Ukrainian Tech Segment 2023: What’s Going On?

The Ukrainian Tech Segment is still here, alive and kicking. It’s this time of the year when everybody’s dropping year-end articles with “insights” and “predictions,” all being “cautiously optimistic” and every other lawful good neutral term out there. This article is not like that. We’re in the business of keeping it real.

Any way you look, the Ukrainian tech segment had a rough 2023. There were high hopes and expectations that everything would change for the better because the counteroffensive would fix every wrong and magically turn the tumultuous economic landscape into a prosperous land of opportunities where everyone has their best interests in mind and everything is fair and reasonable. 

So by the time Q2 was wrapping up, the reality started to sink in – probably, things ain’t change, and you definitely should brace for even more rough times.

During 2023, Talando Market Research gathered valuable insights regarding the market situation, interviewing industry experts, and analyzing all sorts of rumors and innuendo. The resulting document is the extensive 2023 Market Research.

This article is a glimpse into what we have to offer. 

• If you want to purchase the complete 2023 Salary Survey – drop us a line.

2023 Ukrainian Tech Segment Prominent Trends Explained

The big story of 2023 is that the Ukrainian tech industry got stuck in the “wait and see how things will play out” pattern, which slowly turned into a full-on “brace for the rough patch” by Q3. 

Sometimes during the year, things started looking brighter (AI startup spike, cybersecurity demand growth), and companies started revving up to go full throttle, only to tone down shortly thereafter because the future is uncertain. 

During late Q3 coming into Q4 2023, there were many hopes that Q4 would be transformative for the Ukrainian tech industry and signal some kind of change for the better.

• Such hopes were expressed by regular professionals and industry executives (not to mention government officials who are in a permanently positive mood regardless of the real state of things). 

The weird thing is these hopes were mostly unsubstantiated by actual things. Mostly, high hopes were due to the UAF counteroffensive and its prospective war-ending impact. 

As if this thing alone could turn the tide and magically solve all business challenges. That didn’t happen.

Because of that, Q4 2023 became a sobering time for the Ukrainian tech industry.

Essentially, the Ukrainian Tech Industry coming into Q1 2024 continues the trends showcased during Q3-Q4 2023. 

• Numerous external factors continue to affect the industry and obstruct productive business dealings. Recession holds back business scaling and attracting substantive investments, continuing invasion scares off potential outsourcing clients;
• There’s an overall significant industry slowdown. Companies scale back their recruitment operation for the sake of more cost-effective long-term approaches; 
• Several niche hypes came and went – artificial intelligence deep learning projects, data science, autonomous vehicles (drones, etc), smart gadgets. 
• Government regulations remain inconsistent, and maintaining existing clients and gaining new ones is still hard. 
• Cybersecurity, both in the private and government sectors, remains a controversial topic. 
• Gambling and online gaming niches remain questionable despite their massive whitewashing marketing efforts.

The general mood in the Ukrainian tech segment is coming to terms with the fact that the industry needs to learn to operate during the long-term war and figure out a way to contribute to victory tangibly. 

What Happened in The Ukrainian Tech Industry Segments 2023

The big narrative of 2023 throughout each Ukrainian Tech Industry Segment is how mobilization affects and will affect business operations. Lack of clear mobilization strategy, inconsistent mobilization reservation policies, and government unwillingness to compromise puts a damper on the entire Ukrainian Tech Industry

The outsourcing sector continues to struggle with decreasing client interest and competition from South American and Asian outsourcing companies.

• The challenge to maintain a stable client pipeline remains, but now it is exacerbated by growing inflation and cost of living, which increases spending. 
• At the same time, the overabundance of outsourcing supply makes it hard for companies to communicate their competitive advantages.

What’s going on in the Product Segment?

The product sector is going through several exciting developments. 

