Invest in Ukraine: IT sector

IT industry of Ukraine
Creating value on the
global scale

Since 2016, Ukraine has achieved macroeconomic stabilization, the country switched its focus to
supporting economic growth and modernization of the economy.
FDI is crucial for sustainable economic growth and increasing well-being. Together with day-to-day
business environment improvement, state-backed investment attraction and promotion is a pivotal
component of attracting FDI back to the country. The National Investment Council was established by
the President of Ukraine to set a public-private dialogue with key business leaders on investment
promotion, boosting FDI and tackling key obstacles of the Ukrainian regulatory environment.
The Ofﬁce of the National Investment Council is a non-governmental organization which serves as a
platform for public-private dialogue which brings together representatives of the business community,
IFIs and Ukrainian ofﬁcials.
We are focusing on practical steps needed to address investors’ needs and concerns by promoting
actions to strengthen the business climate in the country.
This Report is a brief outlook of one of the fastest growing and promising sectors of the Ukrainian
economy – IT.
IT is more than just a sector of the economy. It is the continuation of Ukrainian historical heritage of
being one of the strongest countries in STEM.
IT is always about people and Ukrainians are famous for our strong will, passion and desire for growth.
That is one of the reasons why the IT sector played a major role in the design and implementation of
some of the most important reforms, including transparent public procurement, open budget,
deregulation and e-government.
IT has been showing a constant double digit growth in the last few years. The sector grew by some 25%
last year, becoming the third largest export sector of Ukrainian economy. And according to all the
forecasts, it will continue to grow in the next few years and the number of IT specialists will double by
2020.
This report details not only the country’s potential for the development of the IT sector, but also the
legislative foundations which make Ukraine a predictable place to do business.
We hope that it will become a useful tool for investors and all the stakeholders of the Ukrainian
economy. We look forward to your feedback.
Yuliya Kovaliv
Head of the Office
of the National Investment Council
of Ukraine
Introduction

12018 | National Investment Council | IT industry of Ukraine
SECTION 1 – Ukrainian agri sector overview
1.1. Market overview
1.2. Internal IT market in Ukraine
1.3. Employment
SECTION 2 – Education and innovation potential
SECTION 3 – Largest market players
3.1. Outsourcing companies
3.2. Product companies and startups
3.3. Companies with most revenue of international origin
3.4. Top hardware startups
SECTION 4 – IT infrastructure
SECTION 5 – Regulation
SECTION 6 – Ongoing reforms
Contents

2 2018 | National Investment Council | IT industry of Ukraine

Ukrainian IT
at a glance

Ukrainian IT at a glance
Market overview
Well-known for the abundance of its highly-skilled engineers, Ukraine has become a leading European
and global IT outsourcing hub. In addition to being an outsourcing nation, Ukraine is emerging as a
premier R&D destination for many global companies. The country boasts more than 1000 outsourcing
companies, including small outsourcing shops, over one hundred national and international R&D shops
as well as over 2000 startup companies.
Ukraine has the largest number of IT professionals in Central and Eastern Europe amounting to more than
125 000 specialists in 2017. In 2016 Ukrainian IT engineering work force grew by about 25% and its is
expected to double to over 200,000 by 2020.
Ukrainian outsourcing companies offer a wide range of engineering capabilities, with most companies
having already switched to agile development over the past few years.
The export volume of Ukraine’s software development and IT services reached at least $3.6 billion in 2017,
showing double-digit growth year after year. Experts forecast that in 2018 IT export will grow to $4.5
billion. In 2017 IT became the third largest export sector of the Ukrainian economy and is expected to
become the second by 2020.
outsourcing market in Eastern
Europe according to
Outsourcing journal
by outsourcing volume in Central
and Eastern Europe according to
Central and Eastern European
Outsourcing Association
№1
№2
№4
by the number of engineers in
Central and Eastern Europe
according to Colliers international
by the number of engineers in the
world according to Colliers
international
№1
№1
most master level certified
nation according to Bench games
2010 2011
3.8
3.2
4.3
3.2
5.0
4.5
3.9
3.6
2016 20172012 2013 2014 2015 2018
forecast
4.5
ICT Export dynamics, bln USD
Source: AVentures

Furthermore, IT accounts for about 4% of GDP.
The US market is the main destination with an estimated 80% volume of exported services.
The investment volume reached the record $265 million in 2017. Growth & Secondary deals formed up to
70% while a dozen of series A deals accounted for another 22% of the total growth.
$650m
Investment volume, mln USD
2010 2011 2016 20172012 2013 2014 2015
Growth and
Secondary
Follow-on
Round B
Round A
Seed
97
20 25
80
42
146
80
265
According to AVentures, the amount of unreported deals in 2017 could have made at least $25 million.
Some of these deals could be reported later this year while some will remain undisclosed.
Foreign capital amounted for 96% of total investment in ICT in Ukraine in 2017. Even though Ukrainian
companies co-invested in most of the rounds the overall distribution is unprecedented. 96% of foreign
investment is an absolute record for Ukraine.
Source: AVentures
Investment volume by capital origin, % of total amount
36
4
60
90
4
Source: AVentures
Foreign
Ukraine
Undisclosed
2012
2017
invested in Ukraine since 2013

