In the heart of Europe, Ukraine’s technology services sector is evolving rapidly. Once primarily a low-cost provider of engineering talent, the country’s IT outstaffing and outsourcing industry is now emerging as a strategic partner for global organisations. Amid ongoing geopolitical disruption, the sector’s resilience, talent depth and near-shoring advantages position it for a transformational phase between 2024 and 2027.
Executive Summary
Ukraine’s IT sector remains one of its most important export engines. In 2024, exports of IT services reached approximately USD 6.45 billion, a decline of about 4% from 2023. Yet, even as the raw export value dipped, the share of IT/computer services in the country’s total service exports rose to around 43% in the first half of 2025. This indicates the sector’s growing relative importance.
Several key trends define Ukraine’s outsourcing/outstaffing landscape:
- A large and growing engineering talent pool, with over ~281,000 IT professionals estimated in 2024.
- Increasing shift from pure cost arbitrage toward higher-value services (cloud, AI/ML, product engineering) and dedicated team/outstaffing models.
- Continued appeal as a nearshore destination for Europe (and also for US firms) — with language ability, time-zone alignment and cultural proximity.
- Significant considerations around risk: talent migration, war-time continuity, wage inflation, and contract/governance maturities.
For buyers, Ukraine offers compelling value but requires careful attention to delivery model structuring, continuity planning and partner maturity. For Ukrainian vendors, the opportunity lies in moving up the value chain, differentiating via domain expertise, and investing in talent retention amid rising competition.
Definitions & Taxonomy
In the Ukrainian context, it’s helpful to clarify key terms:
- Outsourcing refers to contracting a Ukrainian vendor to deliver a full IT service or function (e.g., application development, managed services) on behalf of the client. The vendor takes responsibility for delivery, resources and outcomes.
- Outstaffing (or “dedicated team” model) refers to a foreign client hiring engineering talent in Ukraine (via a local vendor/employer) to work exclusively on the client’s projects, while the client manages the team’s tasks, priorities and integration. The employment, HR and administrative burden remains local.
- Adjacent models: managed services (where the vendor runs a function end-to-end), nearshore/remote delivery (Ukraine acting as the remote node rather than fully offshore), hybrid teams (onshore + nearshore mix), and captive/GIC (a global in-house centre set up by the client in Ukraine).
These distinctions matter because they affect contract type (hourly vs outcome), vendor risk/ownership, knowledge transfer, IP rights, talent retention and exit/transition provisions.
Market Size, Workforce & Export Metrics
Export metrics & market size
- The export of Ukrainian IT services in 2024 was about USD 6.45 billion, down ~4% from the approximately USD 6.73 billion in 2023.
- For the first half of 2025, Ukraine’s total service exports were about USD 7.617 billion, with computer/IT services at ~USD 3.276 billion, i.e., ~43% of total service exports.
- Monthly export volumes: In March 2025, exported IT services were about USD 545 million (vs USD 565 million in March 2024).
These figures underscore Ukraine’s significance as an exporter of IT services—even as growth is challenged by war, talent shifts and macro-factors.
Workforce and talent pool
- Estimations put the number of IT professionals in Ukraine at around 281,000 in 2024.
- Of that pool: outsourcing companies (44%) account for ~123,900 professionals; outstaffing/“staffing” companies: ~13% ~36,600; product/startups ~39% ~109,800.
- Regions: major clusters in Kyiv/Kyiv region, Lviv, Kharkiv, Dnipro, Odesa (more detail in Section 7).
These numbers indicate a sizeable and diversified talent base that supports both outstaffing and outsourcing models.
Company ecosystem and segmentation
- According to the Lviv IT Cluster study, there are ~2,118 active verified tech companies in Ukraine; about 47% are service-oriented outsourcing firms, ~3% pure outstaffing firms, ~31% product companies.
This mix means that Ukraine’s service industry is mature but still evolving toward higher value product and R&D models.
Summary table (excerpt):
Caveats: Data may vary by definition (what counts as “IT services”, “outsourcing” vs internal product), and the war context introduces volatility and reporting lag.
