4. Results

At the G-20 summit (European Council, 2022) held on November 15–16, 2022, in Indonesia, the discussion of the directions for global digitization, alongside global system issues, healthcare, and the pandemic’s impact, and transition to sustainable energy, was added to the agenda as a major item. Digitization has significantly impacted the development of business structures within Ukraine’s IT sector. The implementation of technologies like big data, artificial intelligence, and machine learning has sparked the development of novel business models and opened up new avenues for entrepreneurship. For instance, the widespread adoption of remote work and the increasing demand for IT professionals have spurred the rapid growth of models like freelancing and outsourcing.

Freelancing allows specialists to work independently, offering services to multiple clients simultaneously, which can lead to higher income and greater flexibility in working hours (Kalyuzhna et al., Reference Kalyuzhna, Smutchak, Chorna, Chornyi, Baldyniuk and Chuba2024). Conversely, outsourcing enables companies to concentrate on their core business processes by delegating technical tasks to third-party specialists or organizations—an effective strategy in the highly competitive IT sector.

In particular, the summit specifically discussed such aspects of global digitalization as computer networks, IT technologies, electronic computing, the Internet, calculations, and programming, which now cover all branches of public life of the world’s population and, among other things, accelerate their economic growth (Use of information and communication…, 2024). The global digitization of the labor market is both a current trend and a future challenge for society, employers, employees of research institutions, and educational establishments in Ukraine. The development and proliferation of digital technologies are transforming the local labor market, requiring professionals to acquire new skills and changing the nature of work and demands for competencies (Oleksy-Gebczyk, Reference Oleksy-Gebczyk2023; Bronin et al., Reference Bronin, Kuchansky, Biloshchytskyi, Zinyuk and Kyselov2021).

According to the European Business Association (EBA), companies in Ukraine are becoming more flexible, establishing hybrid workspaces, and offering co-working spaces in convenient locations for employees (R&D personnel by occupation in 2010–2023 (2024)). Among the main trends within the job market are remote recruitment of personnel in conditions of remote work, increasing levels of digitization and demand for IT specialists, and the implementation of “reskilling and upskilling” training programs for employees to acquire new knowledge and skills (Development of the Ukrainian, 2018). These trends in the global digitization of economic processes also indicate the beginning of fundamental changes within the Ukrainian job market. Despite the shift toward digitization in the job market, regional labor markets encounter challenges stemming from the structural characteristics of the country’s economy and the ongoing transition to a fully developed market economy model.

Based on the analysis, several strategic recommendations can be proposed to support and develop entrepreneurial initiatives in Ukraine’s IT sector. First, it is crucial to establish an environment that supports the expansion of freelance platforms and marketplaces, which would aid IT professionals in finding work while also providing social protection. Second, supporting the development of outsourcing companies by offering tax incentives and improving access to international markets is important. Third, it is crucial to develop innovative infrastructure, such as technology parks and business incubators, to promote the growth of startups and provide support during their early stages. These measures will contribute to the expansion of the IT sector and the creation of new jobs in the country.

Given these considerations, there is a growing need for both theoretical and empirical research focused on global digital transformation, the advancement of an information society, and the development of a knowledge-based economy in Ukraine. The issues of global digital transformation of labor markets, training and retraining processes, and the enhancement of qualifications to develop digital and technical skills through new market-demanded competencies and professions, and the transfer of practical specialized knowledge by universities, are actively discussed in domestic and foreign literature. Employers note a constant shortage of highly skilled labor resources and specialists in emerging professions who are inclined toward continuous learning. From an economic perspective, both freelancing and outsourcing offer distinct advantages and disadvantages.

Studies show that freelancing can often lead to greater profitability for individual professionals, as it enables them to determine their rates and engage with multiple clients at the same time. However, freelancing generally has limited potential for attracting investment and expanding into larger business ventures. In contrast, outsourcing provides companies with a stable income stream and facilitates the attraction of investment and the development of long-term business relationships. Additionally, outsourcing tends to result in higher employment rates, as large companies can employ a significant number of IT professionals.

