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An exclusive interview with Plamen Tilev, Managing Director of SAP Labs Bulgaria, for the “Investors of the Decade” Business Survey of Novinite.com (Sofia News Agency) and Novinite.bg.
How do you assess the effect of the investments of SAP Labs in Bulgaria? In retrospect, how would you evaluate the development of SAP Labs Bulgaria in the past decade?
Allow me first to offer some explanations. The so called “labs” are the places where software is created. This is where talent, technologies, and innovations are concentrated. These labs operate within a network called the SAP Labs Network. It integrates ideas and leading technologies in order to answer the needs of specific industries and geographic regions.
SAP Labs Bulgaria is a part of the SAP Labs Network. It is typical for SAP to constantly evaluate new opportunities for expanding the network for global research and programming. This also happened back in 2000 when SAP gave its answer to the need to expand its Java competence and made the decision to found SAP Labs Bulgaria in Sofia.
Our “lab” takes part in the development and support of SAP platforms for business processes and applications. Out major contribution is in the direction of providing the foundation for on-premise products such as SAP NetWeaver, Composition Environment, BPM, PI, and Enterprise Portal. In addition, we are responsible for the main part of the Java OnDemand Platform and crucial lifecycle management capabilities for the SAP HANA solution. .
The investment in SAP Labs Bulgaria has been recognized as the largest software investment not only in Bulgaria but also on the Southeastern European market.
SAP Labs Bulgaria has been recognized with an award for the largest software investment of Stability Pact, Investment Compact of the Organization for Economic Cooperation and Development. It is not only the largest foreign financial investment in software but is also a very serious investment in young people in the hi-tech sector.
SAP’s investment is also a major contribution to the increasing opportunities for the young generation to realize its creative and technological potential within their own country, while simultaneously having access to the creation of the latest technological achievements and being part of the global technological elite.
The development of SAP Labs Bulgaria in the past decade has been extremely dynamic. The number of employees has grown from 60 to 500. These are people who have achieved professional realization in the field of software development, software maintenance and support, quality assurance and even research and development.. We also have experts on intellectual property and technical writing. We can proudly say that we are taking care of creating a truly comfortable and friendly environment in which these professionals can develop.
How have SAP Labs Bulgaria and the Bulgarian IT sector as a whole reacted to the global economic downturn?
In a time of crisis, the IT sector indisputably suffers smaller financial losses than the other sectors of the economy. In Bulgaria, the IT sector remains a leading one, and it is among the most stable sectors in terms of growth and perspectives that are expected to get the Bulgarian economy through the financial crisis turbulence.
Last but not least, IT is also the sector which has proven to be the least risky from an investment perspective because of the small financial investments needed to start software production – in fact the major investment is in high quality human potential.
SAP Labs Bulgaria is a production unit of SAP AG and its financial results are part of the corporate financial results. SAP’s total financial results for 2011 were announced recently, with last year turning out to be the most successful one in the past decade with an 18% growth year-on-year, or over EUR 4.7 B. SAP has proven that even in a time of crisis the software sector can be the one to lift the global economy.
Bulgaria is an attractive destination for IT sector outsourcing but other countries in the region also have aspirations to become leaders in that respect. What are Bulgaria’s advantages as an outsourcing destination vis-à-vis its competitors?
SAP serves as a link between European and American investors. This is what a survey of McKinsey on Bulgaria has found, based on the company’s contribution to the Bulgarian investment climate.
The fact that SAP has key clients in Bulgaria (the Bulgarian government, IBM, Allianz, Coca Cola, Metro, Vidima, M-Tel, OMV, among others) is a clear indication of the company’s success. All the more so because SAP is not just successful in Bulgaria but it also manages to communicate its success in the country in an open and public way. Thus, SAP also provides other investors with the opportunity to get to know Bulgaria as an attractive outsourcing location.
Bulgaria has had historical traditions in the field of IT with both mass production of PCs in the past, and with the building of a material base for microelectronics. Technical education over the years has been invariably connected with these technologies, and Bulgaria now has established traditions in the training of IT sector specialists that are absent at our geographically close competitors. Unfortunately, Bulgaria has a small population, and it is becoming harder and harder for us to meet the growing demand for IT specialists in quantitative terms.
The factors for success of foreign investments in Bulgaria are the well-educated, talented and responsible employees, the European culture, and the good foreign language knowledge of the qualified experts, as well as the competitive pricing.
Geographically speaking, the short distances, and the fact there is little time difference with Western Europe are also an advantage. Bulgaria’s membership in the European Union, guaranteeing the stability of the local economy, makes our country an even more attractive place for foreign investors.
Does outsourcing continue to be the future for Bulgarian IT companies? Do they have other opportunities at this stage?
Outsourcing is a good solution for the Bulgarian economy, especially in a time of crisis, when Bulgaria’s advantages are a lot more considerable and visible than in a period of an upsurge for national economies.
According to the Bulgarian Association of Software Companies (BASSCOM), 90% of the member companies of the association export their “produce” which could easily lead to the conclusion that Bulgaria is a traditionally and historically a “low-cost outsourcing” market.
In spite of the statistics, however, not just SAP Labs Bulgaria is a proof that such a conclusion is not exactly correct. Another argument is that 80% of Bulgarian companies’ software export is the so called “hi-end” software – complex software systems CAD/CAM , GIS, ERP, CRM, E-business, etc. This largely differentiates Bulgaria from the traditional low-cost markets such as China and India, for example, where routine “coding” operations are outsourced to large teams.