Foreign
Ukraine
Foreign capital breakdown by stage
*Excludes grants, crowdfunding, buyouts, M&A deals, ICO funding
Source: AVentures
50%
50%
55%
45%
77%23% 96%
4%
Seed deals: foreign funds led in half of the Seed
deals, accounting for 55% of investment volume
Series A deals: foreign funds led in 77% of deals,
accounting for 96% of investment volume
Number of Seed deals Investment volume
into Seed deals
Number of Series A
deals
Investment volume
into Series A deals
Foreign
Ukraine
Investment by key sectors
*Excludes grants, crowdfunding, buyouts, M&A deals, ICO funding
Source: AVentures
Other
Consumer Internet
Online services
Mobile
Software
Enterprise
E-commerce
Education
2010
2011
8020 97 1464225 80 265
2016 20172012 2013 2014 2015
The largest y-o-y growth occured in Software sector due to a few large deals in SaaS products
17%16%
45% 44%20%54% 31% 8%
18%
53%
12%
29%
14%
46%
5%
24%
5%
11%
26%
7% 7%
16%
7% 23%
10%
21%
10%
9%
32%
6%
4%
27%
10%
22%
5%
74%

Structure of Ukrainian ICT, bln USD
Source: IDC, AEQUO, Baker Tilly, SiBiS
1.85 Telecom services
Hardware
Services
Packaged software
0.12
1.46
0.19
Ukrainian internal IT market remains rather small, but shows potential for growth. The limited size of
internal market stimulates extensive export of IT from Ukraine. Subsequently Ukraine imports a
comparably limited amount of IT service while the key share of IT import remains hardware.
Internal IT market in Ukraine
The largest consumers of IT in Ukraine are financial and public sectors
IT consumption structure in Ukraine, %
35
Financial and banking sector
Public sector
Telecom
Other
Industry
Trade
Services
Transport
Community facilities
2
12
7
16
11
9
6
3
Source:IDC, AEQUO, Baker Tilly, SiBiS
The regional distribution of IT consumption correlates with several key factors such as population,
urbanization, economy and industrial development as well as the amount of educational facilities. Kyiv as
a capital and the Kyiv region consumes almost as much IT as Dnipro, Odesa, Lviv and Kharkiv regions
combined.

Share in total IT consumption
Source: IDC, AEQUO, Baker Tilly, SiBiS
17
5%
8%
6% 6%
7%
4%
2%
3%
3%
3%
3%
2%
3%
2%
2%
2%
2%
2%
2%
3%
3%
3%
3%
5%
Share of the region in IT consumption in b2c segment, %
8 6 5 4 3 2 n.a.
Kyiv, 17%
Breakdown of 150 largest companies by sub-sectors
Score: Number of companies covering each field
Data management
Telecommunications
Cloud
Travel
Healthcare
Finance
Media
E-commerce
Retail
Security
19
26
8
12
12
16
6
6
5
16
18
Gaming
Source: Ukrainian Digital News "High Tech Ukraine From A To Z"

IT outsourcing

Ukraine is listed among the best 25 countries for its outsourcing.
Ukraine is ranked 7th by the quality and efficiency of freelancers.
68.1
7.1 3.6 3 2.9 2.4
2.1 1.8 1.5 1.1 1.1 1.1
USA Great Britain Australia India France China
Norway Netherlands Canada Ukraine Germany Japan
Leaders in total value of IT-BPO contracts
Score: bln USD
Period: 2016
Internet access

More than 57% of Ukrainians have permanent access to the Internet as of end of 2017 according to the
State Statistic Service of Ukraine. This figure more than doubled since 2010 and experts forecast further
stable double-digit growth in the next five years.
Internet access per 100 persons (as of 01.01.2018)
Source: State Statistics Service, NCCIR
High Access Level
59,2
47,8
55,7 51,1
106,5
52,9
48,0
46,0
52,3
40,5
41,4
42,6
62,2
38,3
43,7
42,3
45,5
58,7
40,3
44,4
45,2
46,0
54,8
51,6
n.a.
Kyiv, 100,6
Low Access Level

