2021 has been an excellent year for the tech industry, with many IT companies reporting bumper profits and their employees getting fat bonuses. According to a study conducted by the Payoneer payment platform, the average earnings of Ukrainian IT businesses working with foreign clients rose by 29% this year.
Will the IT market keep booming in Ukraine and globally? If so, how should companies compete for talent as the talent deficit continues?
Investors want technology
If experts' forecasts are anything to go by, investors will keep pouring money into the IT industry for at least the next 3–5 years. According to Roelof Botha, a partner with the Sequoia Capital venture capital firm, $16 trillion has been invested in instruments with a negative return globally. Simply put, it's as if you put $100 in your deposit account and get $99.75 from the bank the year after. In this situation, major investors simply have nowhere to go with their money at the moment. More precisely, ‘IT companies in the cloud, cybersecurity, and anti-fraud segments are still the ones with the best prospects for success’, as Yevhen Pentsak, the Professor of Finance and Economy with KMBS, said.
According to Gartner, worldwide IT spending (including data centre systems, enterprise software, devices, IT services, and communication services) will increase by 5.5% in 2022, totalling $4.5 trillion and losing pace against 2021’s 9.5%. In 2023, companies will earn $30 billion from selling products and services unavailable in the pre-pandemic world.
According to Mykhailo Kukhar, the founder and chief economist of the independent macroeconomic analysis and forecasting outfit Ukraine Economic Outlook, a new 8- to 10-year-long economic supercycle has begun.
Economist and financial analyst Eric Nyman has a more pessimistic forecast. He believes that 2022 will bring fluctuations to the market that have been rising throughout 2021, where companies exceeded their revenue projections by 30% on average.
Start-ups have been rapidly becoming more numerous. In H1 2021 alone, they attracted $292.4 billion in investments—as much as over the entire previous year.
According to Crunchbase, 30 companies also became decacorns (start-ups reaching or exceeding the valuation of $10 billion) in 2021—twice as many as over the previous year. E.g. Grammarly, a company with Ukrainian roots, announced on 18 November that it had attracted $200+ million in investments, with its valuation reaching $13 billion (13 times as much as in 2019, when it achieved the unicorn status).
Although most startups will start turning profit only in a longer term (5–10 years), it is a more viable investment than bleeding money on negative bond yields.
The tech market will keep rising, meaning that competition for IT talent will not only continue but get fiercer. To attract professionals faster, the companies will compete with their compensation, sacrificing short-term profits to hold their ground in the market, creating lots of new disruptive technologies, and increasing capitalization.
Black swans are still possible
Any scenario can be crushed by unpredictable events having a sizeable impact on the economy, including the tech sector. E.g. it is hard to predict the effect of stagflation (economic recession combined with high inflation) risks in China in the global context. Many markets are economically tied to China. And the ripple effect will clearly hit many countries, including the US.
Experts point out that investments in the Ukrainian market may decline amid an unstable political situation. Rising tensions between political powers, the PMC Wagner investigation, Russia amassing forces on the Ukraine border, the expectations of a military escalation in winter 2022—all this is not conducive to fostering investors’ trust. As a result, many foreign capitalists are pulling their money from Ukraine's sovereign bonds and Eurobonds, which is already putting increasing pressure on the hryvnia, bringing its exchange rate to the more realistic UAH 27/$.
There are also negative factors affecting the labour market dynamics: the requests for developer recruiting in Ukraine are declining. This can be attributed to seasonality, as the holidays are approaching, and the above-mentioned economic and political factors. Still, there is cautious optimism in the market that the situation may stabilize. For one, the Ukrainian hryvnia is the eighth-most undervalued currency globally, according to The Economist's Big Mac Index.
Tremendous downturn unlikely as the talent market goes global
The fight for talent is unlikely to subside in the IT market any time soon. Over the next 5–7 years, the gap between demand and the number of available specialists in this industry will only widen. The global deficit is thus forecast to exceed 85 million professionals by 2030. It bodes trillions of dollars in losses due to the impossibility of rapid growth.
Therefore, IT companies are increasingly looking to source talent worldwide. At INDIGO Tech Recruiters, we are more likely to quickly find a Senior iOS developer in Vietnam than in Ukraine. Senior Node.js devs are easier to find in Nigeria, Middle DevOps specialists in Azerbaijan, and Art Designers, Product Managers, and Unity devs in Canada and the US. Requests are coming from the US and Ukrainian employers alike, with local companies resorting to looking for professionals in Europe, Asia, and Latin America.
What can IT companies do?
Look beyond the domestic market to find talent. The global remote work trend makes the competition for the workforce even fiercer, with vacancies piling up and specialists becoming subject to fewer restrictions. Consequently, compensation in the IT industry will start evening out worldwide for everyone from developers to PMs and marketing professionals. It bodes well for professionals in the regions with inexpensive labour: average developer wages in Ukraine may very well approach the global median level. Competition with the markets with higher-paid labour force will thus increase because the chances are high that US companies, for example, may start reducing domestic professionals’ compensation when presented with a choice of talent this wide.
