The IT industry in Ukraine will grow by 20% in 2017 — head of GlobalLogic

Managing Director of GlobalLogic Ukraine Igor Beda told the publication about the projects they work on in the company, shared his forecasts for growth this year and next year and told how IT can help solve global problems of mankind

Over the past year your company in Ukraine grew by almost 300 people. What is the reason?

In August 2017, our team in Ukraine has exceeded 3,000 professionals. In General, this year the company and the Ukrainian IT-industry has returned to pre-crisis growth rates. Analysis of the first half of the market shows 18% growth in the industry, our company is growing at approximately the same pace. I can predict 20% growth for the year.

What causes growth? Increasing demand for software development, the global market grows and we grow along with it.

And the events in the country over the past few years had any impact on the number of specialists?

In the sphere of IT was not falling as a result of the crisis, unlike other sectors of the economy. The growth of the industry was briefly slowed, but he still was and remained at the level of 5-10%. Moderate growth was due to geopolitical risks and reluctance of customers to give projects in the risk area. Now, however, the influence of these factors decreased.

How did you convince customers that Ukraine once again you can send your projects?

First, we worked with them to show how much the risks are exaggerated. Because when you look at what is happening in Ukraine from America, it seems that half the country is at war. We, in turn, showed customers that the Ukrainian IT market is actively developing and is ready to bring their designs to life.

Today there are certain signs that allow you to believe in the bright future of Ukraine. For example, which came into effect from September 1, the Association with the EU, visa-free regime. These are all signs that the EU and the USA believe in our country. And this, of course, have sent a good signal to firms and showed that in Ukraine it is possible and necessary to develop the business.

Are you planning to expand the team in Ukraine? What kind of specialists you now?

We, as a global company, we plan to develop in all the regions, where presented. Plans for growth we are ambitious enough. At least to maintain growth this year (about 300 new staff), and may increase it.

At the moment the only major risk that may prevent this is the insufficient inflow of engineers in the industry. In Ukraine now employs about 120 thousand people in IT, and four years ago there were about 80 thousand on the one hand, the growth of the industry there. On the other — for the last four years from Ukrainian universities annually produced about 16 thousand it professionals. And this number steadily over the last years, respectively, in percentage of inflow becomes smaller.

What is the annual demand for new specialists?

If the industry grows at 20% per year, that means the number of graduates must increase at the same pace. If geopolitical and business risks will be reduced next year’s growth may reach 25%, the need for technical specialists, respectively, too.

Let’s go directly to your company. I can announce financial results for this year?

We are a private company so can’t divulge financial figures. Can only talk about percentage growth. In the first half of 2017 our gross turnover increased by 20% (compared to the same period last year), and increased profit.

And if you compare the income before the revolution, 2014 and after — have you reached those figures?

This was a fairly stable situation, as GlobalLogic is an export-oriented company and our activities are tied to foreign exchange earnings. The cost of services did not fall during the crisis, and inflation of the local currency did not affect the company’s revenues. Thus, we have managed to maintain a steady income.

Tell us who your main clients and what projects are you working on?

I can identify three areas in which we have a large number of different projects. The first is medicine. Ukrainian GlobalLogic engineers are making software for complex medical devices (e.g. defibrillators, or devices that automatically introduce the desired amount of medication into the human body) and that is used in clinics, ambulances, etc. One of the promising directions of development of solutions for diagnosis of various diseases even at early stages using technologies of artificial intelligence.

The second area is digital media. For example, we help to create products Avid for the production of audio and video content. It’s like a program for the casual user and those that are used in Hollywood. In General, digital media — a very wide area. This includes, for example, and mixing consoles for recording and live concerts, and solutions for live events online and on television. And all of these solutions involved our Ukrainian engineers.

Finally, automotive. By and large, the modern car is a complex software product. For example, software high-tech premium car contains nearly 100 million lines of software code (for comparison, the Boeing 787 just over 15 million, and the whole social network Facebook is placed at 60 million lines of code). And our company has a large expertise in this field, from designing systems that are using sensors to determine the condition of the car and its different parts, to Human Machine Interface. This is a system that allows the driver and passengers with the most convenient and fast to interact with the car.

