Kharkiv, once an IT hub for Ukraine, now struggles to provide services after workers fled war

One evening, in the western Ukrainian city of Lviv, a saxophonist crooned on a cobblestone street corner, a family out for dinner. Teenagers laugh in the streets with friends, and in the main square more than a dozen people gather guitarists and dance as soft snowflakes fall to the ground.

The city, despite being under the threat of Russian missile attacks, has become a haven for many Ukrainians fleeing the fighting that has gripped the east and south and looking for some normalcy. According to the Lviv Regional State Administration, the region currently hosts about 250,000 refugees from other parts of the country.

An unfortunate side effect is that cities and towns are left struggling to maintain services.

Vitalii Kucherov had a promising career as a computer software engineer.

When the Russian attack began last year in his home town of Kharkiv in the northeast, it was not fear that caused the man in his 20s to move for his life, but the fact that his friends left. He already works remotely, so it was an easy decision.

‘I don’t want to go back’

He dreams of one day opening an amateur photo lab in Kharkiv, turning his passion for photography into something bigger that can build a community. After moving to Lviv, he and some friends turned that dream into reality and opened a new business in the old city.

He came out of the darkroom he had built in the converted apartment where he worked with the new members to correct some of the problems he was having with spots on the mold.

“So basically, this is our place,” he said. “It contains our lab, also we have this studio where you can use equipment, studio lights, video lights.”

The lab, called Berliner Strasse, is gaining attention quickly, he said, pointing to the facility’s calendar, which is almost fully booked. Even amid the upheavals of war, the community he envisions comes together.

“Well, I don’t want to go back,” said Kucherov, who continues to work remotely as a software engineer.

“I am in Kharkiv, but there is no reason to go back because many of my friends are also here and I really like this city. And I don’t want to leave because of the lab. It’s like a second home.”

Kucherov is far from alone. Tens of thousands of people worked in information and technology services in Kharkiv before the invasion, according to industry records. The city, home to nearly 1.5 million people before the war, is estimated to have halved in size.

Because IT has become a highly mobile industry, workers can easily avoid violence while also maintaining their careers and providing for their families. But this exodus had consequences for the cities they left behind.

“Especially all companies move part of their teams – not all people but some – to cities in Ukraine and outside Ukraine,” said Olga Shapoval, executive director of the Kharkiv IT Cluster industrial group.

He was also among those who fled the city as residents continued to suffer attacks by Russian forces.

“Part of our team is in Kharkiv, part of us is all over Ukraine and all over the world,” he said.

For those who remain, the path forward is uncertain

When Russian soldiers first crossed the Ukrainian border last year, Oleksandr Kolb vividly remembers the panic that rushed not far from danger, but back to his home in Kharkiv.

At that time, he was in Kyiv on a business trip and he not only had to return to his family, but also to the workers. As the CEO of his own company called Promodo, which provides digital marketing solutions, he also feels responsible for keeping his employees safe as well.

First, he said, he created a new office, where employees who do not want to leave Kharkiv can live and stay with their families. They could cook and sleep there, and there was a bomb shelter under the new makeshift dormitory. Only about 20 employees took Kolb up on his offer, but they lived, worked and volunteered to support the army together on board in the early weeks.

“I love Kharkiv. I wasn’t born here, but this is my home,” said Kolb. “So, I decided to stay and help.”

The security situation has improved in Kharkiv after the Ukrainian army pushed into the northeast last summer and fall. The city is still the target of Russian missile attacks, but more workers are returning.

Out of a total of 350 employees, about 80 now live and work in Kharkiv, Kolb said, down from 240 before the invasion. He said that more employees have decided to move to Kyiv now, with more employees there than those living in Kharkiv. And he wasn’t sure if he would ever come back.

“We even opened a new office [in Kyiv]because at a time when we don’t have electricity, many people have to come to the office because that’s the only way to work and stay connected to clients,” he said.

He said it was mainly young people who wanted to stay in western cities. The first is that many do not own property in the east, so it is easier to leave. But another factor is that primary and secondary schools have not yet reopened in Kharkiv, making Kyiv or Lviv better options for young families.

Kolb said he has been forced to move some core parts of his business to Kyiv. They hope to be able to keep their headquarters in Kharkiv, but say it’s too difficult to know if that’s possible.

“I hope people will come back,” Kolb said. “As soon as the war is over.”

Kharkiv is a pillar of the technology industry

On a national scale, the IT sector has had a special place in the Ukrainian economy since the invasion, a quiet bright spot that continues to grow in 2022 according to the national body, the IT Association of Ukraine.

According to statistics, derived from the report of the National Bank of Ukraine, the industry was worth $7.34 billion last year, with exported services increasing by almost six percent from 2021.

“Our company successfully overcomes all obstacles, including blackouts and significant communication disruptions, thus ensuring the growth of the industry, even at a rapid pace,” said Konstantin Vasyuk, executive director of the IT Association of Ukraine.

Kharkiv has long been a pillar of national industry and was home to an estimated 16 percent of prewar Ukrainian IT workers, second only to Kyiv, Shapoval said.

“According to our research, 95 percent of our members are restoring their businesses and many are starting to grow and hire new people,” he said in a Zoom interview.

But even if the business does well and its growth helps the national coffers, in many cases, success will not return to the city it once called home.

Kharkiv’s economy is struggling, with the municipal government receiving more than 200 applications from various local businesses to relocate elsewhere in the country since the war began. This does not account for businesses that have closed entirely.

Loss of tax revenue

This loss of tax revenue comes at a time of increasing demand for municipal services, because urban repairs are expensive and in many cases, house repairs are being handled by the municipal government.

Shapoval said that many businesses from the IT sector continue to support the City of Kharkiv and the community in general through various aid and development projects, such as providing additional financial assistance directly to the municipality, buying ambulances for local military battalions and helping fund evacuation efforts.

He believes that while the security threat has disrupted his hometown, business will return when it is safe, because according to the IT Cluster report, many companies that left Kharkiv say they will return after the war.

Beyond that, Shapoval said people who don’t know they’ll return are still investing money and time to help.

“So I think we will survive because of volunteerism and support.”

Although rebuilding and attracting citizens has been a challenge that has only gotten worse as the war has dragged on, Kharkiv Mayor Ihor Terekhov refuses to stand in the way of that goal.

Last fall, he announced that the municipal government had no plans to cancel capital projects planned before the invasion, despite the drop in tax revenue.

Between the promises of the government and different investment banks, Terekhov said that the difference will be made and the city will plan to return to the citizens.

“The European Investment Bank has confirmed that all projects, including the construction of new metro lines, the construction of depots, the purchase of new rolling stock for the metro, the purchase of new trolleybuses and trams, and traffic safety,” he said. “We’re really holding on to everything.”