The software and IT sector produces three per cent of Romania’s GDP and is expected to exceed €4.1 billion in 2017. It is growing, thanks to the high demand coming from Western countries, and Romania now stands in sixth place in the global index when it comes to the number of certified IT specialists.
Romanian tradition in this field is one of the most respectable in the CEE region. A high standard of education generates a well-qualified workforce and it can count on a considerable number of engineers; something that is always appreciated abroad. Despite the economic crisis, the IT sector has kept growing and its low labour costs are attracting more and more investors.
Nowadays, the entire Romanian software and IT industry is showing signs of recovery, after the slowdown that began in 2014. In 2017, the annual growth rate stands at 13.6 per cent, with a market volume estimated at €4.1 billion. Future expectations are even brighter. Current forecasts expect a growth of 15.9 per cent by 2018, and a market volume that will be close to €6.3 billion in 2020.
Mid-term expectations are clearly discernible and in the longer term, Romania could strengthen its position as a leader in the IT industry, both in the domestic market and abroad. Working for foreign clients has helped Romanian companies build their own reputation and success. Romanians are also showing a good sense of entrepreneurship, developing start-ups and winning business ideas.
Concerning business ownership, there is a remarkable difference between Romanian and foreign ownership. If we consider 2016 revenues, only 27 per cent of the total industry revenue was generated by Romanian owned companies, while the remaining 73 per cent was generated by foreign capital companies. Productivity per employee seems higher in foreign capital companies, since they employ 59 per cent of the people who are active in the industry, while Romanian owned companies account for 41 per cent of the number of employees.
When it comes to the number of companies, the situation is totally reversed: 92 per cent of the total active companies are owned by Romanians and only eight per cent are foreign-owned, which is an indication of the entrepreneurial initiative at a local level, although this is not similarly accompanied by high numbers in terms of revenues generated.
Romania is one of the favourite outsourcing destinations, with the innovative approach of Romanian companies and an English fluency rate that is greater than 80 per cent in the IT sector. As we are living in an era where the labour shortage is much higher than before, the country’s market can be defined as a successful one if we consider the number of people entering the labour market, yearly.
The total software and IT industry has witnessed enormous growth, in terms of workforce. With 65,930 employees in 2013, Romania can now rely on 90,380 workers in the IT sector, and this number is expected to grow by 113,850 in 2020. Productivity (€/employee) is also showing a positive trend, moving from 35,947 in 2013 to 45,309 this year (with an expected reach of 55,248 in 2020).
Multinational companies’ R&D centres are also helping to improve the whole sector, creating a good combination of the two different sectors that make up the software and IT industry: the internal market and the export of IT services.
Domestic growth had a small but important reprise in 2017, after the catastrophic breakdown of last year, when it decreased by 5.9 per cent. While foreign growth stands steady at more than 18 per cent, the domestic one is only 0.5 per cent with better expectations for the future. In 2018, it is expected to be nine per cent and 11.4 per cent in 2020.
In general, the context is favourable. More funds and financing are expected in the short-term. Business angels, crowd funding, start-ups, accelerators and business incubators are taking hold in the country, and are encouraging young entrepreneurs to develop their ideas with success. Additionally, the government and the legal system are working in this direction also, in order to make Romania more attractive than ever.
The views expressed in this opinion editorial are the author’s own and do not necessarily reflect Emerging Europe’s editorial policy.