For now, the time is the humanitarian emergency, no matter what. For technology companies established in Eastern Europe, it is a question of exfiltrating from Ukraine, but also from Moldova, employees who request it, as well as their families. Afterwards, everyone will consider the economic consequences. The first will be an unprecedented talent shortage and a reallocation of global IT know-how resources. This concerns not only the research and development of applications, but all the monitoring and maintenance operations of common services: banking IT, hotel reservations, online purchases.
One of the largest IT providers on the planet, Epam Systems, is an American company from Pennsylvania with much of its forces based in Eastern Europe. She has just paid a high price for her choice with a stock market price that has fallen by 71%, from 700 dollars last December to less than 200 currently. Its CEO and founder, Arkadiy Dobkin knows the environment. He was born in Belarus where his company employs 9,400 people, plus 9,000 in Russia and above all 14,000 in Ukraine. To help them, Dobkin released $100 million. This says a lot about his certainty that this crisis will last but also upset the base of his business and the economic space in which it operates.
At Pentalog, we avoided Ukraine. “I understood in 2009 that it was a powder keg,” says its CEO and founder Frédéric Lasnier, who has long established a large part of his teams in other countries in the region, but also in Vietnam and Mexico. “We also have nothing in Russia, nothing in Belarus.”
Not without a certain prescience, Pentalog stopped at NATO’s borders with most of its forces concentrated in Romania. The company employs around a thousand engineers and technicians there out of a total of 1,500 people who work for clients such as Adidas and TripAdvisor. The company also had a team of 250 people in Chisinau, Moldova, 100 kilometers of Odessa, the port city of Ukraine pounded by the Russian army. Ten days after the start of the war, Pentalog had already repatriated to Romania 300 people, that is to say about fifty families.
WhatsApp, PayPal
Eastern IT developers have long attracted top Western companies with their mastery of math coupled with a vigorous entrepreneurial spirit and strong discipline. In recent history, this has produced some great success stories such as WhatsApp, created by a Ukrainian immigrant, Jan Koum, or PayPal, created in 1998 by a native of Kiev, Max Levchin, to name a few. . In the area of mobile app creation alone, Ukraine is home to – was home, one might say – about 50 leading companies.
“Ask an American engineer where the best developers in the world are, he will instantly answer you ‘in Eastern Europe’, continues Frédéric Lasnier, from Pentalog. Of the 12 countries that supply the best, only three or four are not in Eastern Europe. In the lead are Ukraine and Poland, followed by Hungary, Moldova and Romania.” Before the war, Ukraine had 212,000 developers, with an annual output of 16,000 computer science graduates, expected to grow by 25% over the next two years. It was before the explosion of February 24, 2022.
Today, between the destruction, the displacement of populations, the mobilization of young Ukrainians and economic sanctions affecting Russia and Belarus, Russia’s invasion of Ukraine is likely to result in the indefinite removal of 700,000 developers, according to an estimate by Pentalog. “And if we add the visas of Russians and Belarusians who may not be renewed in the United States and elsewhere, we approach one million.” An estimate confirmed by other sources. International digital service providers are therefore faced with a map turned upside down where the notion of risk becomes paramount.
Frédéric Plais runs Platform.sh from Los Angeles, a company specializing in hosting critical applications for large companies. Extremely rare, its team of 300 people is entirely relocated to… 37 countries. He, too, avoided Russia and Ukraine – as well as mainland China. “We host sensitive infrastructure, he explains. We cannot afford to work in countries where our employees may be under any pressure. We are facing growing security concerns with ever more attempted attacks that have led us to strengthen ourselves considerably.” With double-digit growth, Platform.sh is currently looking for 200 specialists. Frédéric Plais expects serious recruitment difficulties: “The crisis in Europe will accentuate the current tension already fueled by the ‘great resignation’, and by the inflation of salaries resulting from ever greater fundraising.”
The winners: Poland and Latin America
Phil Jeudy is the director of development for Simbe Robotics, a company in San Francisco. After twelve years spent in the United States, a country of which he also took nationality, he settled in Ukraine for family reasons. He chose to stay in this country he loves. Reached by WhatsApp on March 8, his diagnosis is extremely dark: “Not to mention the appalling human toll with its dead and its refugees, it must be understood that each passing minute destroys the country a little more, its infrastructures, its homes, its office buildings, its universities, its schools, its hospitals. Even if the hostilities ceased quickly – and it does not take the path – Ukraine will be a field of ruins. The reconstruction will take years.” Confidence will be even more difficult to restore when hundreds of large digital companies will have had to urgently reorganize their outsourcing.
The redeployment of resources therefore promises to be drastic. First, it risks splitting around the notion of time zones. Schematically, Western Europe continuing to “source” its technical talents from the Old Continent, and American companies, already tired of having to manage a time difference of eight to eleven hours, turning to Latin America. On the risk scale, the South American continent now appears safer than Eastern Europe.
With their usual responsiveness, several IT services players are already exploring acquisitions in Mexico, Brazil, Argentina and even Chile. Moreover, Latin American stock markets have been remarkably stable since the start of the conflict, a sign of positive anticipation. The European recomposition will be more delicate. Even in the event of an end to the fighting, it will depend on the persistence of the Russian threat to neighboring countries, and therefore on the resilience of the current regime in Russiasay the entrepreneurs concerned.
In principle, Poland is best positioned to become the big hub of software development – on the express condition that it does not become the chronic point of friction in a new cold war. “Poland has been strong for a long time, notes Phil Jeudy. It is the natural cousin of Ukraine, including on the linguistic level. It is therefore likely that there will be a strong transfer to this country. Others like the Slovakia or Slovenia can also benefit from the situation.” But these two countries total less than 8 million inhabitants against 37 million for Poland. Its level of vulnerability will be an essential factor in what promises to be a historic recomposition of a sector that drives our daily digital life.
Some key figures :
• 26 million: the number of developers in the world
• 2,500: the monthly salary, in dollars, of a developer in Ukraine
• 16,000: the number of software engineers graduating each year in Ukraine