Still, everything will remain relative. Now, it will become harder for US, UK, or German professionals to land a job in a leading company because Ukrainians will have equal footing with them when it comes to picking an employer. Meanwhile, Ukrainian specialists will have to compete for positions with their Asian colleagues, which are also becoming increasingly valuable in the eyes of employers.
Train personnel internally. Multiple directions could use more effort: establish cooperation with technical universities and launch internships for students and retraining programmes for those switching careers. It is also crucial to provide additional training for junior specialists: employers will have to cover the related expenses or even open in-house training centres if they decide to scale their team substantially.
Amplify the IT trade’s brand in the labour market. Pushing the point that IT professionals are sought after and extraordinary would not suffice to boost the inflow of candidates wishing to work in tech. Hype alone won't solve the problem. It takes a specific way of thinking and maths mastery to become a developer. The students that chose an IT specialization for the myth of high wages for everyone in the industry are quick to jump ship.
To increase the efficiency of the selection funnel at the very point of entry, we need to introduce people to the industry earlier. E.g. my son was admitted into Step IT Academy aged 9. He will be 14 soon and he is about to complete his programmer education. In the meantime, however, he has realized he doesn’t want to be a developer. Still, he likes the tech industry and plans to become an entrepreneur and delve into UI/UX design. It’s a good thing that he tried it this early instead of dropping out in the third year of university, having wasted a lot of time and money. But such cases are rather the exception to the rule.
IT professions should be promoted as early as in grades 5–9 in school. Children need to know what opportunities the industry opens, what skills they need, and what they have to learn to become the next Zuckerberg or Musk because their desire alone will not suffice. We have prepared a similar programme for the charity IT camp for children from families in difficult life circumstances we organize together with Dobrodiy Club.
There are many other ways of introducing children to IT, like robotics museums and interactive centres, where they can see and touch the latest technology.
Enhance the quality of education in universities and colleges. Increasingly, Ukrainian students are starting to work during their second year of university, choosing to commit less of their time to studies and instead to gain first-hand practical knowledge and skills instead. The public university programme is failing to stay abreast of the rapidly-changing situation in the tech field. In this context, businesses expect accommodating moves from the public education system, e.g. initiating cooperation on the first year of study, adapting curriculums to employers’ needs, and offering internships under experienced mentors in IT companies. Preferences (e.g. tax exemptions) for private training centres teaching tech can also improve the situation.
Upskill managers and HRD. Going beyond the Ukrainian market to hire talent is just the first step. Working with global teams takes proper management skills. E.g. not all Ukrainian leaders are ready to work with people based on diversity & inclusion principles. In addition, there are problems with organizing specialists working in different time zones. The working language also poses an issue: not all teams are proficient in English.
The companies need to upgrade their development programmes on all levels: from English courses to leadership and culture. If the management stubbornly tries to micromanage everything, the carefully assembled international team will fall apart, and all growth potential will end up wasted.
Ukrainian HRD is also not enough to support global teams. E.g. it takes comprehensive training and, ideally, specific background to build a compensation system or corporate culture in such circumstances. Over the past year, we at INDIGO Tech Recruiters have been trying to fill 3–5 HR director vacancies. It has been anything but simple to find the professionals ready to rise to the businesses’ new challenges. In this situation, some companies may be better off sourcing HRD specialists from Europe and the markets where they plan to expand.
Preparing for the metaverse?
This year, Mark Zuckerberg has announced the transformation of Facebook into a new breed of social networks—a metaverse encompassing VR, AR, smartphones, and consoles. People will be able to socialize in the comfort of their homes while maintaining the feeling of presence. Sensor gloves have already been announced, equipped with touch sensors that let you feel the objects you see in your VR goggles.
Facebook has also launched the open beta of Horizon Workrooms, where teams can hold virtual work meetings from anywhere in the world (provided that they have Oculus Quest 2 headsets). Each participant has an avatar and can edit digital boards and documents, i.e. people work from where they feel comfortable and benefit from a productive office atmosphere. So far, rather few companies have what it takes to create comfortable virtual offices. Chances are, these are the future, and companies need to watch the developments in this field. In a few years, candidates will most probably be interested in an opportunity like that, rather than whether the office has ergonomic furniture and flavourful coffee.
The IT industry will keep growing amid favourable conditions in the global market and demand in all sectors from business to social. Moreover, the talent deficit will be the primary obstacle slowing down the development in various niches. Therefore, companies must look for new ways of attracting professionals, specifically by expanding the boundaries of search (e.g. increasing the age range for their candidates), training junior specialists, providing re-training programmes for those who need them, and going beyond the domestic market to find new hires.