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INTERVIEW WITH VÁCLAV KLEIN SENIOR VICE PRESIDENT AND MANAGING DIRECTOR OF NESS SLOVENSKO

Industry voices


TSS: Are Slovak firms as open to IT and technological advances as they are in other European countries, such as in using outsourcing or digitalized documents?
VK: Ten years ago the Slovak ICT market was visibly behind in terms of demand from the commercial sector. For example, while ERP [Enterprise Resource Planning] systems at that time were a standard IT commodity in Europe, in Slovakia this market didn't start developing strongly until the second half of the 1990s. In the last few years, however, it is very plain that in terms of corporate customers, the Slovak IT market is maturing, and is gradually catching up with the European market, largely due to the inflow of foreign investment into Slovak firms.

Václav Klein graduated in computer technology and informatics from the University of Technology in Košice. He began his IT career in 1994 as a project manager for Novitech Košice, and then in 1995 joined Delta E.S., first as director of its Košice branch, and then in 1999 as the general director of Delta E.S. Bratislava. Following Delta's acquisition by Ness Technologies, Inc. and its rebranding as Ness Slovensko, Klein in October 2005 was named Senior Vice President and Managing Director. He is a member of the presidium of the Slovak IT Association and from its founding has been actively engaged in all its activities.
photo: Courtesy of Ness Slovensko

TSS: Are Slovak firms as open to IT and technological advances as they are in other European countries, such as in using outsourcing or digitalized documents?

VK: Ten years ago the Slovak ICT market was visibly behind in terms of demand from the commercial sector. For example, while ERP [Enterprise Resource Planning] systems at that time were a standard IT commodity in Europe, in Slovakia this market didn't start developing strongly until the second half of the 1990s. In the last few years, however, it is very plain that in terms of corporate customers, the Slovak IT market is maturing, and is gradually catching up with the European market, largely due to the inflow of foreign investment into Slovak firms. This much is clear from the IT strategies of our leading companies, which are implementing projects very similar to firms in Western Europe. We often see global corporations choosing branches in Central Europe as "pilots" for roll-outs of certain solutions for the rest of the corporation. This is due to the fact that our companies have much more modern IT infrastructure, because they built it after 1989. One example is the banking sector, where a large part of the IT infrastructure of banks from Western Europe is built on solutions implemented in the 1970s. Another reason is the growing competition in certain market segments, which has encouraged Slovak firms to make much more effective use of their technology. They regard IT as an important tool to increase their effectiveness and competitiveness and to reduce costs. For today's managers, the quality of information and the speed with which they can access it plays a key role, as it permits this information to be used more effectively in doing business. This creates added demand for specialized solutions with high value-added, such as solutions for managing supplier networks, company performance (business intelligence, controlling), customer relations, on-line support for business processes, or administration of document contents and flows. The situation in Slovakia is changing as well in outsourcing, which is not only a means to reduce costs, but it also allows firms to concentrate on their core business. If I were to sum it up, Slovak firms are interested in sophisticated IT solutions, even though it is true that Europe is far more advanced in this area. But even this disadvantage can work to our advantage, as it allows us to learn from the successes and failures recorded in the implementations undertaken in other countries.


TSS: Regarding foreign investment and the pressures of competition, can we expect to see a wave of fusions and acquisitions in the IT market in Slovakia as well?

VK: Fusions and acquisitions have become a natural phenomenon in Slovakia as well. Last year we went through this process ourselves, when the global company Ness Technologies bought our Slovak IT group, Delta E.S.. I think we can expect to see more of this in the future, because it remains a common form of expanding your product portfolio or penetrating new markets. A typical feature of acquisitions, largely by bigger firms, is a radical change in know-how, internal processes and the entire company culture, which doesn't always meet with positive reactions from the target company or its customers. This can also be a positive process, because like in our case, a successful local firm can attract to Slovakia a successful international IT corporation, which has a global strategy based on making maximum use of local know-how. What is more, our employees immediately gained an opportunity for further professional growth with access to international know-how and cutting-edge technology. They can take part in international projects, and gain and compare experiences that they would not have access to in a local firm. The arrival of global know-how to the local market is also a major gain for our customers, as it gives them access to a much wider portfolio of products and services, as well as solutions that have been tested and proven and are already in wide use around the world, but that in Slovakia have yet to attract demand. One example of such a global solution could be an information system for the health-care sector based on Internet applications, which allow a variety of health care providers, without regard to place or time, to have access to a patient's health records and his complete health documentation. It's a kind of virtual patient register that contains relevant information on patients, but that leaves every piece of information unchanged in its original location and format. This solution, which allows data to be shared not only within health care providers (hospitals, clinics), but also in ambulances and in rescue helicopters, is already working in Israel, and we are introducing it now in Holland. Another concrete example might be a solution allowing a paper-free court system.


TSS: Does Slovakia have anything that is interesting for foreign investors in the IT sector? What about your company - why did it decide to open a software development centre in Košice?