Among the key characteristics of the current WPU (Working Population of Ukraine), the increasing prevalence of remote work, particularly during the pandemic, and the rapid growth of the IT sector, driven by favorable compensation and working conditions, are noteworthy. Considering the present state of the WPU’s IT sector, particularly its scientific and technical, material, human resource potential, entrepreneurial, and financial support, it is essential to highlight the impact of Russia’s aggression against Ukraine, which has significantly diminished these resources, specifically:

1. Overall, the losses inflicted by Russia’s military aggression against Ukraine as of February 2023 are estimated to be USD 750 billion (R&D personnel by occupation in 2010–2023, 2024). This primarily includes the loss of population, economic, scientific, educational, and healthcare facilities located in territories temporarily occupied by the enemy, as well as the destruction of industrial enterprises, energy, resource, and transport infrastructure, and the near-total devastation of the housing stock, particularly in frontline areas. Undoubtedly, these consequences of the war have diminished the scope of the domestic labor market of the country, volumes of its export–import transactions, and consequently, the opportunities for IT sector development.

2. The population of Ukraine has significantly decreased as a result of Russia’s aggression, with a large number of people migrating primarily to the western regions of Ukraine and abroad. According to the United Nations, as of February 2023, the number of Ukrainian refugees abroad reached 8.1 million, meaning that one in three residents of Ukraine has migrated (Use of information and communication…, 2024). The majority of emigrants moved to EU countries. Poland escaped over 1.5 million Ukrainian people, Germany 1 million, the Czech Republic around 476,000, Italy 173,000, Spain approximately 164,000, the UK around 152,000, Bulgaria 148,000, France 119,000, Romania 106 000, and Slovakia 105,000. It should be noted that a significant emigration flow from Ukraine consisted of the labor force, including specialists in the field of digital technologies. As for internal migration, the total quantity of temporarily moved person is about 7 million people, of which only 4.5 million are registered (Kopackova et al., Reference Kopackova, Simonova and Reimannova2024). This has resulted in a rise in unemployment, especially among IT professionals.

3. The issues related to forced emigration of the highly educated labor force are primarily focused on employment in EU countries. For example, 28.1% of highly skilled specialists moved to Poland, 9.2% to Germany, 6.8% to Portugal, 6.6% to Spain, and 5.5% to the Czech Republic (McKinsey & Company, 2016). Women constitute the majority amongst highly educated professionals who emigrated to EU countries. As for the employment of Ukrainian IT specialists in the EU labor market, their professional training is in demand. Employment of these specialists in EU has proven to be successful since pre-war times.

4. Amid the digitalization of the ACS (Administrative and Civil Service), it is crucial to encourage the employment of IT professionals within Ukraine. This primarily involves expanding the use of business models that leverage digital technologies and remote work. Such an approach fosters the growth of Ukraine’s IT sector, thereby increasing its overall efficiency.

Restoring the full functionality of the IT sector in LMU requires the training of professionals in the digital field, the provision of innovative equipment, and the funding of digital projects. Significant progress in addressing this issue can be achieved through comprehensive economic cooperation with the international community. When assessing the impact of global digitization on structural shifts in the LMU, it’s essential to closely examine its innovative framework, including the operations of technology parks, the employment of highly skilled professionals within them, and the role of IT clusters.

Technology parks are economic activity zones that integrate the capabilities of universities, research institutions, industrial enterprises, and entities from regional, national, and international innovation infrastructures (Miethlich et al., Reference Miethlich, Kvitka, Ermakova, Bozhko, Dvoryankin, Shemshurina and Kalyakina2020; Breus & Khaustova, Reference Breus and Khaustova2016). In recent years, both in Ukraine and globally, technology parks or territorial-production scientific complexes have emerged as the most effective organizational and economic forms of integrating science and industry among various innovation structures. According to the Ministry of Education and Science of Ukraine, only 12 technology parks are officially registered in the country. However, their number and, more critically, their industrial and financial resources are insufficient to fully utilize the existing intellectual potential and meet the demand for innovative products.

