Belarus’ Potential of Becoming Europe’s “Silicon Valley” by 2015 AssessedIn the recent years the Belarusian ITO market has been developing at a fast pace, with a 24% - 28% growth rate on a year-on-year (YOY) basis (since 2009), 25% revenue increase, and market volume assessed at $384 million (as of 2011).
In the 2011 “Analysis of Belarus as an Offshoring Destination” Gartner concluded: “A strong education system and cost-competitive salaries, together with a reasonably strong workforce, have enabled Belarus to develop a mature IT outsourcing industry, supporting the country as an alternative destination for offshore activities, especially software development.”
While being one of the most controversial countries in Europe, oftentimes referred to as a “dictatorship”, over the past few years Belarus has managed to become one of the most powerful hotspots for the outsourced Research and Development (R&D) and IT, even though it is rarely mentioned in the official global industry ratings. Since 2005 Belarus has made and continues to make important steps towards becoming a true e-country with a well-developed ICT infrastructure, well-promoted ICT education, best-on-market IT resources and innovative ICT projects for both private and public sectors – steps that other officially recognized Central and Eastern European (CEE) hubs have not even planned yet.
The fact that many international giants such as Microsoft, IBM, Oracle, Siemens, T-Mobile, Alcatel, Coca-Cola, Philips, SAP as well as leading innovative niche players such as eBuddy and Steely Eye have entered the Belarusian ITO market in recent years proves Belarus’ ability to offer robust technology solutions and qualified resources comparable to the leading recognized ITO hubs.
Today’s Belarus ICT Talent pool is assessed at 25,000 specialists, which makes it one of the largest pools in the Central and Eastern European region (IT Strana, 2011). According to the Forbes Magazine, per capita income from IT services export in Belarus exceeds that of Russia and Ukraine (Park.By, 2012).
Belarus is ranked 56 by the ICT price basket, leaving behind such EU states as Bulgaria, Hungary, Slovakia, and Czech Republic and countries like Argentina, Brazil, India, China, and Mexico (SBBA, 2012). In the 2011 Ease-of-Doing-Business Rating Belarus has climbed up by 22 positions from 2010 (DoingBusiness.org, 2012). These and other indicators already put Belarus in an equal position with other CEE ITO leaders such as Ukraine, Hungary, Romania or Poland. The Belarusian government has ambitious goals of expanding the pool of ICT resources from today’s 25,000 up to 300,000 and increasing significantly the ICT readiness by 2015.
The questions that Ciklum intends to answer with this Review are:
1. Whether Belarus competitive advantages are strong enough to make these set goals feasible.
2. Whether or not the launched and/or planned initiatives are sufficient enough to turn Belarus into the Central and Eastern European “Silicon Valley” in the years to come.
Belarus' Unique Selling Points
When the Belarusian government initiated the first High-Tech Park in the mid-2000s, it launched a massive promo campaign under the slogan “Silicon Valley of Belarus” (Belarus Time, 2006). After the respective Decree “On Belarus High-Technology Park” had been signed by the President in 2005, the government announced its ambitious plans to gradually convert the entire country into the European “Silicon Valley”. With this and other initiatives to be discussed below in this Review Belarus has “opened a door” for foreign companies to come in and use its ITO potential.
Having analyzed the most up-to-date analytics related to Belarus ICT and ITO markets, Ciklum has determined four unique selling points (USPs) that are likely to help convert Belarus into the Europe’s “Silicon Valley” in the near future.
1. Geographical Location
Belarus has a favorable geographical location, especially for the European customers. It takes only 2 hours to get to Minsk from Paris, Frankfurt, Vienna, and less than 3 hours from Rome, London and Madrid by air (High-Tech Park, 2012).
Foreigners visiting Belarus require a visa (only the CIS countries’ residents are exempt from it): a single entry visa can be obtained right at the airport upon arrival, while a multiple entry visa (up to 12 months) should be obtained at the Belarus Embassy beforehand.
Back in the USSR times, Belarus was a hotspot for civil and military software development, robotics, artificial intellect, distributed computing networks and other high-tech solutions. As a result, the independent Belarus has inherited an excellent technical education system which is being strongly supported by the government. As of today, Belarus has 34 universities and higher degree institutions that graduate 16,000 ICT specialists annually (GoalEurope, 2012).
In an effort to modernize the technical education system and align educational programs with the real-life business needs, in 2010 the Belarusian government together with the state telecom companies initiated the ambitious project called “IT Country”. The project’s key goal is to boost the development of the Belarusian ICT market by creating a pool of over 300,000 IT specialists and generating around $7 billion in annual profit by 2015 (IT-Strana.By, 2012).
The following are some of the most robust initiatives under the “IT Country” Project aimed at improving and fostering ICT education among the Belarusian youth.
