KYIV -- Ukraine’s dynamic IT outsourcing sector could more than double in the next decade, reaching $8.4 billion in 2025, according to Stanislav Sheliakin, a senior consultant at PricewaterhouseCoopers, speaking the Ukrainian Software Development Forum.

That’s only if the government comes through with vital reforms to protect intellectual property rights and breathe life into outdated labor laws, he added on Friday.

Sheliakin’s projection, derived from PwC’s industry studies, suggests a more moderate pace of growth for Ukraine’s IT sector than the past decade, which saw 10-fold industry growth, according to Chirag Rawat, deputy director of Avasant, an international consulting firm.

Rawat and Sheliakin were among 50 speakers at the Forum, which brought together hundreds of participants—among them government officials and corporate leaders—to discuss the outlook of Ukraine’s IT.

Like Sheliakin, most were optimistic about Ukraine’s potential. Mr. Rawat, who spoke on the global perception of Ukraine as an IT outsourcing destination, cited Ukraine’s talented tech grads as an edge.

“Now in Ukraine there are more than 100 research centers of large international companies,” he said, adding that Ukraine had a competitive advantage in niches like blockchain technology and game development.

However, the war, perceptions of corruption, and fears about data security still made foreign businesses leery about opening shop here, said Rawat, a native of India.

Speaking after the forum, Sheliakin said outdated regulations were a far more significant obstacle than corruption—or even the war.

Independent contractors and IT intellectual property protection

“Most Ukrainian IT professionals would like to work as independent contractors,” he said. Independent contractors avoid a mandatory 18 percent payroll tax. Instead, they pay the 5 percent independent contractors’ tax, which is permitted by the government.

The problem? While the U.S. and E.U. nations have a body of familiar regulations in place to govern intellectual property rights between independent contractors and their clients, Ukraine’s are far more patchy in the area of transfer of intellectual property rights.

“There are a lot of ways for companies to lose money here,” said Mr. Sheliakin.

Intellectual property rights are especially important in service industries like IT. Without legislation, an IT contractor could create a spin-off company after closing a deal with a client -- even if they’d been paid to develop an exclusive product.

At present, said Sheliakin, some companies, like Ciklum, find ways—usually after extensive consultation—to frame contracts and navigate Ukraine’s legislation.

For now, Ciklum’s might be the best approach, he said—besides moving company headquarters abroad.

“I don’t see [this legislation] as being ready in a year or two,” Sheliakin said.

For comments or story tips, please email UBJ Reporter Aisha Down at: aisha.down@theubj.com

Slider photo: Chirag Rawat, a Delhi native, is deputy director of Avasant, an international consulting firm.

Posted Nov. 14, 2017