Polls are showing a higher percentage. According to Kyiv International Institute of sociology 63% of
population have permanent access to the Internet as of 2017. While the figures are 5-10% higher than the
data from State Statistic Service, the overall dynamics and historic trend are the same: the number of
Internet users has more than doubled since 2010.
20152010 20162011 2012 2013 2014 2017
29
40 43
49
57
62 63
54
Number of Internet users, % of population
Source: KIIS
According to both polls and State Statistic Service, a large amount of Ukrainians are regularly using mobile
Internet. While broadband internet in Ukraine has been relatively fast in the last few years (Ukraine was
listed 42 in the global rating of Internet speed in 2017), the fast mobile Internet is rather new to Ukraine.
4G/LTE mobile Internet appeared in Ukraine only in spring 2018. With more than 50 million clients of
mobile operators in Ukraine this is expected to become one more stimulus for IT development in the next
three years.
Telecom users regional distribution, mln (as of 2Q 2017)
Source: State Statistics Service of Ukraine, AEQUO, Baker Tilly, SiBiS
47,8
55,7
46,0
12
Users of all services
8 7 6 4 3 2 n.a.
6
3
1
Number of users
7,8 16,3 56,3
Internet users
Mobile users
Fixed line users

Employment
Ukrainian IT sector has been showing double-digit growth in the number of IT specialists for the last
several years. In 2016-2017 the growth reached 27% increasing the total amount of IT specialist to more
than 126 000 people confirming the status of Ukraine as #1 country in Central and Eastern Europe by the
number of employees in IT sector.
Growth of IT sector by the number of employees
2017
2016 99 940
126 990
Source: DOU
Vacancies per month
2017
2016
1487
2132
Source: DOU
2015
3111
Number of vacancies published monthly grew by 45% making some 3111 offers in 2017 compared to 2132
in 2016 according to one of the key Ukrainian IT portal DOU. The response rate also grew by 34% from
200 000 to 270 000.
Salary dynamics

Even though Ukraine provides world class IT specialists, the salary level remains lower than in other
countries.
According to the poll conducted by DOU in the third quarter of 2017, the overall salary level distribution
among IT specialists remained within the forecasted levels.
0
$1,000
$2,000
$3,000
$4,000
Front-end senior Java middle QA middle Project Manager
2013 2014 2015 2016 2017

Education and
innovation
potential

Education and
innovation potential
Technical education is the foundation of Ukraine's IT ecosystem. Every year over 150,000 students
graduate in the country, among which around 40,000 obtain degrees in tech studies, including some
15,000 IT specialists. Additionally, about 40,000 IT specialists graduate annually from IT schools.
Number of specialists graduating from IT schools
2017
2016
30 880
43 868
Source: DOU
2015
56 218
Over 125,000 IT professionals make Ukraine the leading country in Central and Eastern Europe by the
number of engineers and the number of graduates emerging into the labor market.
The abundant and well-educated workforce at relatively low cost is an attraction for investors. This is also
proven by the number of technology firms which opened representative offices and labs in Ukraine, and
by the amount of the IT services outsorced.
“Ukrainian education system has particular strengths in math and science education, and this has led to a
very strong IT workforce. On international indicators, Ukraine scores among top countries on investment
in education and on higher education enrollment" - World Bank report.
It is also ranked 18th by the share of expenditures on education from the GDP and 18th by Government
expenditures per student.
Expenditure on education, % of GDP
Global Innovation Index Indicator Rank (out of 128)
40
Education
Government expenditure per pupil,
secondary, % of GDP per capita
20
18
18
Human capital and research
Tertiary enrolment, % gross
40
Tertiary education
Graduates in science and engineering, %
4
10
27
School life expectancy, years
Country Availability of
scientists & engineers
Quality of math &
science education
Higher education
enrollment
29Ukraine 27 11
Poland 5058 25
Bulgaria 7175 26
Hungary 8383 51
89Czech Republic 56 32

