ECONOMY OF FUTURE
Bulgaria's software industry has potential for ever higher results
Two clashing viewpoints dominate the discussion on contemporary Bulgaria economy. The optimistic one maintains that the country is doing well and cites as evidence the growth of the average wages, the low state debt and the low unemployment rates. The pessimistic one focuses on the continuing emigration, the drop in the direct foreign investments, and the last places Bulgaria takes in regard to income and standard of living within the EU.
Bulgaria's software industry definitely provides reasons for optimism. In it, growth is visible, development is noticeable and perspectives are positive.
According to the Bulgarian Association of Software Companies, in each year of the period between 2012 and 2017 software companies in the country registered a two-digit revenue growth. Last year software industry made almost 77 percent of export of telecommunication, computer and informational services, and 10 percent of all services that Bulgaria exports. In 2017 it made 2.4 percent of this country's GDP, double in comparison to 2011. Between 2013 and 2016, software companies increased the taxes they pay with 45 percent, while the national average was 20 percent. In the sector are employed 22,700 people, and the salaries in the past 4 years have increased with over 30 percent. Equalisation of purchase power shows that the wage of an IT specialist in Bulgaria provides better standard of living in comparison with the wage of a similar specialist in the UK. According to prognoses, in 2020 software industry will make 3 percent of Bulgaria's GDP. Over 90 percent of the companies in the sector project that their revenue will grow with 10 percent.
Unlike other sectors in Bulgarian economy, the IT field doesn't have a problem with attraction of foreign investments. Some of the biggest names on the world scene are already on the Bulgarian market, competing with established local enterprises.
Currently, outsourcing remains a major motor in Bulgaria's IT industry. The country has old traditions in this field and established itself on the market in the 2000s, managing high competition of recognised destinations such as India. In the past few years, however, the profile of Bulgaria's direct competitors has changed: these are already the countries in Central and Eastern Europe. For now, however, Bulgaria succeeds in offering attractive opportunities for outsourcing.
"When talking about Bulgaria's outsourcing advantages over its neighbours in the SEE region, we should mention of course the quality of its workforce – over 40% have a higher education degree and 50% speak and use a foreign language fluently, according to the Bulgarian National Statistics Institute," says Mitko Mitev, CEO of software testing company Quality House (Sofia, 1 Balsha St, floor 3, www.qualityhouse.com). "Employees are motivated and eager to prove themselves as equal to their Western colleagues, and wages, while relatively low compared to other European countries, still provide for a comfortable life in Bulgaria. Not only is it part of the EU, but it's also important that the country's economy is very stable economically and politically – GDP numbers are growing every year, inflation is low, its currency is tied to the euro. And let's not forget one of the lowest flat corporate tax rates in Europe – only 10%."
The advantages of Bulgaria's labour force can hardly be disputed. The history of the success of any IT company in the country, be it a Bulgarian or a foreign one, steps on the quality of the human capital.
"We really pride ourselves with the fact, that while not founded originally in Bulgaria, our Bulgarian office rapidly grew to an extent that we recently moved the headquarters to Sofia," says Marin Marinov, Sales Director of the American independent consulting and software development company Do IT Wise (Sofia, 89 Aleksandar Malinov Blvd, www.doitwise.com). "In the global IT market, Bulgaria is mainly seen as an outsourcing destination with the main advantages of being closer to the target markets than other destinations, while still providing cheaper cost of labor to the skillset available. We believe that we can deliver more value-added products and services than outsourcing out of Bulgaria, so we took a different path: we have developed a combination of high impact transformational consulting services and software products we develop, sell and deliver out of Bulgaria. This strategy paid off and today we are proud to say that we have helped more than 50 companies out of the Fortune 500 list in their digital transformation initiatives and the success we have is mainly because of the great people we attract to our team."
Bulgaria's labour market, however, has also a dark side. The country's population ages and decreases, and this significantly reduces the pool of free talents not only in the IT industry, but also in a number of professions and activities which develop as auxiliary ones for the sector. Finding qualified workforce is a problem that every company on the market experiences.
