Eastern Europe outsourcing: our latest posts on GoalEurope.com

I haven’t been updating this blog, but it sure needs some refreshing, since we have been publishing quite a bit of relevant content on GoalEurope.com domain.

software development eastern europe, nearshore outsourcingHere are a few recent posts. Today we published IT salaries of Java developers in Russia. Yesterday we covered Nizhny Novgorod as a nearshore outsourcing destination.

Earlier this month NCR has announced establishing a software development center in Serbia, and we talked about government incentives a foreign investor might get by creating IT jobs in the country.

Visit GoalEurope.com for daily news about outsourcing in eastern Europe

The main website of GoalEurope has all our latest content in an easy-to-search format. It is updated daily, so please visit GoalEurope, follow us on Twitter (@goaleurope, @natashastarkell), and Facebook.

TechCrunch Day Brings Us the Winner … and the Superior Also-Rans

Now that I would like to write more for TechCrunch, I face a problem. I have the articles written, ready and sent for a review, but the editor has fallen silent, and news are getting stale.

So I now have to double my writing efforts just to get some points across. So yes, the winner is MySugr, the only Austrian startup at the Startup Week Vienna competition. Compared to all other companies who are set to increase productivity here, profitability there, these guys aim big! They are to increase the lifespan of diabetes patients (55 million in Europe alone) by up to 8 years. The team achieves that by creating a simple way of tracking the level of sugar and physical exercises for diabetics.

Off they go to the Silicon Valley then, to network, raise funding and spend the Austrian Media award of 30 000 Euros they have received at the Startup Week.

The guys who did not win, but were highly praised by the judges are MyKoob and Pocketguide.

Pocketguide is actually a great tool, it gives you directions to the beginning of your tours, navigates you throughout the tour while offering voice instructions. Once you’ve completed your tour, taken pictures and videos, those too are integrated into the 3D map. Here is a demo video.

PocketGuide promo from Pocketguide on Vimeo.

The idea came to the founder of the company Martin Retai as he was … Continue reading

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Serious Tech Talk: Ukrainian Hypertection Disrupts Virtualization Security

Dennis Turpitka, the founder of Ukrainian software development company Apriorit, is looking for beta-testers for his new venture, Hypertection. Hypertection is an antivirus software application for virtual environments, which dramatically increases the security of virtual machines whilst reducing the cost of antivirus licenses by an order of magnitude. Here is how:

Hypertection is installed not on the operating system level of the virtual machine, but on a lower level closer to that of software. This level is called hypervisor, and is the key element of any virtual system. In this way, the antivirus software for the virtual environment is hidden from the viruses and can effectively neutralize them.

If this makes you scratch your head, keep reading.

As servers become more and more powerful, virtualization technology is on the rise. With the help of virtualization applications such as … Continue reading

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Rejoice! 7 out of 10 Finalists at the Startup Week Vienna Come from Eastern Europe

startup eastern europe, innovation eastern europe, venture capital eastern europe

CEE Panel at Startup Week Vienna 2011

Today is the first day at the Startup Week in Vienna, and here is my alas an incomplete report.

It is hard to get through the crowd of participants at the Startup Week Vienna, this is how full it is. During the presentations this morning there was no spare seats and many attendants had to stand at the back of the room.

The event takes place at the heart of Vienna, in a beautiful building of Haus der Industrie. In fact the stateliness of this palace is hardly suitable for tech entrepreneurs who looked much better against a background of a scrapyard at the European Pirate Summit in Cologne. Not that I think that a place for entrepreneurs is on the scrapyard, but the opulence of Haus Der Industrie is almost overwhelming.

innovation eastern europe, startup, venture capital

My objectives during these three days is to meet Eastern European entrepreneurs and to connect with tech investors in the region.

Here is a quick summary… Continue reading

Slovak Piano Media Raises 300,000 Euros to Accelerate European Growth

startup slovakia, startup eastern europe, innovation eastern europe, venture capital slovakia

Piano Media, online subscription-based media content payment system, announced last week that it has received €300,000 in Series-A funding from Jan Jenča and Ivan Štefunko at MONOGRAM Ventures, bringing Piano’s total market valuation of the company to nearly 1 million Euros. This investment round will be used primarily to expand into new European markets and solidify Piano’s Slovak market share.

Piano’s initial project is in Slovakia where nine publishers have agreed to put their online content behind its pay-wall. “Piano has proven remarkably successful for participating publishers. We have increased their online subscription revenue while having only a small impact on readership ” said Tomas Bella, co-founder and Chief Executive of Piano. “This first round of funding enables us to examine market possibilities and expand beyond Slovakia’s borders while we strengthen our position on the Slovak market.”

Piano netted over €40,000 in its first month of operations in Slovakia and has experienced steady active subscriber growth since it launched in May, 2011. Nine major Slovak publishers participate in Piano’s common payment system offering more than 44 different sites and services.

Here is an older article by WSJ Emerging Europe on Piano Media plans earlier this year.

Recommendation Engine Surfingbird Raises $2.5 Million

innovation russia, startup russia, venture capital russia, innovation eastern europe, startup eastern europe, venture investment eastern europe

Russian recommendation engine Surfingbird announced that it has raised $2.5 million from Russian and French business angels.

Surfingbird allows users to rate websites, add links and rate existing links available in the system. Based on the user’s preferences, the tool, which is powered by complex algorithms, makes recommendations on content that might be of interest to the user.

The founders, the CEO of the company Sergey Shalaev and its CTO Dmitry Shalashov  compare the company with Stumbleupon in terms of value proposition although the engine behind it is unique.

The company was established in 2011 when the founders discovered that such a service was not available in Russia and many other European countries.

The founders have collective working experience at Yandex, Mail.ru and Parallels, the most well known Russian technology and internet companies. They met their angel investor … Continue reading

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My First Post on TechCrunch

innovation eastern europe, startup eastern europe, venture investment eastern europeToday my first post was published on TechCrunch. There is not enough exclamation marks to put at the end of the first sentence to say how happy I am about it. It is not that with that I am launching my journalistic career. I do love blogging, although English is not my first language.

It is just that I am just great believer in the eastern European engineers and their capacity to innovate. So I think that the world should know more about what is going on in this region. Here is a link to my post ‘Eastern Europe creates waves at HackFwd event‘.

Since this post is about TechCrunch, I thought it would be useful to share this video created by another Russian blogger, Daria Batukhtina. This is a video interview with Lukas Zinnagl who writes for TechCrunch Europe (longer than me!) about how to get a post published on TechCrunch. I know less about it, as out of my three submitted posts only one was selected.

Why the Sale of Slando is Good News

innovation eastern europe, tech entrepreneurship eastern europe, internet company eastern europe

Today news broke that Slando, the classified ad website which has 11 million users in eastern Europe (with 81% of them located in Russia and Ukraine), was sold. The buyer is Naspers, a South African Holding, which also owns classified websites in eastern Europe.

The deal is covered in mistery. My contact, who is no longer working in Slando, but has close links with its management, said that everyone is under strict non-disclosure agreements and can not comment much about the transaction, but here is what we know.

The company has been set up by Britons Simon Crookall and Michael Pennington in 2005 after they have successfully exited their other venture Gumtree, property advertisement website focusing on people moving to the UK from abroad.

Slando has been established from the outset as a free classified website focusing on the eastern European markets. A few years ago I have helped the team find software development resources (in eastern Europe, of course). According to “Otkritie Capital” Alexander Vengranovich, based on the website traffic the value of the company might be … Continue reading

Software Development Outsourcing in Macedonia: the Engine of Growth

outsourcing macedonia, outsourcing eastern europe

Macedonia, Sveti Jovan Bogoslov Kaneo Church

The software development outsourcing industry in Macedonia has emerged as one of the most dynamic sectors of the economy in the past decade. With a growth rate of 38% in 2008, it has become an engine of growth, innovation and competitiveness. Due to the massive impact of the economic crisis, 2009 and 2010 were not the best years for this sector.

“The most common concerns regarding the issue was, whether and how the crisis affected the demand in this sector,” says Branka Bugariska, marketing manager of Seavus, a Swedish software consulting and development company in Macedonia. “In our experience, it is evident that it did, in a positive way… Continue reading

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Eastern European Startups at the Startup Week Vienna 2011: Review

startup eastern europe, venture investment eastern europe, innovation eastern europe

The next week is time for the much anticipated Startup Week in Vienna. Among the Eastern European startups which were selected to pitch to the investors were many interesting ones. Below is my take on them.


  • 123ContactForm is an online form builder. The idea is definitely not new. So where is the twist? The judges will find out. The remaining Romanian companies are probably readying themselves for How To Web.


Weekly News: Farmeron, Yandex, Surfingbird, Speedinvest, Startup Sauna, Synopsi.tv, Filmaster

Trying to catch up with the news about eastern European technology entrepreneurship and venture investment, I hereby release, our first weekly news digest.

Speedinvest, a Super Angel fund based in Austria, closed 10 million US dollar fund to concentrate on early stage investments in central and eastern Europe as reported by TechCrunch. The fund will invest up to 500,000 US dollars into web and mobile technologies and will enable entrepreneurs to work out of its Silicon Valley offices.

Raindance British Film Festival has partnered with Filmaster, a Polish movie recommendation service, that provides its visitors with a mobile application developed by Filmaster to keep up with … Continue reading

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IT Salaries in Novosibirsk, Russia in September 2011

outsourcing russia, outsourcing eastern europeThis short survey is based on the information provided by 9 software development companies based in Novosibirsk, Russia.

Some of these companies employ over 100 software developers, while others do not exceed 40 employees. The majority of these companies export software development services abroad. Three participants of the survey provide outsourcing services to the local market.

Compared to the IT salary statistics gathered in February 2011, the following changes have taken place:

Salaries of system administrators and technical support personel have seen the highest growth – up to 60 per cent. An important reason for this growth is the employment of more experienced specialists who demand higher salaries. The importance of experienced technical support specialists and managers has also grown, which can be seen from the salary growth rates between 40 and 50 per cent. Ordinary support specialists were less fortunate: their salaries have risen on average by 25 per cent.

Testing managers have seen their salaries rising by 55 per cent, whilst salaries for test specialists have grown by 16 to 25 per cent depending on the work experience.

At the same time, the salaries of software developers have not changed over the past six months, presumably because any further increase would compromise profitability.

The spread of salaries for analyst positions has narrowed down; salaries paid to such professionals are similar for most of the surveyed companies.

To sum up, the highest growing salaries are in the support area in the software development industries, and the managerial talent sees the highest income growth.

The figures below are monthly net salaries in Euros. To arrive to the gross salaries an employer must add 15 per cent. To calculate total cost of employment, the employer must add 26 per cent or 34 per cent social insurance tax, depending the taxatioin methods used.

Net Monthly IT Salaries, Novosibirsk, September 2011, in Euros … Continue reading

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Slovak Synopsi.tv Releases Beta Version, Two Weeks Behind Polish Filmaster

innovation slovakia, innovation poland, startup poland, startup slovakia, innovation eastern europeI used to be a big movie buff until I started this blog. Now I have no time for movies, and the last two Blu-ray disks from LoveFilm have been collecting dust in the beamer room for over a month.

This must stop. Because of Synopsi.tv. Or Filmaster . Or both.

I love writing, but I love movies more. The only problem I have is that my other half does not always support my movie choices and vice versa. Having wasted enough time watching blockbusters, I switched to independent movies entirely. To help my movie selection process, I scanned all the latest independent film festivals, and put them into the rental queue on Lovefilm.de.

A year later they began to arrive … Continue reading

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Imagine it: Startup Sauna in 3D

innovation poland, innovation eastern europe, innovation cee

I was meaning to write about technology entrepreneurship in Poland, and now, yet, another competition gave me this opportunity, as there is a winner and I must write about it. First, let me put in a few more words about the organizers.

Looking back, the Startup Sauna logos have been appearing quite frequently on GoalEurope over the past couple of weeks. And yes, they did it again. Weary but unwavering, Ville Simola and his team have been conducting Warmup in Poland, the third largest country in eastern Europe after Russia and Ukraine.

As if Russia was not enough.

Startup Sauna is a non-profit accelerator where mentors are successful Finnish technology entrepreneurs. According to Kamil Bargiel, the organizer from the Polish side, startups do not have to sell an equity stake in exchange for mentorship, so they are even more keen to participate.

Bargiel is an entrepreneur himself whose two companies were recently funded by the Polish VCs. One of them … Continue reading

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Outsourcing Destination Romania: Cluj-Napoca

outsourcing romania, outsourcing eastern europeWith its population of roughly 400,000, Cluj-Napoca is the fourth largest city of Romania and the historical center of the multicultural region of Transylvania. It is also one of the most important educational, political and economic centers of Romania.

The city has a population of diverse, ethnic backgrounds, mostly, Romanians and Hungarians. It is famous for its flourishing cultural scene, and because the city has around 100,000 students looking for entertainment in their spare time so the nightlife of the city is world-class.

Cluj-Napoca never faced a large-scale reconstruction program during the communist era. Meaning, most of its historical downtown is left intact. Most buildings being constructed are in Renaissance, Baroque and Gothic styles. Also, there are a number of remarkable buildings from the mid-century style.

Babeş-Bolyai University, Cluj-Napoca, Romania
Image via Wikipedia

 The city has the most important university in Transylvania. The Babeş-Bolyai University (UBB) is the largest in the country, with approximately 50,000 students attending various specializations in Romanian, Hungarian, German and English. The second largest university in the city is the Technical University of Cluj-Napoca, having seven faculties. The two universities have a total of about … Continue reading

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Nordeus Aiming for the Top, Relationship with Facebook “Very Close”

innovation eastern europe, innovation serbia, startup serbia, social games

Branko Milutinovic CEO of Nordeus at WebFestMe

This is the guest post by Vukasin Stojkov originally published on seehub.me

The Belgrade social gaming company, Nordeus, is slowly but surely coming out of a sort of stealth mode in which it has been with CEO Branko Milutinović, taking a greater part in regional conferences. The latest of which was WebFestME held in Montenegro. Future appearances include Startup Week and How to Web.

Being one of the most important tech companies in Serbia and probably, in a wider region too (one of the leading social gaming companies globally), the company came to this position in a relatively short period of time. It is great to hear how things are going and what is next for them. So here’s a recap of what we have heard from Branko on the first day of WebFestMe.

The guys who made the company’s flagship product, Top Eleven (the most popular sports game online), moved to Microsoft’s Denmark development center after graduating where they gained experience, built up confidence to compete globally and contacted networks which were to come in handy later on.

After exiting Microsoft, the team decided to go for gaming which was their passion (not the case with ERP), as it is for many boys interested in IT, since this is the initial point of interaction with a computer for the most part… Continue reading

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Outsourcing: a Road to Innovation? Let Me Explain!

innovation eastern europe, outsourcing eastern europeSo yes, we do write about startups, which aim to change the world, and the outsourcing industry, which allows others to change the world at a lower cost. Where is the logic, you ask?

I felt the need to explain what we are doing here at GoalEurope.