The lack of positive dynamics in the educational structure of the LMU, particularly in the branch of “higher education,” hinders this source of development for domestic scientific and technical potential. Recent times have shown that it has not adequately addressed the global challenges of the modern scientific and technological revolution. Over the past 10 years (from 2010 to 2020), the actual volume of research and development (R&D) in Ukraine has decreased by 45% (in US dollars at purchasing power parity), while the number of researchers has more than halved, with a 62% decline (Figure 1).

Figure 1. Trends in the number of personnel engaged in R&D by categories, as for 2010–2022. Source: Formed by the authors based on R&D personnel by occupation in 2010–2023 (2024).

The downward trend shown in the data in Figure 1 is driven by at least two factors. The first is the impact of Russia’s military aggression against Ukraine, which effectively began in 2014. Secondly, it is the COVID-19 pandemic and its consequences, including medical, psychological, financial, and material effects, among others. In 2018, 950 organizations in Ukraine were engaged in R&D, with 48.1% of them belonging to the public sector, 37.0% to the business sector, and 14.9% to higher education. The share of R&D personnel (including researchers, technicians, and support staff) in the total employed population was 0.54%, with researchers comprising 0.35% of that total. That year, organizations’ total R&D expenditure amounted to UAH 16773.7 million, with labor costs at UAH 8553.0 million, other current expenses at UAH 7456.3 million, and capital expenses totaling UAH 764.4 million, including UAH 588.0 million for equipment acquisition. Ukraine ranks among the countries with the lowest concentration of researchers, with 11 researchers per 10,000 people, compared to 55 in European and OECD (Organization for Economic Co-operation and Development) countries.

IT clusters are also pivotal in advancing the global digitization of LMU. These clusters contribute to the development of the IT industry in various cities across the country, uniting leading companies and partners involved in software development and export outsourcing. Overall, the analysis of data highlighting the regional characteristics of domestic IT clusters, their growth trends, production volumes, and collaboration with foreign IT companies is well-documented in scientific and statistical sources (Tul, Reference Tul2019). It is important to recognize that digital technologies offer distinct advantages in optimizing the work environment, from providing access to advanced tools to enabling flexible work schedules in many offices. In the LMU, the primary models of IT business organization are freelancing and outsourcing.

Some experts suggest that the private sector in Ukraine demonstrates the highest interest in digitalization, supporting the notion that the digitalization of economic activities and the extensive use of information technology enhance labor productivity and business efficiency. It is important to note that IT specialists’ engagement in the national economy primarily relies on civil law contracts with individual entrepreneurs (PPOs) whose activities focus on providing information technology services. Currently, these individual entrepreneurs constitute the majority of IT professionals in Ukraine, with relevant individual entrepreneurs accounting for 90% of registered programmers in the country.

Outsourcing is notably widespread in the Ukrainian IT market, with its primary role being the provision of services to foreign companies. Outsourcing firms can succeed and operate effectively even without robust state institutions or adequate infrastructure. The most prevalent type of outsourcing is business process outsourcing, which involves delegating routine tasks, such as customer call handling, to specialized call centers often situated in regions with lower labor costs.

In recent times, freelancing and outsourcing have increasingly become prominent forms of domestic business. It is worthwhile to comparatively model the characteristics of their practical operations. The goal of such modelling is to perform an economic-mathematical analysis of the comparative benefits of freelancing and outsourcing and to provide recommendations for expanding their application within the framework of global digitalization in LMU.

