After the start of the full-scale invasion, it seemed that business activity stopped. Indeed, in April 2022, about 50% of medium and small enterprises in Ukraine ceased their activities. At the same time, the other half continued to work, despite the daily unpredictable challenges of the war, and is holding the economic front of Ukraine.
How did they manage it then and how have companies changed their business methods now? The APPAU Executive Directorate decided to explore this issue among its members, Ukrainian integrators and developers of industrial high-tech sectors. Our goal was to show current and potential international partners that Ukrainian companies are not just working under shelling and rolling blackouts, they are ready to innovate and expand their service markets.
This is how a series of interviews with heads of Ukrainian leading IT & OT integrators on the Land4Developers marketplace was born. And today we want to summarize the results, creating a generalized portrait of Ukrainian integrator-developer, combining common trends and differences that highlight the strength of each individual company.
Adaptation to war conditions
This first period was difficult for everyone and required determining what to do, how companies should work further, what strategy to develop, what to counter threats and uncertainty.
Some companies suffered physically. Rocket attacks near the S-Engineering plant in Odesa caused direct damage to the company, as well as significant damage to the Kharkiv SAS production facilities, and as for the TerraWatt group offices and production sites in occupied Mariupol, they were completely destroyed and lost.
The companies recovered from the first shock after the beginning of Russia’s full-scale invasion of Ukraine quite quickly, on average it took 2 weeks. It took them some more time to establish all the processes in the conditions of war.
Some companies already had experience in relocating their business, as they evacuated from eastern Ukraine in 2014, and were ready for such events.
Projects within Ukraine’s non-occupied territories gradually resumed, and signing of new contracts, including with foreign customers, intensified. Some companies managed to sign new contracts before the war started, and their staff was abroad. As further developments showed, such companies received significant benefits.
Business optimization is the main priority
Among the first priorities of companies at the beginning of the war is to help the state in the fight against the enemy. IT-Enterprise, which has about 500 developers, quickly set up remote work of teams all over Ukraine and abroad, and in early March has already created a system for military administrations, designed to keep records, orders, and financing in a single system. AIM Director Yuriy Shchyrin headed the territorial defense unit in the suburbs of Kyiv. Almost all IT companies were involved in the cyber war, which was waged in March-April under the coordination of the Ministry of Digital Transformation.
The priority of all companies was and remains preservation of their teams of professionals. Some companies faced the issue of how to pay salaries, as the time of employees to fulfill orders was drastically reduced, and many of them switched to remote work. Nevertheless, many managers decided to pay salaries in full.
Oleg Shcherbatenko, CEO at IT-Enterprise, surprised us with the statement that their company even hires new staff and continues to operate its own training center.
It is important for the sustainability of the Ukrainian economy that businesses fulfill all financial obligations, pay loans, salaries to employees, pay taxes, all this helps Ukraine and its citizens. Several directors mentioned this in their interviews.
Another important priority is to intensify export and internationalization. This direction was obvious in the context of a sharp decline in orders in Ukraine. Business began to actively search for foreign partners, while completing existing contracts in Ukraine. in order to facilitate interaction with foreign counterparties, the companies used the following mechanism: some of the employees who were abroad on business trips on February 24 were organized in foreign representative offices of Ukrainian companies. This applies to IT-Enterprise, Infocom Ltd, Vostok and others, and some of them, such as TerraWatt Group, Waites, MDEM, already had offices in the EU. At the same time, almost all companies complain about restrictions on exports – instead of promoting business, the Ukrainian government has created a number of restrictions, in particular, managers mentioned the ban on men’s travel abroad as the main obstacle. Almost half of our respondents, who did not have resources abroad, lost export orders because of this ban, as engineering projects cannot be performed remotely, and 90% of the company’s staff are men.
Almost all companies are optimizing costs, where support of higher education institutions and patronage have suffered the most. Batyr Annaiev, the S-Engineering founder, comments, “only support of the Armed Forces and the territorial defense was left”.
The second way to diversify risks is to work in small groups distributed in different regions of Ukraine and abroad. Most of all, this method is inherent in companies that have prepared in advance for difficult conditions and have a trained personnel reserve, already proven in work on various projects.
Companies counteract emergency power outages with backup power systems – most of our respondents managed to install them in their offices or production facilities in time.
An important factor in optimization of work, in addition to remote work and organization of an energy-independent office is a complete transition to use of cloud technologies. Every business in Ukraine has optimized costs, integrator companies and industrial systems developers have primarily increased the level of use of cloud services for the development of their projects, and this includes two areas of optimization – use of services as needed, and, in the context of the energy crisis, refusal of their own server capacities, which also saves on power sources. These optimization methods were mentioned by several respondents.
Cooperation between companies
Establishment of more stable communication and cooperation between Ukrainian companies, both in Ukraine and abroad, is another trend noticeable in the respondents’ answers. Such a reaction of companies to the critical situation in the country proves that common problems and a common enemy give an impetus to unite competitors, complement each other’s competencies, search for orders, and in some cases simply joint survival of companies. Although many companies in APPAU are competitors in the market, Eduard Trotsenko says, “weak cooperation is better than confrontation”.
Almost all respondents note that trust and support are growing against the background of general opposition to Russian aggression.
In 2022, APPAU members united in the following initiatives:
- Joint statements on withdrawal of business of international corporations from Russia.
- Creation of the Land4Developers integrators joint marketplace.
- Exchanges on entering foreign markets, and in particular, cooperation with CSIA.
- Matchmaking with other Ukrainian Cluster Alliance clusters.
- Participation in many foreign events, in particular, in support of missions to Denver (USA), Brno (Czech Republic), Tallinn (Estonia) and Warsaw (Poland).