Education and
Top universities
According to the poll among more than 2000 IT companies conducted by a large Ukrainian IT portal DOU,
the rating of top 5 universities for IT in 2017 looks as follows:
University Score for
IT faculty
National University of Kyiv-Mohyla Academy (NaUKMA) 9,1
Donetsk National University 8,3
Kharkiv National University of Radio Electronics (KNURE) 8,2
Simon Kuznets Kharkiv National University of Economics 7,4
Taras Shevchenko Kyiv National University 7,1
10 – maximum score,
1 - minimum
In addition to well established traditional educational system industry players and NGOs have taken active
steps in educating and graduating more computer science professionals. Thus the BrainBasket Foundation
aims to train 100,000 new IT professionals by 2020 and to turn the IT sector into the number one export
industry of Ukraine (from what is currently the third).
The foundation is launching 100 study hubs all over Ukraine to train IT professionals of all levels. Not only
does this initiative help meet a growing demand for Ukrainian technical talent, but it also provides new
professional skills and job opportunities for refugees from Eastern Ukraine.
Additionally, the IT communities of almost all big regional cities offer specialized courses in the field.
Young people attend these as a complementary to the University course. The courses are also popular with
those who pursue a shift from the current career field to IT. Some examples of such private initiatives
include LITS in Lviv, Gelel in Odesa, Ukrainian IT School in Kharkiv, SkillsUp in Dniprok, GoIT in Kyiv, and
ITStep in every large city.
A significant portion of the country’s graduates enters the IT labor market annually. With the IT sector
expanding, Ukraine anticipates computer science and IT to be among the most popular career choices for
graduates in the near future.
R&D centers in Ukraine
Ukraine is gaining importance on the global arena as a developing innovation hub.
The country is also the place for over 100 R&D subsidiaries of global companies from a variety of
industries, including telecom, software, gaming and e-commerce.
Such international giants as Samsung, Aricent, Boeing, Ericsson, Huawei, Oracle, Siemens and
Teleperformance, to name just a few, have chosen Ukraine as one of their R&D facilities' location; these
companies work on innovative products in every known industry, including e-commerce, software, cloud
technology, security, healthcare, finance, transportation, retail, telecommunication and others. A
significant part of these global companies entered the Ukrainian market indirectly, through M&As, joint
R&D with an outsourcing component, or outstaffing service companies.
The R&D Institute opened by Samsung in Ukraine was the company’s largest one of the kind outside South
Korea, with the staff of more than 1000 people.

Source: PV mag
The United States remain Ukraine’s prominent partner for joint R&D activities (around 45% of the
companies involved), followed by EU countries and Israel.
Kyiv is the most popular location for R&D facilities in Ukraine, concentrating over half of all of them. Other
key cities for R&D development include Odesa, Dnipro, Lviv and Kharkiv.
North America
Europe
Asia
Asia
Education and

Largest market
players

Largest market players
Outsourcing companies
outsourcing market in Eastern Europe according to Outsourcing journal
by outsourcing volume in Central and Eastern Europe according to Central
and Eastern European Outsourcing Association
№1
№1
Several IT outsourcing companies of Ukrainian origin grew into technology giants with offices worldwide.
Among these companies are Ciklum, DataArt, Infopulse, Lohika, Miratech and SoftServe. Impressive is the
growth of AOG, an IT service company headquartered in Cherkasy (Central Ukraine), which now accounts
for 5,000 affiliated freelance engineers less than three years after company launch. At the same time a
number of foreign outsourcing companies like EPAM, GlobalLogic, Luxoft have multiple offices in Ukraine,
which now stands as a major R&D hub for these global IT service providers.
Most Ukrainian large outsourcing companies offer full-stack solutions while specializing in a number of
fields.
18 Ukrainian companies were included to TOP 100 Global Outscoring companies of the world in 2017
according to IAOP. This is 5 companies more than in 2016.
Employees
SoftServe 200
Ciklum
Location
ELEKS
Infopulse
Sigma Software
Intellias
N-iX
Miratech
Innovecs
AMC Bridge
Program-Ace
Softengi
Ukrainian
companies
Employees in
Ukraine
EPAM
Luxoft
Head
Office
Itera
TEAM Int.
Softjourn
Artezio
International
companies
Lviv
Kyiv
Lviv
Kyiv
Kharkiv
Lviv
Lviv
Kyiv
Kyiv
Dnipro
Kharkiv
Kyiv
USA
Switzerland
Norway
USA
USA
Russia
5500+
3500+
100
300+
100+
300+
4500+
2000+
1000+
1500+
800+
800+
700+
700+
400+
300+
100+
200+
Ukrainian IT outsourcing companies are headquartered in:
Ukraine
Europe
North America
13%
63%
2%
22%
Israel
Source: Ukrainian Digital News "High Tech
Ukraine From A To Z", 2015

Product companies and startups
Powered by the training and expertise that software outsourcing companies provide, Ukraine also has one
of the most rapidly expanding startup communities in Europe.
Ukrainian software companies offer virtually every possible software service including, but not limited to
software development, web and mobile development, quality assurance and testing, business process
outsourcing research and development services, IT consulting and IT security management.
Source of early capital
Accelerator
Angel
2017
2016
Source: AVentures
2015
2014
2013
2012
In 2017, startups attracted early
funding (Seed and Series A)
primarily from the institutionalized
venture capital funds (90%),
from angel investors (6%), and
crowdfunding platforms (3%).
According to UAngel Association,
in 2017, angels invested $3.5M
into 20 companies.
Grant
Undisclosed
604020 80Million,
USD
Corporate VC
Crowdfunding
Most active investors
VC
Foreign
Local
Late StageSeed to Series A

