It surprises me very little that Gartner’s assesment on software spending in CEE/SEE is very negative. Eastern Europe will be the slowest emerging market region in terms of IT spending growth, come 2010. Total growth is expected to be 4% compared to 17,7% for Latin America.
Let’s have a brief look at Bulgaria for a moment.
It is a Gartner -”C” country with IT spending-peers such as the mighty high-tech powerhorses BiH, Macedonia, Montenegro, Albania and Kosovo. However, my observation is that the
overinvestment in IT
in the case of Bulgaria prior to the crisis was in fact second only to the housing boom in terms of growth and overall hype. Although of course generally positive (for the economy, workforce, etc.), structurally it now turns out to be weaker than originally thought and its
sustainability is seriously questioned.
Why? Because as Gartner points out, it was driven to a large extent by the financial services industry and cyclical demand rather than by organic expansion and export-development of the local IT companies. This is a very bold, stir-the-pot generalization and I know. But there is a serious
lack of strong local IT companies
(I know of less than a dozen such) with strong own product portfolios and stable cross-border client base. Let alone established brands.
Maybe now that the overly inflated IT-labor market has cooled down it is time for the bigger bulgarian IT companies to
rethink their strategy.
They already know that they rely too much on perpetually project-based, outsourcing contractual work. E.g. now that local banks aren’t spending they got a problem. While it is still okay to be an outsourcing company, they should probably figure out they need to better reinforce or establish their new own product lines to become
regionally and internationally competitive.
This is a banal and obvious statement and it’s easier said than done. I would argue however that it is now strategically more significant than ever before. How are companies going to achieve that? If you think about it, the only production factor at software houses are their people. From the
HR perspective,
now that skills retention is no longer the biggest concern (attrition rates have gone down dramatically) they need to strategically invest to further develop their own teams. Yes it would probably show on the bottom line and yes it is a recession. Yet they need to either get way better, or in the short-to-medium run get eaten by cheaper, better trained and well organized Indian or Brazilian outsourcing companies that, according to Gartner, will not see drops in demand for their services.
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