• Recession and market oversaturation weigh heavily on product companies. Consumers having less disposable income to spend affects the competition among software applications and so-called “cheaper alternative” products. 
• On the one hand, products in less developed niches struggle to keep their heads above water because consumers don’t invest in such projects as much as they did back in the late 2010s.
• On the other hand, growing dissatisfaction with corporate suites (for example, Adobe, Shopify, and Salesforce) creates fertile grounds for cheap alternatives that might have fewer functions but cover the basics and can get the job done on a budget. However, the competition in this sub-niche is rather challenging, and there are few ways such projects can differentiate themselves to gain better ground.

The manufacturing sector shows the most promise out of all Ukrainian Tech Industry sectors. 

• The main reason is the burgeoning DefenseTech niche is directly and indirectly involved in developing and manufacturing new types of equipment, communication devices, drones, jammers, etc.
• While DefenseTech cannot be considered a business sector for obvious reasons, the Q2 and Q3 periods laid the massive groundwork for DefenseTech to become one of the significant Ukrainian tech industry sectors soon. 

What About AI?

Artificial intelligence-related businesses started to feel the adverse effects of niche overhyping. 

• As a result, investors often need more realistic expectations regarding the project’s potential and how fast the company can reach it. 
• Consequently, many projects either faded away with their assets sold for other projects or companies got heavily reorganized to recoup the investments with a different strategy. 
• Either way, AI niches struggle to balance consumer interests and cost-effectively handle operating expenses.

What’s up with Cybersecurity?

The Ukrainian Cybersecurity niche is at a weird spot. 

• There is a growing realization that companies should invest in cutting-edge security solutions to avoid destructive attacks and data leaks. 
• In contrast, companies must invest more in cybersecurity departments and employee training to mitigate possible cybersecurity risks. 
• The common thought in the cybersecurity community is that there needs to be a big event that proves that cybersecurity solutions are critical for businesses operating during war. 

Data science is one of the media’s most famous Ukrainian Tech niches. 

• At the same time, few fast-growing data science companies develop innovative products or cutting-edge projects. 
• Data science talent resides primarily in big industry players handling consumer data and occasionally handling open-source data analytics for societal causes. 

The banking and fintech sectors remain a solid bedrock for the Tech Industry labor market with the most consistent demand and salary trends. 

• In contrast with the rest of the Ukrainian Tech Industry, banking and fintech companies take security very seriously. 
• This attitude was reflected in steady growth in cybersecurity specialists demand during Q3 and Q4 coming into Q1 2024. 

The Ukrainian Tech Industry Talent Demand Q3-Q4 2023

During Q3 2023, the Ukrainian Tech Segment’s talent demand continued the trends of Q1-Q2 2023. There’s a significant slowdown in recruitment activities due to increasing concerns regarding the near future impacted by uncontrollable external factors. 

As a result, companies try to balance between the following goals: 

• keeping the existing team intact;
• hiring high-profile specialists where it counts; 
• attracting newbies for a cost-effective workforce;

Given the diminished revenue flow and limited investments, companies try to work smarter and focus on quality results that justify the expenses. 

Consequently, upon discussing new recruitment projects, clients have a more specific vision compared to the same period in 2022 and 2021:

• why they need this kind of tech talent;
• what they expect to achieve with their help; 

The overall talent demand saw an additional 14% decrease during Q4 2023.

• Combined with Q2-Q3 stats, making it a staggering 44% decrease in recruitment queries across the board. 
• September 2023 saw a brief spike in AI-related talent, but by early December, it hadn’t developed into a consistent trend. 
• October 2023 growth in embedded developer talent demand, but similar to AI roles, the demand is inconsistent and far from being a trend.

Ukrainian Tech Industry Talend Demand Q3-Q4 Explained

Q3 and Q4 2023 were more or less a series of start-stop spikes across the board. 

• In August, there was an influx of junior-middle queries from mid-to-big game development companies, and then it came and went. 
• September and partially October saw AI startups wanting to hire some senior lead engineers, and then it was almost a complete stop. At first, it was primarily generative AI, and then the demand moved closer to data science-related AI. 
• And then, during October-November, MarTech is coming out of nowhere and flooding the job boards with their vacancies next month, and by the end of the month, it’s just there. 

As of late Q4, employers are looking to maximize what they already have and avoid the risks of bringing new talent only to be forced to lay them off and restructure the company afterward. 

