Stability and potential for growth: how Ukraine’s IT sector works – research
15 May 2025 11:56
Over the past three years, the Ukrainian IT sector has been contributing a stable 3% of the economy’s gross value added. This is stated in the new annual report “IT Sector Monitor Ukraine” prepared by the Institute for Economic Research and the German Economic Team within the framework of the Berlin Economics project, "Komersant Ukrainian" reports.
The researchers emphasize that earlier, due to Russia’s full-scale war against Ukraine, the IT sector lost significantly in its importance for the Ukrainian economy due to disruptions in its operations and IT infrastructure, as well as a decline in foreign demand amid global uncertainty and relatively better state budget performance.
Thus, after growing to 3.9% in 2021, the sector stabilized at 3% in 2022-2024.
IT sector exports grew by 3% last year. This is lower than the growth rate of total exports, which was 15%. Therefore, IT exports of $6.5 billion now account for only 14% of the export structure.
What is the structure of the IT sector?
According to the report, in 2023 (the most recent data available), programming and IT consulting accounted for the lion’s share of gross value added – 55%, while wholesale trade in computers, related products and software accounted for almost 25%. The telecommunications sector was not included in this study.
Medium and large IT companies make the largest contribution to the sector’s value added. The majority of microcompanies are individual entrepreneurs (269 thousand out of 278 thousand) who subcontract for larger companies. The share of microcompanies in the value of production has declined significantly: to 9% in 2023, compared to 62% in 2020.
The reason for this is the so-called “Diia.City regime,” when many IT professionals retain the status of individual entrepreneurs but receive part of their income as full-time employees due to tax benefits and exemption from mobilization. This shifts the cost of production to larger companies without reducing the number of entrepreneurs.
The tax contribution of the sector slightly decreased in 2024 compared to the previous year, but there was a significant improvement compared to 2022. Thus, the share of direct tax revenues from the IT sector is 2.7% of all taxes paid in Ukraine.
Features of the Diia.City effect
Introduced in 2022, the special legal regime of Diia.City provides for preferential taxation, flexible forms of employment (including gig contracts), and the possibility of booking IT specialists.
These benefits have stimulated a shift from the massive individual entrepreneur contracting model to a more formalized structure where specialists receive income partially as full-time employees. This has changed the distribution of production in the sector, shifting it towards medium and large companies.
“The Diia.City regime has significantly changed the structure of the IT market – we see a decrease in the use of the sole proprietorship model where it actually concealed labor relations. Some IT professionals retain the status of entrepreneurs but earn income as employees or gig workers. This shifts tax revenues to larger companies without reducing the number of entrepreneurs,” says Iryna Kosse, a leading researcher at the Institute for Economic Studies.
Productivity, employment and wages
The IT sector is showing an increase in production for government demand and higher productivity than the economy as a whole. Productivity increased in small and medium/large companies, but fell in micro-companies, with a 10-fold drop in production value.
Employment in the IT sector did not decrease during the war. The number of responses to a vacancy in the IT sector is about 27, while in the economy as a whole it is close to 7.
In terms of salaries, in 2024, IT workers saw a 26% increase in wages compared to the previous year and a 40% increase from the pre-war level. The actual salary, according to available market surveys, is approximately $2500 per month and salaries continue to grow.
As noted in the report by the Institute for Economic Research and the German Economic Team, the largest companies in the sector remain EPAM, SoftServe, and GlobalLogic, but AJAX Systems has also joined the top 5 largest companies, while Ciklum has left the top five.
How many specialists work in the IT sector
As of January 2025, the total number of employees in the 50 largest IT companies in Ukraine is 79.6 thousand. In the second half of 2024, it decreased by 858 specialists, or 1.07%. This is the lowest outflow rate since the beginning of the full-scale invasion. This is stated in the traditional ranking of the top 50 Ukrainian IT companies by the number of specialists, presented at the beginning of the year by the DOU portal.
In general, last year, the top 50 companies saw a reduction of 2 thousand specialists compared to 10 thousand in 2023. The number of technical specialists in the top 50 companies decreased by 901 specialists, or 1.5%, in six months.
War as the main challenge
In 2024, the factor of the great war became a decisive factor for the development of the sector. For foreign customers, Ukraine has been in the “red zone” of risk for three years now.
“The main challenges are the mobilization of key specialists, limited opportunities for booking and traveling abroad, missile attacks, and an increase in the tax burden,” Stepan Veselovsky, CEO of the Lviv IT Cluster, explains to the EP.
In addition, customers are increasingly paying attention not only to the war but also to their own financial difficulties, choosing companies from other countries, including India. The situation is further complicated by the internal unpredictability of government regulation.