"The biggest challenges in Bulgarian software industry is that we need more and better qualified developers, as well as more critical non-technical management people in marketing, business development & sales, finance, R&D and HR," says Krum Hadjigeorgiev, CEO of Melon (www.melontech.com), a Bulgarian software development company. "Together with the rest of the software community, Melon is systematically working to promote, build and nurture more talent, to share knowledge and best practices and to create great examples for the rest to get engaged and build upon."
Contemporary IT specialists have high requirements to the companies in which they work. The adequate wages are only a part of those. Good environment, working on interesting and challenging projects, opportunities for development, social policies in the company are all crucial in attracting talents. The established names on the market pay special attention to achieve an optimal combination of all those factors.
"As a startup company we rely on everyone's knowledge, good judgement and dedication. Hiring the best people is critical for us and there is a lot of competition in the IT labor market right now. I am happy that all hires in the last year in the Engineering Department have been referrals by existing employees. It means a lot that people recommend Taulia to their friends as a good place to work and grow," says Yana Parvanova, an Engineering Manager at Taulia Bulgaria (Sofia, 115G Tsarigradsko Shose Blvd, Level 8E, www.taulia.com). "The concept of early payments is not a new one. Taulia excels in making them reliable and hassle-free. We also provide a great deal of flexibility for both buyers and suppliers and help them tailor our services to achieve their goals. Unlike traditional banks we are small and agile. We can afford experimenting with technology and business models to better capture market's needs and trends."
One of the ways in which Bulgaria's IT industry tries to find the right talents is by nurturing them itself. A number of companies have opened the so-called academies in which they teach young and not that young people, help them to change their qualification and to find work.
Other companies focus on the potential of their present staff, offering opportunities to talented employees to develop – hierarchically, in new fields of competence, in development of innovative products and services with high potential for implementation and added value not only in the present, but also in the short and mid-term future.
Bulgarian IT industry is facing challenges that go way beyond lack of labour force. The industry is undergoing a transformation on a global level and technologies such as cloud services, AI, Internet of Things, robotisation find a widening range of implementation in the corporate and the public sector, as well as in the life of the end consumer. To meet these changes, Bulgarian IT industry cannot rely solely to outsourcing. It should adapt towards innovations and investment in highly qualified specialists and products with high added value.
How is Bulgarian market dealing with this challenge?
Development of products with high added value is a road taken by those companies who nurture the ambition not to follow the international trends, but themselves to define the evolution of global IT industry.
"Currently, Bulgarian IT market is divided in three segments," says Radomir Milanov, CEO of SAP Bulgaria (www.sap.com). "Outsourcing is the largest, based on advantages such as low labour costs and labour force with good mastership of foreign languages, plus a convenient time zone. This part of the sector generates a significant amount of the GDP. However, I think that it will soon become redundant, as there is strong competition from other parts in the world in regards of costs. Moreover, outsourcing doesn't really help the development of Bulgarian companies. Importers and consumers of products make the second tier of Bulgaria's IT sector. They don't bring significant added value here, but they are nevertheless vital for the business. The third group, where SAP is positioned, is the so-called pilgrims. These are companies that are innovative, adequate, knowledgeable and eager to apply their expertise in the business environment. SAP Bulgaria introduces to the country a rich portfolio of products and know-how, tried and tested on the international market. This makes us able to offer a solution to any reasonable need or desire a client might have, providing a working business model for great customer satisfaction. We, at SAP Bulgaria, believe that the country has a potential for development in this respect, in the 4.0 technological revolution."
Methodia, an IT provider of business-as-a-service (BaaS) and software-as-a-service (SaaS) solutions for utilities, started its operations in 2008 (www.methodia.com). Today, it is among the Top 40 software companies in the country. "A company can progress thanks to its team," says Tsveti Kyoseva, CEO. "At Methodia we are proud of our incredible and united team of professionals. Every day we share valuable experience and knowledge, growing together in the challenges we overcome. This makes us even more confident and ready to succeed."