Are there any specific arrangements with OEMs on the implementation of your systems?

While we have no right to disclose the details, but we already have signed contracts. The fact that medicine, and the automotive industry is very heavily regulated industry. From the moment you develop some or detail, up to mass production is 4-5 years. That is, in the next couple of years you will see the cars, which will be written by our specialists. We are talking about the infotainment systems — navigation, media playback, etc.

Cybersecurity experts say that the software for the “Internet of things” is very vulnerable. So, two years ago, hackers demonstrated the hack, which gave them actual access to the vehicle control. How to solve this problem?

Excellent question. Really was a case where hackers from outside the car, was able to access its critical functions and has actually endangered the people there. Our own development platform Nautilus — allows you to avoid these risks.

Our solution shares critical vehicle functions and communications and entertainment functions into two different areas, which does not affect each other. Accordingly, this makes it impossible for penetration to critical vehicle functions from the outside. Commercial implementation of this decision will appear on the market for several years. And this is an important step towards the transition to a fully self-governing automobiles.

And which direction brings you the most revenue?

Actually not to say that some more profitable, some less. From the point of view of the growing interest I can say that this digital transformation. It is not just the development of new versions of technology products, and creating integrated digital solutions that radically changes the business model of companies from different industries. The standard example of what I’m talking about — booking.com or airbnb.com. These services not just assist the end users to quickly find housing, but also change the paradigm of work of the tourism sector. Or, for example, Uber is a new business model for the sphere of transport and its occurrence would be impossible, did not appear specific software.

Now information technologies are penetrating into areas where they previously were not involved. In GlobalLogic, for example, created a solution to the world famous chain of fast food restaurants. This is an interactive panel in which by means of a touchscreen, the customer can make an order and immediately to pay it. Initially the product was supposed as a way to reduce operating expenses of the company in each restaurant. But in fact it turned out that this interactive experience has become a successful method of attracting customers.

You are now present in four Ukrainian cities (Kyiv, Kharkiv, Lviv and Mykolaiv). Not planning to open offices in other cities?

As a global company we are actively considering options for mergers and acquisitions — as in the whole world and in Ukraine. We are not planning for organic growth in the number of offices neither in Ukraine nor in the world, but if suddenly we find interesting company to merge, we might be interested in it.

It may be some kind of small IT company?

Of course, merging two large companies is a complex model does not always work. So I guess we can talk about the asset of medium size. Of course, the key factor for the merger for us is the similarity of business models, but also the fundamental similarity of the company’s values and ways of doing business. If you look at all of our previous acquisitions, then approximately 95% of managers from the acquired company continue to operate in GlobalLogic. This is proof that we find a very nice synergy with those with whom to merge.

Let’s move on to the industry as a whole. What do you see as the main trends of development of Ukrainian market of IT? Now IT is on the third place for exports. What do you think, are there any prerequisites to the role of industry in the structure of Ukraine’s economy have increased even more?

Yes, IT is already a few years occupies the third place in exports. And compared to other export-oriented industries, we grow more stable, more predictable. An important, distinguishing factor in our industry is that we do not export resources, we export services and set up a currency in the country in its purest form. Most of this currency are the salaries of engineers who in turn create the middle class in the country, which are usually held all the strong economies of the world. Also, according to the statistics, one representative of the middle class generates around 3 to 6 jobs in the supporting sectors, in the sphere of trade, public catering, banking and financial sectors, etc.

Two industries at the moment far exceed IT, but since they are a resource (metallurgy and agro), then their further growth is limited. You can try to sow more wheat, but the land still won’t be more. There is a 42 million population of the country is only 120 thousand people are involved in IT. Under certain conditions, the IT industry can grow faster and become one of the flagships of the economy.

Give specific examples of changes required for the development of IT?

The first is education. Business and professional associations are now investing in the development of education. For growth IT is necessary that Ukrainian universities produce more technical experts in the relevant market needs qualification.

And those graduates that come out of our universities, it is ready? Or they still need more training?

In fact, in our area very strongly affected by self-education. If the person is not engaged in self-education, then, unfortunately, none of the universities provides a ready IT professionals. Often our company and other companies in the sector invest in courses that allow in addition to the standard education to specialists with the necessary expertise.

