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INVESTMENT LEADERS

Interview with Peter Weber, General Director of Hewlett-Packard Slovakia

The Slovak Spectator (TSS): Slovak labour has a reputation for being not only comparatively cheap, but also skilled. Is the Slovak government doing enough to ensure that the country's labour force remains equipped with the high-tech and language skills necessary in the 21st century?

He was born in Kutná Hora. He has been involved in computer research since 1969, much of that time with the Research Institute of Computer Technology in Žilina, more recently as the managing director of Hewlett - Packard in Slovakia. He is First Vice President of the American Chamber of Commerce in Slovakia, having been a member of AmCham since its 1993 founding. He serves on the Slovak - US Action Committee as co-chair of the business conditions working group. He is fluent in English and Russian. Peter Weber.
photo: Courtesy of HP

The Slovak Spectator (TSS): Slovak labour has a reputation for being not only comparatively cheap, but also skilled. Is the Slovak government doing enough to ensure that the country's labour force remains equipped with the high-tech and language skills necessary in the 21st century?

Peter Weber (PW): When you look at the typical representatives of liberal capitalism, no government supports programmes to make people buy computers. The role of the state might be to initiate something, to prepare a legal framework, but it does not have to spend billions on ensuring every household has a computer. In the end, it is up to individuals who realize the benefits of having a computer and being plugged into the World Wide Web. Those who have that connection will always be one step ahead in life.

In fact, in Slovakia the generation between the ages of 30 and 50 has a completely different approach to the over-50s. Things were completely different before 1989 and the processes that were already in motion in the West only started in Slovakia after the Velvet Revolution. Also, the lack of deeper penetration of computers into rural areas, for example, is not really surprising. There are still problems of unemployment. Someone who is struggling to earn enough for basic necessities is not likely to be thinking about a knowledge-based society or about what services the Internet can provide.

But we have progressed pretty well over the past 15 years and now I know few under the age of 40 who have never worked with a computer and the Internet. The government's Infovek campaign had an "evangelizing" role, mainly, in fact, in rural areas. Teachers, apart their roles in schools, organise training workshops for children and colleagues who have had no contact with information technology. Due to that, training is available for all ages, including adults and even the older generation even in such areas where people would not pay for commercial training. So I see Infovek as a very successful programme. Nevertheless, the main role of the government is to create a wide selection of useful, interesting services and content on the web for citizens, and to put much greater effort and speed into developing e-Government functions. HP and other IT companies can only assist in this process - for example, we gave over $5 million worth of technology to Slovak universities, and we supported the Infovek programme, the Junior Achievement programmes, and many local initiatives.

Although we cannot compare Slovakia with the USA or other developed Western countries in terms of the penetration of IT and the Internet into people's everyday lives, I think the general level of education is high enough, which means that the idea of a knowledge-based society is not unrealistic.


TSS: In a recent conversation I had with some fellow expats, I heard the view expressed that the best-educated Slovaks have already left the country and that the ones remaining here have no ambitions. Do you share this opinion?

PW:No. The fact that not only Hewlett -Packard but also other multinational companies, such as IBM, Accenture, Dell, Siemens or SAP and Alcatel, are developing professional services centres or software houses here proves that there are still skilled people here and that the schools are producing enough specialists in the field of information technology.

The Slovak cabinet likes to use Ireland as a kind of benchmark in this regard, a country that is also well known for its services centres. Of course, we have a lot of work to do to catch up with the Irish, but we do have a chance because the schools are producing well-educated young people. Thousands of graduates that our companies could use leave the universities every year.


TSS: It is interesting that one of the government reforms that did not turn out quite so well was the education reform. Is what you are saying about the level of education valid for the future?

PW: Certainly it is not necessarily valid for the future. The schools need high quality technical equipment and truly committed professional teachers. If teachers continue to be paid so poorly, the level of education might drop. Perhaps one of the reasons why the education reform did not go through is that there have been so many reforms over the past four years, and reform can be derailed. But the reform of education is a must.


TSS: Is there a tendency for firms to be less passive observers of education and more involved in the process of educating and training their employees?

PW: Each firm educates its employees and does so for a purpose. However, we train our people not only in narrow, technical matters, but also in sales and management, and we help staff members get an MBA. I tell my younger colleagues that they will be working for another 30 years and they will have to perform as European managers. So we support our employees who sign on for an MBA. These employees and managers understand that the programme will cost time and money, but they know that it's worth the investment.

But we only need to add specific training. The best example of the high level of education was our hiring of more than 600 people for our services centres during a period of about 18 months. The fact that we found that number of people, without compromising in terms of quality, proves that there are skilled people in Slovakia. The demands on the centre in Bratislava are the same as on our centres anywhere else in the world. Bratislava is one of only seven HP delivery centres. We gained that status because of the high quality of our personnel.


TSS: With Hewlett-Packard's plan to open a call centre in Poland employing at least 1,000 people, it means the company will soon have centres in Poland, Slovakia and the Czech Republic. What can these countries do to ensure that such labour-intensive investments don't move farther East once wages in New Europe start to rise to Old Europe levels?

PW: The centres that we are building here are centres of professional technical services, so we require people who have relatively high technical know-how. Such knowledge cannot be found just anywhere.

The Irish example shows that after 20 years some capacities move away, but during that time Ireland managed to build itself a reputation as a country where businesses with high added value can flourish.

