nearshoring in moldova mark yates final (1)

Doing IT in Moldova – what’s ready, what to plan for

Mark YatesLead Analyst, IDC Government Insights

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Outsourcng vs. internal nearshore center– traditional matrix

Complexity

Mis

sion

crit

ical

Yes

No

Complex Simple

Keep in house Keep in house – automate

Outsource In or out – automate

Sometimes outsourcing is the wrong thing to do.


Opening a nearshore center Why? Why start an IT support or development center abroad when I can outsource? For mission critical tasks, the answer is self-evident. But the same reasons apply to non-mission critical tasks:

Reduce risk– platform/tech changes –– info leakage &security –– turnover and training–– project management –

– task prioritization –– version control –– quality control –

Control projects– resource allocation –– skills concentration – – consistent methods–– skills development – – task assignment –

– confidentiality –

Save on costs– office space –– recruitment –

– payroll – – taxes –


Opening a nearshore center What are my primary concerns with opening a center abroad?

Economic and financial

Government stability and incentives

People and skills

IT environment


Opening a nearshore center What are my primary concerns with opening a center abroad?

Economic and financial

Government , institutions, and business

People and skills

IT environment


Opening a nearshore center

Economic and financial – real GDP growth

Moldova

2011 2012 2013

Romania

Czech Rep

Bulgaria

France

Slovenia

6.4%

0.8% 2.4%

0.1%

0.3%

-0.2%

1.0%

3.4%2.8%

1.7%

0.5%

1.7%

2.5%

2.0%

1.2%

0.7%

3.0%

1.7%

Data from EUI, 2012



Economic and financial – Cost indicators

Moldova

GDP per cap as PPP 2012

Romania

Czech Rep

Bulgaria

France

Slovenia

$13,438

$36,814

$25,893

$28,818

$12,749

$3,233

PPP projections from EUI, 2012; Wage data from EUI, 2012;*France wage data for 2009, does not include entrepreneurs; from French National Statistics Office, 2012

Avg monthlywages 2011

$467

$2,422*

$1,269

$1,978

$608

$267



Government, institutions, and business

X Institutional paralysis in government over the past few years.

X Opposition boycotts and resistance to parliament and president create risk of social unrest.

X Brain drain among IT workers.

X Infrastructure outside the capital still needs improvement – across the board.

X Ease of doing business – at 81, still lowest among BU, CRO, CZ, PO, RO, SK, SL, and PO.

Free economic zones – discounts on infrastructure; tax and duty exemptions; legal protection from changes in law.

Corporate tax rate of 12% – regionally only Bulgaria is better.

No personal income tax on portion of income above 7,100 leu/month for IT specialists.

Ease of doing business greatly improved – jumped 18 slots in World Bank rankings.

Mulitple free trade agreements with CIS, regional states, and EU.

All set Plan for it



People and skills

Languages, culture, locationRomanian, Russian, English (46% of graduates), French (51.3% of grads); European. Two hours to Germany.

EducationHistorically respected universities – long tradition of technical education.

Graduates and their skills5,900 ICT-related grads in past 3 years; Proportionally more computing grads than RO, BU, CRO, UR, SL; number of IT graduates on the rise.

Χ Leadership and managementProviding purpose, vision, inspiration, mentoring, a “management culture”, task breakdown still developing.

Χ ExperienceIT – smart & educated Moldovans still lack skills IT development firms seek. General – skills for international client management and teamwork incipient.

Χ Productivity in IT services USD 30k in 2010 vs. USD 71k for SEE per worker per year.

All set Plan for it



IT environment

2010 2011 2012 2013 2014 20150

20

40

60

80

100

120

140

160

180

200

IT Spending in Moldova

Strong Growth: 6.6%/year avg to 2015- ICT spend as % of GDP 2x BU, CRO, SL- ICT spend as % of GDP 3x RO

Hardware dominated- 74.2% hardware (2011)- 14.6% IT services (2011) - 11.2% software (2011)

Competition heating upTelco competition fierce – driving network infr.

GovernmentInvesting in egoverment and creation of cloud services platform – likely jump over legacies.

CommunicationsIn capital – exceptional broadband. Outside capital, a lot left to be done.

Prognosis: boom ahead


What it all means

Moldova a solid nearshoring destinationThe combination of education, IT skills, location, and languages makes it ideally suited to organizations looking for a cost-effective alternative to WE and CEE locations. But it comes with a few caveats:

• Better for higher-end service, development, and R&DThe country is too small to support massive support or call centers or what might be called “sweatshop programming”. Training will be necessary; but skills base well in place.

• Management tradition still developing Solid processes, work structures, task assignments, and leadership will be needed top ensure coherent, goal-directed teams. Mentoring and leadership programs a good idea in the beginning.

• Salaries will be rising – make employees happyFor IT professionals, monthly salary could be double or triple the average. While still lower than other countries in region, with a boom on the horizon, competition for headcount will grow. Interesting work, training programs, and other incentives a good idea.


Thank you

Mark Yates, Lead Analyst

IDC Government Insights CEMA

[email protected]

+420 221 423 208

mailto:[email protected]

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