19
Companies with most revenue of international origin
Tech holding with
fast-growing products
operating in African
and Asian markets
Al-powered spell-check
SaaS company
Document
management SaaS to
edit, sign, share and
store documents online
Interactive restaurant
dining technology
Multifunctional
Cryptocurrency
Exchange
Cloud CRM for sales,
marketing and service
automation
Security and cleaning
software for Mac
E-commerce holding
with fast-growing
products in 5 countries
Payment & content
distribution platform
for digital goods
&services in 200+
countries
Mobile App
marketing with user
acquisition
technology
Developer of iSO
productivity apps
such as Spark,
Documents, and
Scanner Pro
Leader in Connected Pets,
maker of Petcube Play and
Petcube Bites
Mac software
development company
Online booking services
including flights, hotels
and insurance
Micro-stock
photo-ban online
marketplace
Supply Side Platform
with own Video Ad
Marketplace
Mobile app for event
planning
Storage management and
SAN software for SMBs
Tools engineered to
increase user adoption
and ROI of enterprise
applications (CRM.
ERP. Etc)
Global jobs search
engine
Top e-commerce companies on Ukrainian market
Global playersLocal players

Top hardware startups
With the global rise of the Internet of Things sector, the Ukrainian market has seen an increasing number
of of startups in this field. Most of them are focused on the global market, where customer purchasing
power is much higher than in Ukraine. Most products created by startups are designed in Ukraine and
manufactured in China or Ukraine. The majority of these startups obtained early funding and customers
via crowdfunding platforms.
Ajax Systems is a wireless security system
controlled from the web or mobile
application.
www.ajax.systems
Branto is a home intelligence system that
affords users remote control of various
electronics in their houses and also acts as
a security device.
www.mybranto.com
Concepter’s initial product, iBlazr, is a LED
flash for smartphones and tablets that is
sold in the Apple Store.
www.iblazr.com
Concepter’s latest product, dubbed ‘Soul’,
is a time-tracking platform for lifestyle
enhancement.
www.concepter.co
Ecois.me is a home energy monitoring
solution that tracks energy consumption
and makes it more efficient. The startup
gained impressive worldwide traction in
just 2 years after launch.
www.ecois.me
eCozy.de is a smart heating solution with a
touch sensor and remote control.
www.ecozy.de
Petcube Play is an indoor home pet
camera that allows checking on a home pet
remotely, from smartphone.
petcube.com

IT infrastructure

IT infrastructure
Ukraine has a developed and yet fast growing IT ecosystem contributing to the overall infrastructure which
includes five major IT clusters. The IT clusters have been formed in five largest cities of Ukraine. Each of the
cities has more than a million of inhabitants, highly developed educational establishments, vivid culture,
as well as a heritage of being a center for research and innovation.
Major regional IT clusters
Source: State Statistics Service, NCCIR
Lutsk IT Cluster
9 IT companies
Local universities
and media
www.litac.org
Kyiv IT Cluster
65 small and middle
IT companies
Over 900 developers
www.itcluster.kiev.ua
Cherkasy IT Cluster
10 IT Companies
www.itcluster.ck.ua Kharkiv IT Cluster
20 IT companies
5 local universities
www.it-kharkov.net
Dnipro Tech Cluster
18 companies
www.it-dnipro.org
Odesa IT Cluster
18 IT companies
3,000+ IT
professionals
it-cluster.od.ua
Bukovyna-Chernivtsi
IT Cluster
15 companies
700 IT
professionals
cbit.org.ua
Lviv IT Cluster
6,500+ IT
professionals
35 IT companies
www.itcluster.lviv.ua

Kyiv and the Kyiv region
Source: UADN, AVentures
A study by Global Services-Tholons has included Kyiv among its Top 50 Emerging Outsourcing Cities.
Kyiv, a city of more than three million, is the capital of the country and the main brainpower of the
Technology Nation. The city’s dominance rests upon a large number of universities, including technical
education, with the highest concentration of students in the country. Four of Ukraine’s major universities
are located here: the Kyiv Polytechnic Institute, the Taras Shevchenko National University, the “Kyiv-Mohyla
Academy,” and the National Aviation University. Like other capitals, Kyiv attracts the largest fraction of
national and international investors, the biggest conferences, numerous IT community initiatives,
incubators, collaboration and co-working spaces etc
Kyiv has a well-developed business infrastructure and transportation system, including two international
airports. Many companies have their official headquarters here for legal and business purposes, even
though some players do not base their main technical office in Kyiv.
55+
55+
35 000+
38+
20 000+
Software outsourcing firms with 80+employees
International R&D offices
IT professionals
Universities and colleges with technical education
Technical graduates (2015)
Kharkiv and Eastern Ukraine
Source: Kharkiv IT cluster UADN, AVentures
Software outsourcing firms with
80+employees
International R&D Centers
IT professionals
Universities and colleges with technical education
Technical graduates
Kharkiv is the second largest city of Ukraine. It is modern and comfortable city with developed
infrastructure including airport, railway, subway and is located just four-hour drive away from Kyiv. Home
to 142 higher educational establishments and research institutes, Kharkiv has been the scientific capital of
Ukraine for decades and is well known in the world for its high-tech enterprises, such as: Hartron,
Turboatom and others. Currently Kharkiv prepares specialists in 69 high education institutions, including
17 universities and 9 academies. Every year more than 200,000 students study in colleges and universities
in Kharkiv. More than 2,000 IT professionals graduate per year from Kharkiv Universities.
35
11
22 000
5
16 000+
Kharkiv
Luhansk
Donetsk
Kyiv
IT infrastructure

