Digitalk 101: Subscribed to Growth

Neither the pandemic, nor the war in Ukraine have shaken the youngest and high growing industry in Bulgaria - the technology sector. For decades companies for software, hardware, telecom services, etc. have been growing unabated, and 2022 financial results are no exception.

Digitalk 101 | 2023

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These are the insights from the Digitalk 101 ranking, which presents the financial and business performance of 114 companies from the Bulgarian technology sector. Their total revenue in 2022 exceeded 9.16 billion BGN.

If we have to describe the Bulgarian top 100 technology companies, the trend is still upward - up by a billion BGN on average per year. Until the new record - in 2022. The 100 largest IT companies in the country have revenues of over 9 billion BGN, or almost 13% growth on annual basis. The same hundred have achieved double-digit growth a year earlier too, when the total business of these companies was 7 billion BGN. The software development companies group have the largest growth, and this sector has the largest number of represented companies in the ranking.

The growth is robust, for comparison - the real annual GDP growth of Bulgaria was 3.4%. Because of inflation in energy and food, the average revenue growth for all companies in the country was 34%, and for the largest 100 in the Capital 100 it was an unprecedented 60%. The rise in revenues of the technology sector is apparently not as affected by the rising prices.

Who are the customers?

Large enterprises and government organisations are among the main sources of revenue for IT companies - and mainly of those focusing on systems integration, consulting services, hardware and communication equipment supply, training and software licenses supply. These users generate the majority of earnings. In the state administration alone, 578 administrative bodies have planned funds for hardware devices, purchase or renewal of license agreements and development of information systems that exceed 347.68 million BGN, the Ministry of e-Government's Annual Report on the state of information resources in the administration notes. For 2023, the planned expenditure on information resources is for over 428 million BGN, and for the next year - 2024 - another 358 million BGN. In short, these are substantial financial resources.

The locally developed projects are not only for digital transformation, but are likewise focused on sustainable, environmental and ergonomic business under the so-called ESG strategies. Examples of successful implementations were demonstrated by the participants of the second Digitalk&A1 Awards in spring 2023.

Projects have also been implemented in numerous small and medium-sized companies, many of which rely on the Recovery and Resilience Plan. The priorities have been clear for a long time, but European money can only be obtained if the set objectives and results are achieved. There are 12 important policy areas in the Bulgarian plan, and each of the fields has a digital component. These policy areas are Education and Skills, Research and Innovation, Smart Industry, Low Carbon Economy, Biodiversity, Sustainable Agriculture, Digital Connectivity, Transport Connectivity, Local Development, Business Environment, Social Inclusion and Healthcare.

The Bulgarian plan covers 4 pillars - "Innovative Bulgaria" with a total of 3.4 billion BGN, "Green Bulgaria" with 5.7 billion BGN, "Connected Bulgaria" with 2.5 billion BGN and "Fair Bulgaria" with 2 billion BGN. The first pillar has the most funds for micro, small and medium-sized enterprises, several procedures were launched in 2022, including a procedure for projects in the field of ICT solutions and cybersecurity. Eligible actions include cloud services such as "software as a service" (SaaS). But in order to use programmes and funds for their digital transformation goals, companies need to find a specialist who understands their specifics well.

"When we launched the program shortly after the Covid-19 pandemic, it became clear that many companies were not digitalized. We were not prepared to work remotely because we didn't have the right products and skills. Healthcare and schools were also not digitalized enough to meet the challenges of the new situation. This is why the European Commission has allocated a significant amount of money to each member state specifically for digitisation," said last year Lora Georgieva, coordinator at Microsoft Bulgaria for Recovery and Resilience Plan measures for 7 countries, at an event of distributor ALSO Bulgaria.

Looking beyond the local market

However, Bulgarian users are by far not the only source of revenue for ICT companies, witth the notable exception of telecom services (although there are also some incomes from roaming of foreigners staying in Bulgaria) and distributors whose main customers are Bulgarian IT dealers and integrators.

The other companies for a very long time have been providing systems, products and services worldwide and they successfully compete in highly developed markets in Western Europe, the USA, Latin America and the Middle East. We have asked and gathered information from the participants' responses, that Bulgarian solutions are also implemented in countries such as Ghana, Angola, Azerbaijan, Puerto Rico, etc.

Increasingly, such solutions include ML and AI based tools, and cloud deployments are becoming more common, whether in public clouds or hybrid models. Manufacturing, agriculture, utilities such as electric utilities, water and gas utilities are boldly betting on IoT solutions that optimize their processes and provide greater visibility and faster response times.

Bulgaria's reputation as a major development hub, not only in the region but also in Europe, is also а result of the successful development centers of leading software giants such as VMware, SAP Labs, MentorMate Bulgaria, Experian, Acronis, Visteon Electronics, Paysafe, and more recently Bosch Digital Bulgaria, operating a while ago under the name Bosch.IO.