There is no question that having financial resources and technical abilities makes it easier to create and grow new ventures. So, who has the money, ideas and experience in Eastern Europe?

If you look at the post-socialist countries (which I loosely and academically incorrectly call Eastern Europe), they have many macroeconomic issues in common. Most of the wealth is being formed predominantly in the traditional sectors, such as construction, retail or banking. The emerging Europe has plenty of money-making opportunities at home without a need to get into risky and complex high-tech ventures.

Let’s face it; it is much easier to become wealthy by replicating an existing business model, be it a car rental, a chain of pharmacies or an online book store  –  provided the market niche is still available, and many are. Raising capital for such projects is much easier. The success has been proven elsewhere, and the unsophisticated investor understands where and how the money will be made.

So, who enters the global high-tech scene from eastern Europe? … Continue reading

Outsourcing to Bulgaria: Overview of IT Labor Market

outsourcing bulgaria, outsourcing eastern europeA post by Polina Danova.

Over the last several years and shortly after Bulgaria’s accession to the EU in 2007, the country can be viewed as having undergone a transitional and developmental period in its economy. As is often the case in such circumstances, IT and ICT sectors thrive and grow rapidly, so it comes as no surprise that Bulgaria’s IT sector has seen an average annual increase of 17% since 2007. In this light, the Bulgarian IT labour market is among the fastest developing in Europe, with remuneration packages, qualifications of professionals and development opportunities reaching the highest levels in Bulgaria’s labour market.

In 2006, many large foreign investment companies such as Hewlett-Packard, SAP Labs, and Johnson Controls began to expand their businesses to Bulgaria, thus creating a large number of highly-paid job opportunities. However, the financial crisis of 2007, followed by the so-called ‘second wave’ in 2009-2010 led the Services and IT sectors to employ hiring freeze policies and to slightly lower salaries. Still, in comparison with other sectors, IT retains its relevant stability.
According to an annual survey on the compensation levels of IT specialists … Continue reading

Startup Sauna Warms Up Siberia

innovation eastern europe, innovation russia, startup russia, startup sauna warmup

Startup Sauna Warmup 2011 in Novosibirsk

Yesterday was the last day of Startup Sauna Warmup adventures in Russia. Having met with more than 119 companies over the past week, the team of organizers, judges and mentors have been selecting the final participants of the Startup Sauna at the final stop in Novosibirsk.

Here, we recap the last three events from Kazan, Yekaterinburg and Novosibirsk.

The results so far, are a mix of technologies. All of them are in IT space: unmanned helicopters monitoring physical assets from RosTechnoExport of Saint Petersburg; insanely useful and inexpensive DNA test kits from Maxygen of Moscow; and pain-relieving, antibacterial “wound pressing technology” from Celoform.

startup russia, innovation russia, innovation eastern europe

Startup Sauna Warmup 2011 in Kazan announcing the winners

The latter comes from Kazan, the capital of the Russian Republic of Tatarstan. Founded in 2006 by 29-year old Anton Moroshek who has a PhD in surgery and oncology, and his professor, Said Ksembaev, Celoform offers a product which achieves all of the above, relying on biological activity of its components rather than pharmaceutical substances.The project has so far been financed … Continue reading

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How To Web Conference in Romania – Save The Date November 9-11, 2011

startup romania, innovation romania, innovation eastern europe

Bogdan Iordache (left) during Eastern European Panel at the European Pirate Summit 2011

I met Bogdan Iordache, the organiser of How to Web this week in Cologne, Germany where  the European Pirate Summit was taking place. It is the third year Iordache organizes How To Web. Hopefully he picked up some ideas from the Pirate Summit, which culminated in burning of the “Ze Copycat Guy”.

As entrepreneurs are usually cash-poor, the conference organizers will provide buses which will bring participants from Serbia, Bulgaria and Romania. So, please read the full announcement by Maxim Gurvits of SocialEast, book your tickets and meet us in Bucharest in November.

How To Web 2011: Ultimate Meeting Place for Southeast Europe Tech

Advising startups is like being a dentist. There is no solution that would equally work for two different teams or products. Except maybe for one thing: the basis of tech success is in measured learning and networking. It’s like a dentist would always recommend to anyone to brush their teeth.

To brush your startup teeth is to connect to a world-class audience of fellow entrepreneurs and dedicated and experienced mentors. So if you’re anyhow interested or active in the startup scene … Continue reading

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Arctic 15 Presenter Campalyst on How to Survive After Hackathon

Campalyst Presents at Arctic15 22 September 2011

Today at Arctic 15, the major entrepreneurial event in the Nordic countries, a number of startups from Eastern Europe (broadly defined as ex-socialist camp by GoalEurope) are presenting. Amongst them are:

Campalyst, Latvia
Campalyst measures whether social media helps brands sell.

Streamtainment Systems, Estonia
Streamtainment is developing a software platform that enables realtime streaming of interactive applications into variety of low-powered end-customer devices over broadband connection.

300mg, Estonia
Real-time team information sharing.

Achoo, Estonia
LinkedIn meets Path. It’s a space for sharing achievements, showing your skills and discovering those of others.

As the conference continues, we publish a blog post by Jevgenijs Kazanins, the CEO of Latvian Campalyst, the Seedcamp and Startup Sauna Warmup company. Here it is.

innovation latvia, innovation eastern europe, innovation cee

It’s been a while since I wanted to write about how (and perhaps, why) Campalyst not only survived, but thrived after Garage48. The “48-Hour Startup” story by Businessweek made this post a must.

So here it goes; a summary of the three most critical things and events that helped us turn a project into a company (ok, a startup for now:). Continue reading

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From the Valley to New Europe: the story of one VC

This post is by the guest blogger Maxim Gurvits, a serial IT entrepreneur with a past in online professional services and workflow management. Based in Sofia, he writes about disruptive tech startups in the Balkans and is interested in (regional) startup ecosystems and all the latest in mobile and web apps. He blogs regularly at socialeast.eu.  

innovation bulgaria, innovation eastern europe, venture capital bulgaria, venture capital eastern europe, startup bulgaria

Last time around, we talked about the road to Silicon Valley for New Europe startups. It remains the classical way for a matured concept to meet true scalability and attention, and validate its product with a decisive audience. But what about about traffic in the opposite direction?

Two weeks ago I met for a beer with Deven Soni, partner at Bulgaria’s only VC fund, NEVEQ. Deven is Chicago-raised, Berkely-educated and worked at Goldman Sachs and Highland Capital before joining the Bulgarian fund. He was hired by NEVEQ in 2010 to foster contacts for fund-backed startups in the Valley. But in 2011 he decided to move to Sofia: to be closer to the action. Continue reading.

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Russian Maxygen and Celoform are Off to Finnish Sauna

innovation russia, innovation eastern europe, startup sauna warmup

Artem Elmuratov, Maxygen with a trophy at Startup Sauna Warmup

The past two events of Startup Sauna Warmup went under the “Healthcare” banner. On Friday, the a winner at the start-up competition at the incubator of High School of Economics (HSE) in Moscow was chosen: Maxygen produces inexpensive DNA tests which allows general physicians detect infectious diseases as well as HIV and tuberculosis.

Yesterday, Ville Simola, Antti Ylimutka and the mentors met Russian entrepreneurs in Kazan to award the first prize to Celoform, cotton 2.0 to clean & disinfect wounds while relieving pain without medicine.

Both companies are now making plans to go to Finland’s Startup Sauna where they will further develop their business ideas, technology and market entry strategy during the six-week of early stage acceleration program. After the Demo day in December 2011, the best out of 15 teams will move to Silicon Valley for three months to concentrate on customer development and fund-raising. We will provide an update on Celoform later. and for now focus on Maxygen.

This is the sixth time Maxygen won a startup contest in the past year. The team has also presented its business to the President of Russia, Dmitry Medvedev. This is how high innovation policy is in the government agenda. Continue reading

The Final Chapter: Credo Week 2011 in Bratislava

It feels that it was ages ago that I went to this trip. Yet, the last stop of Credo Week tour in Bratislava, Slovak Republic was less than two weeks ago. Here is what has happened on that sunny, summer day.

innovation slovakia, startup slovakia, strtup eastern europe, innovation eastern europe

The meetings were going on at a full speed as I have arrived to the venue of Credo Week’s last networking event. It has been organized by Jan Solik, the man behind the Association of Young Entrepreneurs of Slovak Republic.

There is an association of old (or if you like, experienced) entrepreneurs as well headed by another Jan, Jan Oravec with whom we discussed issues of … Continue reading

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Eastern Europe: Entrepreneurial Events, Past and Future

innovation russia, innovation cee, innovation eastern europeI feel like I am being snowed under with all of startup conferences. The upcoming events are plentiful. It seems that life is one big celebration of entrepreneurship. The only question is, when the attendants of these numerous startup competitions manage to do any work.

This past Friday, two startup competitions took place: HackFwd Build07 and Startup Sauna Warmup Saint Petersburg. Russian Maxygen won the Startup Sauna Warmup competition, and Filmaster from Poland got a lot of buzz at HackFwd. Maxygen, which was already mentioned on these pages once, developed a new technology that allows for the detection of infectious diseases including HIV, tuberculosis and malaria within 10 minutes, and at the cost of only $10. Useful and practical in my view. Filmaster has developed a better way to make movie recommendations (must ask Synopsi.tv’s Rastislav Turek how the two compare). Continue reading.


Startup Week 2011 in Vienna will Feature Kosovo’s Siyov

innovation russia, innovation eastern europe, innovation cee, startup weekYesterday, I was browsing a website of the Investment Promotion Agency of Kosovo and to my surprise, I noticed a familiar logo of STARTeurope along with an expired invitation for a startup competition in 2010.

What? Kosovo? The small country crippled by atrocities, war and subsequent poverty? Yes.

Apparently, Kosovo is the country the organizers of the Startup Week 2011 really wanted to visit. As one of them, Jürgen Furian, puts it, Kosovo is a startup of Europe. “It is a new country and we felt the need to visit it.” So, the Startup Europe team organized a Startup Live competition in Kosovo one and a half years ago.

“A lot of people are entrepreneurs in Kosovo. What really struck out is how many private gas stations there are,” recalls Furian. “A lot of people think about building their own businesses, so they copy a proven business model such as a gas station,” he explains. Apparently, Kosovo leads European ranking in the highest number of gas stations per person although the source of this fascinating fact is unknown. Continue reading.

Eastern Europe to be a Major Focus at European Pirate Summit 2011 in Cologne

innovation eastern europe, innovation cee, startup eastern europe

The Weird and Wonderful Odonien, An Outdoor Venue of the European Pirate Summit

The European Pirate Summit is a one-day conference that will take place next week in Cologne, Germany, on the 20th of September 2011.

Put together by German university students Maurice Kock, Till Ohrmann, Fabian Muecke and Waldemar Hein, the event will be carried out under the “Pirate’s Flag”.

The term, coined by Michael Arrington in his TechCrunch post in 2010, was an inspiration for the organisers, who thought that bringing together entrepreneurs under “one roof” would be something everyone could benefit from. The roof is more an abstract figure of speech here, as the weird and wonderful Odonien, the location of the Pirate Summit is an outdoor venue.

Eastern Europe is one of the major themes at the conference. “We think that people in Eastern Europe are very talented and should be given a chance to meet other entrepreneurs and especially Western venture capitalists, so that they could connect and do business together,” says Waldemar Hein, who originally comes from Uzbekistan, a former Soviet republic, but grew up in Germany. I did not test his Russian skills in exchange for the promise for him not testing my German.

Indeed, the opportunities for Eastern European startups to meet venture capitalists will abound, that is if only they (startups) can afford the tickets to attend the conference. The conference will bring together many VCs as speakers and participants, who are in charge of over three billion Euros of venture funds.

Representatives from Romania, Croatia, Poland and Kosovo are speaking at the event.

Visit The European Pirate Summit for more information.

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Unmanned Helicopters and Startup Sauna Warmup in Saint Petersburg, Russia

innovation russia, innovation cee, startup eastern europe, startup russia, startup sauna warmupAnother day, another startup competition. Today, it is Startup Sauna Warmup in Saint Petersburg, Russia. This month a team of Finns sponsored by Aalto University are grilling Russian entrepreneurs and their business models throughout the country. Startups from Moscow, Kazan, Yekaterinburg and my native Novosibirsk are to be examined shortly.

One of the founders of Startup Sauna, the Finnish incubator that works with Nordic and Russian startups, is Ville Simola, a recent business graduate of Aalto University. A catalyst of the startup revolution in Finland, he has co-founded Aalto Ventures Garage, a co-working space for Baltic and Nordic entrepreneurs in Espoo, Finland, and later Startup Sauna, a seed accelerator for most promising teams in the Baltic Rim. “Startup Sauna helps the best teams with seed money, advice and a mentorship program,” says Simola.

The Startup Sauna hosts the winners of the series of startup competitions called Startup Sauna Warmups, which take place across Baltic and Nordic regions as well as Russia. Here is a list of their companies from the CIS region (or what I call Eastern Europe). Continue reading.

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Russia’s Innovation Efforts Pay Off

innovation russia, innovation eastern europe, innovation cee

Skolkovo, Russia's Future Silicon Valley

According to the results of Global Competitiveness Survey conducted by World Economic Forum in 2011, Russia is the only country from the CEE / CIS countries (collectively called here eastern Europe) which has moved up the development curve closer to its goal of becoming an innovation-driven economy. It is no wonder, as the country’s government policies push the innovation agenda high on the priority list. GoalEurope looks at what might have been the cause of Russia rising on the global innovation arena.

Venture capital industry in Russia is growing. According to Russian Venture Capital Association, by the end of 2010, there were 16.8 billion US dollars of venture funds raised which is almost 11% increase compared to the previous year of which 151 million US dollars were invested that year.

There are over 60 private and state-financed startup incubators, accelerators and technology parks while the Russian government continues to actively participate in the high technology industry.

Russian Venture Company, the government venture fund, invests in growing local venture capital industry and into the startups directly. Continue reading.

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The Global Competitiveness Index 2011-2012 Update

innovation eastern europe, outsourcing eastern europe, outsourcing ceeA little over than a month ago, we looked into the competitiveness of Russia and central and eastern European countries on the global scale in this article based on The Global Competitive Index 2010-2011  researched by World Economic Forum.

The new version of the report came out in September 2011. Here are the results.

In the Global Competitiveness Index, Estonia maintains the leadership (position 33) while Bosnia and Herzigovina remains the last country from the central and eastern Europe (position 100).

Moldova remains the only country from the CEE region with the least innovation and factor-driven economy. This group which also includes Vietnam and Ethiopia, competes mainly on price by utilizing its vast unskilled labor resources.

In transition to efficiency-driven stage are Armenia, Georgia and Ukraine.

Efficiency-driven economies include those of Albania, Bosnia and Herzigovina, Bulgaria, Macedonia FYR, Montenegro, Romania and Serbia.

Russia is the only country to move up the development curve in Eastern European region. This country also shares the position with Croatia, Estonia, Hungary, Latvia, Lithuania, Poland and Slovak Republic in a transition stage to become innovation-driven economies.