"As somebody who helps companies to adopt innovations, I can tell you – it is never enough, especially on a global scale," says Nassim Bekkat, Innovations Manager at mismash io, a company for Big Data real-time analysis (Sofia, 30 Yanko Sakazov Blvd, www.mishmash.io). "The good thing is that the Bulgarian IT industry does have a position and recognition, globally. I've had several times people from the UK, US, anywhere, who come to me after a presentation and say: 'Bulgarians? We had a great developer from Bulgaria. We want to work with you,' like that, directly, no questions asked. Which is great! And I learned about how good are the various high schools of mathematics from... Americans. Which is great too, but I think it also shows another side – it's Americans showing off our achievements, not us. I think we have to be more open, talking more about our achievements and even show off more if needed. Business has to communicate, and IT has to communicate globally."
Yet there are still fields where Bulgarian universities, developers and industry should pay more attention and invest more capacity, like robotisation.
"The question of robotisation in Bulgaria and its perspectives for development is polyvalent at a number of levels," say Georgi Arabadziev and Georgi Georgiev, founders of Giga Automata (Sofia, 22 Parva Balgarska Armiya Blvd, www.gigaautomata.com), a company for robot development. "First, there is lack of clear focus in the educational system on the real needs of the market. At the moment the whole industry talks about and plans robotisation, but this is yet to result in a focus in the universities on that. The situation is similar in regards to manufacturers and developers. In the country there are few manufacturers of automated systems and only two companies produce robots, but for specialised tasks. The traditions in robotics, set academically by the Technical University in Sofia and industrially by Beroe Factory in Stara Zagora, are almost completely obliterated."
Bulgarian companies also avoid investing in robotisation. "Robot implementation in Bulgarian industry is more common among international companies with branches here. A handful of Bulgarian companies invest in robotisation," say Georgi Arabadziev and Georgi Georgiev. "On the one hand this is due to the low labour costs, and on the other, due to the lack of long-term planning." However, this doesn't mean that the trend won't improve. "We created Animoto, an accessible and easy-to-use robot. Accessible for the Bulgarian market," add Georgi Arabadziev and Georgi Georgiev. "Giga Automata also works in close cooperation with Bulgarian academical institutions for implementation of innovative approaches and new information in the education of new Bulgarian engineers. Giga Automata also works intensively with branch organisations presenting accessible solutions for automatisation that will result in improved competitiveness. Thus Animoto provides an opportunity for higher productivity, competitiveness and being up-to-date," add the inventors.
The importance of modern IT industry in Bulgaria transcends the economy. It also has a social impact.
Contemporary IT companies in Bulgaria play a key role on the local labour market. They provide well-paid positions for intelligent and educated people, thus motivating them to stay in the country and to develop further in it.
"75% of our employees are under 25 which is the generational strata with the highest unemployment rate across the EU," says Borislav Borisov, Chief Operating Officer at UltraPlay, a company for online betting solutions (www.ultraplay.co). "UltraPlay creates opportunities for employment which are unique on the Bulgarian labour market. Following our vision to be the world's leading eSports betting data and platform provider, we are allowing eSports and gaming enthusiasts to turn their hobby into a career by joining our team of talented and motivated professionals. What we are creating is not simply jobs. We are creating careers, by providing development paths both vertically (into management) and horizontally into other teams (QA, project management, development)."
The looming presence of Internet in the life of Bulgarians is an opportunity, but also a risk – particularly for children and teenagers. Some socially-engaged Bulgarian IT companies pay special attention to dealing with this problem. "Every week, together with the National Police and the Bulgarian Safer Internet Center, we visit schools all over Bulgaria where we teach the kids how to protect themselves online," says Deyan Blagoev, Business Development Manager at the software company Bulbera (Sofia, 85 Aleksandar Malinov Blvd, floor 3, office 7, www.bulbera.com). The company also developed the platform Protect Your Kid (www.protectyourkid.bg) that allows parents to know in any moment where their child is and what they are doing in the Internet. The platform is available in 9 languages and brought Bulbera an award for Innovative Company 2017 and a pre-selection for the UN's World Summit Awards.
The various trends and challenges which Bulgaria's software industry faces show one: with talent, confidence and innovative thinking the country has not only potential to keep its positions on the international market, but also to become a leader in Europe.
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