Foreign Investors Lead Romanian Software Development Market

Our 1st Company Papers Edition, published in September 2010, was very well received  by the Romanian Community living in the USA. Ms. Simona Botezan, a Romanian Journalist living in Washington D.C. granted us with an article based on the information about the local Cluj-Napoca Software Development Market, published on on the 1st of October 2010.

Read the full article bellow:

IT&C Specialists Defy The Global Recession. Foreign Investors Lead Local Transylvania (Romania) Software Development Market.

Codespring is a Romanian software development and outsourcing company.

Over more than 12 years of activity, Codespring has been delivering high quality expertise and efficiency for full software development life cycle. The company is a growing leader of the local leading Romanian IT&C industry.

Every year Codespring team prepares a meeting for planning the future strategies. As a result, in September 2010 the company launched the “Codespring Papers” project, designed to communicate to all stakeholders, information about specific market conditions and capabilities, knowledge and some of this teams’ thinking points. Codespring Company Papers contain local software development market structure, particular trends and events, news about Romanian software industry, various industry insights and dilemmatic subjects.

Ms. Tunde Szekely, PR Specialist at Codespring Company, Mrs. Diana Ciorba, Marketing consultant at Elf’st  Marketing Outsourcing Company Cluj-Napoca  and Mr. Denes Csaki – Senior Graphic Designer have gathered important information about the local Romanian Software Development Market on the first edition of Codespring Company Papers.

Cluj-Napoca is one of the most important Romanian cities, located in Transylvania. It has been identified among the locations which are quickly emerging as leading IT&C centers. This city has continuously provided valuable human capital, due to its’ elitist institutions in education and scientific research. Currently, Cluj-Napoca holds the pole position for hardware production in Romania and it is ranked 3rd in the national software development and IT services sector. However, the dynamics of the local software development market show intriguing growth, in spite of the national industry’s decreasing indicators.

Cluj-Napoca IT&C Market Structure

According to A.T. Kearney’s “Global Services Location Index” 2009, Romania is ranked 3rd in Europe and 19th in the world, named the “new off-shoring star in Europe”. The Frost & Sullivan’s “EMS Provider Regional Migration Opportunities” 2009 Report places Romania as one of the favorite destinations for near-shore EMS production. In such context, in spite of the overwhelming IT&C volumes generated in Bucharest (capital of Romania), Cluj-Napoca contributed to these ratings by delivering the leading hardware production centers in Romania and by hosting some of the fastest growing software development companies in South-Eastern Europe.

While Romania’s IT&C market was dominated by the Telecom area (53% of total volume), Cluj-Napoca and surroundings distributes it’s market shares between hardware production (30,5% of national volume, 1st rank/2008) and software development and IT services (6.3% of national volume, 3rd rank/2008). In 2009, both sectors registered fast growth: 129% (hardware-generated by consolidation of new investments) and 23% (software development).

In spite of the recession registered in national industry figures, the software development companies, subject of this research, continued their increasing trend in total turnover by 23% and total profits. Part of this growth can be explained through the new direct investments and the mergers that have occurred on the local and regional market.

“In order to understand the specificity of this market, we have proceeded to an in-depth analysis of the investors acting on this market. Romanian entrepreneurs have constantly chosen to invest capital in software development. In 2008, foreign investors have raised the game. The new market share structure reveals that 74% of the total turnover is being produced by companies benefiting from foreign capital: Germany (30%); UK (22%); USA (15%) and the Netherlands (15%) are the major investors; following: Austria (5%),

Finland (4%), France and Sweden (3%), Denmark and Switzerland (2%), ending with Australia (1%) and Italy (0,5%)” states Mrs. Diana Ciorba, the marketing specialist appointed for the Codespring reasearch.

Germany remains a constant leader of foreign investments on the Cluj-Napoca Software Development market, holding 30% of the total market (in net turnover). German companies appreciate the technical skills, the cultural proximity and the great labor pool of Cluj Napoca.

The City has 306.000,00 inhabitants and hosts av. 100.000,00 incoming students each year, attending 10 universities. Two of them are ranked as elite universities in the country and abroad, each having an Information Technology and Computer Science College. Currently, more than 5.000,00 software engineers are active on the work force market and a total of 600 graduates in IT&C are available each year. Ranked with a high H.D.I. (Human Development Index), great linguistic skills and many professionals, Cluj-Napoca is not only a hub for software development off-shoring and near-shoring but also for other BPO (Business Outsourcing Process).

Recruitment did not stop in 2009. On the contrary, average corporate employement (studied on the active software engineers panel) regisered a mere increase of 0,04 %. Top foreign employer of the year remains the USA. Seaming to follow the idea of turning Romania into the “Silicon Valley of Europe”, USA technology companies relocate part of their software development activities to Cluj-Napoca. Great work attitude, flexibility and fast learning skills are amongst the most valuable assets. Lack of Income Tax for software engineers is also a big benefit for all parts.

“Speaking in profits, Cluj-Napoca Software industry may be again the ace in the sleeve for the Romanian Economy. While consolidated gross profits on the industry have fallen by 14% at national scale, software development sector maintained its ascending trend, but in a more moderate pace. Foreign capital companies registered a profit rate of 20% in 2009, while Romanian capital companies dropped to a rate of 9% profit margin”, reveals Codespring’s study, pages 2-3, article “Cluj-Napoca Software Development Market Overview”.

Source: Codespring

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