ICT and their regional impact in Slovakia (case study of IT centres)

1. ICT and their regional impact in Slovakia (case study of IT centres) NATIONAL AND REGIONAL ECONOMICS VII, Herľany 1-3th Oct 2008 FP 6 Project : „ Regional Trajectories to the Knowledge Economy“ MILAN BUČEK, RUDOLF PÁSTOR University of Economics in Bratislava

2. Outline • Introduction • Regional dimension of ICTsector • Decentralization of ICT • Localization of IT centres in Slovakia • Conclusions

3. „Every morning in Afrika, a gazelle wakes up. It knows it must run faster than the fastest lion or will be killed.Every morning a lion wakes up.It knows it must outrun the slowest gazelle or it will starve to death.It doesn´t mater you are a lion or gazelle. When the sun comes up, you better start running“.(Th.L. Friedmas: The world is flat, 2007, p. 137)

4. Background • Network and clustering of the software firims – on the customers, universirties etc. • Relations to the regional development and to the disparities: urban agglomerations, peripheral regions, • a contradiction – strong linkages and „overembedness“ (Boschma, Toedtling)

5. Background • Innovative high – tech clusters • accumulation of local knowledge, interactions of enterprises with local public institutions and new SME creations and „tailored“ workforce. • Tripple helix

6. ICT and peripheriality • the location of the production and KIBS is more „footless“ (can be located in periohery). • teleworking • enterprises located in remote regions can used the networks, services and ICT applications ( for new customers, suppliers, partners etc).

7. ICT firm´s location • Delocalization of big international enterprises ( IBM, NESS, HP) • Outsourcing, Offshoring, Nearshoring • Endogenous SME development

8. Delocalisation • Two reasons for the „nearshoring“: • Supporting the producers with IT (PSA, KIA) • Services offering from our country Europe or the world ( service centres of the HP, IBM, Dell, Accenture , DHL from London tom Praque) • Low- end or high – end activities

9. OUTSOURCING USA • FIRST WAVE: 90 % consumable electronics 80-85 % shoes, toys, suitcase and bags, watches,TV 70 % bicycles; 60 % PC 57 % clothing • SECOND WAVE: the routine service – ticket reservations, basic software, credit cards etc.; NOWDAYS: Internet, data processing, „knowledge intensive“ activities and services

10. IT sector in Slovakia • The IT sector in Slovakia has recently high development dynamic (18 423 employees in 2001, 31 140 in 2003, 43 786 in 2006. • The most progressive growth of employment in sector of IT services and SW development. • The area of SW has the lowest „finance barier“ for market entering. SW development is from the point of financing and quality of human resources the most optimal for further development in Slovakia.

11. FDI in IT sector in Slovakia • Slovakia has become an interesting investment destination for IT sector • Positive trend during the last period, inflow of FDI to the sectors with higher vallue added, e.g. IT sector. • FDIare concentrated on IT services. • 3 Phases: • founding of business representations focused on sale, deliveries and services to customers. • creation of favourable business environment - second phase of investments e.g. IBM, Dell, Accenture and HP. • extending of R&D -on the software development is focused e.g.Siemens PSE, Alcatel, Ness etc.

13. Decentralization of ICT • The urban regions are not only places of strong ICT sector but they are also leaders in ICT using in others related sectors. • Peripheral regions are loosing their human capital („brain drain“) - they are less attractive also for ICT sector. • Regions have found the way for sustainable growth in the future with specialization in some sectors (e.g. Kosice region - local initiative „Kosice IT Valley“).

14. Analysis of the demand on labor market in the Slovak IT sector • Research results: • IT sector is one of the most dynamic and most intensive growing sector with high value added and over average wage level of employes. • IT profession is one of the most preferable on the labor market in SVK - the growing number of labor places created directly in IT sector or in other related sectors.

15. IT centres in Slovakia • Reasons for selection of Slovakia from interviews with IT managers from IT centres: • Favourable entrepreneurship environment and political stability • Geographic location: Near-shoring • High level of education - skilled and flexible human resources • Available technical expertise and knowledge of foreign languages • Very good price/performance ratio • Experience in providing near-shore services and working in international projects • Reliable ICT and transportation infrastructure in the region

16. IT centres in Slovakia • Regional dimension of localization of IT centres – Bratislava and Kosice region. • Close relationship between using of ICT and „urban way of life“... • Lack of high qualified labor forces (IT managers, SAP administrators etc.) • with increasing of economic level in Slovakia – possible coming back of IT professionals • possible imigration trends from new EU countries

17. Conclusions • The qualified labor forces created conditions for further development of offshore/nearshore services with low value added (call centres), high value added (operation centres) to the highest value added services (R&D centres). • The IT centres make some kind of pressure on educational system with the intention to fulfill their needs for educated and high qualified labor force. If the reaction of universities is not sufficient – there is threat of lack of this high qualified labor force. The final objective should be to transform positive experiences from IT centres and software houses to the future offshoring with high value added R&D. • Necessary to convert positive experience from IT centres and SW houses into forecasted offshoring of highest added R&D.

18. Conclusions • Existing IT centres are in strong corelation to the urban agglomerations (Bratislava and Kosice). • Main reasons for IT centres location: • Universities (faculty of information science and information technologies…), high level of foreign language knowledge (e.g. English and German) – necessary for outsourcing services for foreing partners. • IT profession is atractive on the labor market, with potential for further increasing of employment....

19. Further research FP6 EURODITE- Territorial knowledge dynamics in the ICT sector in Bratislava region • Security technologies in the ICT • The sector of information security involves firms (e.g. Eset, Ardaco, Inovatrics) the main products of which are concentrated on some of the fields of information system security in public administration, firms and for individual users. The main segments of this market comprise protecting information and information systems from unauthorized access, use, disclosure, disruption, modification, or destruction (anti-virus protection, electronic signature, cryptography, web application security, security IT audits, etc.)

20. Further research • With the penetration of IT in the society the segment of ICT security achieved significant growth in recent years in Slovakia. • Such Slovak firms as Eset and Ardaco (active in the area of SW security and security of mobile communication) represent Slovak ICT firms that managed to be successful in the strong foreign competition and they continue to expand further. • Therefore our task is to explore what sort of knowledge these firms use, generate and how is this knowledge further developed and diffused. We are interested in the ways how the territorial proximity of regional actors influences the knowledge dynamics in region.

21. Ďakujeme za pozornosť • bucek@euba.sk • pastor@euba.sk