Drivers of Change in Ukraine
Talent pool & cost-value advantage
Ukraine continues to offer a competitive engineering talent pool. According to assessments, the country had around 281,000 IT professionals in 2024, which supports global demand. The relative cost versus Western Europe/US remains attractive, though wage inflation is rising.
English language proficiency, strong STEM education and cultural affinity with Europe enhance Ukraine’s appeal for near-shoring clients.
Geography & near-shore advantage
Ukraine’s location (Eastern Europe, overlapping business hours with Western Europe) and cultural/educational alignment make it a near-shore destination—not just an offshore low-cost node. For many European buyers, the time-zone/collaboration advantage is as important as cost.
Additionally, for US clients seeking European engineering hubs, Ukraine offers distinct value.
Resilience & structural change owing to war
Despite the full-scale war starting in 2022, the IT sector has displayed notable resilience. It remains a key export driver. The fact that IT services made up ~43% of service exports in H1 2025 even as overall service export volumes declined highlights that resilience.
Shift toward higher-value services
The Ukrainian industry is evolving beyond pure body-shopping or simple cost-driven projects. There is growing emphasis on cloud-native development, AI/ML, R&D centres, dedicated-team models, and product engineering. This shift is partly driven by rising wages in Ukraine, the need to preserve margin, and buyer expectations for higher complexity engagements.
Ecosystem & government support
The Ukrainian government and ecosystem (tech clusters, educational institutions, startup accelerators) support the sector’s growth. Tax regimes (e.g., special IT statuses), incentives, and the expanding number of verified tech companies (2,118 as of study) contribute to ecosystem strength.
Outstaffing/freelance/individual-entrepreneur models are prevalent in Ukraine, allowing flexibility for both buyers and providers.
Delivery Models & Contracting Trends in Ukraine
Engagement models
The dominant model for foreign clients is often outstaffing/dedicated team: the Ukrainian vendor supplies engineers who join the client’s team, working full-time on the client’s projects. This offers the client control and flexibility while leveraging Ukraine’s talent base.
Outsourcing projects (vendor-responsible delivery) remain common, especially for well-identified scopes such as application development or managed services.
Contracting & pricing trends
Historically, many contracts followed hourly/FTE pricing. However, as the market matures and talent cost rises, there is movement toward outcome-based or value-based contracts, subscription models, retained teams plus a monthly fee, or hybrid models.
For example, clients may now focus on delivery of features, time-to-market and engineering productivity rather than simply hours.
War-driven operating model adjustments
Given the war environment, many Ukrainian firms have adopted hybrid/remote teams, backup office locations, and distributed delivery across safe zones. Contracts increasingly include business continuity and evacuation clauses, knowledge-transfer provisions, and relocation-risk mitigations.
Talent retention & knowledge transfer
With talent migration risk (engineers relocating abroad) and wage inflation, Ukrainian vendors emphasise retention programmes (training, remote flexibility, relocation support) and structured knowledge-transfer to avoid operator risk for clients.
Clients contracting outstaffed teams should insist on escalation/exit plans, dual-location staffing, and documented transition paths.
Rates & cost dynamics
While Ukraine remains cost-competitive relative to Western Europe and the US, wages are rising. Buyers should budget accordingly with an expectation of some annual rate increases, particularly for specialised skills.
For vendors, margin compression drives shift toward higher-value services and outcome-based models.
Regional Clusters within Ukraine & Sourcing Geography
Kyiv & Kyiv region
Kyiv remains the powerhouse: ~52% of IT companies and ~67% of IT income originate in this region according to 2022 data.
Strengths: large talent pool, infrastructure, connectivity, access to management/sales functions for Western clients.
Risks: higher salaries, more exposure to conflict risk, potential talent relocation.
Lviv, Kharkiv, Dnipro, Odesa and other emerging hubs
- Lviv: ~10.4% revenue share in 2022.
- Kharkiv: ~8.1% revenue share in 2022.
These cities offer lower cost, less saturation, and sometimes more favourable relocation/remote-work conditions.
They are increasingly used for dedicated teams/outstaffing models.
Client sourcing geographies
- The United States remains the largest destination: e.g., in H1 2025, exports to the USA were ~USD 1.135 billion (–6.41% vs previous).