I have no doubt that within the EU we will remain competitive for at least two decades. Today the economy is global and Slovakia is certainly in competition not only with European countries but also with India and China, which are producing hundreds of thousands of graduates every year.

But I believe that our EU membership gives us an advantage, and means that the level of service we offer will stay at the top European level.


TSS: IT tenders are one of the areas where problems in state procurement and transparency tend to appear. What can the state do to avoid such scandals in the future? Is corruption truly a problem in state procurement, or are "scandals" often created by firms that lose tenders?

PW: There is no doubt that the ITC segment is very competitive because all the big world players are present. There are three factors that have an impact on the sector: the quality of tender documentation; a lack of business ethics, and the quality of the law on public procurement. It would be ideal if the government or public bodies hired consultants to process all the data for the RFP of a given complex IT project, and prepare a document with detailed, measurable, and well structured specifications. The problem sometimes is that if bids are based on a vague text, then there may be huge variation in the size of the bids received. I remember a tender where the cheapest offer was for Sk40 million (€1 million) and the most expensive for Sk400 million (€10 million). That shows not that the prices between the bidding firms were different, but that the tender was understoood differently.

Business ethics has been equally important, and largely remain a missing ingredient in the country's business environment. It is an important complement to the legal framework. Multinationals have implemented the Code of Business Ethics worldwide. The local business community has for the most part not yet discovered the importance of such a code. The American Chamber of Commerce (AmCham) jointly with the Slovak - US Action Committee launched an initiative to stimulate the creation of a business code in Slovak companies. I believe it has been slow to take root.


TSS: Do you think Slovakia has more problems with corruption or cronyism than other countries, for example Canada or the US, or is it just fashionable to criticize post-communist countries for their problems with corruption?

PW: In the West the system developed and matured over decades and decades, and ethical standards have been increasing for about 100 years, but here Communism interrupted the development. The first, pre-war state of Czechoslovakia was considered a democratic and culturally developed country, and its GDP per capita ranked among the top 10 developed countries. But Communism wiped out that experience so it was understandable that in the 1990s the atmosphere was closer to the wild capitalism of the 19th century than to western European societies, where different control mechanisms have been functioning. But even in the cultivated liberal capitalism of the USA, corruption sometimes happens.

Slovakia in the 1990s went through a phase of redistributing its national property. This is always the most important post-revolutionary stage. The re-distribution is what fixes and drives the change in the economic system. But there is no correct way to re-distribute the national property. We had a Velvet Revolution, but in fact the process of wealth redistribution was full of opportunism. Those opportunities were there for just that one time, and since there were no business ethics here it was tough, it resembled the capitalism of the 19th century and ignited some corruption. Today, mass privatization is behind us and things are more settled. What we experienced over the 1990s was a natural post-revolutionary development. I am pretty sure that the situation in Slovakia has significantly improved and that it has been in line with other transforming central European countries.


TSS: If it was a natural development then does it make sense to try and punish crimes committed during this period?

PW: Yes, it does. Society will be much healthier if crimes are punished, be it at the time or 20 years later. I think everyone who used illegal means to gain wealth should look at what is happening in Italy, where even members of government were dragged to court after 30 years simply because they were suspected of being involved in corruption. The Slovak cabinet is giving clear signals on this issue. If an act is at odds with the law, then it must be punished. I think the mechanisms the government has put in place to fight corruption will bear fruit. I do not think Slovakia is an increasingly corrupt country. Things that happened did so during the privatization process in the last decade. Now the business environment is far more cultivated.


TSS: Investment experts often talk about the "multiplier effect" of foreign investment, which occurs when local people develop skills and professional experience in working for a foreign investor, and then start a company of their own in a niche field. Do you see this happening in IT in Slovakia? Are there any Slovak Microsofts or Bill Gates out there waiting to make their mark?

PW: This question reflects what I often say. When a firm like Nokia, which is a corporation that grew out of a nation of five million people, emerges here, I will know that Slovakia is on the safe side. So far I cannot point at anyone who could become a Slovak Nokia or a Slovak Microsoft or a Slovak Bill Gates. The probability that the US economy will give birth to another Bill Gates is 1,000 times higher than the probability that the Slovak economy will do so, simply because the market has different volumes and different dynamics. Still, I think things are developing on the right path. When Volkswagen came here as the first car producer, the local added value was only in the assembly work; today it is declared that the added value is somewhere around 40 percent. That is a significant development in one decade.

Around the bigger firms there are opportunities arising for firms that are in the supply chain. Of the 600 people that we have at our service centres, the majority are employees of our subcontractors. One of our subcontractors created a joint venture with a Spanish firm which already had experience in the business, and as a result was successful. When firms realize they don't have the know-how, they seek out strategic partners. Many IT firms have been fusing and creating conglomerates with at least regional reach.

There are two dynamic branches in Slovakia. One is the automotive branch, built on big foreign investments, which is developing a supply network. The second field is IT, which has never really been helped by the state, and which grew out of multinational firms coming here. Local software houses or local retailers have also established themselves and grown, and have now reached the consolidation phase by fusing with other firms. I think that in these industries a wide base has been created on which people and firms can develop to regional and European dimensions. And I believe this is true not only of automotive and IT.

If we meet and talk again 15 - 20 years from now, Slovakia by that time may be a significant player in the European and even the global economy. I am optimistic and I think this nation is capable of finding its place in the global business world. I do not think it is doomed to have all its intellectuals leave and to remain at a grey average with people who are capable only of low-level work.

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