Significant changes: What do the results of IT Park for the first six months of 2023 indicate?

IT Park has summarized the results of the first half of 2023. They have not only reaffirmed the vigorous growth phase of the IT sector but also identified significant changes.

Export has substantially increased, but even more intriguing is how it has transformed

One of the primary objectives of IT Park is to enhance exports, through which new markets are explored, foreign currency enters the country, and new employment opportunities are generated.

During the initial six months, the residents of the technopark exported services amounting to $145.3 million. For comparison, this surpasses the entirety of the previous year's figure ($140.9 million).

If the current pace can be maintained, the goal of $300 million will be achieved by the end of the year. Under favorable circumstances, the plan might even be exceeded.

The increase in the export of IT services by Uzbekistan can be attributed to the growing number of export-oriented companies in the country. As of August 1st, there are already 459 such companies among the residents of IT Park. This figure represents a 2.2-fold increase compared to the previous year.

However, all of this represents quantitative growth, nonetheless, the first half of the year also demonstrated qualitative improvements.

For instance, while the United States accounted for 71% of Uzbekistan's IT service exports in 2022, this year their proportion has already diminished to 45%.

This signifies an expanded export geography, wherein Uzbekistan companies have entered new markets, thereby generating demand for IT services from other countries as well. Among these, the United Kingdom (14%) and the European Union (8%) stand out.

Such diversification prevents reliance on a single country, facilitates a swifter expansion of horizons, and fosters the augmentation of international orders.

However, the most significant alteration occurred within the structure.

The share of Business Process Outsourcing (BPO) in the overall volume for the year decreased from 63% to 20%, and in its place, the volume of exports has grown significantly in the following sectors:

• game development — from $0.9 million to $15.2 million,
• software products — from $15.7 million to $60 million,
• technical support services — from $1.8 million to $10.8 million.

This is significant because selling BPO services such as outsourcing call centers is one matter, and game and software development is an entirely different endeavor.

The latter are considered products with high added value. There, a higher level of responsibility results in greater profitability and significance, correspondingly.

The fact that foreign companies are willing to purchase sophisticated products in Uzbekistan not only signifies the growth of the country's average level of IT specialists but also unveils new opportunities, as the global gamedev market alone is valued at approximately $200 billion.

GameDev Case

Since 2022, East Games, a local subsidiary of Lesta Games, has been operational in Uzbekistan. Lesta Games is recognized as one of the largest developers and operators of massively multiplayer online (MMO) computer games in Eastern Europe.

Based in Tashkent, East Games is responsible for publishing the mobile game "Tanks Blitz," which has been downloaded over 1 million times on Google Play alone.

Lesta Games emerged as one of the pioneering major game development companies to recognize that the conditions in Uzbekistan had become sufficiently favorable to establish an office here.

The market volume is approaching 10 trillion som. And there are reasons for that

Given that nearly all significant IT companies in Uzbekistan are residents of the IT Park, the volume of services provided by them can confidently be equated with the overall size of the country's IT market.

Since the beginning of the year, it has reached 5.4 trillion sums (approximately $450 million), marking a 2.4-fold increase compared to the previous year.

If this pace can be sustained, the total volume is poised to surpass 10 trillion sums for the first time by the following year, and might even reach the psychological benchmark of $1 billion.

The primary reason for this growth is the increase in the overall number of residents. While there were 1,123 by the end of 2022, as of August 1st, the number has risen to 1,372.

This can be attributed to the swift increase in the number of new IT companies in Uzbekistan.

The sector of "information and communication" is the fastest-growing in the country — since the beginning of the year, there has been a 13.6% growth in new companies within this sphere.

In addition to local companies, the count of foreign enterprises continues to rise.

For instance, by the end of 2022, there were 156 such foreign companies among the residents of the IT Park, and as of August 1st, 2023, this number has already reached 219.

Education fuels new job opportunities, and new job opportunities, in turn, bolster education

As of August 1st, 2023, the number of job positions created by IT Park residents amounted to 22,140. There has been an increase of 4,140 jobs since the beginning of the year.

The count of educational companies among the residents has risen to 296, marking a growth of 89 within the first six months.

These two indicators are mentioned together because they mutually reinforce each other, serving as both the cause and the effect simultaneously.

For instance, IT Park recently announced that such residents offer over 400 IT courses. If categorized, nearly half of these courses pertain directly to programming—frontend, backend, fullstack development.

In the first three months of 2023, 14,300 individuals commenced their education, among whom 5,190 have already successfully graduated, and 1,396 have secured employment.

All of this is important because it partially addresses the issue of IT specialists shortage. It is precisely for this reason that educational institutions have been granted the right to become residents of the IT Park, even though it was not initially within their scope.

In conclusion

Only half has passed, but the year 2023 has already distinguished itself.

If quantitative growth was observed in the previous year as well, the qualitative shifts in exports have emerged as news, speaking volumes.

The fact that Uzbekistan has embarked on exporting products with higher added value suggests that the country is being perceived in a new light.

Moreover, the projection that the overall market volume, if stick to extrapolation, will soon reach $1 billion, indicates a rapid expansion in domestic demand for IT services within the country.

The fact that educational companies-residents are supplying the market with professionals for developer-residents indicates the functionality of the ecosystem.

On the whole, the outcomes of the first half of the year affirm the initial assessment made at the beginning of the year — the IT sector, now in its fifth year of active development, has entered a stage of rapid growth.

Almost like a car that prepared for four seconds and then abruptly surged forward on the fifth.

Information about the article’s author:

Timurmalik Elmuradov — analyst, R&D specialist, Msc of the Research University Higher School of Economics.

Author of "Skartaris Peak (https://t.me/skartariss)" - the leading Telegram channel about business, market and technology in Uzbekistan.

He was responsible for development at the “Univer Club Family” group of companies (Russia), online publication Daryo.uz. Co-founder and former CEO of Spot.uz.