Russia-Ukraine war: Talking talent and leadership
In an ongoing series of blog posts, TBR analysts will examine the effects of Russia’s invasion of Ukraine across the IT services, cloud and digital transformation markets. Future posts will reflect both the evolving situation in Ukraine and discussions TBR has with vendors as they make decisions about their current and future strategies for coping with changes wrought by the war.
Eastern Europe held promise, probably still does
As of the writing of this blog, the war in Ukraine continues at a kinetic and political tempo sufficient to prevent too much long-term thinking about the prospects of peace and stability or any kind of return to normal. In addition, enough time has passed since the first days of the invasion and immediate reactions for companies, including the IT services firms, consultancies and technology vendors TBR tracks, to have determined and acted on their initial strategies. While at first we saw a spectrum of reactions, from rapid withdrawal from Russia to a wait-and-see approach, by now, almost universally, the Western-based companies have retreated behind the old Cold War lines to relative safety and stability in Western Europe. Before assessing potential next steps by those vendors, including recruitment of newly displaced tech talent in Eastern Europe and/or a rush to diversify global delivery even further afield, we think it’s worth recalling a couple of pre-war conditions that may impact how these vendors tackle talent.
First, most large IT services firms, consultancies and technology vendors have well-established presences in the majority of Eastern European NATO countries. Poland stands out for receiving the most investment and attention, as evidenced by the robust and well-above-European Union (EU)-average growth over the past 10-plus years. According to TBR’s Global Delivery Benchmark, employees in Poland represented 6.9% of total EMEA headcount at the end of 2021 for the 14 vendors covered in the report. This share increased from 6.4% in 2020. We expect this trend to continue, especially as Poland has absorbed the largest pool of refugees fleeing Ukraine. Shortly after the war started, Accenture launched a pilot program focused on building the technology skills of female Ukrainian refugees through an Accenture Academy, starting with cybersecurity. Right before Russia’s invasion of Ukraine, the Polish government butted heads with the EU over the Polish ruling party’s nationalistic and anti-democratic policies, and as recently as the end of 2021 the EU was considering levying sanctions and cutting off investments by and from the EU to Poland. In short, Eastern Europe had solid economic performance and growth potential but still faced plenty of political risk, even before a shooting war erupted on the EU’s doorstep.
Second, TBR sees a lesson learned in the manner in which some of the bigger brands exited Russia in the immediate aftermath of the invasion. Companies with clearly defined and centrally run structures moved quickly and definitively. Similarly, maybe surprisingly, firms with member firm arrangements — think: Big Four — swiftly cut their Russian member firms out of the network. The outlier, then, turned out to be companies deploying franchise-type operations, which found it harder to exit Russia as legal contracts protected the franchisees and mandated some maintenance of the larger global brand. Looking a few months ahead in 2022, if the conflict in Ukraine remains hot, which cools down economic activity in greater Europe, labor unions may kick into higher gear, extracting additional concessions and making it more costly for companies to exit any European market.
Black T-shirt replacing suit and tie
Where does that leave us now, when looking at IT, tech and consulting talent in Europe in the shadow of an ongoing Russia-Ukraine war? In a previous blog, we noted that leadership among the vendors we cover, particularly as the war moves into its next phase and the economic and political decisions become more challenging, will help us separate the long-term winners and laggards. In conversations with professionals across all levels of the vendors we cover — and their clients — we’ve heard about a generational shift, a trend that started before the pandemic and then accelerated during the pandemic. If you just look at Kyiv, Ukraine, and Moscow, you can see a stark example of that coming change. We don’t expect such dramatic contrasts at the C levels of the IT services vendors, cloud and software companies, and management consultancies we analyze, but we do expect the current crisis on the ground in Ukraine and all the knock-on effects across the globe — from talent management to supply chain issues to decarbonization pledges to sanctions compliance — will test current leaders and reveal who can navigate a post-war, post-pandemic world. In essence, employee and customer value criteria, or satisfaction attributes, have changed post-pandemic and the current Ukraine conflict only galvanizes these shifts. The issue, then, is whether leadership will embrace the change or fall victim to incrementalism that can tarnish their brand.