1). To create a vast pool of ICT resources, the project initiators are attracting more students and graduates to get / improve the required ICT skills by offering innovative short-term training and re-training programs (one to eight weeks in duration) as well as longer-term modular programs. They also foster competition among different higher degree institutions to ensure a better quality of the obtained expertise. Another step planned by the “IT Country” project is to re-train people with engineering and accounting backgrounds to gain the most demanded technology skills. This initiative is supposed to add value to other projects (listed below) aimed to provide a sufficient workforce supply level for the future ITO industry (Lenta.Ru, 2012).
2). A huge milestone achieved within the “IT Country” Project is the establishment of the IT Academy, an international training and R&D center. The Center determines the future strategy of the ICT market development, requirements for knowledge levels and skills, and also ensures an appropriate knowledge exchange among national and foreign students and certified specialists. Today, the IT Academy is the only educational center in Belarus that prepares business analysts for ICT sphere (Park.By, 2012).
3). The prospective milestone to be met in the near future within the “IT Country” Project is the establishment of the IT Test Center that will develop special tests and metrics to better determine IT specialists’ levels of qualification as well as solutions to effectively re-direct them to innovative areas and technologies.
4). In October 2011 the Belarusian Ministry of Education and QAI Global Institute (Orlando, USA), the world’s leading provider of express IT training programs, joined forces to create conditions for introduction and implementation of the leading international ICT training programs and certifications. The agreement signed by both parties envisions joint seminars and other educational events dedicated to software development project management, QA and testing, business analysis, processes’ maturity, competence assessment, teamwork and collaboration, and other important topics (IT-TUT.By, 2012).
It is expected that these and other initiatives will help promote ICT education among the Belarusian youth and significantly increase the supply of qualified IT resources for both domestic ICT and ITO industries in the years to come.
3. Technology Parks
Belarus is currently home to two Technology Parks: the High-Tech Park and the Infopark. They both aim to provide a solid legislative, administrative and economic base for the future development of the national ICT and IT Outsourcing industries
3.1. Belarus’ High-Tech Park (HTP) is a growing hub for both domestic and international IT and software companies that was founded in 2005 after President Lukashenko had signed a respective Decree. HTP was established to:
- Foster development of modern software and other ICT solutions in order to increase the national economic competitiveness on the global scale,
- Create favorable conditions to attract foreign investments and increase the volume of the exported technology solutions, and
- Improve innovation and entrepreneurship policy and regulation (Korrespondent, 2005)
Currently, HTP offers economic incentives to its 109 members such as exemption from corporate taxes and customs duties and a fixed 9% income tax for all employees until 2020. As a result of this, international giants such as Microsoft, Cisco Systems, Honeywell and other Fortune 500 and 100 companies entered HTP in 2010 and 2011. Today, 50% of all HTP members are companies with foreign capital. In 2011 the HTP residents exported $225 million worth of products and services, which accounted for 85% of the total HTP output (Centre for eGovernance Development, 2011). The HTP software production volume increased by 199% between January and September 2011, compared to the same period in 2010. The HTP resident companies, employing 12,000 people (as of January 1,2012), execute orders for customers from 52 countries worldwide, including Russia, the United States, Germany, the United Kingdom, Czech Republic and others . According to the HTP statistics (BELTA, 2011), of 80% of the exported software produced in the Park, 45% account for North America, 30% account for Western European countries, and 20% - for Russia and CIS countries.
Belarus’ HTP is an important contributor to the development and implementation of the “IT Country” Project. It cooperates actively with all of the major higher education institutions, supports 30 research labs all over Belarus, and promotes ICT professions among primary school students.
3.2. The Infopark is Belarus’ Scientific and Technological Association that stimulates and fosters cooperation between local IT business and Universities, interacts with permanent government commissions to improve regulations in the national IT sphere, and helps connect Belarusian IT companies with prospective customers both within and outside Belarus.
Unlike the High-Tech Park that mainly represents the interests of foreign IT companies doing business in Belarus, the Infopark focuses more on supporting the domestic ICT business and ensures implementation of the governmental innovation programs and initiatives.
Some of the Infopark projects include:
- Computer Programs as an Object of Intellectual Property (COMPIS) is a series of events such as international conferences, seminars, and workshops focused on practical issues of software development and maintenance as well as procurement, licensing, and accounting.
- Software Engineering Forum (SEF.BY) aims to connect Belarusian IT professionals with their foreign peers and provide conditions for effective knowledge exchange, timely identification and resolution of the most critical software engineering problems, and re-engineering of today’s business processes in the IT.
-Software Engineering Forum to Students (SEF.BY to Students) aims to provide students with the factual and useful information about IT professions, trends, technologies, and training options. In general, the Forum helps promote ICT education among school and college graduates to ensure an adequate supply level in the future.