Experts from some universities you have listed?

Not really so important the particular University, because the man from not quite a technical College can be so strong specialist that will interest us more than the graduate of technical University. But if you look where we received the largest number of engineers, it, certainly, the Polytechnic universities of those cities where there are our offices. As well as specialized faculties of technical universities — for example, electronics.

If you go back to what the state can do for the industry — a few years ago the question was raised about tax incentives for IT, then all was quiet. Now this question is still relevant?

The most important thing for industry is understandable, predictable at least 3-5 years of tax policy. That is industry, like any other, can adapt to different tax changes. But here plays a role the sharpness of these changes, they should be smooth. Whether the IT-industry subsidies? Live view is not needed. As for the level of taxes we now study how to operate the IT-industry in different countries, including countries similar to Ukraine’s economy, and we will be able to see, I think, are wonderful examples for us. The question is — what the state wants? If you want to develop our sector in the same pace as in other countries — we need one policy. If Ukraine wants, as the President said, to catch the Firebird and make IT one of its leading sectors, then, perhaps, some stimulate the industry need. And not from the point of view of subsidies, and Ukraine’s competitiveness relative to other countries.

Give specific examples of changes required for the development of IT?

It would be nice if the government examined the tax policies of the countries in which IT develops, and has a good example. In addition, there are many areas where need to reduce the regulatory burden, particularly should think about simplification of customs policy for the import of test samples. We use them in the development of the latest technologies, but the import process is quite complicated and ill-conceived. The whole customs policy aimed at the imposition of charges of the goods for import. At the same time, we import only the test samples, and the finished products we sell.

The Ukrainian IT market was mainly developed as outsourcing and many claim that Ukraine has no major grocery companies such as Skype. This situation will change?

It is a traditional evolutionary process, which can be observed on the example of other countries, same Israel. First, the whole IT market working for export, in order to do something good, this must learn. The next stage is the appearance of large food companies. Now these companies have started to appear. This year, for example, several companies entered the market. This Mellanox and Ubiquiti Networks, which has opened offices this year and are actively recruiting specialists. And the third stage is the emergence of private food companies. People worked in IT outsourcing, then went international product companies, and create their own startups. In Israel it happened a few years ago, we already have a large percentage of successful startups and their number is growing. But the question of the emergence of startups in our country depends not so much on the quality of the engineers as from the business climate. In Ukraine there are many good people who do not wish to register startups in our country and trying to register them in other countries. That is why we need to gradually change the business climate for the better, lifting each year several notches in the Doing Business rating.

What is the forecast of the overall market you can make for next year?

As I said earlier, this year the industry will grow by about 20%, we are just beginning now to pick up speed. And the forecast for 2018… I think that there is a potential of 20 to 25%. And which will swing the scales, up or down, will greatly depend, first, from the geopolitical situation, as well as several other factors — the fresh experts and the General business climate in the country. If there are no unpleasant surprises on all sides, then the figure of 25% growth is very real.

But if you look globally the industry is that IT can give to the world in solving the problems now facing mankind?

Penetrating in certain areas of life, IT simplifies things, makes life easier, safer and more interesting.

If we talk about food production, there are plenty of examples of how on a small piece of land thanks to information technology grown a large number of products. The problem of world hunger has not been canceled and this is what it can be useful to humanity as a whole.

The second is probably medicine. For anybody not a secret that the main problem of almost all diseases is not the impossibility of treatment and diagnosis in the later stages. Now there is a great effort to develop a system for removing indicators of the functioning of the human body in real time and opportunities, analyzing them to predict the possible disease. It is capable of, in my opinion, significantly reduce mortality and the incidence of the disease in the future. Not to mention the fact that there are lots of technologies that prolong life. For example, there are plenty of implants that would be unable to function without help the heart, make an artificial kidney, etc.

And the third, probably not the most important, but still. IT makes the lives of the people around more interactive and interesting. Only thanks to IT we can at any time to see what was happening in Africa via webcam, or chat with people in other part of the world. The day before yesterday it was not possible at all, yesterday only by phone, expensive and not very audible, we can do it through video. Tomorrow we will be using virtual reality to visit anywhere in the world from the comfort of your own apartment.