Amid the Russia-Ukraine war, the technology industry is now caught in a crossfire and the financial crunch will be felt in the coming months once the customer confidence shrinks which is very probable. Opting to halt software and services to Russia while providing generous assistance to Ukraine represents a bold move for an industry better known for prioritizing growth above everything else. However, the hard stand could come at a significant financial cost, says GlobalData, a leading data and analytics company.

The Russian invasion of Ukraine has prompted numerous cloud, security, platform, hardware, and network providers to aggressively respond to the conflict. Technology companies typically try to toe a relatively neutral line during geopolitical conflicts, but the extreme nature of the assault on Ukraine, and the fact that so many of their own employees and partners are affected, has called for extreme measures.

The industry is largely in support of the US Department of Commerce’s massive export controls. Technology giants including Microsoft, AWS, Google, Apple, Cisco, IBM, and others have gone even further. Swift actions include halting technology services to Russia, backing up or relocating data centers within Ukraine, offering free services/technology to Ukrainians including cybersecurity threat monitoring, providing humanitarian support to refugees in the form of IT professional training, and readjusting Ukraine IT consulting/integration outsourcing strategies. Feeling the effects of a war on the global market and devastating reduction in technology professionals, software vendors are bracing for the geopolitical activities to impact next year’s revenues.

Charlotte Dunlap, Principal Analyst at GlobalData, comments: “For a global industry already sorely lacking in IT and software development professionals, the Ukraine conflict has magnified the situation. The timing is particularly damaging post-pandemic when companies are struggling to accelerate their digital transformations to vastly improve business efficiencies and customer services during a tumultuous global economy. Additionally, the hundreds of thousands of technology professionals based in Ukraine and Russia (reportedly at well over 200,000 in Ukraine alone) will cause a ripple effect and exacerbate the shortage of consultants and integrators available to provide crucial services around digital transformations – not to mention leaving hybrid cloud environments more vulnerable to outside attacks.”

Amy Larsen DeCarlo, Principal Analyst at GlobalData, comments: “The war in Ukraine is being waged both on the ground and in cyberspace. Months before Russia’s military invasion of Ukraine on February 24, Russia took to cyberspace to infiltrate and in some cases destabilize networks within its neighbor. Ukraine and bordering nations like Poland are likely to be more reliant than in normal times on outside MSSPs and security vendors for support, as they have become prime targets of Russian and Russian-affiliated cyber attackers. And due to operational and personnel interruptions during the war in Ukraine, there is a deficit of security resources.”

Dunlap adds: “The significant loss of IT outsourcing services in Ukraine resulting from the conflict has given pause to numerous vendors and systems integrators (including Microsoft, Oracle, Google, Salesforce/Slack) counting on those engineers and developers to support customers’ digital transformations. Vendors are having to rethink their app modernization strategies.”

Larsen DeCarlo concludes: “Most major systems integrators and consulting companies have recalled employees and shut down operations in Russia, Belarus, and Ukraine. Accenture and DXC both suspended operations in Russia and issued a statement providing “support” for the combined 6,300 employees. The exodus from the region highlights the challenges faced by IT firms relying on offshore labor during conflicts, many of whom may be supporting clients in countries outside the region. The companies have had to scramble to replace those resources in the near term.”