VK: There were several reasons. The first was our great potential in the area of specialized information solutions. The Slovak IT market is starting to absorb them, and only large players are capable of offering such sophisticated and complex solutions. The second reason was certainly lower labour costs than abroad, while at the same time Slovak IT experts are of a high professional quality and have a strong knowledge of languages. The final reason was the advantageous business conditions that Slovak offers following the enactment of economic reforms.

As for our software development centre, all three reasons I have mentioned were part of our decision. With its universities, traditions and location, Košice offered everything we needed for our aims - to build a highly qualified centre for developing and testing software for Western European clients. We were pleased that we became another foreign investor to bring jobs with high value-added to a region outside Bratislava.


TSS: How much of a problem is the brain drain in Slovakia, in your experience? Does Slovakia offer enough to its IT experts to keep them here, or to lure some from other countries?

VK: The IT brain drain has its roots in the past. Slovakia, and especially the regions outside Bratislava, developed very slowly, meaning that quality IT specialists from Central and Eastern Slovakia couldn't find the challenge they were looking for at home - they had to travel to Bratislava or even abroad to find interesting and well-paid jobs.

However, in the last few years the offer of domestic job openings in IT has improved tremendously. Many foreign investments to Slovakia are going to the IT sector and bringing interesting work possibilities. The Ness investment in the east is only one example of this. Today even at home we can offer work on interesting international projects as well as the opportunity to work with modern technology in Slovak companies with excellent work environments and respected worldwide names. I am convinced that IT specialists in their search for adequate pay will no longer have to break all of their social and emotional ties and leave their families for work abroad, when they are able to find the same work at home. Of course, supplying the labour demand of foreign companies in Slovakia will be another matter altogether. It is really now that we are starting to feel the IT brain drain from before, although I believe a certain proportion of these people will return home, because they can find comparable work and job conditions as abroad. In this regard, the need to raise the level of education and to link it to practical experience is becoming ever more urgent, both at the university and the secondary levels.


TSS: One of the possible ways to ensure an adequate supply of skilled employees is for companies to work directly with the university community. Why do you think it has taken until now for business and schools to take concrete steps in this regards?

VK: There was cooperation between the private ICT sector and universities in the past, but given their lack of funding universities naturally preferred to work with large global companies, who were the only ones who could ensure that kind of support. The much greater cooperation we are starting to see between the private sector and universities and secondary schools was driven by the current demand for a large quantity of prepared and qualified graduates.

The schools themselves also understood that if they want to be successful in the future, they have to pay more attention to preparing their students well to be successful in their careers; they must be more open to listening to the needs of the market. In terms of the quality of our educational system, it has long lagged behind the more developed European countries in terms of investments and ensuring quality. The private sector can be very helpful in this regard, but it cannot replace or usurp the primary role of the state in building and ensuring the quality of the educational system.


TSS: As an international company you are in a position to compare the extent to which public administrations in different companies are electronic. What are the greatest challenges that face Slovakia in this respect, and when can we expect that the Slovak state administration will offer fully on-line services?

VK: At the beginning I described the development of the ICT market with respect to the private sector. If we compare it to the level of electronization of the public administration, it is clear that Slovakia has some catching up to do. Of course, in this area as well, Slovakia's joining the European Union was followed by several interesting projects, such as the on-line Cadastral Office, the electronic administration of documents at some ministries and offices and so on. However, some fundamental barriers remain in the state administration that are holding back the development of the ICT market. Citizens and businesses still cannot communicate with state offices and use public services on-line, and we have a complicated and expensive system of electronic signatures, which means that in practice it is virtually unusable.

Without some changes to the system of building and financing informatization, it will be very difficult to make any progress. Slovakia still faces the challenge of introducing a single and complementary IT system for the public sector. What happens in future depends on the priorities of the new government. As a representative of a company from the ICT sector, I can only say we shouldn't slacken off, but rather pick up our game significantly.


TSS: If you could advise the incoming government on what steps it should be taking and what legislation it should be passing in the ICT sector in the years to come, what would you say?

VK: We addressed this question very seriously in the Slovak IT Association, which unites more than 80 percent of the Slovak ICT market, and in which Ness is an active member. The result was a document called "Informatization - The Road to the Knowledge-Based Economy," which is a summary of the current state of affairs in the use of ICT in Slovakia, and a comparison with the European context.

This document also defines the most important tasks that the IT Association believes await the new government in achieving a knowledge-based economy. In terms of society in general, the most important task is to reduce the burden of the public administration on business people and citizens by introducing eGovernment services, equality between electronic and paper documents and communication, and so on; just as important is changing the education system to prepare people for the needs of the knowledge-based society, such as support for life-long learning and the creation of useful content.

From the point of view of the ICT market, we believe the key task for the government will be changing the system of educating employees for the ICT sector to reflect changing market needs, as well as ridding the competitive environment on the ICT market of elements that deform it, such as state regulation and intervention, forced expenditures, requirements that exceed EU demands.

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