In the case of SAP Labs Bulgaria, we can rather talk about offshoring or nearshoring than outsourcing. Keeping in mind the globalization and the international character of SAP, the firm in Bulgaria can most precisely be defined as a technological development center. There are similar SAP centers in 13 locations in various regions around the globe using the local talent, regional expertise and experience, as well as the proximity of local markets and clients.
Today SAP Labs Bulgaria employs about 500 of the most highly-qualified software specialists. Their professional skills have been acquired at both the universities (and before that at specialized high schools, mainly mathematical high schools), and through a continuous training at our Education and Qualification Center. In almost all cases of hiring of new specialists, they undergo extensive training in our training center as well as on their workplace under a mentor’s supervision until they reach the necessary professional level to work on their own.
University grade education is not sufficient for the direct inclusion of graduates in the working process, and as a result all software firms in Bulgaria work very closely with universities not just as sponsors but primarily in the direction of creating joint working programs, internships, joint seminars, and corporate training and qualification programs in order to allow students to come closer to latest technologies.
The shortage of IT experts, and especially of software experts is already substantial, and regardless of the internationally recognized high quality of the Bulgarian IT talents we need to acknowledge that Bulgaria’s competitiveness is declining precisely because of the very limited pool of such experts.
How do you evaluate the cooperation of SAP Labs Bulgaria with universities and schools?
In 2007, we included three Bulgarian universities (Sofia Technical University, Sofia University “St. Kliment Ohridski”, and the University for National and World economy) in the global SAP University Alliances Program, and last year the Ruse University and Plovdiv University also joined in.
Through the SAP University Alliances Program, SAP provides access to its latest technologies and business solutions to 650 of the most renowned universities and colleges across the world. The program provides students with the opportunities to acquire practical knowledge and skills in working with SAP technologies. To achieve this goal, experts from the Technical University in Munich train university professors to work with SAP software.
SAP’s business solutions are becoming increasingly popular among companies in Bulgaria, and thanks to this program, universities are sending trained specialists to the labor market.
SAP Labs Bulgaria assumes all costs for the participation of universities in the SAP University Alliances Program. We help universities to provide an environment in which students will study under conditions that are as close to the actual working environment as possible. Universities receive from us educational programs and materials, training for their professors, and access to the entire SAP Business Suite package.
We are also working closely with high schools. Every year we support financially the teams of the Sofia High School of Mathematics and National High School of Mathematics and Natural Sciences for their participation in international mathematical olympiads.
What has motivated SAP Labs Bulgaria to commit to participating in the international robotics contest FIRST LEGO League?
SAP supports globally the FIRST LEGO League robotics contest. Since 2007, SAP Labs Bulgaria has become involved in this initiative by sending a team to the semi-finals in Germany. With the founding of Robopartans School of robotics by current and former employees of ours, it became possible to organize a Bulgarian round of the contest. It was held for the first time on November 26, 2011, and featured 11 teams. Many of our employees became involved as mentors, judges, and jury members.
We support this contest believing that we are investing in the new hi-tech generation of Bulgaria. The competition sets the students in new, unknown conditions, and builds upon the education that they get in schools. It gives them the chance to develop teamwork skills, to work on a real research and development project, and to present it.
We believe that this is a valuable experience, which gives an opportunity to Bulgarian talent to develop further. Bulgaria has a potential that needs to be developed. The fact that the Bulgarian robotics team KASAPIN40 is going to the final of the finals of the contest in Mannheim, Germany, in June proves that.
What measures do you think the Bulgarian state needs to take in order to improve the business environment, and more specifically to encourage IT investments?
The least that needs to be done is for the state to find enough will to overcome high corruption and non-transparent public procurement tenders, and then to cope with the image of being the poorest EU member state where even the purchase of a computer is a luxury and the Internet penetration rate is very low.
Many Bulgarian governments have started but failed to complete their programs to stimulate the IT sector. Let’s take Romania as an example – it’s not necessary to go all the way to the Silicon Valley in order to see the measures that a government needs to adopt to stimulate IT industry investment.
Bulgaria’s northern neighbor has a lot to show for in this respect – starting with a more favorable tax policy, free economic zone, technological incubators (created by or with the help of the state near university centers such as Cluj and Timisiora), creation of the necessary network infrastructure with high-speed Internet, and, last but not least, execution of a program for attracting and providing high quality education to students in IT majors.
China and India have rich traditions in that respect but Russia and Brazil as well as new Silicon Valley candidates are already competing to attract investors.
A number of governments around the world are trying to attract foreign IT investments through attractive programs and favorable policies, and we should not be deluded that Bulgaria can remain on the list of attractive investment destinations for a long time without such measures.
Is SAP Labs Bulgaria a green company?
I will start with the fact that this year we expect to complete our ISO 14 001 certification. Those who are aware of this term know that it is a specialized international standard that contains requirements for incorporating “Environmental Management Systems”
The sustainable development concept has been instilled deep into SAP’s development strategy, and we are following up on a global policy with adequate local actions. Last year we managed to reduce our electricity consumption by 5%, and our gas consumption by 7%. We have adopted a garbage separator system. We use underground water to maintain our green areas. These are only some of the initiatives that we have in that area.
It is positive that our employees are demonstrating an extremely responsible green behavior which makes us more motivated in our efforts.
What do you expect that 2012 will bring for SAP Labs Bulgaria, and for the Bulgarian IT sector in general?
Despite the pessimistic forecasts of economists and analysts about the crisis, I believe it is the IT sector that will uplift economies, and these trends will probably become visible towards the end of the year when investors will be seeking safer sectors, and IT will have already demonstrated stability and growth.
SAP is one of the stability and success stories, and regardless of the crisis I believe that many other IT companies will manage to prove that investments in this sector are low-risk, necessary for technological innovation, and, above all, yielding successful returns.