837 Product Manager 689 DBA 547 React Native 492 Unity 413 ERP/CRM 395 Golang 393 Embedded 384 Technical Writer 339 Security 273 SEO 241 Scala 234 1С 234 Blockchain 85 Data is not available DOU estimates 191.8 thousand people as of end-2019 (compared to 159.7 thousand in 2018). Share of juniors estimated at 27% in 2019, 26% in 2018 which corresponds to 51.8 and 41.5 thousand respectively. DOU also surveyed 55 IT companies regarding employment of juniors in 2019 (55). Overall these companies hired 5370 junior level specialists. Large Companies hire juniors through their own free educational programs. 43 2.1.3 Demand Human capital in IT: market overview
44. By Cerulean Industries 01 Amount of switchers This issue is not covered in the literature Remote work of UA workforce for international companies This issue is not covered in the literature Remote work of International workforce for Ukrainian companies This issue is not covered in the literature 44 Source: IT Ukraine Association as reported in Hlova M., 2018. Legal aspects of outsourced software development in Ukraine: Key highlights , Ni-X. Amount of foreign workforce attracted Migration of IT specialists and numbers of their return This issue is poorly covered in the literature 2.1.3 Demand Human capital in IT: market overview
45. By Cerulean Industries 01 Lack of non-technical professionals, like sales, marketing, business analysis and management specialists. High competition for top class IT-specialists leads to significant increase in senior employee compensation. Staff shortage is still tangible. Huge flow of people went into the IT industry creating a pay gap between the junior and senior level specialists. Limited practical knowledge and skills hinder the school to transition. Kharkiv cluster mention outflow of talented students abroad. Cooperation of universities with corporate IT varies between regions. Cluster reports emphasize the need for dual education so that students could gain practical knowledge at the workplace. Increase in labor cost – the rates are gradually reaching the cost of development in the countries of Eastern Europe. Big companies are aggressively growing. Entrance of large companies into the market will redistribute the market and these companies will poach the best specialists. Small IT-companies and startups experience challenges with attracting and retaining top talents due to limited financial resources at the beginning of their business life cycle. Obsolete labour legislation restricts hiring of professionals, forcing companies to use subcontractors instead; additionally, it limits the transition of students to the work environment, impedes internship opportunities and prevents professionals from teaching at universities. 01 List of challenges in human capital in IT 45 2.1.4 Challenges Human capital in IT: market overview
46. By Cerulean Industries 01 01 2.2.1 General numbers Education market overview Amount of universities, preparing technical personnel In 2018 there were 143 universities preparing professionals (bachelors, specialists, masters) in IT specializations, based on open database of territory education graduates of Ministry of Education of Ukraine. 46
47. By Cerulean Industries 01 Amount of universities, preparing technical personnel Relevant tech specializations also include physics and mathematics from natural sciences and automation and computer-integrated technologies. Other tech specializations may also be relevant, like electronics, applied mechanics, etc, but to less extent. Full list of specializations can be found in the list of specializations approved by the Cabinet of Ministers of Ukraine (56) Specializations IT specializations include Information Technology 121 122 123 124 125 12 Software engineering Computer science and information technology Computer Engineering System analysis Cybersecurity Natural sciences 104 105 Physics and astronomy Applied physics and nanomaterials 10 Mathematics and statistics 111 112 113 11 Math Statistics Applied Mathematics Automation and instrumentation 151 Automation and computer-integrated technologies 15 47 2.2.1 General numbers Education market overview 56 Cabinet of Ministers of Ukraine, 2015. On approval of the list of specialties and specializations for the training of higher education students. Resolution 266 Viewed April 3, 2020. http://vnz.org.ua/zakonodavstvo/101-perelik-galuzej-znan-i-spetsialnostej
48. By Cerulean Industries 01 Applied Mathematics Software engineering Computer science and information technology Computer Engineering Automation and computer-integrated technologies Total Junior Specialist 179 2 503 739 2 485 1 353 7 259 113 121 122 123 151 Junior specialist Physics and astronomy Applied physics and nanomaterials Math Statistics Applied Mathematics Software engineering Computer science and information technology Computer Engineering System analysis Cybersecurity Automation and computer-integrated technologies Total Barchelor 839 413 1 243 86 743 2 724 5 240 3 033 397 33 2 637 17 388 104 105 111 112 113 121 122 123 124 125 151 Bachelor Physics and astronomy Applied physics and nanomaterials Math Applied Mathematics Software engineering Computer science and information technology Computer Engineering System analysis Cybersecurity Automation and computer-integrated technologies Total 3 11 38 9 140 192 162 15 78 5 653 104 105 111 113 121 122 123 124 125 151 Specialist Physics and astronomy Applied physics and nanomaterials Math Statistics Applied Mathematics Software engineering Computer science and information technology Computer Engineering System analysis Cybersecurity Automation and computer-integrated technologies Total 374 417 473 95 771 1 438 4 214 1 969 590 938 4 11 283 104 105 111 112 113 121 122 123 124 125 151 Master Total IT Total 26 890 36 583 48 Number of graduates general and per each specialization 2.2.1 General numbers Education market overview