Central Ukraine and Dnipro
Central Ukraine has the fourth largest IT outsourcing community by the number of companies after Kyiv,
Kharkiv and Western Ukraine, and the second largest community of R&D centers after Kyiv.
Dnipropetrovsk is not the only city in the region with a large number of IT companies. Vinnitsa, Cherkasy
and Zhytomyr also have significant IT communities.
44
14
9 000+
5+
27 000+
80+employees
International R&D Centers
IT professionals
Universities and colleges with
technical education
Technical graduates
Dnipro
Poltava
Sumy
Chernihiv
Cherkasy
Kropyvnytskyi
Vinnytsia
Zhytomyr
Lviv and Western Ukraine
Although Lviv is a primary driving force behind the IT development of its region, Ivano-Frankivsk, the cities
of Rivne and Lutsk add to that growth. The region is home to such huge IT outsourcing giants as Softserve,
Eleks, Intellias, N-iX, Malkos and many others. Lviv-based N-iX and Perfectial made it into twelve top
Ukrainian IT development company ratings, published by American research publisher Clutch.
32
14
15 000+
17
15 000+
Software outsourcing firms with 80+employees
IT professionals
technical education
Technical graduates
Chernihiv
Lviv
Ivano-
Frankivsk
Uzhhorod
Lutsk
Rivne
Ternopil
Khmelnytskyi
Chernivtsi
IT infrastructure

Odesa and Southern Ukraine
80+employees
IT professionals
technical education
Technical graduates
28
23
11 000+
10+
15 000+
Odesa
Kherson
Simferopol
Mykolayiv
Zaporizhia
Major co-working spaces and incubators
Odessa is one of Ukraine’s top five IT hubs with over 190 IT companies. Roughly half of them are IT service
providers, the other half are software publishers.
In addition to five technological universities, the city has several popular IT coaching centers which provide
advanced training in software development, UX/UI design, QA and testing, and other IT disciplines. Some
IT companies operating in Odessa have their own IT training centers to help grow and nurture junior tech
talents.
IT infrastructure

Kyiv
In 2017 the total office supply in Kyiv amounted to 1 823 000 m² according to Colliers. The new supply
grew only by ~ 40 000 m². Compared to 2016, in 2017 the vacancy rate dropped by 6.8%.
Commercial real estate in major cities
IT infrastructure
The demand for high quality office space mainly came from IT companies (36%), professional services
(18%), and manufacturing (12%). Co-working spaces are becoming increasingly common, with IT
companies and start-ups as their target clients.
The prime headline rent remained unchanged at $28/m²/month. The average rental rates in Grades A and
B settled at 16/m²/month.
Lviv
The current supply of offices in Lviv meets the demand of the industry. The first A-class premises appeared
in Lviv in 2017. According to Lviv City Council 12 Business centers with GLA 80 400 m² are available in the
city. The prime rental rates vary from 10 to 18 EURO m²/month.
Dnipro
In 2016 the total office supply in Dnipro amounted to 1 670 000 m², mostly B/B+ and C-class premises. The
rent starts from $2 and grows depending on class and location.
Kyiv office submarkets
Desnianskyi
district
Podil
Left bank
Dniprovskyi
district
Darnytskyi
district
Obolon
Shevchenkivskyi
district
Podilskyi
district
Solomianskyi
district
Holosiyivsyi
district
Sviatoshynskyi
district
sq m
$**
128.000
9-15
Class B
sq m $**
56.700 16-20Class A
168.600 13-17Class B
225.300Overall
Right bank sq m $**
116.900 16-20Class A
766.030 9-16Class B
882.930Overall
CBD sq m
$**
217.600
16-28
Class A
239.100
13-17
Class B
456.700Overall