Czech Republic and Slovenia remain the only countries from the Eastern Europe in the innovation-driven stage of development.

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Eastern Europe’s Startups After the Seedcamp: Zemanta, Brainient, Codility and UberVU Revisited

innovation eastern europe, seedcamp, startup eastern europeThe year 2011 has been remarkable for startups from Eastern Europe at Seedcamp. four companies from the region were shortlisted as finalists at this year’s Seedcamp Week 2011, and two other ones: Vox.io and GrabCAD became winners. Today I look in more detail at how Seedcamp has impacted Eastern European startups over the years.

Before going any further, let us agree on the definition of the region we are covering. I have been using the term Eastern Europe to define the fast-growing region that comprises former communist countries, including CEE (Central and Eastern Europe), as well as European CIS (Commonwealth of Independent States) countries. I would like to stick with this definition, as it is a less of an alphabet soup than CEE/CIS etc, even though it may not be technically or academically correct.

Eastern European companies have been present at Seedcamp since 2007, starting with Zemanta from Slovenia. I was curious about the performance of startups after they have won a Seedcamp competition, so I spoke to some of the Eastern European finalists from the years 2007 to 2009, and this is what I learned. Continue reading.

The Future of Evernote

innovation russia

According to The Next Web, in a recent Lifehacker poll, Evernote, originated in Russia, took the top spot as today’s most popular note taking application, beating out pen/cil and paper, Microsoft OneNoteSpringpad and Simplenote. Evernote is currently growing at a rate of 1.2 million users per month, averaging over 40,000 signups every day, which is enough people to fill Madison Square Garden, twice.

While you can use Evernote for free, forever, out of those 13.5 million, there are approximately 600,000 paying subscribers, representing a 4.5% conversion rate of free to paying subscribers. While there are a slew of premium features (advanced collaboration features, more versatility and monthly uploads of 1GB each month) worth dishing out $5 a month/$45 a year for, founder and CEO Phil Libin believes that the best predictor of a customer converting to the paid version is how long they’ve been using the system. While you can use the full featured version for free, forever, Libin thinks as you store more of your life and your memories it will become more valuable to you the longer you use it, thus prompting you to want to pay for it. Continue reading.

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Venture Investment in Russia: Almaz Capital is Raising a New Fund

innovation russia, startup russia, venture capital russiaAlexander Galitsky, the veteran of Russian venture investment, is raising a new fund.Almaz Capital, the growth stage venture fund focusing on technology companies in Russia where Galitsky is the founder and managing partner has invested most of its current fund and aims at $150-200 million US for the next one.

The Almaz Capital’s portfolio companies include Yandex, Russa’s leading search engine, now a public company listed on New York Stock Exchange; Parallels, the virtualisation software company that is expected to go public in 2012; Qik, a mobile video sharing platform that was sold to Skype; Acumatica, a cloud-based ERP software company; and Alawar Entertainment, Russia’s leading publisher and distributor of casual games; and other companies.

Galitsky’s deep knowledge of technology and experience in building successful technology businesses are at the heart of the venture fund’s stellar performance. By 1991 he had already pioneered the development of WiFi technologies in collaboration with Sun Microsystems, not to mention his subsequent achievements (full list). Prior to that he was, well, a rocket scientist.

Technology, digital media and communications industries are high on Almaz’s agenda, which focuses on early- and expansion-stage companies. Galitsky and his partners are strict in their selection approach. “We do not aim to invest in Russian ‘clones’, the copycats of successful Western companies. We search for technology companies with a unique value proposition and a global ambition,” explains Galitsky.

This is unusual, as the ‘clones’ offer the least risky return on venture investment in Russia… Continue reading

Accountants: Belarus Outsourcing Industry’s Answer to the Shortage of Software Engineers

In the year 2011, Belarusian government has approved the legislative program “IT Country” to promote outsourcing, information and communication industries in Belarus for the years 2011 – 2015. The program has originally been conceptualized in 2007 by the director of BelHard Group Igor Mamonenko. Now supported by the government as well as many outsourcing industry executives, the program’s objective is to establish the modern IT and IT-enabled services industry in Belarus by 2015, educating 300,000 software developers and BPO professionals.

outsourcing belarus, outsourcing eastern europe, outsourcing cee, IT salaries belarus, it salaries romania

To achieve this goal, it is planned to retrain country’s numerous accounting and legal professionals into IT engineers and operators of so-called IT-enabled services industry which includes data entry, call center and technical support services.

According to Belarus Statistics Agency, there are 400,000 accountants in Belarus compared to China’s 155,000. Igor Mamonenko suggests to promote attractiveness of IT education to the accountants and introduce short term IT courses for those interested to retrain, following international best practices adopted to the local market needs.

Does the program offer a realistic solution to the problem of skill shortage? Continue reading

Credo Week Day 2: The Glorious Budapest

To start with, I had bad luck choosing a hotel in Zagreb. I stayed in the Movie Hotel, which had a loud air-conditioner and a tram line nearby. So, if you want a good night’s sleep, stay away. They do have password-free Wi-Fi though for those of you seeking a cheap and cheerful Internet connection in Zagreb.

After a wake-up call at 6am (tram!), and a decent breakfast later, I was on the road to Budapest, which was quite uneventful, with the exception of a Hungarian customs official inspecting my luggage on the border with Hungary, and my GPS navigator TomTom not recognizing a new highway, connecting the two countries.

Better that, than the built-in navigation system in Ondrej Bartos’ car, which simply refused to give directions and left him lost in Budapest for a while. The rest of the Credo team arrived safely in Budapest in the Cessna 172, but their journey was affected by the peculiarities of the region: they had to fly back to Slovenia first, and only then to Hungary to comply with customs regulations.

I was the first to arrive to the Ybl Palace where the meeting was to take place, and had the great fortune to welcome the first attendants of Credo Week in Budapest: Peter Farago and Balázs Benedek of Skawa, the Hungarian crowdsourcing company. Since our publication is about outsourcing and innovation, crowdsourcing fits both themes perfectly.

startup hungary, innovation hungary, venture capital cee, innovation eastern europe, innovation cee

Continue reading

The First Long Day: The Second Stop of Credo Week is Zagreb

It is amazing how close Zagreb is to Ljubljana. It only took 1.5 hours of driving to get there. In fact, it is so close, that someone came up with an idea to include them into one country and call it Yugoslavia.

In Zagreb, over 80 people turned up to attend Credo Week. Most of them spoke impeccable English, thanks to the local television, which broadcasts Hollywood movies in the original language.

innovation croatia, innovation cee, innovation eastern europe, credo week

Credo Week was organized by Crane, Croatian Business Angel Network. After Ondrej Bartos’ presentation of Credo Ventures and Sven Marusic’s presentation of Stratus, a Croatian company which turns Microsoft Dynamics NAV deployment into a cloud-based service, the participants formed lines to pitch their ideas to Credo Ventures team. Continue reading

Multilingualism – Poland’s Outsourcing Advantage

outsourcing poland, multilingual outsourcing, outsourcing cee, outsourcing eastern europeOutsourcing continues to gain momentum in a constricting business environment, forcing companies to cut costs. ICT research estimates that the 2011 global outsourcing market (both onshore and offshore) will increase by 9.2% amounting to … Continue reading

Outsourcing to Central and Eastern Europe: a Business Case

outsourcing cee, outsourcing ukraine, outsourcing eastern europe, outsourcing czech republic, outsourcing romania, embedded development

Kyiv, Ukraine

Recently our American client asked us to develop a business case to help decide whether to outsource their embedded software development to Eastern Europe, to acquire a company there or to build a captive center in Czech Republic, Romania or Ukraine.

Based on our research, we now offer a review of what a company should think about in planning outsourcing to Central and Eastern Europe.

Our clients differ greatly from one another. Some choose mainly on price, and push our suppliers down at the negotiations table, some look at the expertise and are ready to pay a premium price for a particular capability, such as core competence in system development, expertise with security systems or focus on a particular development language.

This time, the client wanted a thorough analysis which both evaluated the skills and compared the cost across three countries, four cities and three strategies… Continue reading

Outsourcing and Innovation in the Czech Republic: Ostrava, the Former City of Coal and Iron Rides the IT Wave

Looking for IT resources in Central and Eastern Europe, one would most likely come across Ostrava, the prime outsourcing destination in the Czech Republic. Constantly changing, the city has shifted away from heavy industry and now it is attractive location for IT and outsourcing companies. This article has been written by Lukáš Dočkal, Managing Partner of Advanced Search Technology

Forgetting its Past Glory

outsourcing to ostrava, outsourcing to czech republic, it salaries czech republicThe former eastern bloc knows a lot of cities like Ostrava. Their traditional mining and heavy industries have disintegrated after the fall of the communist regime and the cities were bogged down in chronic economic and social diseases. But Ostrava’s story is quite different. It survived the decline and focused on new opportunities in the free market.

Today Ostrava is not the dark and smoky city fallen into the trap of living in its past glory (although environmental problems are still significant). On the contrary, changes in infrastructure, transport systems, education and business attitude have attracted domestic and foreign investors such as Hyundai, Siemens, ArcelorMittal, CE Money, HSBC and many other companies.

Read more

POido: Groupon on Wheels or Another Convergence of Outsourcing and Innovation Story in Russia

In 2003, a recent MBA grad, bright-eyed and bushy-tailed, I was implementing my business plan which I developed during the entrepreneurship course at London Business School.

GoalEurope was set up to offer outsourcing advice to western companies looking for software development outsourcing in eastern Europe. I have signed up a number of companies to be in my supplier network. One of them was NTR Lab whose cofounder and CEO Nick Mikhailovky told me all sorts of interesting stories about neutral networks when I first met him in his office in Moscow in 2003.

outsourcing to russia, outsourcing eastern europe, outsourcing cee

In the recent years, most owners of outsourcing companies in my emerging supplier network swapped outsourcing for innovation. This year, Alex Freedland, the owner of Mirantis, became an investor in AGroup from Latvia; and Alexander Snurnitsin, Mirantis’ managing director in Russia is now its CEO (more here). Our supplier, Sciant from Bulgaria, was sold to VMware. Steve Keil, its former Australian-born CEO is a founder of a startup in a stealth mode. The owner of Afortio Vlad Voskresensky is now running a successful software company Invisible CRM (we wrote about it here), while Anatoly Gaverdovsky is putting his weight behind yaM Labs (more here) after selling Vested Development to EPAM.

A couple of years ago, Nick too, has entered the innovation scene. Read more.

Credo Week: Day One – Innovation in Slovenia

Ljubljana is a beautiful city. So beautiful, I would say, that one should have no reason whatsoever to want to go on a business trip, let alone move to the US to grow the business, as some Slovenian entrepreneurs are planning to do. Enter Credo Week, day one, organized by Credo Ventures, Czech venture capital fund.

Credo team decided against driving all the way from Prague, and settled for a private jet instead, as its partner Jan Habermann is also a pilot.

Innovation in Slovenia, outsourcing slovenia, outsourcing eastern europe, outsourcing cee

For me, however, the journey is not as seamless. To get to Ljubljana, located at the heart of Central Europe, I had to travel from Northern Germany via Switzerland and Austria to finally drive across the border to Slovenia.

The first the Credo Week event was well attended – three hours was just enough time to talk to everyone. Here is a list of companies whose founders came to the meeting:

One company, whose name was not yet on the business card, analyses Twitter content created by Slovenians and makes clippings of tweets for the businesses who aim to understand how they can use Twitter, or wish to monitor their brand’s reputation.

Ivan Turkovic talked about Kuponski, a Slovenian startup that aggregates deals and offers them to mobile phone users in real time.

Innovation in Slovenia, outsourcing slovenia, outsourcing eastern europe, outsourcing cee

A company, whose name I will not disclose yet: its technology simplify organisation of sport events.

Matija Klemenc from Adrialog came to talk about the online travel community and focused on the Adriatic Sea as a travel destination. The community is number one in Slovenia, and the founders are looking to expand it into other European countries.

Jure Zadravec from Genelitik discussed the company`s capability to diagnose genetic causes of various diseases. By conducting analysis of its clients’ DNA the research conducted by the company … read more


Mobile Game Developer or Outsourcer: What is the Best Bet?

outsourcing to ukraine, outsourcing to belarus, outsourcing to eastern europeWho hasn’t heard of “Cut The Rope” or hasn’t been cheered by “Your Nobel Prize is waiting”? The mobile game, developed by the Russian company Zeptolab, is played by adults and children alike. It has become wildly popular and a great Russian success story, inspiring others to get into the game development business. Read more


Third Time Lucky in Latvia? Reach.ly Raises Seed Capital

Innovation in Latvia, Startup in Eastern EuropeFor Ernests Stals Reach.ly, the real time marketing tool for the hospitality industry is the third iteration of the technology application; and his 6th business. Technology – a complex algorythm allowing to mine deep into the social networking data has been put to a practical use before… read more

VC on the road: Credo Week in CEE

It is tough to be a venture fund in Eastern Europe. The region, broken down into more than 20 countries, has diverse economies, from struggling Moldova to prosperous Slovenia. Besides it is separated by languages, causing further communication difficulties.

Yet Jan Habermann of Credo Ventures is optimistic that the Credo Week, a set of meetings between Venture fund and the entrepreneurs in Slovakia, Slovenia, Hungary and Croatia will be a productive networking event.

“Our objective is to increase our brand awareness, to let entrepreneurs know that there is capital available for them… read more

Ukraine: Programming Languages Rated

Developers.org.ua is the leading site that connects Russian-speaking community of software developers in Ukraine to the world. As a guest writer of GoalEurope, Ruslan Shevchenko, shared his article about the results of the survey conducted by Developers.org.ua. Ruslan Shevchenko is a columnist for Developers.org.ua, and the co-founder and president of Gradsoft, Kiev-based software development company.

Rating of Programming Languages
(Based on the results of the second survey)

Over 3,000 respondents took part in our survey between July 5th and August 9th of 2011 (including 2,663 Ukrainians). Half a year ago, we had 2,394 participants including 2,079 from Ukraine. 23% of last year’s participants responded to the current survey.

Brief Summary

The leaders of the programming languages remain the same. C#, Java, PHP. JavaScript are becoming important. Development on pure C becomes marginalized while Scala is showing a great future. Here are the complete results… read more

Belarus: Export of Software Services Grew 55% in the First Half of 2011

Outsourcing to Belarus, Outsourcing to Eastern EuropeThis month Belarusian High-Tech Park announced that its resident companies have reported a 55% increase in their software and IT services export for the first half of 2011. GoalEurope takes a closer look at what is happening in the Belarusian software development industry.

Having neither sea nor mountains, Belarus is not exactly a tourist hotspot. Most people might have learned about the country for the first time when Yulya Nesterenko won the women’s 100 meter race in the Athens Olympics in 2004, or when they watched Sasha Rybak at Eurovision in 2009 (although he represented Norway).

