In the previous issue, we wrote about Bohdan Kupych, a Ukrainian-Canadian entrepreneur and manager, who currently works for a leading Ukrainian IT company KM Core as a Vice President for Business Development. Since 1992, Bohdan has worked in the IT sector in Ukraine and there are few people who know this sector as well as Bohdan. The New Pathway spoke with Bohdan Kupych to get a first-hand account of what is going on in this sector which has been in the spotlight for several years and is currently getting increased attention from the Prosecutor and tax authorities.
New Pathway: Are the kind of problems, which KM Core had in August with the Prosecutor’s office when they raided your offices, hindering the development of the Ukrainian IT sector and putting off potential investors?
Bohdan Kupych: Absolutely. Our company is 26 years old, we are well-known, we work with people like Intel Capital (the largest venture capital company in the world that invested in one of our projects) – we have undergone their due diligence. Intel Capital only works with companies who are transparent. The project in question was a project with a gas company UkrGazvydobuvanniya which we completed in 2012 and never got fully paid for. It was a typical software implementation – SAP provides software, the client needs consultants to help implement. Ukrainian IT companies in general over the past year have been targeted many times and the Ukrainian authorities do things like no one would ever do in Canada. We have proposed solutions if there is a problem – come, meet, we will show you the reports. But in Ukraine they still come with the use of force.
New Pathway: Is this interference disrupting your current activities?
Bohdan Kupych: On the one hand, it’s motivation for further change. KM Core is very active in the community and in the cultural sphere. The company’s owner Yevhen Utkin is very well-known, he contributes to social and cultural projects many of which people don’t even know about and he is always ready to help. These kinds of intrusions motivate us to keep pushing for change.
These kinds of events can be traumatic for employees that don’t understand what’s going on. One of the companies the prosecutors went to, and broke the door down, is called UaRms. It’s a two-person company that makes NATO-standard helmets for the Ukrainian military. The Ukrainian army needs helmets. They were buying expensive helmets elsewhere, so we started to produce them in Ukraine. UaRms has been around only since 2015, the dispute in question happened in 2012 and has nothing to do with U-Arms whatsoever.
New Pathway: Does the Ukrainian IT sector have a future despite the attacks?
Bohdan Kupych: The IT will develop on its own. It would like government support but doesn’t depend on government. It only needs human capital and access to Internet. There is a lot the government can do though, understanding the economic and social benefits of the IT industry.. Today outsourcing employs a lot of people in Ukraine, it’s over $2 billion in export, but it’s more like a commodity – we’re exporting unfinished goods like wheat. But, if given the right support many of entrepreneurs could create new products and services and potentially become global. We try to keep people from leaving Ukraine as 9,000 IT people left Ukraine last year to go work in countries like Poland, Estonia and even Canada. That may seem like a small number, but it’s just a tip of the iceberg. 9,000 left, but many more would leave if they had the chance. The worst thing is that they leave Ukraine and they don’t plan to come back. For example, many people from India or China got an education at MIT, Stanford, etc., worked for big global companies, then went back to their countries and created new companies. They have been able to realize themselves in their own countries. Unfortunately, many Ukrainian IT professionals leave and they don’t even think about coming back.
New Pathway: What is the reason for that? Say, the infrastructure and quality of life in India is often even lower than in Ukraine.
Bohdan Kupych: It depends. You can be an entrepreneur and you can do very well there. You can work for some of the biggest companies in India and China that are competing with IBM today. Opportunities for entrepreneurs in India are greater than in Ukraine today. In Ukraine you don’t have access to financing, you can’t borrow money from a bank. Angel investors are few and far between – often the only source of financing is family and friends. Venture capital is extremely limited in Ukraine, and mentorship and business acumen is not available. Some is available in the big cities such as Kyiv, Lviv or Odesa. But if you’re somewhere else – it’s just not available.
A few Ukrainians go to Silicon Valley with a tourist visa say “I’m here, I have a great idea, where do I go?” If the venture capitalists see you at all – there are 1,000 people in line, so good luck. Maybe the Ukrainians’ English isn’t that good, maybe they haven’t prepared their pitch properly, or they say “Well my idea is so great, I don’t want anybody to steal it.” That’s not the best approach. At the same time, Ukrainians often can figure out how to do things in a unique way. That’s the beauty of using Ukrainian engineers – they often can look at a problem in a different way. For example, we started one of our companies, Polyteda, which writes software for the semiconductor industry because Ukrainians didn’t have access to huge computing resources to solve a particular problem. They were able to develop unique ways to accomplish the task through math and algorithms.
New Pathway: What is the future for Ukraine in terms of creating a good climate for business and investment to rise to at least the Indian level?
Bohdan Kupych: The question is – is the development in Ukraine going to happen in an evolutionary or revolutionary way? Now it’s the tipping point – enough people are saying that there is a need for some major changes. There has been progress in certain areas, like police, but it’s not enough and people aren’t trusting anyone – government or politicians. Turning Ukraine around is like turning the Queen Elizabeth ocean liner, but they have to turn it faster. Much depends on young people who are are somewhat frustrated and think about leaving the country.
I came in Ukraine in 1992 and even then, people said “Ukraine is going to take off”. Indeed, Ukraine had everything, it was on the same level with Poland in 1992 in terms of GDP. As well, the Ukrainian diaspora is experiencing some donor fatigue, saying “It’s been 25 years and Ukraine can’t get its act together.” If Ukrainians in 1992-95 had taken some major steps, they would have been able to reform faster like Poland, instead, they have gone two steps forward, then one step back.
The Free Trade Agreement with Canada does create some new opportunities and it now puts Ukraine on the radar screen for Canadian investors. And we are currently working on a strategy to implement Polish best practices and apply it to Ukraine.
New Pathway: Is the system going to break through or break down in Ukraine?
Bohdan Kupych: If there is no development, the country could stay afloat, but it won’t go forward. I think that Ukraine is big enough that the momentum will keep it going anyway. It doesn’t matter what is going to happen. Of course you have a neighbour to the north with is not conducive to Ukraine developing faster and actually sabotaging that. That’s a major issue for everyone, it’s an unresolved problem that is always on your mind. More likely Ukraine will be treading water in 2016-2017. When people say “parliamentary elections will help” – I don’t believe that. Presidential elections – I don’t know. It’s not a matter of elections, it’s a matter of people being motivated to make the changes that need to happen. I’m not sure in Parliament they understand what those changes are.
New Pathway: This is quite a grim picture. Does Ukraine ever surprise you nicely?
Bohdan Kupych: Every day. The energy of the people despite everything going on is great. There are a lot of good things happening. Ukrainian Catholic University, I’m involved with it, has fantastic energy. From nothing they created a university that I think some day will be phenomenal. Lots of examples of young people taking initiative, volunteers taking initiative – that’s a lot of positive energy for Ukraine. To channel it in the right direction – volunteerism is good, but doesn’t last not forever. As an example, our project URPA was started with volunteers.
New Pathway: Has the situation improved with Ukrainian language and culture since the Revolution?
Bohdan Kupych: I think it’s not a first priority on people’s mind. People now are more concerned about their well-being rather than language and culture. On Maidan, there was resurgence of the Ukrainian language but many people have now reverted back to what’s easier for them. There are many young people, who I know of, that decided to speak only Ukrainian. I know Russian, but I speak Ukrainian in Ukraine. If someone speaks to me in Russian, I will answer them in Ukrainian. I feel that the Ukrainian language requires affirmative action. The only way that the Ukrainian is going to thrive is if you use it. It is only one of the challenges facing Ukraine and helping to address these challenges is what keeps me going.
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