Tech and conflict: How the war in Ukraine can affect the IT sector
In a world as hyperconnected as we have today, butterfly effects are quite common for all industries. If a country is going through a crisis of any kind, all markets on the planet will suffer to a greater or lesser extent.
The current situation in Europe is complicated, but it’s not up to us to say, who is right or wrong in this conflict. Therefore, we will try to make this analysis free of opinions and add to the proven facts and the doubts that this can generate in the technology sector.
Technology, a war front
Most of us remember waking up on February 24 with the news that tensions in Ukraine had escalated into war. We found out later that this attack with tanks, bombs, and troops was preceded by several cyberattacks on ministries of the invaded country. In addition, Russia also used some kind of data erased malware to affect the computers of Ukrainian companies and individuals.
In response, President Zelensky's government started looking for hackers in the underground communities, who wanted to join the digital war by defending their country and attacking the Russians online.
The government's main concern is that, through these attacks, the population can be left without essential resources such as water, electricity, or the internet. In some conflict zones, the internet is already quite intermittent. Moreover, during the period of tension that began in 2014, the country's electricity network was affected by previous attacks.
We do not know how this digital attack front will continue to develop. But, although it is not the first time that Russia has used cyberattacks as a weapon to persuade its enemies, it is the first time that the world has seen how hacking is used as a weapon.
A hit to the global IT sector
The technology sector used to be the third economic pillar of Ukraine. Still, the attacks do not only affect developers and companies located in the country; the whole situation affects European and American companies that use outsourcing services in Russia, Ukraine, and Belarus.
This region is so important in terms of IT because, among these three countries, there are about 70 thousand to 100 thousand highly qualified developers with seniority over five years, which is almost 10% of the highly skilled developments market. This is a very significant number if we consider that the software development market is already suffering from a significant crisis due to the lack of qualified personnel and the high demand for IT positions.
Likewise, Forbes assures that a considerable drop in qualified personnel will affect service prices worldwide. This may favor other markets, such as India or Latin America, that are not directly linked to the European conflict.
On the other hand, the Russian IT sector already feels the war's consequences. American companies have begun to doubt the software developed by the Slavic country. US businesses cite the possibility of backdoors, data theft, and espionage as risks of this type of software.
The need to renew their software is a priority for many enterprises, especially those companies that handle sensitive data or work with the government. Some are thinking of paying the high costs of hiring companies within their country, while others decide to trust Latin American outsourcing businesses.
For the Russian technology sector, this is already a severe blow. The situation not only affects companies within its territory but also developers of that nationality, who are already feeling the distrust of the market in their work. Moreover, this situation can impact Russian developers even years after the conflict.
The Impact on Ukrainian Start-ups
Another sector related to technology that will be affected is that of entrepreneurs. Ukraine had a thriving start-up ecosystem in which nearly 1,000 companies were already recognized worldwide. Last year, Ukraine set a new tech record with its first "decacorns" - start-ups that have exceeded a valuation of $10 billion, and the IT sector grew 36% in 2021.
Some of those big start-ups are Grammarly, the English proofreading AI, Ajax, the home security application, or Readdle, the company that makes PDF, e-mail, and other productivity tools. Many of these companies are in suspense and monitoring the situation to take the appropriate actions. Some have even taken their employees and immediate family out of the country or have moved them to more western areas of Ukraine, where they may be safe.
With the escalation of attacks, many users of Ukrainian technologies have begun to wonder what will happen to these applications, whether their data is safe and if the app will work as always. The founders and spokespersons have ensured that the apps will continue to work and the situation will not affect users, since many of these solutions are hosted on servers outside Ukrainian territory in the USA or Western Europe.
The chips, a sanction to Russia that we could pay all over the world
Given the attacks, Western countries have decided to apply a series of economic sanctions on Russia to pressure its economy and slow down its growth. These sanctions have to do with the purchase of chips and semiconductors, necessary to build, modernize, and operate Russian military technology. The United States has stopped the sale of these semiconductors to Russia, and other producing countries may do the same. However, chip producers look concerned at the conflict since Ukraine supplies more than 90% of the U.S. semiconductor-grade neon, critical for lasers used in chipmaking, and Russia is the source of 35% of palladium, the metal used in the United States to make sensors and memories, among other applications.
The possible scarcity of these materials could aggravate the chip crisis that had been going on for years, affecting the countries involved in the conflict, the chip producers, and the cost of the finished technology, which could impact everyone.
Conclusion
This conflict is full of uncertainties for the whole world. The news follows each other, and the long-term consequences are still quite difficult to determine. Currently, most technology companies carefully observe how the conflict develops and take action as the situation evolves. The consequences for the global IT sector are still not very clear. Still, if history has taught us anything, it is that wars in Europe always affect the entire planet.