In the meantime, its nearshore outsourcing industry is one of the most robust segments of the country’s economy. It is a popular destination for such global international companies as Peugeot, Mitsubishi, British Petroleum, Gazprom, Reuters, British Telecom, London Stock Exchange, World Bank, Coca-Cola and many others, which outsourced their software development to the Belarusian IT service providers. Here is why… continue reading



Bucharest: The First Choice of Multinationals Coming to Romania

The largest and undoubtedly the most important city in Romania is its capital, Bucharest. Official census data shows that 2 million people live in this huge melting pot, but unofficial estimates say that the metropolitan area of Bucharest is more likely to have a population of around 3 million. Continue reading

Yet Another Meeting: This Time with Anatoly Gaverdovsky

yaM Labs (where yaM stands for Yet Another Meeting) is a Russian Start-Up founded by Anatoly Gaverdovky. The company creates Cloud-based software that enhances the efficiency of meetings. GoalEurope’s Natasha Starkell has talked with Anatoly Gaverdosky about his business past, his new company and future plans.

What is yaM Labs?

Eight software engineers and their CEO, Anatoly Gaverdovsky, created Cloud-based application to make meetings more efficient. The yaM team members are based in Moscow, St Petersburg, Minsk and even in the little known town of Kamishin. There is no doubt that this virtual team makes good use of its software even as it develops it.

Outsourcing Roots

“I have always wanted to develop products. I did not go into the service industry ‘voluntarily’, but to survive,” Anatoly Gaverdosky begins his story. It took him over a decade to be able to do just that.

Many years and many meetings ago, in 1993, Gaverdosky co-founded Vest Co. – a Moscow-based software company which developed a few products in the document management and workflow space. Vest sold its OEM license to PC Docs, then the world leader in document management software… Continue reading


And The Winner Is…. How To Get To The Top Of Elance

Unlike other talent marketplaces, Elance uses a weighted rating system of its freelancers. We decided to write about the most prominent Elance suppliers from Russia and Ukraine, and what they had to do to get there.

The software development company, HireRussians, comes from Siberia. Since 2001, the company has been competing for projects on the online employment platform, Elance, with a grand vision in mind: get to the top of the supplier list. Ten years later has reached the fourth position in Elance level rating.

The team traces the rating fluctuations on a weekly basis in an effort to understand the exact formula … Continue reading


In Brief: Outsourcing Industry in Bulgaria has the greatest growth potential

According to the Bulgarian Ministry of Finance, the outsourcing, electronics, and information technology industries have the greatest potential for further growth. On Monday the 8th of August, 2011, the Economic Analysis and Forecasts Directorate of the Finance Ministry released a report that reviewed the performance of the real sectors within the Bulgarian economy during the 2008 – 2010 period, outlining those with the greatest potential to further expansion. Continue reading

First Outsourcing, Then Innovation: The Story Of InvisibleCRM

Here is a success story of a spin-off from two software development companies: Ukrainian Afortio and Russian VDI, which turned from services to product business, and found its niche and success on the international marketplace. GoalEurope’s Natasha Starkell spoke to Vlad Voskresensky, the CEO of InvisibleCRM.

Innovation in Ukraine, Outsourcing to Ukraine, Outsourcing to Eastern EuropeIn the past, many technology companies which outsourced their software development offshore were concerned about violation of intellectual property rights. Yet there was and still is little evidence of the outsourcing service providers taking advantage of their proximity to code. Same goes for InvisibleCRM. The spin-off from Ukrainian Afortio and Russian VDI has become successful on its own right… Continue reading

Burgas, Bulgaria – Outsourcing Destination Eastern Europe

It is a summer time, and we begin our overview of the Eastern European outsourcing cities with coastal town of Burgas, Bulgaria.

Outsourcing to Bulgaria, Outsourcing to Eastern EuropeLocated in the southeastern part of Bulgaria and the second largest city on the Bulgarian Black Sea coast, Burgas with a 197 000 population has strategic geographic location: it is a port, blooming tourism and economy, with economic activity of the population of 63.9% (source: Ministry of Finance of the Republic of Bulgaria). Continue reading

Business Incubators in Eastern Europe: Fostering Innovation and Growth

Innovation Russia, Outsourcing Russia, Outsourcing Eastern EuropeHis tone, during our telephone interview, is relaxed, yet Konstantin Kulikov has his hands full. Since the creation of a business incubator at the Bauman Moscow State Technical University in June 2011, he has been working with 18 start-ups to “package” their ideas into viable businesses. The teams of entrepreneurs are made up of recent graduates, full of practical ideas ranging from new water purification technologies to a compact city car.

“We develop business concepts and realistic business models, we help build project teams and prepare our start-ups for the fund-raising stage,” comments Kulikov, referring to Venture Expert, his company’s involvement in the business incubator. “We are also looking for new projects to join the incubator in autumn this year”.

Funded by the government-owned Russian Venture Company, the business incubator has already identified attractive investment opportunities… Continue reading

Outsourcing to Romania: Country Overview

Outsourcing to Romania, outsourcing to eastern europe

If you think that India’s dominance in IT outsourcing services will never be challenged, think again. Romania is already one of the most important software producers in Eastern Europe and a top IT outsourcing service provider worldwide. According to Gartner, one of the leading names in information technology research, the IT market is one of the fastest growing sectors of the Romanian economy, with a turnover of about one billion Euros ($1.38 billion) and with growth rates of 40-60 percent per year… Continue reading

Outsourcing Industry is About People: Arobs’ Act of Kindness

Here at GoalEurope magazine, we aim to show the Eastern European outsourcing industry from different angles, beyond what is commonly published in international media.

Outsourcing to Romania, outsourcing to Eastern EuropeThe outsourcing industry is all about people who not only write code, answer phone calls or enter data, but who also create new ideas at project meetings, share a joke in the company’s kitchen, struggle to get home in rush hour traffic, worry about their children’s education and help their friends apply for new job openings. In other words, the outsourcing industry is one huge living organism and our objective is to go beyond numbers about skills, availability and cost savings and allow the Western business community to see the region in another dimension.

Today the story is about Arobs, a Romanian company from Cluj-Napoca, who challenged its employees with a Play-Dough competition to raise funds for Alia, a 3 year old girl from the same town who has cancer. Continue reading

Russian Supercomputer Sets New World Record

Russia-based T-Platforms created supercomputer which outperformed its competitors – the word leaders such as IBM and HP, in speed and quality of processing large arrays of data.

Outsourcing to Eastern Europe, Outsourcing to Russia

Such tasks are commonplace in pharmacology, information security, and many other knowledge-driven industries. In order for these complex tasks to be resolved effectively, high-performance systems capable of processing hundreds of petabytes of data are required.

“The Graph500 ratings are interesting because they allow us to assess not only the computing power of supercomputers but also their efficiency, in real terms, at processing huge quantities of data. In such tests, those computer systems that have been optimized for working with large arrays of data will always triumph,” says Vsevolod Opanasenko, CEO of T-Platforms. “This is yet another endorsement of Russia’s achievements in creating high-performance systems aimed at solving an extremely wide range of applied problems.”

“Emerging applications in healthcare informatics, social network analysis, web science, and anomaly detection in financial transactions, require a new breed of data-intensive supercomputers that can make sense of massive amounts of information,” says David A. Bader, Professor of the Georgia Institute of Technology, one of the founders of the Graph500 rating. “The Graph500 Benchmark highlights the importance of new systems that can find the proverbial needle in the haystack of data.”

T-Platforms custom-builds its supercomputers for the use by Russian scientific research institutions, in the field of biotech, nanotech, chemistry where complex modelling and data processing are required. For example, Rusnano uses T-Platforms supercomputer in the nanotech-related modelling. International expansion is also in plans in the not so distant future.

How Competitive are Eastern European Countries on the Global Scale?

by Natasha Starkell, GoalEurope

When a company begins an outsourcing project and a decision is made to source required skills abroad, the first question that usually arises is where in the world that place should be.

Outsourcing to Eastern Europe

If the decisions in the company are made in a methodical way, giving careful consideration to various options and their numerical assessment and comparison, it is likely that their outsourcing project team will pick up the latest copy of the Global Competitiveness Report, published by the World Economic Forum.

The report shows where countries stand in respect to their competitiveness and provide a wealth of other macroeconomic data, covering amongst others education, efficiency of labour market, capacity for innovation as well as main issues of doing business in each country, helping to answer a question whether or not a country has advantages in the global outsourcing industry.

Here we provide a summary of the Eastern European countries and their competitiveness related data … Continue reading

Bulgaria: Overview of Foreign Direct Investment

Outsourcing to Bulgaria, Outsourcing to Eastern EuropeBy Polina Danova, GoalEurope.com 

By analysing Foreign Direct Investment (FDI)  indicator one can get a sense of a country’s risk perception and its suitability as an outsourcing destination. Today we review FDI in Bulgaria, one of the leading outsourcing locations in Eastern Europe.

In 2009 Bulgarian GDP contracted by 5.6 per cent as Bulgaria was hit by the economic crisis. FDI have contracted from 30% of the GDP in pre-crisis level to just 4.5% of GDP in 2010. Here is a summary of FDI fluctuation in Bulgaria over the past two decades and signs of recovery for 2011.

During the late 1990s, Bulgaria’s geographic location and its low GDP and inflation rate made it a popular destination for foreign direct investment (FDI) so that in the period between 2000 and 2005, Bulgaria was viewed as the third most popular FDI destination among the countries in the South Eastern European region, with Turkey and Romania preceding it. In these years Bulgaria started to receive significant foreign capital and funds which allowed for a transfer of technology, skills and job opportunities.

During the last decade, the country became an attractive FDI destination due to three main circumstances. Firstly, because Bulgaria had a rather low GDP, there was significant room for growth and the GDP rates and growth of inflation Bulgaria achieved during the 2000-2005 period appeared promising. Secondly, the strengthening of the national economy coincided with Bulgaria’s accession to the EU in 2007 which caused further FDI inflow. According to the Vienna Institute for International Economic Studies, FDI have more than doubled from Euro 2.7 billion in 2004 to Euro 6.2 billion in 2006. Thirdly, as a result of regional trade and market cooperation, Greek FDI had already become a major inflow of investment in Bulgaria’s industry. Thus, by the end of 2008 Bulgaria’s national economy had become one of the most FDI heavily reliant countries in the Central and Eastern Europe region, attracting Euros 6.7 billion.

However, shortly after this FDI growth period, significant problems began to emerge. Ever since Bulgaria’s accession to the EU, the country has been failing to meet EU economic regulation standards. It has had issues with bureaucracy and corruption and, moreover, its cumbersome administrative procedures have not made trading transactions easy. Nonetheless, the most significant factor affecting FDI markets worldwide, the global financial crisis of 2007-2008, saw Bulgaria somewhat less hit than other economies, due mostly to the country’s relative ‘poorness’. Still, with the shortage of worldwide market liquidity and the rise of private debt, Bulgaria’s economy did contract and the flow of FDI significantly decreased.

By 2010, Bulgaria had a negative FDI inflow of 62.5 million Euro for the April-January period followed by another contraction of 26.9 million Euro for the same period so far in 2011 according to data provided by the Bulgarian National Bank. For the most part, it is considered that a significant volume of FDI for the period between 2008 and 2011 has failed to generate absorptive capacities and productivity growth. Furthermore, during the time of a financial recession when global market liquidity of funds is widely unavailable, the most stable FDI sectors are deemed to be the processing industry, energy and telecommunications. As it happens, however, in Bulgaria the major FDI sectors are finance, retail and real estate, with FDI being 70-80% spread among these sectors in 2008, and shrinking to 24% in 2010.

Although the first half of 2011 has seen a doubling in FDI inflow, it still remains a negative figure with very little growth. According to experts from the Invest Bulgaria Agency, an inflow of about 1.0 billion Euro can be expected in the finance, property and retail sectors, and 1.5 billion Euro spread among other sectors. A lucrative concession is that of Sofia airport which is hoped to provide new trading and job opportunities. Another factor to be taken into consideration though is the fact that Greek debt restructuring further delays FDI recovery for Bulgaria. Nevertheless, every cloud has a silver lining and with Ernst & Young’s expectation of Bulgarian GDP growth of 3.2% in 2011, some overall outflow of capital and growth could be foreseen.

GoalEurope Launches New Magazine About Outsourcing to Eastern Europe

The content of this blog is now available in the new magazine created by GoalEurope. Please visit us at www.goaleurope.com for more content, images, videos and more.

High level of demand for Warsaw office real estate

This article is relevant for those who are looking to establish a captive operation in Eastern Europe. Here is an overview of the property market in Warsaw by Property Wire.

Cracow Poland, Outsourcing to Poland, Captive in Cracow, Real Estate in Poland, software development Eastern Europe outsourcing Eastern Europe

As interest grows in Eastern Europe commercial property markets the latest sector report from Jones Lang LaSalle shows that the Warsaw office market continues to see high levels of occupier demand.

Following the stabilization of the vacancy rate in 2010, sound demand and limited supply has continued to push this rate down. At the end of the second quarter approximately 6.2% of modern office stock in Warsaw remained vacant. That is made up of 6.7% in the CBD, 9% in the City Centre and 5.2% in the Non Central locations. The vacancy rate is expected to decrease further due to the relatively low number of new completions.

Prime headline rents in Warsaw are growing, while the demand side has improved and the vacancy rate dropped. Prime office space in Warsaw City Centre can now be secured from €22 to €25 per square meter per month. However, there are some A+ developments quoting rents even higher than this. The best Non Central locations are being leased at €15 to €15.50 per square meter per month. The first sub markets to witness rental growth were the City Centre, Upper South and South West. Continue reading

Reverse trend: Westerners are moving to Eastern Europe to find jobs

By Natasha Starkell, GoalEurope

This month a Romanian company placed an ad in which it was looking for Finnish native speakers to relocate to Romania. This gave way to the idea for this article and the question about whether Eastern Europe can provide employment for Western Europeans.

Doom and gloom in Western Europe

Consider a doom scenario: the economy is diving, the number of unemployed is rising and the chance of finding a job according to one’s qualification is close to zero. So instead of earning tips in a bar to pay off an education loan and moan over the increasing taxes, why not go on an adventure, get a job in an exotic location in Eastern Europe, save up some cash and build up international work experience?

This scenario is far from unrealistic. According to the data released by the British Higher Education Statistics Agency, almost 10% of British university graduates still remain unemployed 6 months after graduation in 2011. This is almost 20 000 people.

One of them, Laura Dixon is taking courses in childcare in Scotland. After graduating from Liverpool Hope University majoring in politics and drama, she went on to a charity mission in Tanzania, then took an au pair job in Germany before going back to the UK to requalify as a nursery worker. “When I graduated, it was impossible to find a job. So I decided to go onto an adventure”, explains Dixon. Her friends in the mean time, also university graduates, ended up working in United Utilities and HMRS call centres in Cumbria.

Can Eastern European jobs be a suitable alternative to these young professionals? Perhaps a seaside location can be one selling point. Constanta in Romania, Varna in Bulgaria, Odessa in Ukraine, all located on the Black Sea coast, could be alluring to northern Brits, if only because of the climate and warm sea. Better jobs and living standards are other good reasons to look for jobs in Eastern European outsourcing industry. Here are just two examples.

