Forty-three percent of software companies in Romania develop software under contract exclusively for international clients, another 46% develop under contract for international clients and also their own products and 11% develop commercial software, the report shows.
“We divided the software companies in Romania into four major categories,” says Andrei Pitis, ANIS chairman, who added the association commissioned IDC to do this ‘investigation’ for it to use as a starting point towards the creation of a strategy for a stronger development of the industry over the coming years.
What are the major software categories in Romaia, according to the IDC-ANIS survey?
“The first category includes foreign companies that sell software solutions in Romania, which usually have marketing and sales employees rather than engineers. Such companies include Microsoft, SAP and Oracle. It’s true that these companies have development or outsourcing centers in Romania, too, but that is practically a different business altogether conducted by different companies,” Pitis says.
“The second category is companies like Ixia, Intel and Adobe, which develop software in Romania, have development centers, which actually conduct research and development in this country. The companies have complex operations in Romania, staffed by very well paid people, these are the kind the companies that keep very well trained people from leaving [to work] abroad. They hire software engineers to work on very interesting products.”
The third category, he added, consists of software outsourcing companies. There are huge companies developing software in Romania and very little is known about them. They also include companies with a hybrid business model, which develop their own products besides those they work on for their clients. Such companies employ 90% of engineers and programmers and this is where the heaviest pressure is on the number of people and salaries because these companies need to hire more people to boost their business. The pressure on the market comes from such companies, Pitis explained.
The software companies in Romania exported $163 million worth of software last year, up from the $143 million the year before, according to IDC.
The fourth category includes a number of rather diverse local companies, from powerful local players like Bitdefender, Siveco and Totalsoft to the new generation of companies like Mavenhut, Ubervu, 123sContactform and Smartbill, Pitis says.
“They are companies that sell [their products] abroad, as well. They employ engineers, programmers and sales, marketing and branding people.”
What conclusions can be drawn from the survey?
“The software industry is at a turning point where it has to start a shift from the traditional model of developing software by order to creating its own software and innovative services,” ANIS chairman says.
This is a change the industry needs to make because Romania is starting to lose its edge in terms of costs over other countries in the region and Asia, and as the trend becomes more visible, companies with stable outsourcing revenue will begin losing customers and revenue.
Romania will most likely follow into the footsteps of its neighbors and most important competitors, where the growth of the market was hampered by the significant increase in human resources costs. If this trend is confirmed in Romania, too, a significant slowdown or even stagnation of service export revenue will follow, the IDC report says.
“The local software industry will be completely different in five years from now,” Pitis said.
Romania’s biggest rivals over outsourcing contracts are Russia, Ukraine, Bulgaria and Poland, according to the IDC report.
What is the solution for the software industry in Romania to grow?
“We need more ‘Radu Georgescus’,” Pitis says. What he means is that more local companies have to try to develop their own products to sell on international markets as Gecad group president did.
“The problem is that there are no incentives precisely for the fourth category of companies that employ not only engineers and programmers but also sales and marketing people. Such companies cannot claim the tax exemption available for programmers and have no access to funding, private equity funds and an ecosystem to support their development. The government unfortunately does not understand the business model of these companies, which can have international sales with a handful of people. This is a Europe-wide problem, but it is worse in Romania, which is why we need to move or else we’ll be lagging behind.”
The solution, the ANIS chairman believes, does not only reside in startups but also in spin-offs of large companies, which will thus try new market niches.
(English version by Loredana Fratila-Cristescu)