4. Competence & Cost of IT Resources
In 2010 Belarus ranked 13th in the Global Services List of Top 20 Locations for ITO and High-Tech Services by the number of developers employed by the ITO sector (IT-TUT.By, 2011).
Belarus is rich in all of the mainstream technologies as well as some rare ones, such as SAP and Lotus. According to Ilya Yuriev, Managing Director of SAP Belarus, “SAP has a strong position on the Belarusian market and continues to see benefits from the investments here. There is a strong culture of IT development and innovation and that is the most valuable asset a company can have in the IT business.” (ITO News, 2012).
The qualification of the Belarusian IT talent is undisputable and globally recognized. According to the 2012 Bench Games, an international online intellectual competition conducted by Brainbench (2012), one of the world’s leading providers of skills assessment solutions, Belarus ranks 6th out of 50 countries by the number of the most certified specialists leaving behind such Western European countries as the United Kingdom, Germany, Sweden and Norway, and it ranks 4th out of 50 countries by the number of the most Master-Level certified specialists.
Overall, Belarus ranks 4th globally (together with India) by the number of IT certificates granted in 2012, following Ukraine, the United States and Russia.
Employment in the ITO sector also offers a significantly lucrative salary for the ICT specialists in Belarus, the average being around 1,400 USD (while the overall average monthly salary in Belarus is only 330 USD, as est. in 2011). Though this is high for Belarus, it is still three or four times lower than in Western Europe or the USA.
Salary-wise, the cost of the ICT resources depends on a seniority level and technology skills. Android and iPhone developers are some of the most demanded ones nowadays due to an increasing number of the outsourced mobile projects, and their salary can reach up to $2,000 USD per month or even more. The next in demand are JAVA developers. The ones with more than 2 years of experience cost nearly 1,800 USD per month, while senior developers (more than 6 years of experience) may cost up to 2,300 USD per month. The experienced (over 3 years) .Net and PHP developers cost 1,600-1,700 USD per month, which is around 75% less than in Western Europe.
Several years ago Belarus faced a massive brain drain in the ICT sphere. However, today’s governmental support of the industry, existence of the High-Tech Park, and other initiatives help stop the brain drain and motivate IT specialists to work within their home country. According to Igor Mamonenko, MD of Belhard Group, an obvious trend is currently observed when a lot of former IT migrants return back to Belarus (BEL.BIZ, 2012). It is just much more convenient for them to live close to their families, relatives and friends and work for international companies where they can earn almost as much as in Russia or the United States, but pay fewer taxes and have less administrative hassle related to migration and work permits.
The goal of this Review was to assess the factual ability of Belarus to reach its declared goal of becoming Europe’s “Silicon Valley” by 2015.
The analysis of the ICT initiatives launched in the period from 2005 till present shows the country’s vivid progress in terms of facilitation of doing business and attraction of foreign investments. These achievements have already led to the overall ITO market growth and increase in software export volumes, modification of the ICT infrastructure, and better alignment of technical education with the real-world business needs. This progress became possible due to the fact that Belarus managed to timely identify its competitive advantages and develop effective programs to strengthen them.
Among these the key advantages are:
- Favorable geographical location for the European customers and a GMT+2 time zone allowing a partial overlap of Belarusian and American working hours.
- Well preserved strong technical education base inherited from the times when Belarus was a “Brain Center” of the whole Soviet Union.
- Two Technology Parks that provide innovative R&D platforms for companies from over 50 countries, accumulate the best-on-market IT talent and ensure successful implementation of the state’s ICT initiatives.
- High quality and affordable cost of IT resources who continuously gain global recognition by such opinion leaders as Gartner, Brainbench, Forbes and other expert names.
Considering the progress it has made in only 7 years, the country’s general goal of becoming Europe’s “Silicon Valley” by 2015 seems quite feasible.
Ciklum is a Danish IT outsourcing company specializing in nearshore software development by establishing and servicing clients’ own development teams and/or centres in Eastern Europe, in Ukraine and Belarus. The environment of services and knowledge sharing within the company helps clients to market quickly and with less risk and minimal investment.
Established in 2002, Ciklum employs nearly 2,000 IT specialists with more than 170 global clients’ own software development teams. Ciklum has six development offices in Ukraine, one in Belarus, and two in Pakistan, as well as representative offices in Denmark, Sweden, United Kingdom, Switzerland, Germany and the Netherlands. Ciklum is recognized as CeBIT 2010 Top 20 innovative company delivering services/products for small and medium sized companies, and named the 2010 and 2011 Top 100 global services provider. Ciklum is rated Best Larger IT Employer 2010 & 2011 in Ukraine by DOU, the Ukrainian Community of Software Developers.
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