High added value in software development and outsourcing expansion in 2015

Konstantsa Kadankova

ICT and ICT outsourcing are the two sectors in the Bulgarian economy which have enjoyed the fastest growth and went through the crisis relatively easily.

Not surprisingly, the ICT sector is one of the priorities in the National Strategy for Smart Specialization as it has great potential as a competitive export-oriented sector generating high added value, opening new jobs, giving good wages and paying good taxes, respectively.

Expectations

The Bulgarian Association of Software Companies (BASSCOM) expects that the software business in Bulgaria will continue to grow at high rates in 2015, similar to those of the last few years.

According to the latest edition of the BASSCOM Barometer, an annual report on the state of the software sector in Bulgaria, 2/3 of the polled companies expect growth in sales, and nearly half of the respondents expect growth to exceed 15%. In addition, 73% of all companies expect an increase in jobs by at least 10%.

These expectations are confirmed by an independent analysis of the software industry produced by CBN - Pannoff, Stoytcheff & Co. on behalf of BASSCOM.

The overall software segment revenue went up by 11% in 2013 and by 15% (projection) in 2014, and a similar growth is expected in 2015 .

As for employment, the independent analysis shows that in 2015 “the software segment in Bulgaria will employ the largest number of people of the 10 segments in the ICT sector with a 28% share of all high-tech jobs, and will definitely overtake the telecom business.”

BASSCOM also expects to see another trend continue - companies shifting from offering low-skilled "coding" to developing their own products and services with high added value, covering all phases of today's software production - analyses, design, architecture, implementation, quality control, maintenance and development. This is a trend which not only helps high growth but also allows employers to pay some of the highest average salaries in the sector and in Bulgaria as a whole - approximately 4 times the national average.

Given these expectations for growth, it is not surprising that the main challenge in the sector will continue to be the shortage of well-qualified specialists. 70% of the companies polled for the BASSCOM Barometer call this a major factor with a negative impact on the business. According to the same study, the time it takes for companies to fill an open position is an average of 9 weeks. For developers, that time is three months.

"The long-term solution to the problem of staffing is associated with a fundamental reform of the education system, for which a number of organizations, including BASSCOM, continue to work actively. In the short term, there are at least two factors that we expect will have some positive effect. First, it is the number of training centers (corporate academies, universities, schools, etc.) that educate people into software which have started operating in recent years. And second - which is predominantly dependent on the public administration - the expected simplification and relief of procedures allowing companies to attract professionals from outside the EU," BASSCOM commented.

As for ICT outsourcing services segment, Stefan Bumov, Chairman of the Bulgarian Outsourcing Association, expects that business process outsourcing (BPO) companies and shared service centers will experience the most significant growth in the number of employees in 2015. There is also great interest towards companies offering IT outsourcing. If the industry and the state take prompt action to overcome the shortage of well-qualified staff, we will witness a dynamic development there, says Bumov.

Investments

Petar Ivanov, Chairman the Board of the Bulgarian Association of Information Technologies (BAIT), expects that the 2015 IT budgets of companies in Bulgaria will be directed into investments for business process optimization, technological modernization through further integration of different systems and increasing the usage of IT (e. g. migrating from using separate PBX and CRM software to an IP PBX with call center features and CRM integration), as well as improved management with tools to analyze and monitor company operations.

E-governance, e-education and e-healthcare are the vertical segments where BAIT and BASSCOM are looking forward to seeing more significant public investments in ICT.

High added value in software development and outsourcing expansion in 2015 Peter Ivanov expects "targeted investments in (finally) the establishment of a system for e-government, changing curricula and inclusion of information technologies in each subject, deploying IT in support of education (via electronic textbooks and other technological teaching resources), implementing e-healthcare and e-justice.”

BASSCOM pointed out that the political will for reforms and changes demonstrated by the government at the moment is a key factor for the successful introduction of ICT in various vertical segments and overall in the state.

BASSCOM expects that the highest investments of public funds will be in the field of e-government, for example for restructuring and streamlining public administration and integrating existing records and systems. The association highlights several arguments in favor of the development of e-governance in the country: there is a variant of a strategy and road map for the implementation of successful e-governance in the country; a council is already working on the structural reform; the working group on the Law on electronic identification proposed version of the law in line with the Regulation of the European Commission adopted in July 2014; there is a functioning e-government council with the participation of the business.

The software association also expects significant public investments in education in view of the need for major reforms caused by shortage of well-qualified personnel and the inability for companies to develop at a more rapid pace due to limited human resources. There is already a draft law that significantly changes the focus, character and approaches to the overall educational system. There are also respected sectoral working groups that generate new ideas, approaches and methodologies for adequate education in line with modern criteria and society needs.

In addition, BASSCOM expects significant public investments in e-healthcare. "There is a vital need to launch significant reforms in healthcare caused by lack of customer oriented information systems and effective control on spending, as well as heavy and inefficient document flows. In this area, there are highly qualified specialists who participate in decision making concerning effective e-healthcare, and there are also specific plans to introduce electronic prescriptions, electronic health records, etc.”

"POLL: Which technologies do you expect to dominate in 2015 in Bulgaria?

Stamen Kochkov, Chairman of BASSCOM:
Over the last 10 years, Bulgaria has gradually evolved from a low-cost outsourcing destination to a technology hub where companies provide and export their own products and services with high added value and participate in all phases of modern production software - analysis, design, architecture, implementation, quality control, maintenance and development. The technologies that dominate in Bulgaria, logically, follow global trends - cloud, mobile, social, big data, semantics. They are among the main areas in IT in which Bulgarian software companies have gained experience and develop. Of course, on-premise technologies remain as they are already in use in many companies, but they are no longer the tip of the iceberg.

Petar Ivanov, Chairman of BAIT:
Mobile technologies, cloud services.

Stefan Bumov, Chairman of BAA: The technological trends in Bulgaria follow the world. Of course, the scale and speed of introduction of new technologies is different, but generally it reflects the global developments. This is logical given the fact that some innovative technologies are developed with the participation of Bulgarian engineers and experts working at leading ICT companies. In particular, I would highlight three areas of IT development. First is the increase in mobile applications. Second is the growing number of different applications that transfer working to cloud environments for greater flexibility and efficiency. And last but not least is the accelerated deployment of applications and models to process large volumes of information from the network or alternative communication channels.