Distribution World: What Ukraine buys on technology market?

Author : Nina Hlushchenko

Source :

Many important legislative initiatives in the field of electronic management and development of Internet services were introduced in Ukraine in the second half of 2017. So, the Verkhovna Rada adopted the law on telemedicine, the terms of the first tender for 4G were assigned, the "green light" for MobileID was given.
22:16, 19 December 2017

112 Agency

At the second International Summit of Mayors, the mayors of the region reported on innovations in the communities they were entrusted with. The Ukrainian state at last switches to electronic way. How this happened, we talked with a company that was engaged in the wide-scale supply of IT solutions and equipment to the Ukrainian market - the IT Division of MTI-Distribution.

The distribution world is closed from prying eyes - the average Ukrainian is not very interested in how his smartphone, laundry detergent or a favorite brand suit got to the store. The topic of distribution emerges only in the context of the discussion on when a new iPhone will appear or what harm was caused by smugglers to the economy and official suppliers. Who supplies hardware and software to corporate users - this worries only system integrators or employees of IT departments in different structures. Nevertheless (and do not rush to yawn and switch to another article, now we will talk about simple things that concern every Ukrainian), the situation with project distribution allows us to understand the vectors of business and state development and assess how actively the technologies transform the country and certain sectors of the economy.

Life after the crisis

After crises and as a result of the decentralization processes in Ukraine, businesses began to actively invest in technology. The leader among the customers in the field of project distribution is the state - local authorities, profile ministries, security forces. Transformations in the utility market are stimulated by companies that supply and provide these services, digitize the infrastructure and move from manual to automated accounting, and the opening of the European market forces the Ukrainian business to become more efficient for competing with companies of a different level.

In 2014, projects that were financed in 2013 were still in the process of implementation. In 2015, there was a sharp decline due to the depreciation of the hryvnia, hostilities, the withdrawal of investors from the market. In 2016, with the support of the West, public sector financing has become more active, and significant market growth has begun, which may last in 2017 and at least another 3-4 years. First, it’s because the market is far from saturation. Secondly, because many Western manufacturing companies are interested in Ukraine - they come here, look for partners, see the potential in the country. If the IT market, not including the project distribution, increases by 5-7% per year, then the project distribution, according to the estimates of the IT Division of MTI-Distribution, will grow by 15-20%, if there are no external negative factors. The company estimates its own growth in this segment in the last year at 20%, it is among the three largest companies in terms of project distribution in Ukraine.

How the market has changed

For a year and a half, there have happened major changes in the landscape of customers of project distribution. This was influenced by decentralization and deferred demand. If earlier the classical request from the public sector looked like a big project from a particular ministry, which was implemented by one large integrator, but now it's hundreds of local players and new faces. Local authorities are more comfortable working with contractors who are near.

At the same time, the requirements for such companies decreased, and the tenders became open and transparent thanks to the ProZorro system. If earlier it was necessary to pass qualification requirements for the volume of projects implemented, now any company with specialists capable of selling and installing equipment can take part. In ProZorro there is a tool for challenging dishonest tenders, and, according to the company, this tool is actively used.

The company says that now there is an influx of IT specialists into the public sector, so competent solutions begin to appear. Although in general, the expertise is still at a low level, and the assistance of specialists is required even in the preparation of technical requirements for tenders. And they do not always have budgets.

What they invest in?

If we talk about what the state is implementing, then, first of all, they buy what is simpler - the client part (computers), and then they begin to get the infrastructure to this. In terms of money, the ratio is approximately 65-70% by 30-35%, but the infrastructure part will grow annually because the client part "lives" for a long time. They also invest in infrastructure solutions, data processing centers, storage facilities. If we talk about Kyiv, there are tens of millions of dollars of investment in IT. Lviv over the past 4-5 years made a breakthrough in terms of the development of IT solutions and projects, according to some initiatives the city already competes with Kyiv, also Dnipro and Kharkiv are actively developing.

In the German market, which can be called a kind of benchmark, as it is old and saturated with supply, the distribution between hardware, software and services is about one-third. In Ukraine, the hardware market is about 80%. This suggests that since the first financial crisis in 2008, a large deferred demand for equipment has formed. There was no updating of the systems, modernization, the rate increased, all budgets were eaten by the depreciation of the hryvnia. Although almost 9 years have passed, demand is not satisfied. But when the market is saturated with hardware, it is exposed basically only to an upgrade, and it is little money. When the company has upgraded, it invests in new software, so the structure of the market is changing.

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If in the West, cloud solutions are popular in the public sector, then in Ukraine this service is not regulated legislatively. State agencies cannot place their data outside the country. Therefore, we have a popular local data center. In addition, the habit also plays a role - if the state has stored data for years, it is difficult for them to send data to the cloud.

In the ministries, the client equipment is being updated, but they are also interested in infrastructure solutions. The source of investments in this sphere is international grants. In the Division of IT-Distribution, it is said that the state implements IT in the sphere of transport, including railway.

The defense sector is also investing in technology. A popular direction is primarily data transmission, but also informatization processes, video surveillance was introduced. This happens due to budgetary funds, and the segment is actively growing.

The energy market in Ukraine is also preparing for transformation, there is a growing need for IT in all aspects related to oil and gas, their transportation and storage. The country is already beginning to experience a serious boom in equipment modernization, which has been working since the times of the USSR. The simplest example is a personal office, this is what Ukrainians already have. For the subscriber to see information about his consumption, it must be collected from each counter, stored, processed and given out. This is all done with the help of counters with data transfer and network infrastructure for data transmission. Then we need servers and analytical programs to process the data, as well as storage so that the data will be somewhere accumulated. The next level is when the companies that provide services, through the analysis of the use of utilities, will be able to more accurately predict the demand for them. In this direction, Ukraine still has much to do.

What is interesting for business

Although the state is the main driver of the market, a business also invests in technology. So, many developers are the key consumers of IT solutions in the country.

Industry today is in a deplorable state. But the agro-market and everything related to logistics and processing are developing. For today they are seriously equipped with IT solutions and the trend for updating these solutions remains.

The banking sector invests in modernization and support of operational tasks. Banks have a need to increase capacity, including through the development of additional services.

Telecom sector is also developing. But if the construction of networks occurs under direct contracts, bypassing the distributors, then everything related to the development of networks - related services, for example, also requires IT solutions, and there is an increase in demand. This is mobile banking, television, and other services. Behind each program, there is a data center that transmits and processes data.

And another segment that the company does not leave separately - these are Western companies that have representative offices in Ukraine. They work stable on the principle of updating the equipment every three years.

The retail sector also invests in IT. Trade buildings are equipped with an infrastructure that allows you to see how customers move, what they are interested in. In retail, this is the trend of the future; it allows stores to sell more thanks to a competent layout of the goods.

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