Outsourcing Eastern Europe, Outsourcing Ukraine, Software Development OdessaGraduate jobs in Ukraine

Consider attractiveness of Ukraine as a potential job location, where taxes are low and summers are hot, costs of living are affordable and job opportunities are great. The country has almost a thousand outsourcing companies, many of which would benefit from a Western take on marketing of their services which they have to sell in a highly competitive international market place.

Intellias, an outsourcing company in Lviv brought Tom Seuren, a Dutch post-graduate student to join their sales and marketing team in Ukraine for a gap year. His job was help build sales in The Netherlands. Seuren, who faced lukewarm prospects in a very competitive job market back home, decided to take on a challenging job in Ukraine, rather than settling for a mediocre one in Holland.

Outsourcing to UkraineSeuren assisted Intellias to build a Dutch market entry campaign from scratch. In the interview to GoalEurope he said “I was able to develop my skills much faster and it gives me a big advantage on the job market right now.”  By moving to Ukraine Seuren has also increased his living standards: “Though my earnings would not have been sufficient to live on in my home country, it was a pretty good salary in Ukraine, ” he added.

During his gap year in Ukraine Seuren not only worked in the Ukrainian environment, he also had a Ukrainian flatmate, so he has been completely submerged in the Ukrainian culture. “Instead of just travelling to other countries, I truly lived in a different culture and completely integrated in it. I had a really awesome year in which I learned a lot, had loads of interesting experiences and met great people who I will never forget,” he concluded.

Expat jobs in management

Management talent is also in high demand across the outsourcing industry. The problem can be solved by bringing client representatives to join the local team. Providing such client professionals a local base in the Ukraine is standard practice at Ciklum, a Danish-owned, Ukraine-based outsourcing company.

“We offer our clients a unique opportunity to live and work in Ukraine either on a permanent or temporary basis. By doing so our client representatives gain professional experience and cultural knowledge through direct employment in the nearshore destination as well as from the Ukraine’s lower cost of living”, says Torben Majgaard, the CEO of Ciklum. “At the same time, the client’s organization benefits from faster ramp up and increased productivity of their development team due to the more efficient daily communication and onsite management”, he adds.

Outsourcing to Ukraine, Software Development, Outsourcing Eastern EuropeChristophe Lemoine, senior VP of software development at Chartsnow, a client of Ciklum, has been living in Ukraine on and off for the past three years. Here is how he describes his experience so far. “Ukraine is an amazing place to be. Kiev is one of the big cities I know where I never feel stressed or oppressed. Ukrainians are great people to know, work with or simply enjoy good time with. They have this rare quality of being able to have fun and be welcoming, even during the hard times.”

Currently Ciklum employs 11 people from 5 different Western European countries who stay in the Ukraine for a period between 6 months and up to 3 years.

More opportunities abound

Besides graduate students and managers, as much in demand are the Western specialists for call centre jobs or document processing positions where rare languages such as Finnish are required. Not much chance of finding locals who have mastered these difficult languages fluently? A native speaker who’d take a job will probably benefit from lower taxes, cheaper living costs and save up for a down-payment on a house to return to when his adventure in Eastern Europe is over.

Snapshot: Russian IT Market

By Natasha Starkell, GoalEuropeRussia Software Development Offshore Outsourcing Nearshore Eastern Europe

Russian IT industry has grown by 30% last year, and the market reached the value of $4.6 billion.

According to the annual IT Services Forecast and Analysis report by IDC, improvement in Russian economic situation has caused the growth. Financial and government sectors lead the spending on IT with 19.8 percent and 17.5 percent of the market. Telecommuncations and energy market segments account for 14. 4 percent and 11.6 percent respectively.

Outsourcing industry in Russia grew by 14%, with notable growth in hosting and IT outsourcing.

Virtual Corporation: a US Software Development Company

The days of companies with clear-cut national identities are over. Here is an example of one with “the head” in Minneapolis, US and “the body” in Minsk, Belarus. As reported by Steve Alexander on 17th of July 2011 in Star Tribune, Minneapolis

Outsourcing to Minsk, Belarus, Software Development, Nearshore

There was a time when a company based in Minneapolis was really here.

In the digital age, it’s not that clear-cut. Warecorp, a Web and software development company, is based in downtown Minneapolis, where its three founders have an office in the old Grain Exchange building. All of its data, including proprietary customer information, is locked in a computer at a Twin Cities data center.

But 50 of Warecorp’s 60 employees live in the city of Minsk, Belarus. Minsk, one of the technology centers of the former Soviet Union, is a place where English is a foreign tongue and automobile ownership is a sign of prosperity. There Warecorp workers program software projects over the Internet, using data that never leaves Minnesota. Continue reading

Tax advisory Accace buys Hungarian peer

Taxadvisory group Accace, which operates in the Central and Eastern European region, has acquired Hungary’s Interbook Kft. Accece group, which entered the Hungarian market in 2008, and Hungarian-owned Interbook, established in 1996, joined forces on July 1, the companies said in a joint press release.

Accace’s main clients are international companies operating in the CEE region, and the company expects the current acquisition will expand its circle of clients. In addition, it plans to launch tax advisory services in Hungary in the second half of the year.

Accace group, founded in 2006, has been one of the fastest-rising companies in the CEE region in the field of accounting, and payroll outsourcing. Continue reading

Euro Crisis: Implications for Eastern Europe and Outsourcing

By Natasha Starkell, GoalEurope

Euro Crisis Eastern Europe Outsourcing Bulgaria Serbia Albania Romania UkraineGreek default is becoming imminent. Last week the country won an approval for a 3.2 million Euro loan from IMF and the European Union, a fraction of its 340 billion Euro debt. However, the new bailout package has not yet been agreed.

It has also now emerged that Italy’s national debt is at 120 percent of gross domestic product (GDP), the second highest in the Euro zone after Greece. Whilst Italy is considered unlikely to default because of the strength of its economy and long-term debt structure, its economic difficulties can add to the Euro crisis.

So what does this mean for Eastern European outsourcing?

Recession in Western Europe / World

If Greece defaults, markets will panic and this will make ongoing funding for Ireland, Portugal, Italy and Spain much more expensive and limited. This may trigger a new recession, resulting in a revenue drop for Eastern European nearshore outsourcing companies.

What can be done? Outsourcing companies in Eastern Europe will benefit from serving companies in industries unaffected by economic downturn (for example aerospace, energy, healthcare, discount goods).

Slowing down of Eastern European economies

Almost 30 percent  of Bulgaria’s banks and 12 percent of Romania’s are owned by Greek financial institutions (e.g. Piraeus Bank, Alpha Bank). Greek lenders own 15 to
25 percent of the banks in Macedonia, Serbia and Albania. Greek and other European banks who face losses as a result of this default will reduce their lending in Eastern Europe. This will put loan-funded expansion plans on hold for outsourcing firms and will greatly affect local markets for the outsourcing and technology businesses.

What can be done? While EBRD leads the efforts to persuade the lending community to maintain their commitment to the Eastern European region, the Eastern European outsourcing and technology companies may reinvigorate their efforts to expand their international trade with the more stable economies such as Germany, the banks of which hold only 17 billion Euros in Greek debt.

New opportunities

Inevitably, an economic downturn will cause the labour market to cool down . For outsourcing companies in Eastern Europe this means better recruitment results for clients and an opportunity to restructure and improve their outsourcing operations.

Greece may appear as a new European nearshore outsourcing destination. The local economy in Greece is shrinking as a result of dried-up financing and unemployment is rising. The Greek government has approved austerity measures which will include eliminating 150 000 government jobs. Local businesses will look to the international markets for new sources of income. Lower salary expectations, European location and good standards of education will make Greece an attractive nearshore destination in the not so distant future.

Snapshot: Foreign Direct Investments in Ukraine 2010

Ukraine had little luck attracting foreign direct investments (FDI) in 2010. A year after the presidential elections the level of FDI inflows in Ukraine was three times lower compared to the previous year, according to the research findings “European Attractiveness Survey 2010” provided by  the managing partner of Ernst&Young Ukraine Alexey Kredisov to national Ukrainian newspaper Den.

Alexey Kredisov Managing Partner E&Y in Ukraine Outsourcing Ukraine Eastern EuropeAccording to research, uncertain investment climate, inflation and 19% GDP contraction in 2009 might have been causes for concerns for the potential foreign investors and raised questions about the country’s ability to handle the economy.

Over the years 2006-2010 the key sources of FDI came from the USA (22 projects), Germany (21 projects), Russia (17 projects) and France (14 projects), and created 1809 jobs, while polish investors created 1900 jobs in Ukraine in that period of time.

Outsourcing Destination Estonia: See Tallinn in 360° panorama

by Natasha Starkell, GoalEurope

Tallinn - The Capital of Estonia - Outsourcing Destination in Eastern EuropeIt is said that it is better to see once than to hear 100 times. The project Tallinn 2011 has offered the world the opportunity to see spectacular 360° panoramic views of the old city. Tallinn is the chosen R&D location for Skype, Danfoss (Danish industrial group), Seven (US real- time mobile applications company), Indico, (Norwegian digital storage solution provider) and many more.

I wish I had the same opportunity to review outsourcing locations in 3D back in 2002 when I worked on Unisys project looking for an offshore outsourcing supplier. It helps visualizing how the project can actually come to life. For companies looking to outsource their development to Eastern Europe seeing these tranquil images of the old Europe may push their decision into the Baltic region.

Tallinn in 360° panorama

High-Tech Investment Funds Getting Fashionable

We would like to see Russian money invested in Russian companies, but alas foreign companies may be of greater interest, based on this article published in Moscow Times.

High-Tech Investment Funds Getting Fashionable

By Irina Filatova, The Moscow Times

A new equity fund was launched on Friday, enabling local retail investors to buy shares of domestic and foreign Internet companies amid growing interest in the sector.

The fund created by investment company Troika Dialog will invest in global Internet leaders like Google and Yahoo, as well as in companies developing new hardware technologies, like Apple and Akamai, said Yury Karavan, a portfolio manager at Troika Dialog. Continue reading

Beyond Outsourcing: Latvian software company raised venture capital funds

By Natasha Starkell, GoalEurope

Latvia, Private Equity, Outsourcing, Eastern EuropeAGroup, a personnel management software company headquartered in Riga,
Latvia, announced today that it has raised 1.5 million Euros to complete the development of its new product version and convert it to SaaS (Software as Service) model.

As venture firms use razor sharp logic when it comes to assessing the
competitive advantages of technology companies, GoalEurope questioned Alexander
Snurnitsin, the CEO of AGroup about it. “We compete largely in Russian, Eastern
European and Middle Eastern markets. Our HR management software was developed
for an enterprise architecture. So it is better positioned on those markets
compared to the local products which started as solutions for SMEs.”

As for large multinationals serving the same client base, Mr. Snurnitsin
comments, “This region is too small a niche to enter for large
multinationals such as Oracle or SAP which have HR modules built into their ERP
software. Besides, employment legislation in our target markets changes
frequently. Our product can flexibly address this but for large players the
need to update their solutions to reflect legislative changes deters them from
these markets. Our prices are also more attractive”.

Mr. Snurnitsin has his professional roots in the outsourcing industry.
For more than 10 years he was the General Manager of Mirantis, a Russian
outsourcing company. In fact, it was one of Mirantis’ shareholders, Boris
Renski, who suggested him for a leadership role at AGroup, a recent management
buy-out which Mr. Renski helped finance. After a short stunt at Boston
Consulting Group where Mr. Snurnitsin worked as a senior consultant, he decided
to join AGroup as an interim CEO in 2010 and once he discovered the company’s
potential, he bought a part of the company and stayed to see it grow.

Getting a venture fund to invest in a company in Eastern Europe is
already a great achievement. So what are the next steps now that the first
round of financing is secured? “We are going to concentrate on R&D
efforts, release a new version of our software and complete its conversion into
the SaaS model. And we are definitely planning to expand to Western Europe in
the next two to three years”, said Snournitsin, finishing the interview,
and getting into a taxi to take him to the next meeting.

The big one: NASA outsources space travel to Russia

By Natasha Starkell, Outsourcing Eastern Europe

Ok, it is probably not a typical topic of outsourcing to Russia and Eastern Europe and it is only a temporary solution, but NASA does outsource space travel to Russia.

With the retirement of the shuttle programme NASA does not have a vehicle to resupply International Space Station and turns to Russia for an interim solution. Russia will charge $65 million per seat (not a typical cost of outsourcing to Russia) and provide service until private companies in the US such as SpaceX, (owned by Paypal founder Elon Musk) and Blue Origin (owned by Jeff Bezos, founder of Amazon) are cleared for human space travel.

via New space race: Orbital outsourcing to fill shuttle void – Business – MiamiHerald.com.

Eastern European BPO Industry Is Growing Despite Competition from India

by staff writer, Outsourcing Eastern Europe magazine

12 July 2011

The Polish business process outsourcing industry grew by 20% last year. McKinsey reported that 33,000 jobs were moved to Eastern Europe in 2010. BPO service providers are growing fast across the region but Eastern Europe still remains the underdog in the global business process outsourcing industry.

Just take a look at Accenture, one of the leading BPO providers in Eastern Europe. According to an interview Nicholas Butt, the director of Accenture’s BPO centre in Romania, gave to ZF, it would have 400 employees by 2011, offering services such as finance and accounting services, human resources, logistics, supply and insurance for multinational clients. This figure must be compared to 21,000 employees in the Philippines and over 70,000 in India.

It is certainly hard to compete with lower cost locations. For example, a data processing clerk in India earns 1,500 to 2,000 Euros per year, while in Romania the annual gross salary for such a position would be around 6,400 Euros. Still, the price is competitive compared to what a similar job would be paid in England (19,000 Euros). This is perhaps why, according to Liliya Dimitrova, Sales Director at the Bulgarian outsourcer Sofica, the back office services are provided primarily to companies based mainly in Bulgaria and nearby countries. “At the same time, the European market is strategic for us”, she adds.

So what does or will attract companies to the region? “Eastern Europe must find a market niche where it can compete not only on price but also on quality and skills”, says Natasha Starkell, director of GoalEurope, the outsourcing advisory firm in Eastern Europe. “English is a second language to all Eastern European nationals but so is German, Spanish and Italian. So providing multilingual support services is clearly a niche where India does not have an advantage or a strong incentive to compete”. As if to confirm this point, EBRD announced last week that it has invested 3 million Euros in a Bulgarian BPO company named Call Point JSC which offers its services in 16 European languages.

UCMS Group, BPO company specialising in outsourcing Payroll, HR Administration and Accounting has direct operations in Hungary, Russia, Ukraine, Romania and Poland and its 350 employees provide services to 600 legal entities. “Our services require an in-depth knowledge of local legislations and local languages, hence we do not see much competition from BPO providers from India”, says Balazs Nagy, the business development manager of HeziHold, now UCMS Group Hungary. “I think that highly educated people, flexibility, regional presence and proximity to customers make the BPO industry strong in Eastern and Central Europe”.