Regulation

Taxation
Budget revenues from IT in 2017 formed only around $30 million. Even though this amount is about 40%
more than in 2016 it’s still incomparably little to the side of the sector. The key reason for this is the current
tax system.
Salary is the most significant expense for Ukrainian IT companies which often accounts for up to 60% of
a company’s total expenditures. Salary taxes comprise a unified social security contribution (USCC) of 22%
(mostly on top of net salary) and personal income tax (PIT) of 18%
At the same time majority of IT companies employ personnel by outsourcing from private entrepreneurs
using simplified tax system. This system was created by the Government to stimulate small and
medium-side business development. The key stimulus of the simplified tax system is a very low tax rate
of only 5% of the revenue plus a fixed social contribution tax of around only $30 per month. VAT does not
have to be paid either. Compared to an average 40% tax rate on a usual salary in Ukraine the simplified
system provides a significant advantage.
The existing simplified tax system creates a very strong stimulus for IT development on the one hand, but
deprives the budget of the tax revenues. Furthermore such a system does not help IT companies grow at
a stage when they are looking for credit or venture financing.
Currency control
In order to remain the IMF program Ukraine was obliged to impose currency restrictions. As our financial
and banking system has been reformed and substantially strengthened in the last two years the National
Bank of Ukraine is lifting the restrictions step by step. Thus the National Bank relaxed the restrictions on
2 March 2018.
With effect from 2 March 2018, the following currency restrictions are in force:
Foreign investors are allowed to repatriate their investments subject to monthly cap of USD 7 million
regardless the period of dividends’ accrual. Previously, foreign investors were able to repatriate
dividends accrued for 2016-2014 only subject to cap of USD 5 million
Ukrainian borrowers may prepay cross-border loans denominated in foreign currency subject to
monthly cap of USD 2 million; and
The requirement for mandatory conversion of 50 % of loan denominated in foreign currency will be
disapplied to the extent to which such funds are utilized by such borrowers for refinancing or
repaying to other non-Ukrainian lenders (including, foreign trade creditors) and Ukrainian banks
Regulation

Regulation
Intellectual property rights protection
In Ukraine, the same as in other European countries, and the USA, the international copyright laws rules
apply. Those rules state that IP rights arise once the asset is created and no registration is needed for those
rights to exist (Presumption of Authorship).
Nevertheless, when it comes into dispute, the registration document – called the Certificate of Copyright
Registration – generally does matter, be it in Ukraine or in other jurisdictions.
According to the Berne Convention of 1986, a title of copyright protection locally issued is valid in all
convention countries, which includes 168 countries among which the USA and EU countries. Copyright is
treated distinctly from trademark protection, which requires registration in every country separately,
whether you apply locally or by means of international application.
This means that one may protect the IP rights in any country participating in this convention, but it would
be more effective to protect them in the country of IP usage.
Here is worth mentioning that in Ukraine IP is being registered as submitted, without substantial
examination. When it comes to a dispute, evidence of priority is to be presented by the parties. It is the
opposite in the US, where the Copyright Office conducts examination of software code in order to detect
if it contains protected IP of third parties. This makes US copyright protection more valuable for the
foundation of evidence in the case of a copyright dispute.
Work permits for foreigners
In 2017 the Ukrainian Parliament adopted a law on taking out the barriers for foreign investment
attraction. The law stipulated a new simplified procedure for employment of foreign citizens was
introduced. The new regulation allows for a faster and easier process of getting a work permit. Now it takes
less then one week to get a permit. This change became a significant relief for IT companies employing
foreigners according to European Business Association. As labor is the key resource in IT industry this
relatively small step could make a ground for quite substantial leap on the industry attracting more
foreigners to live, work and invest in Ukraine.
Establishment of the National Startup Fund
In 2017 the Government of Ukraine launched a creation of a National Startup Fund aimed at supporting
innovation and IT in Ukraine. The World Bank supported the initiative and provided technical assistance in
establishing the new body. It’s expected that the fund will start operating in fall 2018.

Regulation
UNSF will invest 50 million HRV into
early-stage startups that demonstrate
potential for commercial success
through scalable growth in the
global market
Viable, teamed, early-stage, innovative,
high-tech Ukrainian companies
Hight-potential ideas that can achieve
sustainable, international, commercial
success: 'unicorn' goal
Sectors for Investment
Artificial
intelligence
Fintech
Internet of
Things
Energy
Agritech
Med tech
Big DataCyber security
Blockchain
UNSF – Goals, Guidelines and Benefits
Goals
Guidelines
Benefits
Result oriented and transparent
Promote Ukraine as an innovative country on
national/international level(s)
Share best practices with the Ukrainian startup community,
inspire more young entrepreneurs
Coordinate and partner which existing entities to strengthen the
startup ecosystem
Invest in the most promising and innovative ideas that also
demonstrate high probability for global commercial success
Provide strong and consistent post-investment support to the
companies, aimed at fostering their development, preparing for
next stage financing, and ultimate success
Contribute to the economic development and global
competitiveness of Ukraine
Support innovation to transform the Ukrainian economy
Act as a catalyst for igniting new investment activity in Ukraine
Executive Summary

