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Doing IT in Moldova– what’s ready, what to plan forMark YatesLead Analyst, IDC Government Insights
IDC: Getting Data to Reveal IT’s SecretsCentral and Eastern Europe                                                        ...
Knowing the users across verticals                                                                Industry-focused units ...
Outsourcng vs. internal nearshore center  – traditional matrix                       Complexity                           ...
Opening a nearshore center    Why? Why start an IT support or development center abroad when I can    outsource? For missi...
Opening a nearshore center    What are my primary concerns with opening a center abroad?                                  ...
Opening a nearshore center    What are my primary concerns with opening a center abroad?                                  ...
Opening a nearshore center                            Economic and financial – real GDP growth                            ...
Opening a nearshore center                            Economic and financial – Cost indicators                            ...
Opening a nearshore center                      Government, institutions, and business                         All set    ...
Opening a nearshore center                            People and skills                                All set            ...
Opening a nearshore center                            IT environment                                                      ...
What it all means           Moldova a solid nearshoring destination           The combination of education, IT skills, loc...
Thank you     Mark Yates, Lead Analyst     IDC Government Insights CEMA     myates@idc.com     +420 221 423 208© IDC Gover...
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Nearshoring in moldova mark yates final (1)

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  • Other factors that I did include in the slides include:Office space – much more affordable than in BucharestPPP per capita is twice as high as GDP per capita – points to greater spending power per dollar in MoldovaBank liquidity is relatively high and local banks not as dependent on international borrowing for local lending
  • Eight zones have been established, mainly outside Chisinau. Firms doing business within them get discounts on infrastructure fees (transport, water, gas, and electricity), VAT and duties exemptions, discounted or zero tax rates depending on the activity, and 10 years of protection from changes to the law that could adversely impact businesses. There are also a multitude of additional benefits related to the transfer of profits and ownership titles, trade of goods and services within the free zones, and tax exemptions related to the level of overall investment. The same rules and exemptions apply to industrial parks, which are designed and located to benefit specific regions of the country. An additional incentive to organizations located within industrial parks is freedom to use land as needed, sidestepping the usual bureaucratic hurdles associated with zoning and permissions.Legal protection for contracts is very strong in Moldova; and it ranks 26th world wide in contract enforcement, according to World Bank. Moldova has free trade agreements with every CIS country except Tajikistan, is a member of the World Trade Organization, and has signed on to the Autonomous Trade Preference Agreement with the EU (until 2015, when it will likely be replaced with another agreement) and several regional free-trade and economic cooperation agreements. Brain drain – not really a government issue, but I included it here as the government tax program for IT specialists is related.
  • Transcript of "Nearshoring in moldova mark yates final (1)"

    1. 1. Doing IT in Moldova– what’s ready, what to plan forMark YatesLead Analyst, IDC Government Insights
    2. 2. IDC: Getting Data to Reveal IT’s SecretsCentral and Eastern Europe Middle East/Africa Albania Moldova Turkey Egypt Azerbaijan Montenegro UAE Morocco Belarus Poland Saudi Arabia Algeria Bosnia & Herz. Romania Kuwait Tunisia Bulgaria Russia Qatar Libya Croatia Serbia Oman Ghana Cyprus Slovakia Bahrain Kenya Czech Republic Slovenia Lebanon Uganda Estonia Tajikistan Syria Nigeria FYROM Turkmenistan Iran Namibia Georgia Ukraine Jordan Ivory Coast Greece Uzbekistan Israel Ethiopia Hungary Rest of CEE Rest of ME Tanzania Kazakhstan Botswana Kyrgyzstan South Africa Latvia Rest of Africa Lithuania Malta  220+ staff  Offices in more than 20 Countries  Research coverage of 60 countries© IDC Government Insights. Reproduction is forbidden unless authorized. All rights reserved. Page 2
    3. 3. Knowing the users across verticals  Industry-focused units within IDC.  More than 80 analysts WW.  Dedicated Insights team in CEE and MEA.  Industry experience and local knowledge.  Understanding of IT priorities and how IT is deployed by users.  Leveraging more than 45 years of IDC research methods and processes.© IDC Government Insights. Reproduction is forbidden unless authorized. All rights reserved. Page 3