Standardising processes is another way to offer quality in the outsourcing services industry. This is why representatives from Sofica are participating in the development of a new international standard: ISO: Guide to Outsourcing. Just as CMM certification helped put more quality-focused Indian companies on the radar screen in the late 90s and and the new millennium, adherence to the new ISO standard might become another competitive advantage for the Eastern European BPO industry.

The potential for Eastern Europe to become a leading location for advanced BPO services exists. Looking at their pool of educated resources, Eastern Europe stands out. 17.2 million people were in tertiary education across the region including Russia, compared to 13.6 million in India. And recent investment by EBRD demonstrates that investors expect the industry to grow further.

Who reads this? Outsourcing to Eastern Europe is great because …

I just wonder who reads all these look-alike articles about outsourcing to Eastern Europe… Has media become a bunch of SEO experts? This is ComputerWeekly by the way.


But what has Romania got over India?

To give you a taster here are five reasons to outsource to Eastern Europe:

1. High skilled labour

The former Soviet Union had a strong educational emphasis on engineering and the sciences. As a consequence, many of the countries in this region today have a highly skilled workforce in areas such as computer science, but at much lower labour costs than the UK.

2. Cultural similarities Continue reading

Outsourcing of Insurance business processes in Eastern Europe

Natasha Starkell has been interviewed for the article BPO: too far East? The subject of BPO outsourcing for insurance industries is pretty straight forward. Take, for example, the salaries of the insurance processing clerks in India, Romania and UK and it is obvious when the most savings will be made. The salaries are gross:

India: 1500-2000 Euros per annum

Romania: 6400 Euros per annum

UK: 18000-19000 Euros per annum

Besides, considering the number of English-speaking graduates ready to do data entry type work it is no wonder India excel at this service. Having looked at over 20 countries 9 years ago we at Unisys also thought that India is the best location to process customer data for life insurance business.

Post Europe – BPO: Too far East?

By Edward Murray

Post Europe

01 Jul 2011

When it comes to business process outsourcing (BPO), the message has always been clear: go east. Although the likes of India, China and the Philippines may be the big hitters in this market, Edward Murray asks if insurers are looking too far east and ignoring opportunities closer to home.

As a BPO centre, Eastern Europe is still dwarfed by the more mature territories it competes against, but it has a number of highly attractive aces up its sleeve.

According to Everest Group’s study, Role of Global Sourcing in Financial Services BPO, the market is now worth between $16bn and $18bn. However, has revealed it has the potential to hit $250bn in the coming years, with Eastern Europe among the fastest growing territories in this developing market.

So just what has it got to offer and what should insurers be mindful of in making any BPO decisions?

The first trump card that Eastern Europe has is its strong base of multi-lingual people. Unlike in the Far East, where it can often be difficult to source multi-lingual operatives, Eastern European countries have a host of people that not only speak their mother tongue, but who are also fluent in the likes of English, German, French, Spanish, Italian and even Arabic.

For insurers trying to service either offices or customers across different European territories, being able to set up multi-lingual centres in a single location is an attractive proposition.

Natasha Starkell, a director at consultancy GoalEurope, explains: “Since English or German or other such languages are secondary languages in Eastern Europe, it is possible to create a base of multi-lingual speakers. If companies are working on a pan-European basis then it can make sense to establish an office in an area where those multi-lingual skills are available. These skills do not tend to be as readily available in India or China.” Linguistic talent is not the only thing at the heart of Eastern Europe.

Linguistic talent is not the only thing at the heart of Eastern Europe’s attractiveness as a BPO centre. Being closer to Western insurers also has benefits in terms of the different time zones that are in play.

Although there have been many exponents of the ‘follow the sun’ model, where work is pushed out to territories that complete it overnight and send it back ready to be picked up again in the morning, this approach does not always work in practice.

Michael Heric, partner at consultancy Bain & Co, believes many processes are now so integrated that it is difficult to compartmentalise each of them in this way and says there often needs to be interaction between processing centres to keep them functioning at their best.

According to Mr Heric countries like India are trying to get around this problem by staffing up centres in the middle of the night so they can communicate with partners during their working day, but adds: “It is becoming increasingly difficult and there is a high staff attrition level.”

For Eastern Europe this simply is not a problem.

However, while Eastern Europe has numerous advantages to offer, there are also a number of issues that it has struggled to resolve – the biggest perhaps being scale. While companies like Accenture have tens of thousands of people working on the Indian sub continent, that number drops to hundreds when it comes to Eastern Europe.

This means that getting the right sort of numbers on the ground is challenging for insurers looking at a wholesale move of significant operations.

From a pure cost perspective, Eastern Europe is not able to better the potential wage savings from a move to the Far East. However setting up a BPO centre in an Eastern European country does give insurers the option to then develop that location into a fully fledged sales centre and make inroads into the local market.

With countries like Poland proving so attractive to insurers this is a way of expanding into new territories while also lowering existing operational costs and improving efficiencies.

For those focusing largely on cost savings, Robert Thomson, managing director of The Innovation Group, is quick to point out that relying on labour arbitrage is not an effective long term strategy and that wage inflation alongside currency movements is already having an impact on the savings available in overseas BPO territories.

Mr Thomson said: “People often do not look past the short term cost savings and in a relatively small labour market where competition for high quality staff will be fierce, I think Eastern Europe could see significant wage increases.”

Whatever happens it is likely that labour cost savings will be available for a few years yet, but it is also worth considering that much of the worst wage inflation takes place not at entry level, but in middle management salaries and this could create problems for firms that have not factored this into their thinking.

Mr Heric continued: “If you look at wages, it is in the middle management layer that much of the inflation is happening. It is very difficult to get quality middle management. It is a fast growing industry and there just aren’t enough people with numerous years of experience who can manage operations.”

There is no doubt that Eastern Europe offers significant opportunities for insurers looking at overseas BPO and that as a centre for this sort of commercial activity it is growing incredibly quickly.

Eastern Europe offers insurers access to multi-lingual staff and a potential entry route into new territories. Its time zone also sits more comfortably with the Western European working day, but whether it can overcome the scalability issues it faces and attract insurers in significant volume remains to be seen. However, it will certainly be an increasingly attractive consideration for insurers continually struggling to reduce their
cost bases and improve their margins.

Are you bored of outsourcing PR? Watch this video

by Natasha Starkell, GoalEurope

Digging through mountains of outsourcing companies PR is tiresome. The best press release header can do is to announce the supplier to “top the XYZ outsourcing list”, or “make the top 50 (100, 1000) best outsourcing companies” in Eastern Europe, Ukraine, Bangladesh or wherever. Not only the suppliers have to pay for the press release, getting on top of the ranking is also rather expensive. Frost & Sullivan, for example charges a round number (from my experience back in 2004).

So refreshing to come across something completely different. I just love this video by Sprigs from Kosovo. Not without Dutch influence:

sprigs from sprigs on Vimeo.

Security company outsources to Poland. Client reaction?

An ultimate example of trust in Eastern European outsourcing arrived today on a silver plate. SonicWall, the provider of network security and data protection solutions, has just revealed that it has hired a Polish company to support its client base. Shouldn’t it be the last one outsourcing to a third party, and not to nearby Wales, but to Poland?

It appears that there were initial concerns of the client reaction. The first article by ChannelWeb in June 2011 elaborated on continuous support issues of Surrey-based company struggling to manage its in-house resources in Chertsey, UK and Delhi, India, while only speculating about a third party solution in Poland.

This week however the headline was positive – SonicWall revamp is welcomed. Continue reading

Romania Outsourcing to Finland?

Just saw this job ad: a Romanian company is looking for Finnish native speakers  to relocate to Romania and provide services to (presumably) a Finnish client. Not much chances to find locals mastering this difficult language fluently? And why not? A successful candidate will probably save on taxes, cost of living, cheaper alcohol and save up for a down-payment on the house to return to when his adventure in Eastern Europe is over.

Bucharest Concert HallCustomer Service & Support- Romania – World leader in Outsourcing – recruiting now Finnish speakers

Language(s) Required: Native level of Finnish and fluency in English, Full relocation for successful candidates, Rent allowance 200 Euro per month Continue reading

EBRD supports growth of knowledge economy in Bulgaria and Romania

“BPO Industry in Eeastern Europe gets a thumbs up from investors. Multilingual is the way forward!”

The EBRD, seeking to expand its support to knowledge based investors in Bulgaria and Romania, has signed a €3.0 million equity investment in CallPoint New Europe JSC, a mid-sized provider of business processes outsourcing (BPO) and client interaction services for clients in Europe and further abroad.

Continue reading

Gödel Technologies Europe expands in Belarus

Business software developer Gödel Technologies Europe is expanding its base in Belarus with a plan to create 20 jobs by the end of the year. Continue reading

Europe disappoints Russia at St Petersburg

Unhappy with its partners in the EU, Russia turns both east and west in its search for closer cooperation.

Thousands of top executives from the international business community joined political leaders in Russia’s imperial capital in the middle of June for the annual Kremlin-sponsored St. Petersburg International Economic Forum. Continue reading

Why more businesses are nearshoring in Eastern Europe

This morning an article appeared in Computer Weekly. The same argument for going to Russia and Eastern Europe remains the same. Here is what one of the interviewees, Peter Ingram, IT director at Addison Lee said about his experience of working with Indian and Russian teams:

“The guys in India said yes to everything, copied the mistakes we had deliberately put in there, and didn’t ask us anything about the business – it was all very systematic. The team in Russia looked at our proposition, asked if it was functional, noticed the mistakes and asked us why we did things in this way. They really challenged us and had much
better engagement.”

What can better describe the cultural differences between the regions?

Continue reading

Poland may become the largest center of business services

In 2010 the value of offshoring investments in Eastern Europe grew by 15%. Poland is the fastest growing player in the sector with 20% growth per annum. According to experts ABSL in the next few years Poland can become the largest European advanced services center for global businesses.

The main advantages of the Eastern European countries to the investors are the large labor pool and its relatively low labor costs compared to Western European countries, good transport infrastructure and office space, high quality of services and political as well as economic stability. As the results of analysis conducted by McKinsey & Company, 33,000 jobs were moved to Eastern Europe in 2010. The vast majority (30,000) were the vacancies created in the existing business service centers. Only 8% were the result of new investments. Continue reading

Sitel Expands into Serbia with Major New BPO Contact Center Site

Sitel, a leading customer care outsourcing provider, is solidifying its nearshore offerings, by announcing it has now expanded operations into Belgrade, Serbia.

A well educated workforce, high national literacy levels and lower costs mean that Serbia is an attractive proposition for organizations new to the region. Continue reading

Got money? The Kremlin can help

On an overcast day in May, a clutch of the world’s most powerful investors gathered in a 19th-century mansion in Moscow to hear a proposition from Vladimir Putin: invest in Russia, and we will invest with you.

For forty minutes at the government’s Vozdvizhenka guest house, the prime minister addressed private equity and sovereign wealth funds representing a combined $2 trillion of wealth. He was pitching a plan to launch a $10 billion state-backed fund that Russia hopes can win over those foreign investors who still regard the country as a no-go zone. Continue reading

Russian online companies the new investor darlings

ST PETERSBURG, Russia (Reuters) – Russian internet firms are winning the capital of foreign investors due to their ability to bypass country-specific risks while attracting users and advertising revenue.

The two most successful Russian stock-market floats of the past twelve months have been web-based firms, their fortunes contrasting with a cluster of private issuers that have tried and failed to access capital markets. Continue reading

Hungary GBP Growth May Have Quickened to 4-Year High on Exports

Hungary’s economic growth may have accelerated to a four-year high in the first quarter as rising exports fuel the country’s recovery from its worst recession in 18 years.

Gross domestic product expanded 2.4 percent in the quarter, according to the median estimate of 10 economists in a Bloomberg survey. That would be the fastest pace since the same period of 2007. The statistics office will publish a preliminary growth estimate at 9 a.m. tomorrow in Budapest. Continue reading

Embattled Belarus removes currency limits

Belarus cancelled the retail trading limits for its ruble on Wednesday to ease a growing economic crisis which has driven people to besiege exchange points in search of hard currency.

“The national bank from May 11, 2011 has cancelled the recommended limits on the exchange rates established by banks in buy-sell transactions of foreign currency with the population,” the central bank said in a statement. Continue reading

Bulgaria Registers 4.6% CPI Annual Inflation in April 2011

The consumer price index (CPI) in Bulgaria in April, 2011, compared to March 2011 was 100.2%, i.e. the monthly inflation was 0.2%. Continue reading

A Look Into Moldova’s ICT Spirit with Grigore Raileanu

This interview with Grigore Raileanu, CEO of Moldovan server management company Remsys gives an insight in the ICT industry in Moldova, the country we haven’t covered before.
by Vincent

Chisnau, photo by Vincent

Moldova has a lot of entrepreneurs.  As you walk along the streets in Chisinau, the capital city, you constantly pass signs advertising software development companies, data centers, and computer sales.  As citizens of a “developing” country, young people know they need to work smarter, harder, and more creatively to compete with not only each other, but also others countriesin Europe and the world. Continue reading

Innovation in Software Engineering to be discussed at a CEE SECR 2011 in Russia

The conference takes place in Moscow from October 31 to November 3 2011. One of the keynote speaker is Serguei Beloussov whose company SW Soft (now called Parallels) has become a world leader in server virtualisation technology. This is Russia meeting point for those who believe that there is much more to the software engineering than straight outsourcing.

About CEE-SECR 2011

Central and Eastern European Software Engineering Conference in Russia (CEE-SECR) brings together researchers from computer science, IT and software engineering academia and practitioners from industry and government. Up to 1,000 participants from over 20 countries are expected to attend the 2011 event, presenting and discussing innovation, trends, experiences and avenues for growth in the field of software engineering.

For more information please visit the conference website.

A flurry of activity to ensue

This blog has been quiet for a while, but it by no means indicates the slowdown of the outsourcing industry in Eastern Europe. Quite to the contrary, it has grown significantly over the past two years despite the downturn. I will be updating the blog posts shortly so stay tuned.


CEE Outsourcing Industry Shows Growth in 2008 but will decline in 2009

According to the data provided in CEE IT Outsourcing Industry Review 2008 and 2007 issued by the Ukrainian High Tech Initiative, the outsourcing industry market value has increased by 2% from $2999 million in 2007 to $3056 million in 2008.

CEE outsourcing Review Figures Comparison


 Growth Dynamics

On the country level, the growth was not consistent. Ukraine, Romania and Hungary showed slight decline, whilst Poland, Belarus, Serbia and a number of other countries showed a considerable increase in market value of the outsourcing industry. Whilst overall in the region the IT outsourcing industry continued to grow in 2008, the reduction in rates and volumes was expected in 2009.  Already in the second half of 2008 there was a slight reduction of business activity by two to three percentage points, a significant reduction of 15-20% was seen at the beginning of 2009.

The cooling down of the industry growth is from our prospective a positive development, which offsets the accelerated price increases over the period of 2006-2007 fuelled not only by demand but also by cost of living, often reflecting the real estate boom in the region.