49. By Cerulean Industries 01 Number of IT courses (not in universities, private initiatives and corporate Academia) Total number is not presented in the literature Number of prepared students of courses The number of IT schools is growing with 43K+ graduates per year. 49 2.2.1 General numbers Education market overview
50. By Cerulean Industries 01 46 2.2.2 Stakeholder map in education Education market overview 50
51. By Cerulean Industries 01 2.3.1 Comparing industry demand with existing supply (quality and quantity) Existing gaps analysis There is a significant mismatch between education and labour market needs in Ukraine. Ukraine is among the most educated societies in the world with a tertiary gross enrolment ratio (GER) of 83% (2014, UNESCO). At the same time analysis of vacancies in Jooble by Ott and Tymchenko (57)(2020) shows that 82% of vacancies do not require higher education. Mismatch is present in specializations of higher education as well and it also concerns IT sector. Ott and Tymchenko (2020) compare Jooble vacancies with application to higher education. Number of vacancies in IT (136 275) was 3 times higher than applications to IT education (39908). There is a labor shortage of both IT and non-IT specialists due to a rapid industry growth. Number of vacancies increased by 30% in 2019. However, this gap cannot be filled just with a higher number of graduates. Market participants admit, that there is a huge inflow of people into the IT industry that stopped salary growth at junior level. In 2018 the number of graduates in IT (not including math and other tech education) was at around 24 thousand at the level of bachelor and higher (if math is included this number increases to 27 thousand), compared to total number of junior level IT specialist, that was at 51.8 thousand in 2019. 51 updated curriculum academic integrity more cooperation of universities with the corporate sector in terms of curriculum and internships/first jobs. Some of the clusters mention dual education as a possible solution as well. At the same time, there is still a significant shortage of middle level and senior specialists. As a result, the wage gap between junior and senior level widens. Further increase in IT education should match industry development. IT education exceeds the growth of industry and graduates are not able to find jobs at junior level, they will hardly become senior level employees in the IT industry. More likely they will work in another specialization or even at another level of qualification requirements. Another issue is quality of education, that includes: 57. Ott M., Tymchenko O., 2020. Who to be: who are employers looking for and what specializations do students choose?(in Ukrainian) VoxUkraine.
52. Country Niches for USP Positioning and Go-to- Market Strategy 3. 1 Specialization 3 3. 2 Regional distribution
53. By Cerulean Industries 01 Ukrainian IT companies primarily specialize in data management, telecommunications, cloud, gaming, e-commerce, media, fintech, healthcare, and others. Most of the reports (AVentures Capital & Ukraine Digital News 2016, National investment council of Ukraine 2018, Ni-X 2019) provide the same breakdown of almost 150 largest companies of Ukrainian IT industry by sub-sectors. This breakdown is based on the report by Ukraine Digital News "High Tech Ukraine From A To Z" as of 2015. According to this data, most popular sub-sectors include Data management (accounting for about 18%), Telecoms (13%), Cloud (12,5%), Gaming (11%), E- commerce (11%), Media (8%), Finance (8%), etc. 53 3.1.1 Vertical: percent of companies doing projects in various verticals (FinTech, Agrotech, Adtech, Spacetech, etc) Specialization Besides, AVentures Capital & Ukraine Digital News (2016) provides data on R&D subsidiaries of global companies working in Ukraine. They span many industries, with gaming, software, telecommunications and e-commerce being the most represented industry types in terms of number of employed IT professionals. AVentures Capital & Ukraine Digital News (2016) also lists R&D developers that work in certain sub-sectors: Source: AVentures Capital & Ukraine Digital News, 2016. National investment council of Ukraine, 2018.
54. By Cerulean Industries 01 There are also specialized reports on Game Development in Ukraine, Agritech, MarTech, Fintech, though it is hard to relate them to the total structure of companies in IT. USAID Financial Sector Transformation Project, UNIT.City (2018) provides information about participants of the FinTech ecosystem of Ukraine. According to it, there are about 80 providers active in the market. Based on the survey results for 59 FinTech providers of Ukraine, it specifies different FinTech Categories, with Payments & Money transfers accounting for 32% of all respondents, Infrastructure – 19%, Lending – 14%. Report on MarTech states that there are 160 companies and 5000+ employees, $130M of disclosed investments. 54 3.1.1 Vertical: percent of companies doing projects in various verticals (FinTech, Agrotech, Adtech, Spacetech, etc) Specialization Source: AVentures Capital & Ukraine Digital News, 2016.
