Ukrainian tech outsourcing sector at risk after Russian invasion

Ukrainian tech outsourcing sector at risk after Russian invasion

The resulting Internet outages have paralyzed outsourced tech operations in banking, insurance and financial services.

The Russian invasion of Ukraine has put the outsourcing of tech services from that country at risk, according to a report in he Wall Street Journal. Tech outsourcing in Ukraine is a sector that has bounded ahead in recent years with customers in the U.S. and Europe.

Following the Russian incursion, internet outages occurred across Ukraine, according to a monitoring dashboard run by the Georgia Institute of Technology. Kerry Hallard, chief executive of U.K.-based trade group, the Global Sourcing Association, told WSJ that at one member business in Kharkiv, 80% of computers had no internet access.

The conflict “is going to have massive repercussions because Ukraine is obviously a huge country, a huge IT delivery nation,” Ms. Hallard said.

Technology workers in the country support fields including banking, insurance and other financial services operations, she said.

Ukraine’s information technology sector has been booming. Its IT export volume increased 36% to $6.8 billion last year, up from $5 billion in 2020 and $4.2 billion in 2019, according to a report from IT Ukraine Association, a trade group.

Western tech companies are closing their offices in Ukraine

Technology companies including German software provider SAP SE and London-based financial-technology company Revolut Ltd., as well as Israel-based services marketplace Fiverr International Ltd. and website design and development platform Ltd. say they employ workers in the region.

“Companies that have outsourced talent there have grown to rely on them,” Ms. Gove said. Many companies likely prepared to mitigate the effect of Russia’s actions by moving projects to teams in other locations, she added.

SAP said it had closed its Kyiv office and taken safeguarding measures to support its employees, The Wall Street Journal reported.

Wix said it evacuated employees to Poland and Turkey last week. Fiverr said the majority of its Ukraine-based workers have moved to “safe places both inside and out of Ukraine,” while Revolut said it has offered financial support to employees who wish to relocate.

The security of some technology resources such as code, designs and documentation may still be vulnerable in the conflict zone, Ms. Gove said.

Ms. Hallard of the Global Sourcing Association said member companies are more concerned about longer-term impacts than short-term mission-critical projects.

“It depends on where the situation goes,” said Vitaly Sedler, chief executive of Lviv, Ukraine-based consulting and IT services firm Intellias Ltd. and president of IT Ukraine Association.

“If the situation is resolved and doesn’t lead to long-term military activities, the impact will be limited … we are looking at the situation and different scenarios,” he said.