Real-life examples of successful Ukrainian companies that utilize entrepreneurial models in the IT sector can serve as valuable illustrations for analysis. For instance, SoftServe, one of the largest outsourcing providers in Ukraine, effectively employs this model to deliver services to clients worldwide. The company actively attracts investments and continuously expands its workforce, contributing significantly to the growth of Ukraine’s IT industry. Another example is the Upwork platform, which enables Ukrainian freelancers to find clients abroad. Through such platforms, Ukrainian specialists can participate in the international market, positively impacting the country’s economic development.

Additionally, Genesis, a successful Ukrainian company specializing in developing tech start-ups, uses a hybrid business model that includes outsourcing, freelancing, and investment in its products. Genesis has launched several successful projects in media, e-commerce, and fintech, such as BetterMe (a fitness app) and Headway (a reading platform). By leveraging its model, Genesis has attracted over USD 500 million in investments, created more than 1500 jobs in Ukraine, and expanded into new international markets. Examining the economic indicators of freelancing and outsourcing in Ukraine’s IT sector reveals how these models contribute to entrepreneurship and economic growth in the country (Table 1).

Table 1. A comparison of economic metrics between freelancing and outsourcing within Ukraine’s IT sector

Source: Formed by the authors based on How many IT specialists are there in Ukraine: Counting according to the Ministry of Justice (2018).

As shown in Table 1, outsourcing contributes a larger portion to Ukraine’s IT sector GDP (4.1%) compared to freelancing (1.4%). This indicates that outsourcing is a more developed and influential sector of the economy, contributing significantly to national GDP. An entrepreneurial approach in outsourcing enables companies to attract more international customers, leading to higher income levels and sustainable sector growth. The export volume of IT services in outsourcing is USD 6.8 billion, significantly higher than the USD 1.5 billion generated by freelancing. This indicates that outsourcing companies have a stronger presence in the international market, thanks to their capacity to manage large contracts and deliver reliable, high-quality services. The entrepreneurial approach in outsourcing is export-oriented, allowing companies to attract foreign investments and contribute to economic development through export growth.

Investments in outsourcing companies total USD 800 million, four times higher than the USD 200 million invested in freelancing. This indicates that outsourcing companies are more attractive to investors due to their scalability, stability, and capacity to generate significant revenues. Thus, the entrepreneurial approach in outsourcing involves actively attracting capital for infrastructure development, service expansion, and innovation, enabling companies to remain competitive in the international market (Annual Report on the State of…, 2022).

In this specific context, the primary objective is to justify the selection of the most suitable form of work for IT professionals. To make a well-informed decision, it is essential to consider the problem’s multifaceted nature. To fully grasp the various aspects, it is advisable to identify a range of possible solutions and determine the set of criteria required for their implementation. It is crucial to consider as many relevant criteria as possible, as overlooking even one could result in an incorrect choice. The selected solution should be well-founded, comprehensive, adaptable, optimal, lawful, and clearly defined.

Given the current state of development in the national IT sector, it is important to employ a heuristic approach, particularly the expert evaluation method. This involves gathering insights from professionals, analyzing, and synthesizing this information to make informed, risk-based decisions. Based on the stages of collective expert research, the algorithm for modeling the comparative advantages of freelancing and outsourcing in Ukraine’s IT sector involves forming a group of experts.

First, it is essential to identify the number of experts who are directly involved in the IT field. The selected group of experts will participate in a survey regarding the importance of variables in each of the identified groups. According to existing recommendations and based on a specified level of confidence (95%), the number of experts should range from 5 to 15. For this problem, they were chose five experts. The second stage involves developing questionnaires to gather relevant information. Consequently, the third stage will involve surveying the experts regarding the factors that constitute the holistic problem and identifying criteria that influence the alternative selection process. The fourth stage involves defining the tasks that need to be addressed by searching for alternatives and obtaining evaluations from the five experts. To reach a decision, three key tasks must be addressed:

• • identifying potential alternatives;

• • categorizing these alternatives into solution classes;

• • Select the most suitable alternative.

