Can Ukraine Replicate Israel's Military Tech Success?

Ukraine’s tech industry has emerged as a beacon of optimism amid the destruction of war.

Despite a staggering 30% contraction of the country’s GDP in 2022, the country’s IT exports grew by an impressive 9.7% in May 2023 compared to the previous month. During the first five months of this year, Ukraine’s IT exports, mostly software, amounted to $2.8 billion.

Tech is central both to Ukraine’s defense — and its future economic recovery. Once the war is over, Ukraine will need to mobilize tech resources to protect itself. It could, optimists hope, turn this adversity into a competitive advantage, just as Israel has fused military and technological prowess.

“Ukraine’s effective use of military technologies has led some observers to suggest that the country could become a “second Israel,” says *Mykhailo Fedorov, Ukraine’s Deputy Prime Minister and Minister of Digital Transformation. “*This is a flattering comparison, but in reality, Ukraine has arguably even greater potential. Within the next few years, Ukraine is on track to become a nation with top-tier military tech solutions.”

His ambitions are, to be sure, hyperbolic. The Israel analogy should not be overstated. Israel’s tech sector is growing at more than 15% a year, and its IT exports reached $71 billion in 2022 — more than 20 times larger than Ukraine’s tech exports, even though the Jewish state’s population remains four times smaller than Ukraine’s. Microsoft, Cisco, IBM, and Apple chose Israel as the site for their first development centers outside of the US. Ukraine, in comparison, remains a secondary subcontractor for these global giants.

Even so, Ukraine enjoys significant tech strengths. During the Soviet era, its educational system emphasized computer education and science. President Volodymyr Zelensky pitched digital Ukraine. He created the Ministry of Digital Transformation, which did road shows to present the country as a cutting-edge tech destination with abundant talent and low taxes.

When Russia invaded, Ukraine’s burgeoning tech sector counted an estimated 5,000 software companies. Since then, only about 2% have gone out of business. Of the country’s estimated 285,000 tech specialists, an estimated 50,000, mostly women, have emigrated, while 12% to 15% contribute to cyber defense.

Tech has helped lead Ukraine’s resistance. It has beat back Russian cyberattacks and adapted civilian drones for military use. The Ukrainian army has launched strike drone battalions.

The Ukrainian military has created apps that report enemy movements and identify potential targets. A good example is Delta, best described as “Google Maps for the military.” It provides real-time views of the battlefield by integrating data from a variety of sources, including aerial reconnaissance, satellite images, and drone footage.

The Diia app, initially conceived to provide tax and passport services, now allows citizens to upload reports and videos of Russian military activities. It sends news updates to people who find themselves cut off from traditional media.

Although Ukrainian security will remain tenuous once the fighting ends, the country hopes to turn this adversity into a competitive advantage, emulating Israel. Israel fuses military intelligence with technological innovation. The Jewish state’s Military Intelligence Unit 8200 has become a hub for research and development. Former Israeli servicemen and women leverage their expertise in cybersecurity, data storage, and mobile communications to create its “Startup Nation.”

Even as the country fights, Minister Fedorov vows to develop “a military tech ecosystem with a vibrant startup sector alongside a strong research and development component.” In April, he launched BRAVE1, funding private-sector developers to address defense issues. Brave1 streamlined the time and paperwork it takes to start contracting directly for the military from two years to a month and a half, says Oleksii Reznikov, Ukraine’s Defense Minister.

Ukraine’s IT sector has displayed extraordinary resilience to adversity. It has helped the country defend itself. But once the hostilities end, the big unanswered question is whether it can leverage this success to protect and rebuild the shattered country.

Also published here.