The modern telecommunications market is undergoing a profound transformation. Telecom operators are gradually moving away from monolithic systems toward platform-based business models. According to analysis by Kearney and Oliver Wyman, telecom players are actively restructuring their value chains, which is driving demand for new, scalable software solutions. For owners, CEOs, and CFOs of Ukrainian IT companies, this presents a strategic challenge: whether to continue scaling exclusively through service contracts or to invest in the creation and licensing of proprietary intellectual property (IP).
The service business is an excellent stage for accumulating capital and deep industrial expertise. However, transitioning to proprietary IP is a fundamental decision that allows a company to break the linear dependency between the number of engineers on staff and the volume of foreign currency revenue, thereby maximizing export margins.
The Time & Material trap: why linear models limit capitalization
Many Ukrainian technology companies have historically built their businesses on selling engineering time via the Time & Material (T&M) model. In this paradigm, financial planning is linear: to significantly increase revenue, management must proportionally expand the development team. This creates constant pressure on operating profitability due to rising direct costs for recruitment, staff retention, and administrative management.
From an investment perspective, service companies are valued at lower EBITDA multiples because their business scales linearly with personnel costs, and revenue depends directly on the volume of services provided in a given period. In contrast, IP models (product or hybrid), which generate recurring revenue from licensing, receive significantly higher valuations. Owning proprietary software turns a product into a transferable asset capable of generating exponential profit.
Unit economics of IP versus services: where export margins hide
An analysis of unit economics clearly demonstrates the difference between the two models. The gross margin of a classic service contract is limited by a high share of labor costs. Conversely, in a product model where a developed core (such as a billing system or softswitch) is licensed, margins increase significantly. The primary costs are concentrated in the R&D phase, while the cost of delivering a license to each subsequent client is minimal.
An important driver for the capitalization of telecom products is their ability to solve expensive problems for operators. For example, according to the CFCA Global Fraud Loss Survey 2025, global losses from telecommunications fraud are estimated at approximately $41.82 billion. Operators are actively seeking ready-made, specialized solutions for network protection and billing. Using niche IP products allows for measurable results—for instance, reducing operational losses by 27.7% or increasing traffic routing efficiency by 53.7%. For the client, purchasing a ready-made, proven product is far more cost-effective than lengthy custom development from scratch.
Architectural standardization: moving to API-first and TM Forum ODA
For a Ukrainian telecom product to successfully compete in the global market, it must meet current industry standards. Modern telecommunications architecture is moving away from monolithic BSS/OSS (Business/Operations Support Systems) in favor of component-based structures.
The industry standard enabling this approach is the Open Digital Architecture (ODA) from the TM Forum consortium. ODA involves a modular architecture where components interact via standardized open APIs. For technology companies, this means their solutions must be developed as a set of independent services capable of seamless integration into an operator's IT landscape. Compliance with ODA and API-first principles lowers the barrier to entry for the client, accelerates the sales cycle, and minimizes custom integration costs.
Market practice: how specialized IP solves operator pain points
A real-world example of the product approach in telecom is the creation of carrier-grade VoIP platforms. Instead of providing outstaffing services for fragmented solutions, a company can license a ready-made product. For example, specialized IP in the form of the DooxSwitch platform focuses on solving specific tasks: LCR (Least Cost Routing), CDR processing, and real-time voice and IoT/M2M traffic billing. This positioning ensures stable license revenue that does not depend on the number of engineers involved in support.
This approach is part of a broader technological strategy applied by members of the Intecracy Group alliance (an alliance of independent companies linked by partner agreements and share exchanges). For the development of complex enterprise systems, portals, and registries, the low-code platform UnityBase is used (a joint development of Intecracy Group companies, where InBase acts as the key developer). By using a unified domain metadata model, automatic REST API generation, and built-in access control mechanisms (RBAC/RLS), companies can quickly create and scale proprietary software with a high level of security. Having such a platform foundation allows teams to focus on product business logic rather than basic architecture.
Transition strategy: from service contracts to a product model
A sudden transition from service to product involves risks, as developing proprietary IP requires investment before the first license revenues are realized. A hybrid path is optimal.
First, the company conducts an audit of existing developments, identifying recurring components and architectural patterns created during service projects (without violating NDAs or existing client rights). The next step is to unify these modules into an independent core. Simultaneously, the contract structure changes: instead of pure T&M, the company begins offering clients a license for the ready-made core (its IP) plus services for its integration and customization. This allows for a gradual shift of revenue into a recurring plane while maintaining current cash flow from services to fund further R&D.
| Analysis criterion | Service model (Time & Material) | Product model (Proprietary IP) |
|---|---|---|
| Revenue scalability | Linear (depends on the number of personnel) | Exponential (scales with transaction/user volume) |
| Business valuation | Based on lower EBITDA multiples | Based on higher multiples due to recurring revenue |
| Architectural standards | Custom development per individual requirements | Compliance with international standards (e.g., TM Forum ODA, API-first) |
| Capitalization degree | Low level of transferable assets | Creation of IP that builds long-term capitalization |
FAQ
How does the transition to a product model affect an IT company's valuation?
Companies that own proprietary IP and generate recurring revenue from software licensing typically receive significantly higher EBITDA multiples during valuation compared to service (outsourcing) companies, whose revenue scales linearly with personnel costs.
What is TM Forum ODA and why is it important for exporting telecom products?
The Open Digital Architecture (ODA) from TM Forum is an industry standard that defines the transition from monolithic BSS/OSS systems to a modular, component-based architecture based on open APIs (API-first). Compliance with this standard is a critical condition for integrating a product into the infrastructure of global telecom operators.
How can risks be reduced during the transition from T&M to proprietary IP licensing?
The optimal approach is a hybrid model where the company maintains service contracts to ensure cash flow while gradually isolating recurring components into proprietary products. New clients are offered a license for the product's core along with customization and implementation services.