The Ukrainian Tech Segment Going into Q1 2025: What’s going on?

Things have been rough during 2024. That’s what you need to say about what happened with the Ukrainian tech segment in 2024. 

• The market is down because there’s a war going on;
• The economy barely manages to carry its load; 
• The labor market is continuously devastated with no solution to mitigate it; 
• The cost of living crisis in Ukraine, the USA, and Europe is running wild;
• The recession hollows out the momentum of the worldwide economy into an “all show no go” state. 
• Big tech butts heads with the governments but everyone else feels the toll as the online-based businesses need to catch up with the whims and fancies of the big tech platform providers.
• Crypto is making a comeback but this time everyone is on the joke that it is for scamming dunces.

That’s where we are at right now. What’s not to like, eh?

So how is all this reflected in the Ukrainian Tech Segment?

The Ukrainian Tech Segment in 2024

This was the year that happened and whatever good managed to sneak in was instantly overshadowed by the hubris of trying to run a business in a country amidst a war with a government playing checkers. That’s the short of it. 

The long of it goes like that.

• The mobilization and its increasingly confusing regulation continue to devastate the Ukrainian tech talent pool. No amount of learning courses and switchers can mitigate this factor.
• The reintegration of the veterans is currently not an option to replenish the talent pool due to several reasons. 
  • First is that no demobilization policy would enable a mass influx of tech talent to come back into the fold. 
  • Second – those veterans who get discharged are injured and variously impaired which is a can of worms of its own that should be dealt with by the government first. Companies will follow suit eventually.
• In addition, institutional corruption enables illicit immigration – those who can afford it (some of which are part of the tech talent pool) try their luck leaving the country outright for the greener and safer pastures. As soon as the travel ban for males gets lifted – lots of fellers will do that too and it is not like the European Union will turn them away. 

What’s interesting is that while the overall Ukrainian Tech Segment talent is getting smaller and smaller, the talent itself doesn’t grow in value. 

• It is not like high-profile specialists really can command big-money salaries like they did in 2021. 
• More often than not companies are fine with letting go big money salary guys to reduce spending and focus on maintaining the core team for the long haul. 
• As a result, many high-profile specialists are forced to accept either lowball offers or stay put with no significant salary increases.

The global recession is taking its toll on the Ukrainian tech segment both product and outsourcing sides.

Here’s how things are on the product side:

• The consumer product segment is in the weird spot in which the target audience still spends money on tech products (especially those that directly affect quality of life), but they spend like they used to and the figure goes down and down year over year. 
  • The cost of living crisis is real and slowly eating away at the foundation of the consumer tech product segment. People can’t afford to keep this many software subscriptions, they can’t afford to buy premium, and they can’t afford to blast lifetime subscriptions out of the goodness of their hearts. 
  • But consumers are still willing to spend their hard-earned cash on something that gets things done. However, the modern software product mindset is not very adjusted to this configuration and it will take time until the companies fully adapt to the leaner, less commercialized approach of yesteryear.

At the same time, there’s a return on investment problem that plagues the entire Ukrainian Product Segment. Investors still have rather unrealistic expectations that their products will work out spectacularly and they will get a lot of money out of that. 

A part of that unrealistic expectation is fueled by the product companies themselves hyping up their business prospects in the volatile market with limited predictability. 

But you gotta hustle to get investments so it is part of the process even if it is becoming increasingly counterproductive.

Here’s how things are on the outsourcing side:

• The outsourcing segment suffers from a lack of long-term projects to build their companies up for bigger things and diversify. 
• Historically, Ukrainian Tech started by outsourcing US and EU projects and slowly expanding into product niches. It is still a viable business model that enables building up a competent team, working out the operational kinks, and then leveling up with something of your own. 
• However, as of late Q4 2024, this kind of strategy is becoming a fantasy because companies can’t gain enough momentum from chugging on short-term small-scale projects. As a result, they’re stuck in the loop of soliciting project after project but never establishing themselves enough to scale. 

Meanwhile, in the startup realm, things are haphazard as always but a tad different.

The unrealistic expectations conundrum has always been a thing in the startup community. It is the name of the game at this point even though it is a deeply misguided way of thinking. In practical terms, the unrealistic expectation conundrum causes startups to rise high and fall hard. 

The overhyping of Artificial Intelligence technology and no-code solutions caused a lot of noise in the startup community and brought in a lot of people with lots of spare cash looking to invest in the next killer app.

• Except the killer app is not coming and at this point, it is fair to say that producing a killer app was never an intention in the first place. It was always about getting the bag for as long as possible and finding a good excuse to shrug off things not working out.

The problem this kind of attitude makes things a lot harder for startups that try to do something worthwhile. 

The realistic business planning just doesn’t look all that exciting. Given that you can’t get an ambitious project off the ground without significant starting investments – it leads to projects getting smaller and more derivative of what is already on the market. 

At the same time, most of the investments burn out on overhyped borderline sci-fi speculative potboilers.

• In other words – always the same, always different. 

So what’s next?

What will happen in 2025?

The tax increase will definitely do more harm than good and that’s probably why the government plays around with it so much but the uncertainty surrounding the tax increase also makes it hard for companies to plan ahead in one more aspect. As if things weren’t complicated already.

The mobilization shenanigans and the reservation hijinks will drain the tech talent pool even more. 

At the same time, the Ukrainian government seems to be hellbent on making every single thing going on in the military tech segment about itself, and given the government’s track record at running businesses and making deals that don’t end with scandals – things ain’t looking bright.

Gamble will sure feel alright given, as is online gaming which will continue its slow devolution into straight-up gambling.

The startup segment will remain shaky and getting serious investments will be even more of an undertaking because of all gimmick projects tanking the potential of the niches.

At the same time, product companies will feel bad and they are going to love it because experts said the SaaS business model is dubious back in 2015. So don’t expect some new “little engines that could” and expect more layoffs and restructures.

Aside from that – everything gonna be alright.