55. By Cerulean Industries 01 01 There is no data on percent of companies having cross-specialization on international trends.There are reports on AI, AR/VR, Blockchain, but they are mostly focused on mapping. 3.1.2 International trends: percent of companies having cross-specialization on international trends (AI, AR/VR, Robotics, etc). Specialization 55
56. By Cerulean Industries 01 Distribution of legal entities. According to UNIT.City and StrategEast, 2019. Innovative Ukraine, around 50% of the IT- related legal entities are registered in Kyiv. Also a lot of the companies reside in Kharkiv (7.5%), Dnipro (6%), Lviv (5%) and Odesa (4.5%). Distribution of IT specialists. DOU survey of the Ukrainian IT professionals demonstrates that 67% of Ukrainian IT specialists live in Kyiv, Kharkiv, and Lviv: Kyiv (37%), Kharkiv (14%), and Lviv (15%). IT clusters. Most reports provide information on major regional IT clusters in Ukraine (National investment council of Ukraine 2018, UNIT.City and StrategEast 2019, AVentures Capital & Ukraine Digital News 2016). According to UNIT.City and StrategEast, 2019. Innovative Ukraine, there are 16 IT clusters in Ukraine, the most significant of which are located in Lviv, Kharkiv, Kyiv, Dnipro, Lutsk, Ivano-Frankivsk, Chernigiv, Cherkasy. Lviv IT Cluster is the largest in Ukraine, uniting over 80 members. However, the information about members of IT Clusters is outdated and some of the NGOs, related to clusters mentioned here are not active at the moment (Odesa IT Cluster). There is a good overview of Lviv, Kharkiv, Dnipro. Kyiv is well covered in general reports. Data on other regions is scarce. 3.2.1 Share of each region in each element of ecosystem structure Regional distribution 56
57. By Cerulean Industries 01 57 Source: National investment council of Ukraine, 2018 3.2.1 Share of each region in each element of ecosystem structure Regional distribution AVentures Capital & Ukraine Digital News (2016) maps regional distribution of most popular locations in Ukraine for opening an international R&D center. According to the report, Ukraine houses over 100 R&D centers of global companies, half of them are in Kyiv. Chief among other major cities with high concentrations of R&D centers are Dnipropetrovsk (15 centers), Lviv (15), Odessa (13), Kharkiv (11) and Vinnytsia (6).
58. By Cerulean Industries 01 3.2.1 Share of each region in each element of ecosystem structure Regional distribution Source: AVentures Capital & Ukraine Digital News, 2016. According to MarTech Made in Ukraine, 2019, Kyiv is a key location for martech (marketing technologies) companies with 68,4% of offices based here. Lviv 6.8%, Odesa 6.8%, Dnipro 3.8%, Kharkiv 3%, Chernigiv 2.3%. Only 5% of martech companies have their offices outside of Ukraine. SaaS Nation, UNIT.City, Center42 Innovation Agency, 2019 explores the location of Ukrainian SaaS-companies’ R&D offices: Кyiv - 51%, Оdesa - 9.5%, Dnipro - 8.4%. 58
59. By Cerulean Industries 01 3.2.2 Smart specialization of regions Human capital in IT: market overview Not directly covered in the literature, scarce data is provided by clusters Most reposts provide descriptions of major regional IT destinations in Ukraine that usually include Kyiv, Lviv, Dnipro, Odesa, Kharkiv. Data on major characteristics of these regions (human capital, educational system, number of companies, clusters) are almost consistent among different reporters. Kyiv City 40,000 specialists in the IT outsourcing sector, which is 46.6% of all resources in Ukraine Human capital 38+ universities and colleges that prepare future IT professionals Educational system 52+ Software outsourcing firms with 80+ employees 52+ International R&D centers Kyiv IT Cluster Number of IT companies Lviv 20,000 qualified IT software developers - 10% of the Ukrainian IT resources 10 colleges and 7 higher technical educational establishments. Currently, more than 12,000 IT specialists are studying in Lviv. Around 5,000 engineers graduate from Lviv educational institutions every year More than 192 IT companies 32 Software outsourcing firms with 80+ employees 14 International R&D centers Lviv IT Cluster 22,000 specialists work in the software development sector - 16.2% of all IT resources in Ukraine 5 Universities with technology and engineering faculties 35 Software outsourcing firms with 80+ employees 11 International R&D centers Kharkiv IT Cluster 8,000 technical specialists, which constitutes 5.5% of the Ukrainian IT talent pool 10+ Universities and colleges with technical education 150 IT companies (approximately half of them are IT service providers and the other half are software publishers) 28 Software outsourcing firms with 80+ employees 23 International R&D centers Odesa IT Cluster Around 9,000 IT or 7.9% of all Ukrainian IT resources 5+ Universities and colleges with technical education, 17,000 technical graduates More than 44 software vendors 44 Software outsourcing firms with 80+ employees 14 International R&D centers IT Dnipro Community Kharkiv Odesa Dnipro Source: UNIT.City, StrategEast, 2019. Innovative Ukraine 59
