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Swiss Organisation for Facilitating Investments (SOFI) Experience of Swiss SME‘s investing in transition countries in Eastern Europe and Central Asia in the IT sector. Missing the train ?. Subsegments of the information and communications technology market. ICT. Telecommunication. IT.

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Swiss Organisation for Facilitating Investments (SOFI)

Experience of Swiss SME‘s investing in transition countries in Eastern Europe and Central Asia in the IT sector

Swiss Organisation for Facilitating Investments


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Missing the train ?

Swiss Organisation for Facilitating Investments


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Subsegments of the information and communications technology market

ICT

Telecommunication

IT

Software

IT Services

Hardware

System

Software

Application

Software

Source: DB Research 2005

Swiss Organisation for Facilitating Investments


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Situation in the IT Sector in Eastern Europe marketToday..... and tomorrow

With 1 % Market Share of the global Software Market

Eastern Europe is a minor player today

But.........

Comparing the SW product sales, the growth rate forecasts for 2008 of Eastern Europe are impressive with

Germany conceding market share to Eastern Europe

Source: EITO, 2005

Still......

Due to its small size Eastern Europe‘s IT sector‘s opportunities lie within the niche segments

Absolute in

EUR bn (2008)

270

4

125

21

Source: DB Research, 2005

Swiss Organisation for Facilitating Investments


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Niche specialities by country market

…where lie EE / CA Niche Specialities ?

Domain of Specialization

Country

Canada

China

India

Ireland

Israel

Russia

SEE / CA Countries

Application Outsourcing

BPO (Business Process Outsourcing)

Contact Centres

Embedded Software

Hardware Services

Various

Packaged Applications

Product Development

High-End Software Development

Learning Systems

High-End Software Engineering

Software Programming

Application Outsourcing

Source: Gartner 2004

Swiss Organisation for Facilitating Investments


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Preferred IT-Offshoring Locations for West European Companies (according an opinion poll among W.E. companies of 2003)

Source: A.T. Kearney, 2003

Swiss Organisation for Facilitating Investments


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Where lie the opportunities for the EE / CA Region as Companies IT Services provider for Western European Countries ?

Nearshoring Advantages like....

  • Geographical proximity simplifies process co-ordination

  • Due to similar time zones easier communication between service provider and customer

  • More possibilities for personal meetings due to short travel distances

  • Cultural Closeness between West and Eastern Europe

  • Experts not only with English, but also with German skills

The Newcomers-Advantages like.....

  • As newcomers with little Information Technological history the entry on a very high and technologically progressed level is possible (no bad history)

The Specific EE Advantages

  • Big pool of IT-Experts in the Region

  • Numerous former Balkan war refugees acquired sector specific know how and the understanding of the cultural dfferences during their stay in Western Europe and can adopt now a bridgehead function between the service providers and the western customers

  • Gradual adaptation to EU IT / Telecom standards

Swiss Organisation for Facilitating Investments


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What requirements of W.E. companies are matched by EE / CA IT sectors‘ offer - Where are the gaps ?

DRIVER

WESTERN REQUIREMENTS

EE / CA OFFERS

Metamorphosis

in the EuropeanIT services market withoutsourcing

as a major

strategy for

increasing

competitive-

ness

Cost reduction

Avoidance of capacity

Shortage

Access to new Markets

High Quality stable

Location

-Very attractive

Salaries

- Experience with Out-

sourcing procedures

-High Productivity

-A large pool of qualified

IT-Experts educated at local

technical universities

-Compared to Asian

customer market

rather small potential

- Robust infrastructure

-Politcal and economicalstability and reliability

-Legal environment

-Government Support

-IPP (Intellectual Property Protection)

Swiss Organisation for Facilitating Investments


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What framework must be created for the attraction IT sectors‘ offer - Where are the gaps ?of the IT sector ?

  • Basic & IT Infrastructure

  • Free regime for Internet Access and Services (leads to a dynamic expansion of Internet Service Providers and thus to a great reduction of the price (Death of Distance)

  • Stable and reliable communication infrastructures (fixed and mobile lines and internet) - further liberalization of the communication market

  • Strong academic environment with universities and institutes willing to co-operate with the economy and to educate staff according economy's need

  • Support IT-Clusters

  • Strong IT Business Community involving Corporate Customers, Multinational Investors, High Tech Universities and the Government

  • Governments considering ICT as a priority sector, as ICT Investments are stimulating investments in other fields

  • Strong support of the ICT Investment process by the Government

Swiss Organisation for Facilitating Investments


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Lessons learnt from SOFI‘s projects investing in the South East Europe / CIS IT sector

  • Strong Co-operation / Partnership with local companies

  • to assure local market access (e.g assure critical size)

  • to mediate between western needs and expectations and the local approaches for succeeding in the outsourcing business

  • Combined “On-site / Nearshore” Business model for the outsourcing business

  • On-site operation for the daily interaction with the western client

  • Nearshore Software Development Center to ensure quality development and cost cutting

  • Intercultural Management Approach

  • Leave the offshore office enough room to realize own plans (according local market needs) => High involvement of the local management

  • Usually the planned project time horizons are strongly transgressed => Sufficient liquidity reserves

  • Deal openly with intercultural differences and aim sincerely at a joint “Corporate Culture”

  • Physical exchange (staff rotation) in both directions

  • Appropriate and sufficient technical means for the interaction and the information exchange (on-site /nearshore)

Swiss Organisation for Facilitating Investments


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