2016 Romania Software & IT Industry Report

Over the last 15 years, Romania has achieved and maintained a lead position as one of the main outsourcing countries of not only Eastern Europe, but also the world, being a preference for many multinational companies in terms of project relocation and department setting in the region. With a strategic position within Europe and human capital with high potential, Romania has gained momentum in the IT industry, being recognized and advanced by Western and domestic market demands[1].

This competitiveness emerged as a result of Romanian technical and proactive operational capabilities, which allow businesses to have quick access to qualified personnel, technical experts, cost reduction, increased flexibility, greater effectiveness and speed. Romania has been providing such services for a decade now and its professional maturity is increasingly visible. Although it does not offer the lowest prices in Eastern Europe, clients and partners highly value the IT services there[2].

As Catalina Dodu, country manager at Atos stated at the Romanian Outsourcing Summit, 2016 “[…]The number of resources is limited, but the results that we have are unlimited. When we show people what competence centers we have, everyone is amazed. We have competence centers delivering services from Romania, worldwide”[3].

So why Romania? According to A.T. Kearney’s 2016 Global Services Location Index, Romania ranked 13th, advancing 5 positions since the previous year, because of financial attractiveness, people skills and availability and business environment.

The economic situation of Romania seems to have finally shaken off the consequences of the global financial crisis of 2008 and has started to flourish. The country’s growth is among the highest in the EU in 2016 and will probably continue in 2017 at the same pace. If 2013 and 2014 brought a small economic comeback, it was because of exports and rich agricultural harvests combined with consistent industrial production. 2014 was the year when the IT&C sector surpassed agriculture, booming among all other economic sectors in Romania.

In 2015, the Romanian IT&C sector contributed 5.6% to the national GDP. But in the first quarter of 2016 alone, its share increased to 6.1%, according to the National Statistics Institute (INS). At such a pace, by 2020, the turnover may well surpass 4 billion EUROS[4]. This IT&C industry growth rate places Romania on one of the lead positions within the European Union.

Romania - Total SITS Industry - Market Destination - Volumes and Growth Rate
Romania – Total SITS Industry – Market Destination – Volumes and Growth Rate. Source of Image and Data.

Romania is still behind in technology startup activity, and business investment in R&D has not yet reached a well developed stage. This is however an opportunity for the Romanian IT sector, with a specific reference to the offshore and nearshore investments through services on specific niches that are yet to be exploited[5]. Moreover, the Romanian government has created and successfully implemented a law on tax exemption for “software development activities”, a strong incentive to trigger and support the IT sector’s development, which made Romania a true fiscal paradise, especially for investors. The reason behind the tax exemption law was to be able to ensure economical growth. The higher the salaries, the more interest for an IT career and Romania’s pool of talents has just started to develop at Western standards[6].

Its strategic position and a high availability of resources make Romania a powerful outsourcing partner, given the technical proficiency and software abilities of employees. Occupying a top 10 position in both Europe and worldwide in terms of certified IT specialists[7], Romania now has around 120,000 employees in the IT industry, of which 60,000 are presently engulfed in the outsourcing sector[8].

Education plays an essential role in preparing the future generation of developers and the Romanian higher system of education is adapting to this new perspective. Since 2015, a new Strategy for tertiary education was adopted, aiming to improve the participation in tertiary education, to develop and implement high-standard study programs that are relevant to the labor market and ensure the business and IT&C sectors’ involvement[9].

As a result, some IT&C companies have been actively involved in cooperation with major universities, especially targeting the Information Technology, Automation and Computer Science, Telecommunications and Electronics departments, where they implement Mentoring Programs for students, right from their first years of university. Such programs involve practical workshops, training sessions, prep courses, summer internships and professional supervision of BSc and MSc dissertations.

3 cities in Romania are host to over 220 service centers, with 5 others emerging as hubs for another 45 companies
3 cities in Romania are host to over 220 service centers, with 5
others emerging as hubs for another 45 companies. Source of Image and Data.

The top universities in Romania include 5 polytechnic universities, 59 domain-specific universities and 174 private colleges, over 70% of Romania’s IT&C specialists having a tertiary education[10]. Romania’s geographic position and Latin heritage make it easier for professionals and graduates to develop and use linguistic skills that cover English, French, Italian, Spanish, German, and Russian, bringing that extra notch of competitiveness that many other outsourcing areas lack. This strong pool of educated talent is another mark of Romania’s outsourcing potential, Romanian developers and programmers being resourceful, open-minded and creative individuals, specialized in various technologies.

Romania is becoming one of the most sought-after nearshore and offshore locations in the IT&C business. Putting a high stress on transparency and secured IT services and capitalizing on solid education combined with thinking outside-the-box, Romania is truly consolidating a lead position in the outsourcing European and global markets.

In a 2016 report produced by ABSL and KPMG[11], most of the outsourcing companies operating in Romania have already set a 2-year plan for expansion, stabilization and optimization of services and activities. Besides the talent pool, the Romanian legal and fiscal branches also strive to trigger changes that support and encourage the outsourcing market through various incentives, subsidies and grants, government support, reduced taxes and other facilities. Albeit with a slow start, constant operational advancement and clear desire for growth has given Romania its thrust in the IT&C industry, capitalizing on niche technologies and strengthening foreign client relationships. A trait of maturity has become visible in the information technology and communication domain through the quality of outsourcing services provided. Hence, during the last few years, ongoing nearshore and offshore collaborations have been very promising and sustainable, meeting the customer’s demands and even exceeding expectations.

[1] Outsourcing Advisors, Romania http://www.outsourcingadvisors.ro/ro-economy-info/
[2] The Diplomat, Bucharest http://www.outsourcing-today.ro/articol.php?id=6732
[3] The Diplomat, Bucharest http://www.outsourcing-today.ro/articol.php?id=6732
[4] Romania-Insider.com http://www.romania-insider.com/romanias-it-sector-gdp/
[5] European Commission, Country Report Romania 2016 http://ec.europa.eu/europe2020/pdf/csr2016/cr2016_romania_en.pdf
[6]Romania-Insider.com http://www.romania-insider.com/romania-expands-tax-incentives-software-programmers/
[7] IBP Group Business Digest, Romania http://rbd.doingbusiness.ro/articles/the-outperforming-romanian-it-c-market-gaining-momentum/4178/
[8] ANIS Employer Association of the Software and Services Industry, Romania IT Industry Key Points http://priaevents.ro/wp-content/uploads/2016/10/TBlidarus-_-ANIS-_-Software-and-IT-Services-in-Romania_Overview.pdf
[9]European Commission, Education and Training Monitor 2016 https://ec.europa.eu/education/sites/education/files/monitor2016-ro_en.pdf
[10] Brainspotting, IT&C Talent Map Romania 2016 http://www.brainspotting.ro/wp-content/uploads/2015/10/Brainspotting_ITC_Talentmap_2015-2016.pdf
[11] ABSL Outsourcing Industry Report 2016 http://www.absl.ro/sites/default/files/absl_romania_industry_report_2016.pdf

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