Let’s Go To Bulgaria

Actually just after my Chinese visitor dropped by I received a Bulgarian one, my former ‘research assistant’, young Bulgarian anthropologist Yassen Bosev. And what did Yassen want? To tell me to Forget India, Let’s Go To Bulgaria. Only trouble was, I had some bad news for him: India’s minister of Disininvestment and Technology, Arun Shourie, already got there first. Why does everyone think Indian president Kalaam was in Bulgaria on his first overseas visit late last year?

“The figure we encountered earlier ? that the US accounts for 60 per cent of our IT exports ? is not something that should by itself discourage us: perhaps the US accounts for some similar proportion of the use of IT as a whole. But it should caution us. Germany and Japan are the obvious markets we should target: Germany?s IT market is worth $ 66 to 70 billion; our IT exports to Germany are only $ 250 million ? that is, if you accept our figures; they are just $ 50-55 million if you go by German figures.

And as countries like Cyprus, Bulgaria and others join the European Union, forming strategic alliances with their companies, even setting up subsidiaries there can help us vault over such tariff or non-tariff barriers that may be set up in the coming years. They have strengths ? for instance, in mathematics. We have strengths from which they can gain ? for instance, entrepreneurial skills as well as good knowledge of the markets that have to be targeted.

??And frankly,?? says an Indian IT executive who has long worked in Europe and knows it well, ??there is racialism. Mounting a campaign, ?Our jobs are being taken away by Indians? is easy. Mounting a campaign, ?East Europeans are stealing our jobs? will be difficult. Others within Europe will muffle those voices.?? So, alliances with those who will be joining the EU. And there is no time to lose ? some of them join from the coming May.”

Meantime the Business Week article is not without interest:

Forget India, Let’s Go To Bulgaria

Peter K?rpick vividly remembers his first trip to Bulgaria. Traveling into Sofia from the airport two years ago, the executive with German software giant SAP (SAP ) breathed air thick with coal smoke and saw laundry hanging from buildings on dirty, snow-covered streets. Then he pulled up to the gleaming glass-and-marble tower that houses SAP’s Bulgarian research lab. It was like “an island of beauty,” recalls K?rpick, who became the lab’s managing director in 2002. Dedicated that year, SAP’s facility has 180 engineers who write vital Java software for SAP’s cutting-edge products around the world.

Wait — isn’t writing software for foreign companies India’s specialty? By the numbers, yes. The outsourcing business there totaled an estimated $12 billion in 2003 out of $25 billion from low-cost locales worldwide. But Bulgaria, Romania, and other locations on the outskirts of Europe are plying a new twist on the craze for sending technology development offshore. They’re pushing what pundits call “near-shoring,” or shifting work to countries that cost less but are only a short hop away. Finnish companies farm out IT work to Estonia, Germans use contractors in Poland, and Italians ship projects to Serbia. For a lot of European companies, “India seems an awfully long way away,” says information technology services analyst Ian Marriott of researcher Gartner Inc.

It was access to nearby talent that convinced SAP to set up its Bulgarian outpost, which has turned into a beacon of hope for a country struggling to lift itself out of communist-era poverty. But it’s not the only one. Scattered around the capital are hundreds of small companies doing projects for an impressive list of clients, including Boeing (BA ), BMW, General Motors (GM ), and Siemens (SI ). “There is an exceptionally high level of talent in Eastern Europe,” says Kasper Rorsted, managing director for Europe, Middle East, and Africa at Hewlett-Packard Co. (HPQ ).

It’s not just distance and time zones that motivate the search for alternatives. India struck gold with U.S. and British clients in part because of its workers’ English skills and interpersonal ties. But those assets don’t hold the same sway for French or German customers. “Cultural, linguistic, and even ethnic connections are very important in near-shoring,” says Erran Carmel, an associate professor at American University’s Kogod School of Business in Washington. French companies are drawn to Romania, whose Latinate language and historic links make it an appealing alternative to Anglophone locales. German companies are likewise lured by the many German speakers in Hungary and the Czech Republic. “People want to be able to pick up the phone and resolve problems,” Carmel says.

That’s boosting places like Bucharest. Taking advantage of ample tech talent and engineering wages as low as $6,500 a year — a tenth the norm in Western Europe — companies including IBM (IBM ), HP, and Alcatel (ALA ) have set up shop there. On Feb. 17, software giant Oracle Corp. (ORCL ) announced three new centers in Bucharest to provide European and global support to customers.

As in the U.S., growing use of foreign workers could provoke political backlash. So many companies keep their outsourcing plans quiet — or say they’re merely adding employees elsewhere, not laying them off at home. What’s more, the cost advantages of some countries — especially those slated to join the European Union on May 1 — will likely diminish as their living standards rise. But for now, Europe’s poorest countries are looking to technology for an economic lift. If near-shoring keeps growing, many of them could soon sport software palaces as symbolic as Sofia’s.

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

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