It is cheap in Ukraine and the country has a lot of advantages compared to neighboring countries such as Armenia and Romania, says Ebbe Groes, CEO at EveryMatrix. However, the IT sector has one problem – not enough workers.
The Ukrainian IT sector is growing by around 20 percent per year due to low wages, a beneficial tax system, and well-educated workers. One of the many companies experiencing growth in Ukraine is the Danish company EveryMatrix, which was formed in 2008 and has several offices worldwide, including an office in the Ukrainian city of Lviv. They have grown from being five employees several years ago to be around 120 today, creating IT solutions for iGaming sites such as online casinos and betting sites.
“I don’t think that anyone should be nervous about doing business in the IT sector in Ukraine,” says Ebbe Groes, CEO of EveryMatrix, to Ukrainenu, “There is, of course, some corruption here, but it does not affect you in the IT sector. It is only if you need to go to the doctor or if you get a speeding ticket. It does not affect your business.”
“We have never been asked to pay for any favors. It might be a problem in other sectors or if you are getting government contracts, but not in the IT sector,” says Groes, “There are some bureaucratic problems in Ukraine, but it is smaller than in the US.”
EveryMatrix has offices in several countries, including China, the U.S., Armenia, Romania, Spain, and Malta. Salaries for IT workers in Ukraine are increasing every year, but wages for everything else, such as lawyers and HR personal, are cheap.
“You can always hire a lawyer here for almost nothing to help you with the bureaucratic stuff,” says Groes, “Ukraine is not expensive. You can get a nice office here really cheap, which would not be possible in many other places.”
Some challenges in Ukraine
Groes says that Ukraine has made much progress since the revolution in 2014. EveryMatrix has customers from all over the world, working with sports betting and online casino entertainment. As a company with several offices across the globe, Groes especially points to the 2014 association agreement with the EU as a significant step forward. Employees can now participate in meetings, courses, and conferences in the EU without a visa.
“There is a different culture in Ukraine. Ukrainians mainly just do what they are told, while we in Denmark, for example, question tasks, which can be very beneficial for a company,” says Groes, “It takes some time to create a good working culture in Ukraine. It requires that you are here a lot, engage your workers and give them responsibility.”
“The workers need to know that they have responsibility for the product. We have tried it before in Romania and Armenia, so we know what to do. The workers in Ukraine are really good at their jobs, probably even better than in Romania and Armenia, but the mentality is more difficult in Ukraine than in Romania, for example.”
Problem with meeting demand for workers
Groes also points out that Ukraine has a problem with a lack of qualified IT workers. The industry organization IT Ukraine previously called the lack of IT workers the biggest problem facing the sector. The Ukrainian IT sector makes up 8.3 percent of all Ukrainian export, which is much higher than the number in 2013, where it was 1.3 percent.
“The biggest problem for us right now is to find enough people. Companies have started to steal from each other and it is annoying,” says Groes and pointing out that EveryMatrix is starting to hire more interns and junior developers.
The hope is that this will create a culture where workers stay, and it is a way to recruit more workers to meet future demand.
“It, of course, takes a long time,” says Groes, “It is okay for us because we are already here in Ukraine and we are established. I would be more cautious if I came here and wanted to start a new office with a quick need for 50 to 100 IT people. You would really have to question whether you would be able to find all those workers, that you would need, here. The body-shopping companies are hiring everyone; they can.”
Body-shopping companies are consultancy firms recruiting workers to contract their services out to other companies on a short- to mid-term basis.
Low taxes – might need to change
IT workers in Ukraine are paying a low five percent tax (the so-called private entrepreneur tax). It is much lower than the standard tax in Ukraine of 18 percent, which are paid by almost everyone in Ukraine. The entrepreneurial tax was introduced to keep IT workers in Ukraine, but it is debated right now. Some politicians are considering increasing the tax, meeting much criticism from the industry organizations such as IT Ukraine.
“It would damage the IT sector if the government changes the favorable private entrepreneur-tax,” Constantine Vasuk, CEO of IT Ukraine, previously told Ukrainenu, “It might not be very dramatic… but why change something which is working?”
Groes says that the low five percent tax was essential to help the Ukrainian IT sector develop ten years ago, but that it makes very little sense anymore.
“I believe that the taxes should be raised. The critics say that it will be terrible, but it does not make sense anymore that IT workers with really salaries pay so little tax. An increase might have been a problem 10 or 15 years ago, but the sector is now stable, and a small increase in taxes will not force companies to move,” says Groes, “Why should I close my company in Lviv and move 120 people because of a little higher taxes? The IT companies here can sell everything that they got, and they will not close just because their workers will have to pay a little higher taxes, and the salaries will need to increase.”