Ukraine-Russia War Impact On Engineering And IT Services Availability – Forbes

Ukraine-Russia War Impact on Engineering and IT Services Availability
Ukraine is one of the top locations for offshore and near-shore third-party services, especially for engineering and IT skills. Thus, Russia’s invasion of Ukraine this week has a significant disruptive impact on American and European companies. What is the impact, which companies are affected, what are the numbers, how will it affect prices, and how long will this disruption last?
The disruption in global service delivery from the war in Ukraine will affect three types of service situations:

How significant is the disruption? It’s significant, especially considering that before this war, we were already dealing with a multi-year global talent shortage and that the type of senior, experienced digital engineering talent that is especially hard to find these days is exactly the type of resources that were prominent in Ukraine. And they had already conquered the time-consuming, all-important learning curve for the work of their client companies.
Ukraine is a key global delivery location for IT and engineering R&D services, so the war creates widespread uncertainty and significant concerns for companies with service operations in the region.
The Impact Numbers
The resource-pool numbers alone paint a picture of disruption of services because of the war in Ukraine and the economic impact of the sanctions imposed on Russia. Consider the following:

So, services from 70,000 to 100,000 highly qualified workers (especially with digital engineering and IT skills) will be disrupted.
Putting these numbers into a total market context, compare the 100,000 against the 5 million (a modest approximation) workers for service providers in remote locations or in GBS centers. Not such a large percentage. But if we consider that Ukraine’s workers are largely senior engineering talent, we should measure the 100,000 against 1 million workers in remote locations. Thus, the disruption for workers is 10%. That’s a significant disruption in services.
To continue uninterrupted service delivery and protect employees, some service providers began relocating their staff from eastern Ukraine to safer parts of the country or even to other countries such as Poland, Turkey, and Israel before the war started. However, martial law in Ukraine prevents able-bodied men over age 18 from leaving the country now.  
Length Of Disruption
How long is the disruption of services likely to last? It’s a significant disruption, but we believe the market will be able to absorb the disruption. We believe the impact will be temporary. Perhaps three to six months, with the situation easing gradually over three months. It is likely that we’ll have availability to the 70,000-100,000 capacity back in at least nine months.
Impact On Service Pricing
Unfortunately, this war and the consequent services market disruption (especially in Ukraine, Russia, and Belarus) is happening at the same time as the acute global talent shortage. That shortage was already affecting the price of talent. Be prepared for an increase in pricing now, as the impact of the war adds to already strong inflationary pressures. Even though the length of the impact will be a temporary (three to six months) period, I believe the disruption will fuel inflationary pressure, which is already building, and these effects will be felt long after the dust settles in Ukraine.  
Black Swan Lessons
Russia’s war against Ukraine is a black swan event. It is important to keep in mind that black swan events such as hurricanes, floods, disease, or war are inevitable. They happen every three to five years.
The lesson many companies will learn now is that they have a material risk when they don’t diversify their service locations instead of concentrating all or most of their services in one location. This is a mistake that many companies had to learn during another black swan event – the COVID-19 pandemic. Companies with location concentration risk paid a high price. And those with significant service and talent concentration in Ukraine, Belarus, and Russia are relearning this painful lesson again.
In this Russia-Ukraine war, the disruption hit will be harder for companies that have services ( from third parties or GBS centers) concentrated in one location than for companies that are diversified in their services approach and use multiple locations. I cannot overemphasize the need to avoid this risk in the future.


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