    4. 4. Outsourcng vs. internal nearshore center – traditional matrix Complexity Complex Simple Mission critical Keep in house Keep in house Yes – automate No Outsource In or out – automate Sometimes outsourcing is the wrong thing to do.© IDC Government Insights. Reproduction is forbidden unless authorized. All rights reserved. Page 4
    5. 5. 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 Control projects Save on costs– platform/tech changes – – resource allocation – – office space –– info leakage &security – – skills concentration – – recruitment – – turnover and training– – consistent methods– – payroll – – project management – – skills development – – taxes – – task prioritization – – task assignment – – version control – – confidentiality – – quality control –© IDC Government Insights. Reproduction is forbidden unless authorized. All rights reserved. Page 5
    6. 6. 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© IDC Government Insights. Reproduction is forbidden unless authorized. All rights reserved. Page 6
    7. 7. 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© IDC Government Insights. Reproduction is forbidden unless authorized. All rights reserved. Page 7
    8. 8. Opening a nearshore center Economic and financial – real GDP growth 2011 2012 2013 Moldova 6.4% 2.8% 3.4% Romania 2.5% 1.0% 3.0% Bulgaria 1.7% 0.8% 2.4% Slovenia 0.5% -0.2% 1.2% Czech Rep 1.7% 0.3% 2.0% France 1.7% 0.1% 0.7% Data from EUI, 2012© IDC Government Insights. Reproduction is forbidden unless authorized. All rights reserved. Page 8
    9. 9. Opening a nearshore center Economic and financial – Cost indicators GDP per cap Avg monthly as PPP 2012 wages 2011 Moldova $3,233 $267 Romania $12,749 $608 Bulgaria $13,438 $467 Slovenia $28,818 $1,978 Czech Rep $25,893 $1,269 France $36,814 $2,422* PPP projections from EUI, 2012; Wage data from EUI, 2012;©*France wage data for 2009, does not include entrepreneurs;authorized. All rights reserved. Office, 2012 IDC Government Insights. Reproduction is forbidden unless from French National Statistics Page 9
    10. 10. Opening a nearshore center Government, institutions, and business All set Plan for it  Free economic zones – discounts on X Institutional paralysis in government infrastructure; tax and duty exemptions; over the past few years. legal protection from changes in law. X Opposition boycotts and resistance to  Corporate tax rate of 12% – regionally parliament and president create risk only Bulgaria is better. of social unrest.  No personal income tax on portion of X Brain drain among IT workers. income above 7,100 leu/month for IT specialists. X Infrastructure outside the capital still needs improvement – across the  Ease of doing business greatly improved board. – jumped 18 slots in World Bank rankings. X Ease of doing business – at 81, still  Mulitple free trade agreements with CIS, lowest among BU, CRO, CZ, PO, RO, regional states, and EU.© IDC Government Insights. Reproduction is forbidden unless authorized. All rights reserved. SL, and PO. SK, Page 10
    11. 11. Opening a nearshore center People and skills All set Plan for it  Languages, culture, location Χ Leadership and management Romanian, Russian, English (46% of Providing purpose, vision, inspiration, graduates), French (51.3% of grads); mentoring, a “management culture”, European. Two hours to Germany. task breakdown still developing.  Education Χ Experience Historically respected universities – IT – smart & educated Moldovans still long tradition of technical education. lack skills IT development firms seek. General – skills for international client  Graduates and their skills management and teamwork incipient. 5,900 ICT-related grads in past 3 years; Proportionally more computing Χ Productivity in IT services grads than RO, BU, CRO, UR, SL; USD 30k in 2010 vs. USD 71k for SEE number of IT graduates on the rise. per worker per year.© IDC Government Insights. Reproduction is forbidden unless authorized. All rights reserved. Page 11
    12. 12. Opening a nearshore center IT environment Strong Growth: 6.6%/year avg to 2015 - ICT spend as % of GDP 2x BU, CRO, SL - ICT spend as % of GDP 3x RO IT Spending in Moldova 200 Hardware dominated - 74.2% hardware (2011) 180 - 14.6% IT services (2011) 160 - 11.2% software (2011) 140 Competition heating up 120 Telco competition fierce – driving network infr. 100 Government 80 Investing in egoverment and creation of cloud 60 services platform – likely jump over legacies. 40 Communications 20 In capital – exceptional broadband. Outside 0 capital, a lot left to be done. 2010 2011 2012 2013 2014 2015 Prognosis: boom ahead© IDC Government Insights. Reproduction is forbidden unless authorized. All rights reserved. Page 12
    13. 13. What it all means Moldova a solid nearshoring destination The 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&D The 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 happy For 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.© IDC Government Insights. Reproduction is forbidden unless authorized. All rights reserved. Page 13
    14. 14. Thank you Mark Yates, Lead Analyst IDC Government Insights CEMA myates@idc.com +420 221 423 208© IDC Government Insights. Reproduction is forbidden unless authorized. All rights reserved. Page 14
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