• Companies are trying to increase the quality of hires with more meticulous recruitment processes and more time for making final decisions. 
• In practice, it is not a practical approach as some other companies always make decisions faster. 
• At the same time, retention measures via salary reviews and benefits management became much more efficient during 2023. For instance, companies started experimenting with giving talent select work hours to:
  • handle their pet projects or;
  • improve their work-life balance.;
• However, salary review remains the most effective retention tool. 

Look at how talent demand changed at each experience level during Q4 2023.

Junior-level Talent

The demand for junior talent dropped 42% for outsourcing and product niches. The startup sector saw a shocking 66% decrease from Q1 2023. 

• At this point, junior talent recruitment is part of big companies’ talent development pipeline. There is limited interest from mid-level companies and minimal interest from small-scale projects. 
• During Q3-Q4, some companies started to look for specifically junior+ talent with basic skills and experience who can be shaped into the role on the go.
• An influx of switchers considerably stretches the junior-level salary ranges.

Middle-level Talent

The demand for middle talent saw a 29% decrease going into Q1 2024. 

• The majority of talent demand for middle-level talent is from outsourcing and outstaffing companies.
• Product companies and startups are more interested in middle+ borderline senior talent. 
• As a result, a significant salary range stretches across the board, with the maximum level keeping up with 2022 figures while minimum figures getting closer to junior-level highs.
• Meanwhile, salary ranges for middle+ talent got tighter, with the difference between average minimum and maximum reaching 31%, while regular middle got an impressive 52% average minimum-maximum range difference.

Senior-level Talent

The demand for senior-level talent remains predictably strong regarding hiring and retention despite the labor market being in rough shape. 

• The competition for senior-level talent remains consistent and reasonably solid, especially senior+ level talent. 
• At best, it is on the same level as in early 2023, with irregular dips in demand here and there due to enemy state acts of terrorism putting everything on a standstill. 
• Senior talent is the only category that consistently gets equal or salary increases from one job to another. 
• However, there are also negative trends of high-profile talents losing jobs and being forced to accept lowball offers (down to 50% at times). 
• Overall, seniors remain in a better job search state than lower-level talent. 
• Still, it doesn’t mean finding long-term employment is easy. Companies are hesitant to risk hiring new talent for high salaries only to look for a replacement in the next quarter. 
• This pressure often drives senior talent out of companies instead of keeping them.

Then there is the senior+ talent demand, which remains all over the place. 

• On the one hand, companies want to have senior+ talent for their expertise and potential impact on business.
• But they also want to hire new talent cost-effectively. Companies are more interested in senior+ level talent who want to find a new job as soon as possible. As a result, companies can issue a quick offer with 20-30% lower salaries supplemented with stable employment guarantees.
• Senior+ talent who remain employed but are looking for new opportunities often struggle to get a good offer. A combination of high salary expectations and high-profile expertise keeps job offer frequency unusually down.

Lead-level talent

Lead-level talent demand is both growing and decreasing at the same time. Here’s how it works: 

• Companies want to hire high-profile lead-level talent to manage a team and boost the unit’s efficiency. 
• On the other hand, lead-level talent with proper leading experience is rather costly. Companies are looking for seasoned senior talent who can hypothetically tackle lead-level tasks. Sometimes, it works. More often than not, it doesn’t. This kind of sink-or-swim approach increases talent turnover rates for no good reason.
• Then, there is lead-level talent that got laid off. These guys are in high demand. Companies can swoop in with slightly lower offers and quickly employ high-profile talent for lower costs.   

Going into Q1 2024, it is doubtful that the talent demand situation will change drastically. November 2023 shows similar dynamics to July 2023. Everything is on shaky ground. Everyone tries to make a careful, well-balanced decision to keep things going but not drastically impact anything.

What’s Next?

The Ukrainian Tech Industry managed to get through 2023 in one piece. However, this doesn’t mean the challenges are over; everything will be sunshine and roses afterward. Unfortunately, there are still way too many unsolved challenges The Ukrainian Tech Industry needs to handle. But that’s the topic for another time.