Ongoing reforms

Ongoing reforms
Further strengthening of IT education
In order for Ukrainian IT to grow faster than the global IT market country have to be not just competitive
at this particular moment, but think strategically. It requires to reinforce education strengthening
vocational training and establishing stronger cooperation between IT companies and universities. It is
important to coordinate such efforts on the national level and establish a country-wide program on IT
education development which would set strategic priorities for the development of the human capital in
sphere. At the same time the IT education system should be flexible enough to allow educational enteties
to adapt faster to market needs changing programs and introducing new disciplines when needed.
Intellectual property rights improvement
By far one of Ukraine’s top priority in developing IT is strengthening the intellectual property rights.
In 2016 the Government of Ukraine disestablished the State Agency on Intellectual Property and
transferred the functions of regulation of the sphere to the Ministry of Economic Development and Trade.
In summer of 2016 the Government adopted the Concept of intellectual property rights protection reform
and the Reform Action Plan. According to the documents the reform comprises of the three steps:
Institutional changes: creation of a new transparent body regulating intellectual property rights issues
in Ukraine
Reorganization of the Collective Management of Copyright and Related Rights system
Improvement of the national regulation on the Intellectual property rights protection
In February 2018 the Government created the Intellectual Property Rights Council responsible for
coordination of State IPR protection policy.
In September 2017 the President of Ukraine created a new High Court for Intellectual Property which is
expected to deals with the disputes on copyright, trademarks, inventions, patents, author’s rights and
administration of titles to intellectual property and other IPR issues. This body was created as a part of a
wide reform of the Ukrainian judiciary.
The Court is expected to enhance the speed and quality of hearings by the expert judges in IP-related
cases and, ultimately, improve protection of intellectual property rights in Ukraine. It is expected that the
Hight Court for IPR will be established in 2018 with judges appointed through a competitive and
transparent procedure.

Ongoing reforms
Introduction of sustainable taxation in IT
The current simplified tax system allows many IT companies to pay a low tax rate of only 5% from revenue
with a simple administration process. At the same time this system does not allow IT companies to attract
foreign financing, limits systemic growth and puts market players in unequal position when one company
has to pay around 40% taxes on salary while another can only pay 5%.
According to the European Business Association survey IT companies are ready to pay fairly higher taxes
in case their level remains adequate and competitive to neighboring countries.
At the same time the changes to the taxation should not mean the full elimination of the simplified tax
system for IT as itcould jeopardize the development of the IT sector or motivate companies work in the
shadow.
Digitalization of public services and digital economy development
Since 2014 Ukraine has already introduced a number of world-class IT solutions to public services such as
an online public procurement system Prozorro, online platform e-Data created to monitor public spending
and enhance budget transparency, electronic online VAT reimbursement system and many others. These
initiatives not only tacked corruption and significantly improved public services, but they also gave a yet
another push for the development of Ukrainian IT sector. Therefore further digitalization of public services
is a win-win for both the public and IT sector in particular. In year 2018 421 public services are provided
online, including register of real estate, company registration, tax-payers online cabinet etc. Further public
services will be launched online as well as other IT solutions for management of municipal infrastructure,
energy supply and data-management.
Introduction of GDPR
Comprehensive regulation of data protection in the European Union should by introduced in Ukraine in
the nearest time. GDPR currently is focused on the individuals whose data is being utilized, and changes
need to made in regulation to further strengthen of regulation of organisations utilising the data in
Ukraine.

This report has been prepared by the Office of the National Investment Council for information purposes only. Although the
information in this report comes from sources we believe to be reliable, and although we have made every effort to ensure
its accuracy at the time of publication, we make no warranty, express or implied, of this report's usefulness in predicting the
future performance. Nor should this report be regarded as a complete description of the macroeconomic situation and
markets regulation in Ukraine.
Office of the National Investment Council doesn’t do or seek to do business with companies covered in its research reports.
Any investment decision made on the basis of this report shall be made at the investor's sole discretion, and under no
circumstances shall Office of the National Investment Council or any of its employees or related parties be liable in any way
for any action, or failure to act, by any party, on the basis of this report.
This report, or any part of it, is free to reproduce, distribute and quote, referencing Office of the National Investment Council
is required.
Office of the National Investment Council would like to credit AVentures and Ukraine Digital News which produced a report
IT Ukraine, IT services and software R&D in Europe’s rising tech nation, from A to Z. The information from aforementioned
study was partly used in the preparation of the current document.
Source of photos: Pexels, Unsplash, Pickwizard
Produced by the Office of the National Investment Council of Ukraine which
is supported by the European Bank for Reconstruction and Development
For any questions or comments please contact office@nicouncil.org.ua

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