60. By Cerulean Industries 01 60 3.2.2 Smart specialization of regions Human capital in IT: market overview IT Dnipro research, 2019 and Kharkiv IT research 2019 surveyed the IT provided details on IT companies specialization in this region:
61. By Cerulean Industries 01 Methodology and uncovered needs for a comprehensive report of the IT Sector in Ukraine and key criteria for comparing Ukrainian IT Sector with other countries Despite a large number of reports, in many cases, the data on critical elements of the ecosystem is lacking or has significant drawbacks, including questionable sources, outdated information, or only regional covering of several clusters with no country perspective. Reсiting of unreliable data from one report to another misleads market participants and stakeholders. Based on our research we identified the following areas which lack sufficient data: Ecosystem mapping with key stakeholders on each segment Data on the size and structure of the local IT services market: available data on the local market is scarce, contradictory and outdated Biggest consumers of IT on the local market: partial, contradictory and outdated data Structure of exported IT products and services in 2019: fragmented and very scarce data Number of companies registered in Ukraine: Official data is not representative as one company often combines several legal entities, while experts’ estimates vary substantially Number of companies operating in Ukraine but not officially registered as legal entity Share of foreign companies in the Ukrainian IT sector Legal types of companies and share of each type Types of companies by business model: Data is based on the survey of IT specialists (which company you work for), not clear whether the sample is representative Structure of companies by the number of employees: fragmented cluster data is available, but there is no updated data on companies by size for Ukraine overall There is a big difference on what usually reported in market overviews as R&D and what is state statistics on R&D and a need to agree on a definition Size of investments in R&D in IT is also hard to measure and needs to be further investigated Profit Structure: Data on profit and profit structure of each type of Ukrainian IT companies is not covered in the literature Taxes: Overall estimates are up to date, but details are not revealed, cluster estimates made by two companies (FAMA, PwC) give a more detailed overview Structure of salaries: Data is based on the survey of IT specialists, but the representativeness of the sample is not guaranteed Salary growth trends in the last and coming years by category/position: No data on coming years in the reports Reliable data on investments structure (local vs foreign): Data vary between two sources Types of investors and investor map: Maps are not complete Data on infrastructure, required for IT companies to operate well: not available The number of specialists that work in the IT sphere in non-IT companies is not presented in the literature and is impossible to receive from official statistical sources The number of university graduates employed by IT sector: data on school to work transition for IT specialists is scarce, it is not known whether all IT graduates with IT specializations can find a job in the IT sector, how many graduates leave the country, etc. Migration of IT specialists is poorly covered in the literature Amount of switchers Remote work of UA workforce for international companies Remote work of international workforce for Ukrainian companies Share of companies doing projects in various verticals (FinTech, Agrotech, Adtech, Spacetech, etc): fragmented and partial data 61
62. By Cerulean Industries 01 Methodology and uncovered needs for a comprehensive report of the IT Sector in Ukraine and key criteria for comparing Ukrainian IT Sector with other countries Cross-specialization of companies in modern technology (AI, AR/VR, Robotics, etc): data is not available. There are reports on AI, AR/VR, Blockchain, but they are mostly focused on mapping Share of each region in each element of ecosystem structure. There is a good overview of Lviv, Kharkiv, Dnipro. Kyiv is well covered in general reports. Information on other regions is scarce Smart specialization of regions. Not directly covered in the literature, scarce data is provided by clusters All global segments need to be analyzed surveys of IT companies and IT specialists, experts interviews; desk research. The data missing is crucial for the understanding of ecosystem needs. Thorough further research is required to cover existing gaps in the data needed for informed policy-making. This research should include: The next step is to compare Ukrainian tech ecosystem to its peers based on conceptual framework and key elements presented in the ecosystem map of this report. In addition, international experience should be studied. Literature on startup ecosystems is developing, evaluation of policies and impact of ecosystem elements is sporadic and rare. Comprehensive literature review is required. 61
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