As specific objects of alternative options, two forms of business are proposed: freelancing and outsourcing, both in the LMU IT industry. Specific features, such as a limited number of alternatives and a large number of criteria, characterize the existing options. The task is to select the best and most profitable alternative. To accurately perform the modelling, an analysis of existing statistical data was conducted (Vlasova, Reference Vlasova2015), focusing on the proportion of Ukrainian citizens employed in the primary industries and sectors of the national economy. Only those sectors with the highest percentage of the total workforce were selected for this analysis. This criterion served as the foundation for creating a comparison table aimed at conducting a balanced evaluation of the application of two alternative IT business models within the LMU, specifically freelancing and outsourcing.

Based on the criteria and the selection of the highest percentage of enterprises employing IT professionals, a Comparison Table was created to properly analyze these two alternatives: freelancing and outsourcing (Table 2). Based on the selection criteria for the highest percentage of enterprises employing IT specialists within the total number of enterprises, a comparison table was constructed to accurately analyze the two alternatives: freelancing and outsourcing. According to the individual opinions of experts, who rated each criterion on a relative scale from 1 to 10 points based on its importance, the total points awarded for each alternative are as follows: outsourcing received 348 points, while freelancing received 345 points. Therefore, according to the experts’ opinion, outsourcing is considered the better alternative.

Table 2. Expert industry assessment of the use of IT specialists in such proposed alternative forms—outsourcing (A) and freelancing (F)

Source: Formed by the authors based on R&D personnel by occupation in 2010–2023 (2024).

Following the data presented in Table 2, which highlights the initial survey of ranked importance for various variables, the total points assigned by selected experts for each criterion were considered. Experts identified 10 key criteria for companies in the information and communication technology sector, including information and communication technologies, advertising activities and market research, other professional, scientific, and technical activities, professional, scientific, and technical activities, information and telecommunications, computer and communication equipment repair, wholesale and retail trade, motor vehicle and motorcycle repair, electricity supply, scientific research and development, legal activities, head office operations, management consulting, architectural and engineering services, technical testing and research, and the manufacturing industry.

Based on the assessments provided by five experts on the relevance of outsourcing and freelancing in these economic sectors, it was observed that in five of these sectors, these factors hold the greatest importance. Variables deemed less significant for outsourcing and freelancing, as determined by calculations and ranked order, were excluded. These adjustments are documented in Table 3.

Table 3. Ranking of job types based on the criterion of high ratings

Source: Formed by the authors based on McKinsey & Company (2016).

Since the two alternatives being investigated can be interpreted as an unresolved part of the employment problem for IT professionals (which shows the highest parameter in the ranking group), this provides a basis for using the cognitive function of effectiveness according to individual-subjective preferences of the chosen alternatives.

(1) $$ \mathrm{lternati}\;(x)=\frac{e^{\beta {F}_i(x)}}{\sum \limits_{j=1}^n{e}^{\beta {F}_j(x)}}, $$

The alternative is the function of individual-subjective preferences of alternatives; $ Fi $ is the function of the effectiveness of alternatives; $ i $ is the ith attainable alternative, which can be any specific alternative; $ \unicode{x03B2} $ is a structural parameter or cognitive coefficient, the value of the functional of which is equal to 0.3; $ e $ is a natural number (exponential) 2.71828; $ n $ is a set of alternatives (2—outsourcing and freelance); $ a,X $ is are necessary conditions (arguments) for finding the extremum of the function.