- Europe (UK, Malta, Cyprus etc): H1 2025 exports: UK USD 283 m (+0.65%), Malta USD 281 m (+10.82%), Cyprus USD 231 m (+31.09%).
This makes Ukraine especially strong for European clients seeking near-shore engineering.
Near-shore vs offshore narrative
While traditional outsourcing hubs emphasise cost arbitrage, Ukraine’s near-shore position (especially for European clients) offers advantages in time-zone alignment, cultural/educational proximity and travel accessibility.
Given the war context, many firms also adopt distributed delivery: part remote from Ukraine, part relocated to other countries, which further enhances risk mitigation.
Technology & Service Trends in Ukraine
AI/ML, R&D outsourcing
Ukraine’s talent base is increasingly engaged in higher-value services: AI/ML, data analytics, R&D. Although specific national statistics for these are limited in the sources used here, the shift is acknowledged in industry commentary and vendor positioning.
Firms are forming dedicated engineering teams for global product firms, focusing on areas such as fintech, analytics, cybersecurity.
Cloud-native development, DevOps/SRE
Ukrainian engineers increasingly work on modern tech stacks: microservices, observability, DevOps/SRE models, platform engineering. This accelerates the move from project-based build to product-oriented engineering services.
Product engineering & dedicated team growth
Rather than simple task-based outsourcing, many clients now engage dedicated Ukrainian engineering teams embedded in their global squads — often for long-term product development, innovation and maintenance.
Cybersecurity, defence-tech spin-off
The war environment has sharpened interest in defence-tech, cybersecurity and resilience services. Ukrainian firms are leveraging this context to develop capabilities that serve global clients in security-heavy sectors (e.g., fintech, telecoms, infrastructure).
Hybrid/remote/ global mobility
Many Ukrainian engineers now operate remotely from abroad (Europe, Americas), or from safe zones within Ukraine. Vendors offer flexible models: remote first, distributed teams, and cross-border talent pools. This aids continuity and client comfort.
Talent & Workforce Strategy for Ukraine
Sourcing strategy
For clients engaging Ukrainian talent: decide on outstaffing vs outsourcing model; align time zones; embed governance; ensure remote/hybrid readiness; plan for knowledge transfer; diversify across regions.
Retention & development for Ukrainian vendors
Given the competitive landscape, vendors focus on training, internal mobility, remote/hybrid options, relocation support, and career pathing to retain talent.
Also, with many engineers operating as IEs, vendors structure incentives (profit-sharing, equity, benefits) for retention.
Hybrid/remote/IE model
The prevalence of the IE model gives flexible engagement but also poses compliance risks. Buyers and vendors should establish clear employment or contractor status, intellectual-property assignment, and employment-law clarity.
Skill pipeline & education
Ukraine produces many tech graduates annually (although exact current number was not found in sources). With ~281k professionals in 2024, vendors invest in upskilling toward AI, cloud, SRE, product engineering to meet global client demand.
Diversity & inclusion
Female developer representation in Ukraine is improving; one source cited ~28.3% female developers in 2023 (though not independently verified here). Investment in diversity helps with global client expectations and talent pool broadening.
Mobility & distributed delivery
Vendors increasingly support remote work (Ukraine-based or abroad) to provide flexible delivery and mitigate local risk. For clients, this hybrid/resilience model offers continuity assurance.
Outstaffing model implications
From a client perspective: ensure onboarding, alignment of remote teams, integration into global workflows, strong communication tools, regular check-ins, retention incentives. From vendor side: ensure alignment with client culture, time-zone overlap, professional development, career progression for engineering staff.
Case Studies & Short Examples
Case Study 1: European Company & Ukrainian Dedicated Team
A European software firm engaged a dedicated team of 20 engineers in Lviv to accelerate product development. The proximity (time zone, cultural fit), cost advantage and strong engineering skills enabled faster time-to-market. However, the client insisted on dual-location contingency (engineers from both Lviv and remote EU location) to manage relocation risk and ensure continuity.