Revenue per professional 2008 














The report provides a consistently optimistic assessment of all of the Eastern European countries as cost effective outsourcing destinations. For example, the revenue per employee calculated on the basis of the figures provided by the report, shows very attractive equivalent hourly rates from $11 for Moldova to $23 for Hungary. This may reflect the lower prices on the existing contracts than the ones offered to the new clients. In our experience the price of outsourcing services are more attractive in the locations such as Ukraine and Belarus, than in Bulgaria or Romania, where the hourly rate have increased beyond the $30 per hour.

The report shows the maximum and minimum price per person per year for each country. For example in Hungary the cost of one man-year may ranges from $33’500 to $66’500 and in Albania it fluctuates from $25’000 to $48’000.


With the worldwide economic downturn outsourcing services are typically experience growth, offering much needed cost efficiency. At the same time the Eastern European outsourcing providers, especially small and medium size companies experienced revenue decline in the second half of 2008 and in 2009. Although the outsourcing market grew slightly in 2008 it has already shown decline of 15-20% in the first half of 2009 and will undergo a further decline by the 2009.

Outsourcing providers companies will have to implement drastic cost-cutting measures to remain profitable in the foreseeable future. Despite current difficulties, leaner organisation and more competitive pricing will position Eastern European region once more as an attractive outsourcing destination.

Further study needed

The report does not explain sudden growth or contraction on individual country markets, such as 25% reduction in market size in Estonia or 56% market growth in Croatia. We believe that an individual country study would be useful to explain such fluctuations to better understand the individual country dynamics. Source: CEE Outsourcing Industry Review 2007, 2008 Analysis: by goaleurope.com

The reports can be found at http://goaleurope.com/main?cat=6

S&P Cuts Ukraine’s Credit Rating on Economy, Banks

This article has appeared in Bloomberg and sheds the light on the impact of the financial crisis on Ukraine. With IT labour market cooling down the opportunities for outsourcing are on the increase. We will cover the impact of the financial crisis on the outsourcing industry in our upcoming articles.

S&P Cuts Ukraine’s Credit Rating on Economy, Banks

By Daryna Krasnolutska, Bloomberg

Oct. 24 (Bloomberg) — Standard & Poor’s lowered Ukraine’s credit ratings for the third time since June on concern over the strength of the country’s banks, its weakening currency and slowing economic growth.

Foreign-currency debt was dropped to B, five steps below investment grade, from B+, the ratings company said in a statement today. Local currency debt fell to B+ from BB-. S&P cut Ukraine’s credit ratings in June and lowered its outlook to negative from stable on Oct. 16, joining both Fitch and Moody’s, who downgraded the country’s ratings earlier this month.

“The downgrade reflects the rising cost to the Ukrainian government of a necessary recapitalization of the banking sector against a backdrop of declining growth and heightened exchange rate risk,” said S&P in the statement. “Low confidence in Ukraine’s financial and monetary institutions increases the associated risks to the real economy and inflation.”

The global financial crisis is hitting more vulnerable emerging markets as investors shun riskier assets in countries with growing current-account deficits in a flight to safety. Ukraine has the worst creditworthiness of Europe’s emerging markets, based on the cost of credit-default swaps, which protect bondholders against default. Its economy’s meltdown is complicated by a political crisis that led to collapse of the government and early elections.

Hryvnia Falls

The hryvnia fell to 6.0812 per dollar, its weakest level since the currency was introduced in 1996. Ukraine’s annual inflation rate almost tripled in a year to a record 31.1 percent in May before easing back to 24.6 percent in September.

The government is seeking a $15 billion loan from the International Monetary Fund and plans to join countries including the U.K. to Iceland, Germany and Belgium in nationalizing troubled lenders. It may buy Prominvestbank, the country’s sixth-largest lender, and other banks, Prime Minister Yulia Timoshenko said.

“A substantial IMF loan facility for Ukraine is likely to be approved relatively soon,” said S&P. “ Nevertheless, the necessary political consensus upon which IMF and other concessional lending depends may not come quickly enough to offset mounting pressures on the exchange rate and the financial sector.”

The country’s economy may face the risk of recession as prices for its main exports, including steel, dropped, as demand weekend at world’s market, according to the president’s office.

“A reversal in Ukraine’s terms of trade is also underway, adding further downward pressure on growth prospects in the lead-up to national elections,” S&P said.

The outlook for Ukraine is negative, said S&P, indicating it may cut the rating further, according to an e-mailed statement.

“Conversely, the outlook on the ratings could change to stable if the government is successful in implementing effective financial stabilization measures that lay the foundation for economic recovery over the next two years,” said S&P.

A brave opinion on Russia by an Englishman

Ed Lucas can not travel to Russia. He simply can not obtain a visa. This is how the Kremlin mildly intimidates foreign journalists critical of its regime. Ed’s book “The New Cold War” has just come out this week. I am reprinting here his piece from The Times.

 From The Times

February 5, 2008

Why kowtow to brutal, cynical Russia?

We have a new Cold War and we’re losing it. The West must stand up to the Kremlin now

Edward Lucas

Sixty years ago the Berlin Airlift highlighted the menace of Stalin’s Kremlin. Forty years ago Soviet tanks crushed both the Prague Spring and any remaining illusions about the Kremlin’s grip on the captive nations. Twenty years ago we began dropping our guard, as totalitarianism withered under Mikhail Gorbachev. Now it is time to acknowledge the inconvenient truth. Russia is back: rich, powerful and hostile. Partnership is giving way to rivalry, with increasingly threatening overtones. The new Cold War has begun – but just as in the 1940s, we are alarmingly slow to notice it.

The loudest alarm signal is Russia’s predictable yet mystifying presidential election on March 2. Predictable because everyone knows who will win: Dmitri Medvedev, Vladimir Putin’s polite, lawyerly sidekick; mystifying because the meaning of that victory is so unclear. Will Mr Medvedev be a mere figurehead? Will he stand down and allow Mr Putin to return? What does his stint running Russia’s energy giant, Gazprom, one of the world’s most corrupt, incompetent and sinister companies, tell us about his plans for the future? What does his rise mean for the clans of crooks and spooks whose murky feuds have increased so sharply in past months? Once a dead art, Kremlinology is now a lively and useful discipline.

Politics in Russia is a matter of life and death. Mikhail Khodorkovsky, once Russia’s richest man, is on prison hunger strike in protest against the ill-treatment of his aide Vasily Aleksanyan. Mr Aleksanyan is confined in a filthy mould-infested cell because he refuses to sign a bogus confession incriminating Mr Khodorkovsky. His judicial torture, including denial of medical care, which has blinded him, has been condemned by the European Court of Human Rights. It reads like something from Dostoyevsky, not a factual account of prison conditions in supposedly one of the world’s top eight industrialised democracies.

That doesn’t bother most Russians. Mr Putin is wildly popular; so is Mr Medvedev. Mr Khodorkovsky and other former “oligarchs” are seen as despicable emblems of the 1990s, a decade in which Russians feel they were swindled at home and humiliated abroad. Mr Putin has brought both stability and pride. For now, democracy has failed: most Russians say they agree that the media should be controlled and that the opposition should not be allowed to contend for power.

Those feelings are complex. They are partly the result of the state-controlled media’s propaganda. They also truly represent tragic misunderstandings and missed opportunities in the Yeltsin years, when oil prices were low and Russian governments struggled with crippling foreign debts. Mr Putin has been lucky – with oil at nearly $100 a barrel, Russia is bound to prosper. Yet he too is a product of the 1990s, an unemployed ex-spy who became a top official in the Yeltsin Kremlin. His denunciations of that era neglect to mention its strengths: press freedom, and also economic reforms such as privatisation and price liberalisation from which Russia has hugely benefited.

Communism has gone, but in its place has come “sovereign democracy”, a potent cocktail of self-righteousness, nationalism and xenophobia that fuels the Kremlin’s power grab abroad. In the “swing states” of Eastern Europe – Bulgaria, Latvia and Moldova – we are already losing the new Cold War. We have avoided catastrophe in Serbia by a hair’s breadth. The great engines of EU and Nato expansion, which brought half a continent into our orbit after the collapse of communism, have stalled.

But it is not just “faraway countries of which we know nothing” that are at stake. Russia plays divide and rule with the West, ruthlessly using our democratic politics and open economies to undermine us. It has brazenly hired Gerhard Schröder, the former German chancellor, to promote its biggest energy project, Nord Stream. This is a hugely expensive and strategically vital gas pipeline on the Baltic seabed that will bypass Poland and deliver gas straight to Germany. Like a rich and powerful man who becomes pathetically dependent on heroin, Germany is mainlining on Russian energy. The new pipeline hooks up addict and pusher directly. Instead of urgently diversifying away from gas and to other suppliers, the Netherlands, Italy and Austria are following the same path.

Russia has cowed and muzzled the Organisation for Security and Co-operation in Europe, supposedly the Continent’s main democracy-promoting and election-monitoring body. It has nobbled the Council of Europe, a talking shop that is supposed to be the custodian of human rights. The British Conservatives, in bizarre alliance with Mr Putin’s United Russia party, came within a whisker of electing a former KGB man and Kremlin propagandist, Mikhail Margelov, to the presidency. At its summit in Bucharest in April, Nato’s European members are all set to kowtow to Kremlin pressure and give a cold shoulder to Georgia’s bid to move towards membership. The EU can not even summon the willpower to liberalise its internal energy markets, let alone counter the Kremlin’s ruthless use of cheap energy deals and lucrative pipelines.

Our biggest weakness is money. During the old Cold War, doing business with the Soviet Union was a rare and highly suspicious activity. Now bankers, lawyers, consultants and spin-doctors (and even, it is whispered, politicians) flock to take 30 silver roubles for services rendered, even when they are privately disgusted by the source. Until that changes, we have little chance of resisting the Kremlin – and even less of persuading ordinary Russians that their corrupt, cynical, brutal and incompetent rulers are harbingers of disaster, not triumph.

Edward Lucas is author of The New Cold War: how the Kremlin menaces both Russia and the West 

Consolidation in Eastern Europe: Who is Still in the Outsourcing Game?

Here is my article which came out in February issue of the Outsourcing Journal.

For a long time the management of EPAM Systems, Eastern Europe’s largest software development company, was looking to enter the Russian outsourcing market. At the same time the labor market in Belarus, with a population of nearly 10 million and EPAM’s first offshore location, began heating up. So the need for new resources became more urgent.

EPAM management selected Vested Development (VDI), a Russian software development company headquartered in Burlington, Massachusetts. “We looked at a number of companies, but with VDI we knew each other for many years and there was a strong level of comfort,” says Arkady Dobkin, CEO of EPAM. VDI, founded in 1993, began life as an offshore software development company. However, since the beginning of 2000, the company has placed a strong focus on the Russian market.

Such is the picture across Russia: many software development companies have seen more success on the local IT market than abroad. The Russian economy, rich in natural resources, finally showed a need for the talented engineers back home. Besides, unlike publicly-listed Western companies looking to squeeze every cent of efficiency out of their outsourcing business case, privately-owned Russian businesses pay well to keep the best suppliers delivering the best results.

The growth of the IT industry in Russia has been remarkable. According to the estimates of Russian information agency RosBalt, in 2007 the IT market in Russia grew by 25 percent compared to the previous year; the market has maintained that growth rate for a number of years in the past. The increasing local market need for IT professionals, exceeding existing supply, resulted in the first signs of the industry consolidation.

Thus in 2007 one of the largest Russian system integrators, IBS Group, completed an acquisition of Borlas, a consultancy and IT services company. At the end of the year the company employed 6,000 people. Also, last year Systematica acquired systems integrator TopS BI. In the meantime Verysell, which employed 750 employees in 2007 and was valued at $300 million by Troika Dialog, raised $50 million to acquire an IT services company in preparation for an IPO.

Across other eastern European countries the fight for IT resources gets tougher. In Poland, the third largest country in the region after Russia and Ukraine, there are only a few large specialized offshore outsourcing service providers. In 2007, the total IT outsourcing market volume was 750 mln PLN (3.5 PLN = 1 Euro). Most of the key players, though, offer software development services to their international customers, accounting for approximately 45 percent of their revenue, although there is no firm statistical data, according to Andrzej Horodeñski, the spokesman of the Polish Chamber of Information Technology and Telecommunications.

“The Polish IT labor pool is close to being exhausted,” he says. “The basic reason for that is not labor migration, but mainly the internal IT industry growth.” Here IT companies merge to survive fierce competitions from the international giants such as IBM and HP. In 2007 Computerland merged with Emax to form 3000-people-strong Sygnity Group, and at the end of the year Asseco merged with Prokom, creating Poland’s largest IT company.

In Romania, where the country entered the EU on the first of January 2007, its outsourcing industry was simply sold out. U.S.-based Techteam acquired Akela, one of the oldest Romanian outsourcing companies; UK-based Endava acquired AGS; and Adecco bought IP Devel to expand its embedded development team. U.S.-based Computer Generated Solutions bought EasyCall, the largest Romanian call center operator, with 600 employees and Euro 1.8M revenue.

Also, in 2006 Adobe bought the Dreamweaver development experts InterAKT. Now, according to Vasile Baltac, the president of ATIC – Romanian IT association, there are few small outsourcing companies with Romanian capital left. Branches of ICT multinationals or joint ventures where the main shareholder is a foreign company produce 80 to 90 percent of the industry turnover,” he says. “All the big names are present in Romania now: Oracle, HP, IBM, Alcatel, and Siemens. Large multinationals number about 3,000 people, and they are very aggressive on the local IT market too.”

In Bulgaria the demand for software developers exceeds supply, and the local providers are fighting with Coca Cola, HP, SAP, and Siemens for the talent. VMware solved the problem with resources fairly easily. In 2007 it simply acquired its outsourcing supplier Sciant, a Bulgarian software development company with a lower-cost subsidiary in Vietnam; so Sciant clients had to look elsewhere to set up their operations from scratch.

Acquisitions of outsourcing companies have been happening across Eastern Europe. Exigen, the U.S. outsourcer, has been buying companies in Eastern Europe for a while. In its portfolio, for example, is Dati Gruppa, a Latvian IT company, and Starsoft, a Ukrainian company.

In Ukraine, acquisitions also started to take place although the country has still over a hundred small and medium-size players, with only a handful of them employing over 200 people. For example, Global Logic whose resources are based in India and the U.S., merged with Bonus Technologies, whilst Kharkiv-based Telesens was sold for $2.7 million to NASDAQ-listed TTI Telecom in December 2007. The purpose of the latter deal was to open up markets for both companies, rather than simply secure a resource base.

Tom Scharning, the Vice President of Business Development at EDB, a Scandinavian IT company, has conducted extensive research looking for infrastructure outsourcing capabilities in Eastern Europe. “We looked at both outsourcing and acquisition options. However, we didn’t find sufficient level of expertise in infrastructure management, only some rudimentary skills,” he says. So the company decided to acquire a company in the region and train specialists in house.