- Creation of a joint projects portfolio “Top 10 Initiatives for Advanced Manufacturing” and deployment of the Critical Infrastructure Assistance Initiative.
Among the factors of improving the quality of cooperation between companies, respondents mention APPAU as a good example of promoting consolidation, networking and coordination. Ivan Kun, a new APPAU member, Director of Interproject GmbH comments, “I joined APPAU in mid-June and since then I have been actively involved in several initiatives and working groups facilitated by the Association. I like this community and the areas of collective work that are underway”.
Many of our interlocutors noted the great support from their foreign partners, they offered assistance to Ukrainian partners, their employees and families. It sounds in many answers, but Ukrainian companies ask their partners not for patronage, but for contracts.
Keep Working despite any difficulties
Despite all the difficulties, our integrators and developers continue to work, implement engineering projects, create new products and solutions.
“Interproject is developing Cloud City solutions for water utilities, with a special focus on the functionality of Maintenance and Repair. Infocom Ltd developed the direction of enterprises’ energy audit, significantly advanced in the subject of electric charging stations and opened a joint venture with a Turkish partner. SAS and Indasoft continued to implement engineering projects in Naftogaz, including a project in Kazakhstan. IT-Enterprise continued to invest in Industry 4.0 developments, focused on the sale of its asset management products (SmartEAM line) in Egypt and the Middle East, but unexpectedly discovered new niches for these applications also in Ukraine. TerraWatt Group has successfully completed several projects in Central Asia and India and started new projects in Uzbekistan. S-Engineering had many orders abroad in complex energy supply projects and successfully implemented them. a-Gnostic continued to implement the system of electricity consumption forecasting in agricultural holdings and energy corporations. Techinservice Group successfully commissioned the first plant in Ukraine for deep processing of wheat in Roshen.
The speech of Waites co-founder Rob Raterman from the United States was very positive for all participants of our community. Part of the Waites team was in Kherson, and fortunately, in the first days of the war they managed to evacuate to other regions of the country, and partly abroad. Rob says that despite all the difficulties, the Ukrainian Waites team has shown incredible resilience and continues to do their work. Similarly, Mykolaiv-based MDEM designers have not lost a single order, although not all of them have been able to relocate to safe regions.
Many of our respondents became participants of the EIF APPAU innovative fundraising program and significantly improved this function in their own companies. In particular, grants for innovation were received by IT-Enterprise, Infocom Ltd, a-Gnostic, Discovery Drilling Equipment, SmartZavod, Waste Ukraine Analytics, 482.Solutions, Aleistyn. During the year, APPAU has repeatedly emphasized that in the conditions of a sharp decline in orders for innovations from Ukrainian customers, grants are an opportunity to keep development teams and thus survive in this difficult period.
In other words, the war has made significant adjustments to the enterprises’ life. But work with customers, fulfillment of orders and even innovative development, except for the first few weeks of the war, did not stop even for a day!
How companies see the future
After the end of the war, Ukraine will face a great recovery. Government programs for this large-scale ‘Marshall Plan’ range from 100 to 400 billion euros, their priorities are subject to constant iterations, but one way or another, these are huge sums for Ukraine. Our respondents, like all Ukrainian businesses, are looking forward to these better times. There will be a lot of work, but it is not only about projects as such, but also about changing the “rules of the game”, in particular, the state has to change a lot in improving conditions for attracting investments and doing business in Ukraine.
It is also not only about investments in new plants or construction. Ukraine has huge challenges in industry ecosystems and their components – training systems, quality standards, tools for innovative, digital and green development, etc. “A lot of European companies are interested in cooperation, everyone is looking at the Ukrainian market, where they could share their experience, knowledge and technologies with Ukrainian customers and partners,” Mykhailo continues.
Companies also see that many industries are preparing for changes.
What Ukrainian developers and integrators offer to foreign partners
Ukrainian developers and integrators of industrial high-tech are more than 200 companies that cover a large number of customer needs in industry, energy, infrastructure and logistics. APPAU keeps records of these companies on the Land4Developers resource. We believe that our country, despite the growing trend of deindustrialization over the past 10+ years, still has a great engineering, scientific and technical potential for the production and services with high added value. The war will worsen our position in these sectors in many ways and it is already obvious that we will suffer great losses in human capital. We are talking about those mobilized to the Armed Forces, emigration of scientific and educational personnel, closure of some companies, as well as brain drain abroad and IT outsourcing.
Nevertheless, all our respondents believe that the Restoration will bring new opportunities and growth prospects and are preparing relevant proposals for foreign partners. Most companies are positioned in the areas of traditional competencies and expertise, which has been proven over the years and dozens – hundreds of successful projects.
Some companies associate their future participation with industry challenges.
Managers also reflect on what their cooperation with large foreign investors will be like.
Also, Ukrainian developers have a request for R&D partners, almost all our respondents who have relevant departments in their companies are ready for such cooperation.
Summarizing this picture of APPAU, let us add a few more of our own observations. Not all companies from our members continued to work “as before” – several members stopped working due to occupation of their offices in the east and south of the country, or due to loss of customers. In the interviews, our interlocutors practically did not emphasize difficulties and did not disclose them in all details, although they all had them and their scale was absolutely incommensurable with what was before the war. Even the management of TerraWatt Group, which lost its assets in Mariupol, did not consider it necessary to emphasize this in their presentations to foreign partners.
Instead, most companies tried to prove and show that they fully control the course of their business and are able to fulfill their contractual obligations. It is clear to all of us that controlling all aspects of business in the current conditions in the country is a super task. And although our respondents did not use phrases like “economic front”, in fact, this is exactly what we are talking about. Our companies continue to do their work – modestly, routinely and selflessly – and, in fact, this is a key to sustainability of our economy and a reliable rear for the Armed Forces.