(2) $$ \beta \hskip-0.3em :\hskip0.3em =-3,-2.9\dots 4;\hskip0.6em x\hskip-0.3em :\hskip0.3em =0\dots 100;\hskip0.6em {\alpha}_1\hskip-0.3em :\hskip0.3em =0.01;\hskip0.6em {\alpha}_2\hskip-0.3em :\hskip0.3em =0.1, $$

(3) $$ \mathrm{X} 10\hskip-0.3em :\hskip0.3em =76.9;\hskip0.6em \mathrm{X} 20\hskip-0.3em :\hskip0.3em =63.7;\hskip0.6em \mathrm{F}1(x)\hskip-0.3em :\hskip0.3em =\mathrm{X} 10-{\alpha}_1\cdotp x;\hskip0.6em \mathrm{F}2(x)\hskip-0.3em :\hskip0.3em =\mathrm{X} 20-{\alpha}_2\cdotp x, $$

(4) $$ Frl\left(x,\beta \right)\hskip-0.3em :\hskip0.3em =\frac{e^{\beta \bullet F2(x)}}{e^{\beta \bullet F1(x)}+{e}^{\beta \bullet F2(x)}}, $$

(5) $$ Aut\left(x,\beta \right)\hskip-0.3em :\hskip0.3em =\frac{e^{\beta \bullet F1(x)}}{e^{\beta \bullet F1(x)}+{e}^{\beta \bullet F2(x)}}. $$

There are two alternative types of employment: outsourcing and freelance (Figure 2). Using the ranking of the importance of each variable for $ Aut $ and $ Frl $ companies, the most significant ones were identified based on the proportion of companies employing IT professionals relative to the total number of companies. This serves as the benchmark value. Next, were use the function of individual-subjective preferences for these two alternatives to understand which alternative’s qualities (advantages) are more convenient or which advantages can rely on when choosing employment. $ F1 $ is the effectiveness function of the outsourcing alternative ( $ Aut $ ), which is a variable parameter (after ranking by a group of experts) for the criterion “Information and Communication Technologies” and equals 76.9%. $ F2 $ is the effectiveness function of the freelance alternative ( $ Frl $ ), which is the variable parameter (after ranking by a group of experts) for the criterion “Information and Communication Technologies” and equals 63.7%.

Figure 2. Cartesian graph in (a) calculation of entrepreneurial forms activity and (b) comparison between outsourcing–freelance. Source: Formed by the authors.

Calculations using the individual-subjective preference function reveal that, between the two alternatives, the outsourcing sector is the preferred option for Ukrainian professionals in the “Information and Communication Technologies” field. This is clearly illustrated in the Cartesian graph, where the dashed blue line (representing the freelance option) is shifted along the x-axis (measured length). The analysis of digitization’s impact on structural changes within the national economy yields several important conclusions. First, Ukraine’s approach to digitalization, alongside the rapid development of its private IT sector and the expansion of IT clusters, is driving positive structural transformations in the national economy.

Regions hosting IT clusters, such as those in Lviv and Kyiv, are emerging as key hubs for attracting highly skilled talent, not only in IT but also in related industries (McKinsey & Company, 2016). The IT sector is facilitating the rise of new business models like freelancing/self-employment and outsourcing, which are positively affecting entrepreneurship and the development of human capital in Ukraine. European integration has supported decentralization, liberalization, and the easing of conditions for conducting business activities, helping transition towards a market-based digital economy. This, together with the accelerated digitalization of the public sector (including administrative services), is expected to create synergy in the structural changes of the national economy, boosting entrepreneurial activity, enhancing work flexibility, and driving up wage levels.

The analysis reveals that outsourcing emerges as a more advantageous business model compared to freelancing in Ukraine’s IT sector, demonstrating higher GDP contribution, greater export volumes, and stronger investment attraction capabilities. The impact of global digitization on Ukraine’s labor market has been significant, despite challenges from Russian aggression and the COVID-19 pandemic, with the IT sector showing resilience through the adoption of remote work, hybrid workspaces, and the development of IT clusters in major cities. The mathematical modelling and expert evaluation confirm outsourcing’s superiority for IT professionals in Ukraine, particularly in the Information and Communication Technologies field, while the overall digitalization trend continues to drive positive structural transformations in the national economy through increased entrepreneurship, enhanced work flexibility, and improved wage levels.