“We looked at many Eastern European countries such as Russia, Bulgaria, Poland, Belarus, Ukraine, Romania, and Baltic States. We found that only Russia and Ukraine fit the bill. We feared that Belarus, Bulgaria, and Romania will follow the steps of the Baltic countries where the resources became drained quickly and the prices reached those of Finland.” Eventually, EDB bought a majority stake in two companies in Ukraine.

“We had a long list of about 40 Ukrainian companies, some of which had high expectations of their valuation,” says Sharning. “So finally we made a deal with Infopulse and Miratech, which are now part of the EDB global operation.”

In defining its Eastern European strategy, EDB looked not only just at low-cost resources, but it has also followed the steps of its clients. “Scandinavian banks are the key EDB customers. They are moving eastwards towards Russia and Ukraine,” adds Scharning, so the company looked for the resource base nearby to continue supporting its clients worldwide.

The consolidation of the offshore outsourcing industry in Eastern Europe has become a reality, which demonstrates both the high demand for the local professionals, located close to the Western European markets, and the bottleneck of the labor supply. As for EPAM Systems, the acquisition was a success; it completed the post-merger integration in 2007. “As a result of the merger we’ve got interesting CIS clients, and now 50 percent of our resources are in Russia and Ukraine,” concludes Arkadiy Dobkin.

Lessons from the Outsourcing Journal:

  • As the consolidation of IT industry in Eastern Europe has started, the companies looking to secure IT resources in Eastern Europe need to look for the locations carefully, avoiding overheated labor markets.
  • Companies looking to buy an outsourcing supplier in Eastern Europe should look at additional benefits of an acquisition such as access to the new markets.

Private Equity: is local presence in Eastern Europe necessary?

I have always claimed that Russian beer is superior to German (although Russian breweries use German equipment anyway). We have our mini-arguments about it at home, especially when I get the treat from a local Russian supermarket.

This week however I was pleased to learn that the battle around the Russian Baltic Beverages Holding is heating up. Carlsberg and Heineken are fighting with Scottish & Newcastle as to who will end up owning it.  Blackstone and TPG have both stepped in to finance this joint venture buy-out on S&N side.

In my work I see many PE firms forming Eastern Europe-focused strategy out of the local offices: Poland (3TS), Ukraine (Advent), Russia (TPG). Other firms, such as Blackstone however build their East European teams within their existing teams in the West.

There are arguments for both approaches. Local presence offers a better chance to find a good deal while minimising the likelihood of a competitive bidding which occurs when deals are advertised by investment banks. It offers an ease of networking, a better chances of doing due diligence, an access to the local advisors and a much better availability of the executives at a short notice. But it comes at a price, especially when the dealflow is scarce and really good deals are are hard to come by.

Russia is perhaps still such a country where despite the economic growth risks are perceived high, preventing many investors from playing an active role there (few will remember a murder of Baltic Beverages’s CFO in 2000). Both Blackstone and TPG name Russia amongst their regions of interest. Blackstone, which started actively looking at Russia only a few months ago, does it out of its London office. Texas Pacific however went all the way to establish local Russian presence with the former British Olympic athlete Stephen Peel running it.

Should S&N win the bid for Baltic Beverages Holding, Blackstone would justify its strategy based on a pan-European team structure. but Mr. Peel would question whether moving to Russia was necessary.

Scottish & Newcastle’s Russian buyout

January 13, 2008  Sunday Times


TWO private-equity groups, Blackstone and Texas Pacific, have held detailed talks with Scottish & Newcastle, the brewer, to help buy out Carlsberg’s £4 billion share of the Russian joint venture Baltic Beverages Holding.

Blackstone and Texas have made separate approaches to S&N’s chief executive, John Dunsmore. Both groups have said they are prepared to invest as much as £2 billion. The approaches form one of the key reasons why the S&N board last week rejected a revised offer of 780p per share from a European brewing consortium comprising Carlsberg and Heineken, valuing the company at £7.6 billion.

Dunsmore is confident he can generate significantly higher value for his investors by buying out Carlsberg’s interests in BBH, rather than selling out. However, some big investors are concerned that his determination to see off the bidders will result in a big share-price fall if he is successful.

A top five shareholder said: “There will be a severe backlash against the board if they let this deal fall through.”

Another said: “There is real commercial sense behind this deal. The board might say it can go it alone, but so far it has failed to do so.”

Blogosphere is invaded by Pro-Kremlin Oligarchs

Russian pro-Kremlin Oligarch is reported to have purchased a US blogging site Live Journal. Russians are amongst the largest user base of the firm- 28%. More than 2 million bloggers use the website, but now there is a concern that Live Journal will be censored.

It has been used by many outspoken critics of the Kremlin as I have been writing about previously. Let’s wait and see what happens but I believe Russia is a few steps behind China in censoring the Internet, not the least because Mr. Putin is known not to even own an email account. All can change with the arrival to power of Mr. Medvedev, who is told to regularly read electronic news channels.

Prices rise in Russia

Natural resources export, not supported with the proportional growth of the other sectors of Russian economy is likely to cause last year’s price increases. In Russia, according to Interfax, the inflaction for 2007 reached 12%.

This perhaps would also be reflected in the corresponding salary increases of IT personnell, making offshore outsourcing less attractive proposition for the Western customers.

But so long as the population keeps its savings in a stable currencies (albeit salaries of many employees are still measured in declining dollar), the impact of the price increases on savings would not be anything like hyperinflation of the mid-90s.

Outsourcing to Ukraine: Why the US$246 Million Industry Is Expanding to the Provinces

This is one of my latest articles which appeared in December 07 issue of Outsourcing Journal.

By Natasha Starkell for Outsourcing Journal

December 2007

When the executives of Rotterdam-based ISM eCompany decided to expand its software development capabilities outside the Netherlands two years ago, little did they know their core development team would be based in a small town of Zhytomyr 140 kilometers away from Kyiv, the capital of Ukraine.

The Netherlands is experiencing a shortage of IT engineers, so ISM eCompany, an Internet solution provider, had to find alternatives to hiring locally. “We looked at 20 countries and came up with India, China, and Ukraine as the top three locations to set up a captive operation,” says Michiel Schipperus, the company’s COO.

The company’s decision is not surprising. Ukraine, the second largest Eastern European country after Russia, with a population of 47 million people, is a popular outsourcing destination in Eastern Europe. A key attraction: according to the Ukrainian Ministry of Education, over 670,000 technical students are currently enrolled in Ukrainian universities.

Offshore Outsourcing Industry in Ukraine

In its recent study Goaleurope, an Eastern European advisory firm, estimated the size of the outsourcing industry in Ukraine reached over US$246 million in 2006. Ukraine is not a member of the EU, so Ukrainians cannot take jobs freely outside their country, unlike Polish, Czech, and other nationals of the new EU members. So the Ukrainian software developers stay in their homeland, where the prices are low; work comes from offshore outsourcing customers.

According to Schipperus, ISM eCompany chose Ukraine because it has a large pool of highly educated people and the geographical location was convenient. He found the English competency of his employees was better than in China. And the cultural differences were less noticeable compared to those in India and China.

Ukrainian Capital and the Provinces

Ukraine still maintains a low cost of living. An average salary in the capital of Ukraine, Kyiv, is only US$329 per month; in Kharkiv, the second largest city, is only US$186, according to the State Statistics Committee of Ukraine.

However, the property boom resulted in higher real estate prices, primarily in Kyiv, and that impacted the salaries of those living in the capital. The salaries of the IT professionals there rose to the level of US$800-$1500 per month, which differs significantly from the salaries in the provincial towns.

For example, the salaries for IT engineers are set around US$600 in towns like Lviv, Kharkiv, Dnipropetrovsk, and Odessa, according to the Web site developers.org.ua. In addition to salaries, the high prices of real estate and the tougher competition in Kyiv were reasons why ISM eCompany decided to look outside of the capital for a location for its development center.

In fact, many outsourcing companies already established their subsidiaries in provinces. While Kyiv is still responsible for over 50 percent of all development resources, according to Goaleurope, 18 percent are in Lviv and 13 percent in Kharkiv.

After a careful analysis, the company went to Zhytomyr, which has a population of just under 280,000 people. The reasons behind choosing Zhytomyr included availability of a technical university, which provided a high quality of education, and its location, which is a short drive from Kyiv, notes Schipperus.

Ukraine Advantages

There are many good reasons for choosing Ukraine. It is well situated for doing business with Western European countries. There are no visa requirements for Western European and North American citizens. Ukraine is relatively well connected to the rest of the world, as it has international airports in Kyiv, Kharkiv, Dnepropetrovsk, Donetsk, Odessa, and Lviv. Kyiv is within a two-hour flight from the European capitals, and other cities are connected to the rest of the world via Vienna, Warsaw, Kyiv, and Munich.

Maybe that is why over 60 German companies outsource their software development to Ukrainian companies, accounting for six percent of all employed engineers in the industry, according to Goaleurope.

As for the labor pool, qualified resources are in abundant supply, despite the high demand. Many experienced engineers are already employed by software development firms. To hire IT professionals, recruiters look to hire university IT graduates.

They need to be trained in the new technologies and processes before becoming valuable to the industry, as the universities are not always up to date with the new trends in the IT industry. Some outsourcing executives even teach university courses and use them to find the best new talent for their organizations.

To improve the level of education, the Ukrainian Minister of Education Stanislav Nikolaenko announced the government plans to spend 6.52 percent of its GDP on education. This compares favorably with the education budget in Romania, reaching 3.5 percent of GDP, and 3.8 percent of GDP in Russia, according to the CIA World Factbook 2006.

The Challenges of Outsourcing to Ukraine

Disagreeable politicians are still scaring off some foreign investors. First, the Orange Revolution brought the expectation of the bright future for the country and attracted US$10 billion of foreign direct investment, according to Globe and Mail’s interview with the President of Ukraine Victor Yushchenko. Then continuous disagreements between Yushchenko and the government resulted in the recent parliamentary crisis and questions about democratic consolidation.

Software developers’ level of experience is another issue if a company sets up a software development center outside the capital. Most of the software developers with experience are in Kyiv, says Schipperus. In Zhytomyr they are mainly students with minimal work experience. This is why ISM had to invest in training its employees since it hired many straight from the university.

Now ISM eCompany employs 50 people, who represent the core of its software development team, although the growth was not without challenges.

Communication was the major challenge. “At first we had to learn how to understand each other. In practice, it can be really complicated. Some tasks here are often clear, but they weren’t clear at all to the Ukrainians,” says Schipperus. Workers who interface with the Ukrainian team must understand how Ukrainians think so they can explain something to get the results they want.

To improve communication between the teams, the representatives of the Ukrainian office work at the Dutch office for a few months, and ISM eCompany has kept two Dutch managers in the Ukrainian branch from the beginning.

Employee retention is also a recent inconvenience. As the demand on experienced IT professionals grows, people seek higher salaries to compensate for the rising rental costs and cost of improving their living standards. Employers have to make extra efforts in helping their personnel develop their careers, improve their knowledge, and establish strong social ties to the organization. Outsourcing centers in the provinces also help retain employees, who value their local environment and do not want to move to Kyiv to make a living.

Alexander Farstad, the CEO of eZ systems, which owns a development center in Odessa, treats his Ukrainian employees exactly the same as employees in the Norwegian headquarters. The open-source content management company pays “white salaries” and offers the same benefit packages, including maternity leaves.

The company also makes its Ukrainian group feel like members of the larger eZ family. “We organize annual employee conferences when everybody comes to our headquarters to Norway. Our Ukraine team has high stability because we involve them in the company,” says Farstad.

The Future of Offshore Outsourcing Industry in Ukraine

Given the number of small players, the outsourcing industry will inevitably go through the consolidation process, which is already happening in smaller Romania. There Techteam purchased Akela, Endava acquired AGS, Adecco bought IP Devel, CGS bought EasyCall, and Adobe bought Interakt. In Ukraine, the consolidation of the industry started with a large Norwegian IT company EDB buying two local software development companies.

With the assurances of the larger firms investing locally, more companies will outsource to Ukraine. Ultimately though, Ukraine will occupy a niche in the international outsourcing business, focusing on highly complex software development projects delivered by smaller teams.

Finally, customers looking for the best quality of service for a good price will shift further into the provinces. The question is: which will be the next capital of outsourcing: Lviv, Odessa, Dnipropetrovsk or Kharkiv?

For ISM’s captive development center in Zhytomyr, the future is bright but challenging. “The last year and a half were an investment because we had to devote a lot of extra attention to the Ukrainian subsidiary. It might take us another year until we can reap benefits,” concludes Schipperus.

Lessons from the Outsourcing Journal:

  • For a captive operation, do your research to find the best location that will sustain cost advantages over a longer term.
  • Invest in training to ensure growth of your development team.
  • Prepare your communication process well in advance and engage teams from both countries to learn more about their culture and approach to sharing, understanding, and interpreting information.
  • Develop a set of incentives other than salary and bonuses to keep your team motivated to remain a part of your team.
  • If you are setting up a captive operation, be prepared to spend a year before it is up and running.

Controvercial Time’s Person of the Year: a Marketing Trick or an Insight?

V Putin
Russia’s President Vladimir Putin was elected Time’s Person of the Year. At first, I was outraged, for the cynicism of the Russian parliamentary elections made many outsiders eyebrows rise to the other side of their heads.

However having looked at the explanation in more details, indeed the choice is commendable. And whilst Tom Casey, the US Government spokesman refused to comment as he didn’t want to help Time sell more magazines, the decision behind such an award is surely not only PR related, though undoubtedly controversial.

Previous winners include Adolf Hitler and Joseph Stalin. After Ayatollah Khomeini won the award in 1979, thousands of readers cancelled their subscriptions but it has certainly created talk in the media. So here is why I think there is more to the award than a PR stunt.

To start with, the award is not an honour, no matter how Kremlin’s Administration is using it to its advantage. It is a mark of a significant achievement or change. Surely, there are both as far as Putin is concerned. The country is an economic power, and its oil and gas not only drive the prosperity,  but also respect from the worlds nations.

 On the other side of the scale are corrupted courts and an intricate legal system, making it easier for the government or other interested parties to shout “Illegal!” and get the victim out of business or action, if the motives are political. Rossneft, British Council and Garry Kassparov, the presidential candidate, are just few examples. Taking Victor Shenderovitch to jail after legally allowed one person’s demonstration took place – using a prop student with a flag to increase the number of demonstators to two – is another simple way how unwanted action can be served under illegal sauce.

Then there is infrastructure, which didn’t see much money also the government is awashed with cash. Education and health system are less than inadequate. Corruption is of staggering proportions. The freedom of speech is extinct, as is any viable political opposition.

The award of Time magazine is perhaps more fascinating, as it allows us readers and viewers to see the free Western press interact with the Russian President, who has not been challenged by journalists for many years.

And finally, this feature on the Time website is a true blend of technologies: read the condensed article, make your own judgement from a full transcript, or watch the facial expressions of the Russian president in this video. And if that’s not enough information, check out the videoblog about the Russian countryside.

I don’t know if the authors have irritated Putin enough to be refused Russian visas during their next visit, but they have certainly made an impact: they let us all see Putin without Russian media’s pink glasses, or political correctness of the oil hungry politicians.