IT Outsourcing 2025: what awaits the industry after the turbulent 2024

The Ukrainian IT industry experienced difficult times in 2024 but remains one of the key sectors of the country's economy. What can we expect moving forward?

IT is the second-largest export sector, contributing 38% of Ukraine’s service exports. In the first half of 2024, its share was 11.6% (6.4 billion USD) of total exports.

Despite a 4.6% decline in export volumes during the first nine months, Ukrainian IT companies are showing resilience. They are finding new ways to attract clients and enter new markets.

Before 2022, the IT industry in Ukraine was experiencing a true boom. Clients eagerly chose Ukraine as a service provider, and various sources called it the best country for IT outsourcing in Eastern Europe. The demand for digital solutions during the COVID-19 pandemic created a precedent in the market, allowing Ukrainian IT to thrive. This created a "candidate market" where companies competed for top talent.

When the war started, everything changed. Foreign clients began to fear the high risks of doing business in Ukraine. Among the main concerns were power outages, employee mobilization, and the challenges related to the war. 

As a result of project losses, Ukrainian IT companies faced mass layoffs. According to DOU, the top 50 largest IT companies cut 2,400 jobs, or 2.9% of their total workforce, in the first six months of 2024.

Ukraine is not alone in facing layoffs, tech giants like Intel, Tesla, Google, and Meta also announced layoffs. According to Layoffs.fyi, over 130,000 jobs were cut in 457 companies in 2024.

The main reasons for mass layoffs worldwide are inflation and rising interest rates in the United States, economic uncertainty due to the U.S. presidential elections, the market's return to pre-pandemic demand for digital solutions, and the rapid growth of AI’s impact on certain positions. 

Outlook for Service Companies

The global economy remains unstable, affecting the demand for IT services. A gradual improvement is expected in 2025, but it’s too early to speak of rapid growth.

Tech giant stocks are rising. The "Fantastic Seven" (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla) have accounted for over 53% of stock market profits. Wall Street expects the U.S. stock index to reach at least 6,500 points by the end of 2025, representing a 9% price increase.

Hiring will recover. The industry is emerging from a multi-year slump, shifting from mass hiring to more specialized, high-quality recruitment.

The demand for AI solutions is high. AI is already delivering value to businesses across various sectors, meaning many industries will require AI applications, creating additional demand for AI solutions in the second half of 2025.

The economic outlook in the U.S. is positive. Trump’s proposals, including corporate tax cuts, regulatory easing, and the introduction of new tariffs, may boost company profits and stimulate economic growth. However, these moves also carry the risk of putting additional pressure on inflation.

What should we expect? 

Ukrainian IT is part of the global market, but we have one critical factor that impacts our market more than it does foreign players: the war. Everything depends on the developments of 2025, but in any case, we should not expect rapid growth in the industry.

According to my colleague Andriy Yavorsky from GlobalLogic, the market will decline due to the lack of significant growth drivers. There won't be a sharp collapse, but gradually, by $100-200 million per quarter, IT exports will decrease.

There are 2,000 IT companies in Ukraine, 47% of which are outsourcing companies. The main markets are the U.S., the UK, Malta, and Cyprus (the latter two are primarily used as offshore zones).

We at Ralabs mostly work with clients from the U.S. and the UK and we faced several challenges at the beginning of 2022 – the number of projects temporarily dropped by 10% due to the exit of several key clients.

We minimized risks for our clients by providing employees with alternative power sources and equipping the office with everything needed to operate during blackouts. Additionally, we’ve joined "Diia.City," allowing us to reserve employees. Last month, we successfully reserved our first engineer. 

A part of our team (about 25%) works abroad. For some clients, this is critically important, so we continue hiring specialists in the EU. Of course, we always prioritize Ukrainians – this is one of our core values. 

Our financial growth in 2024 was around 15%. We avoided layoffs: we maintained our team and even grew by 14% since the start of the full-scale war.

The military – a new player in the domestic market. The state is actively fostering quality development by mobilizing IT specialists. During my service, I witnessed many talented professionals join the military and create remarkable projects, including Delta, Reserve+, and Army+. 

Furthermore, the number of mil-tech startups is growing, attracting foreign investments, creating new jobs, and building a whole hardware and software ecosystem around them.

AI – one of the main services in 2025. If you're not investing in training your specialists and integrating AI into your processes, there’s a real risk of being left behind in the most significant trend of the decade, or perhaps the century.

Hiring will focus on specialists in niche areas. The demand will be centered on specialists in AI, cybersecurity, and data analytics. There will also continue to be a demand for non-technical specialists – marketers and sales professionals. Returning to pre-pandemic job vacancy levels is not something to expect.

Conclusion

Uncertainty will likely define 2025 due to geopolitical and economic changes. The outlook for the world is positive: the stock prices of tech giants are rising, hiring is recovering, and demand for AI solutions will keep the industry afloat.

The Ukrainian IT sector will most likely continue to gradually lose ground, but much depends on political trends in the country and the situation on the battlefield. Despite the decline in 2024, it remains a strong export-oriented industry that continues to bring significant foreign currency inflows to the country year after year.

Despite all the circumstances, Ukrainian IT companies have shown an exceptional ability to adapt, innovate, and expand their services. 

Ralabs has consistently adapted to these challenges by maintaining client engagement and communication. A key example is the preparation of 12 monthly digests in 2024, which were shared with clients to provide valuable updates on market trends. Each digest included an important reminder: "Support the Ukrainian Army in any way you can." This principle remains true for me now: support the Ukrainian Army in any way you can.