Case Study 2: US SaaS Vendor & Ukrainian Outstaffing for AI/ML
A US-based SaaS provider hired a Ukrainian outstaffed team of AI/ML engineers via a local Ukrainian vendor. The team was embedded into the US product roadmap, working remotely on feature development. Benefits included access to niche talent, cost advantage, and English proficiency. Key success factors: weekly syncs aligned to US hours, structured onboarding, IP/legal frameworks clearly defined, and proactive retention bonuses for the Ukrainian team.
Case Study 3: Ukrainian IT Services Vendor & War-time Resilience
A mid-sized Ukrainian IT services firm had to relocate part of its workforce westwards following war escalation. They adopted a hybrid delivery model: part on-site Ukraine, part remote from neighbouring countries. They developed robust backup power/internet plans, instituted frequent remote communication and documented transition procedures. Their global clients remained largely unaffected, demonstrating how Ukrainian vendors adapt to high-risk conditions.
Future Outlook & Scenarios
Scenario A – “Growth & Premiumisation”
If war stabilises and investment continues, Ukraine may transition from cost-engineering hub to premium engineering/innovation centre. Foreign buyers increasingly demand product-engineering, cloud, AI, security expertise. Rates will rise, margin squeezes may push vendors to focus on niche sectors (fintech, cybersecurity, deep-tech). Talent retention becomes paramount.
Scenario B – “Stabilisation with Caution”
In this middle scenario, growth is modest. The country continues to serve as a near-shore hub, but wage inflation, talent competition and risk cause some buyers to diversify. Ukraine remains viable, but vendors must differentiate on quality, governance and value rather than cost only.
Scenario C – “Relocation & Consolidation”
In the most challenging scenario, if war intensifies or infrastructure degrades further, some outsourcing may shift away. Vendors may consolidate, smaller firms may exit, and only top-tier players survive. Clients will insist on multi-region delivery models, while Ukraine remains a component but not sole delivery location.
Short-term (1–2 years): Expect continued high demand for Ukrainian engineers, moderate wage increases, more remote/hybrid models, and dual-location staffing.
Medium-term (3–5 years): Outcome-based contract models become more common, talent scarcity may push up rates, and vendors will evolve into more product-engineering/service-platform providers.
For buyers: prepare for higher cost, stronger competition for talent, and need for stronger governance/continuity. For Ukrainian providers: upskill, build retention frameworks, invest in higher-value services, and develop global branding.
Practical Recommendations (Checklist)
For foreign buyers engaging Ukraine:
- Conduct due diligence on vendor’s business-continuity and war-risk mitigation (e.g., backup locations, remote infrastructure).
- Clarify model: Are you using an outstaffed dedicated team or a full outsourcing vendor? Ensure contract aligns (IP rights, KPIs, exit strategy).
- Build strong governance: integrate Ukrainian team into your global workflow, ensure time-zone alignment, weekly syncs, cultural integration.
- Insist on knowledge-transfer and dual-location staffing (to mitigate talent migration/relocation risk).
- Budget for rate inflation and retention incentives; treat Ukrainian engineering talent as strategic.
- Diversify sourcing: consider multiple Ukrainian cities or combine Ukraine with other near-shore hubs to spread risk.
For Ukrainian service providers/outstaffing vendors:
- Move beyond cost arbitrage: differentiate via engineering excellence, domain verticals (AI, fintech, security), outcome-based services.
- Invest in talent retention: training, hybrid/remote flexibility, relocation support, good career progression.
- Present strong business-continuity plans: backup offices, distributed teams, documented risk mitigation.
- Structure contracts to reflect value: dedicated teams, outcome pricing, longer-term partnerships—not just hourly billing.
- Develop global brand and compliance credentials (ISO, security certifications, GDPR readiness).
- Monitor wage inflation, maintain margin by moving up the value chain, and anticipate shifting talent competition.
Methodology & Data Sources
This article draws on publicly-available data as of October 2025 from Ukrainian government/industry sources (e.g., National Bank of Ukraine export data), tech-cluster analyses (Lviv IT Cluster), and market-overview publications. Some data may vary due to differing definitions or incomplete wartime reporting; readers should interpret figures as indicative rather than definitive. Where possible, multiple sources were cross-checked for consistency.
