IN SLOVAKIA, the information and communications technologies sector has rather silently grown from a greenfield initiative into one of the main drivers of Slovakia’s economy – comparable to the automotive or electro-technical industries. Though it accomplished this without much direct support from the state, the sector now faces challenges that will require more follow-through from the government, such as in informatising public administration – a process known as eGovernment – developing better education programmes, and forging closer links between business and academia.
The Slovak Spectator spoke with Juraj Sabaka, president of the IT Association of Slovakia (ITAS), about the challenges facing the information and communications technologies (ICT) sector in Slovakia, the impacts of the economic downturn, and about how IT experts are educated in schools here.
The Slovak Spectator (TSS): What is the current standing of the ICT sector in Slovakia?
Juraj Sabaka (JS): The ICT sector is one of the most important parts of Slovakia’s economy. In terms of creating added value, it is comparable to the automotive sector. Even though the automotive industry and the electro-technical industry receive more media coverage, the ICT sector generates a comparable level of added value, with only half the number of employees as those sectors.
The reasons why I think the automotive and electro-technical industries are more ‘visible’ is the large degree of state support that has been extended to investments in these sectors, which politicians need to take credit for in some way.
I would like to point out that over the last 20 years the ICT segment in Slovakia has grown from a greenfield initiative into a strong industry without any huge state subsidies – because state support is set up in a way that is not fully suited to the needs of the ICT sector.
Another reason for ICT’s lower visibility is that it is much easier for politicians to present themselves in front of large production halls than in a room filled with young people in T-shirts just sitting behind computer screens.
TSS: Regarding the automotive sector, some say that Slovakia has been turned into just a large assembly hall. What does the ICT sector bring in terms of creating higher added value or R&D?
JS: The situation in the ICT sector is different.
Of course, there are service or customer service centres here but there are also a lot of companies which are designing and providing their own ICT solutions even though those that have managed to establish themselves in the global market, for example Eset, are not very numerous.
TSS: What are some of the challenges that the ICT sector currently faces?
JS: This industry in Slovakia is basically following the trends of western Europe, within households as well as in the corporate sector. For households, usage focuses on entertainment while companies in Slovakia do not lag behind western countries in terms of IT equipment. What I certainly perceive as the biggest challenge is getting the eGovernment concept off the ground here. I see a huge difference between Slovakia and other developed countries in this area.
TSS: In March you voiced hope that this year the government would launch the systematic building of eGovernment that had been halted after the change of government in 2010. What is the current status?
JS: What I said half a year ago is still valid: the situation has not yet changed significantly. Preparations are going on and documents are being prepared. But it seems, based on discussions so far and what we know, that the direction is good and prospective. Nevertheless, these trends have not materialised into many concrete steps yet.
What I see as a tragedy in Slovakia, but maybe the same thing happens in other countries as well, is that after every change in government everything is halted for nine months or a year. First, new people are installed into top positions; then these people get acquainted with the situation, make analyses, and only then do they start to really accomplish something.
I do not see anybody among the top politicians in the current government for whom process improvement, eGovernment, and getting rid of paper-based administration is a number one priority, even though I am aware of problems with the debt crisis, the European Financial Stability Facility, and others. When compared with past governments, the situation is slowly improving but there is space for much greater progress. There is no way to improve the productivity and effectiveness of public administration without eGovernment.
TSS: In the past Finance Minister Ivan Mikloš put the primary blame for the slow development of eGovernment on “asymmetry in information and knowledge and symmetry in interests” –which he said led to the public administration’s poor capability as a qualified partner of the ICT industry and its inability to pursue procurement in a transparent way. How do you view his words? Has this changed?
JS: That was a fitting description of the situation, something that people from the ICT sector had already perceived for some time. Symmetry in interests means that the procurer has the same interests as the supplier, which in the end brings unfair tenders and procurement processes. Here the government’s efforts to change are very strong. So far, projects have been adjusted, prices have been reduced, and the government has adopted ‘ten commandments’ on how to procure information technologies. Now it is very important, when actual implementation of projects and procurement starts, to see whether the government will stick to these principles or not. Some information has already surfaced that does not fully correspond with the declarations of what should be done, i.e. that this government wants to handle procurement fairly and transparently and use competition to find the best solution. We are seriously worried about the ability of the government to procure IT projects, because the rules are too complicated and strictly defined.
TSS: How did the economic crisis affect Slovakia’s ICT sector?
JS: Generally, it halted growth in the sector, which had been at a double-digit pace before the crisis. But with a more detailed look, there are segments that the crisis sent crashing down and there are others that it helped to grow. There were months, or quarters, when ICT-related sales to households decreased by 20, 30 or even 40 percent, even though from an annual point of view it turned out to be just a single-digit decline. But then there were segments which the crisis positively affected, for example service centres from which information systems are administered or from where services are provided to other countries. Here, pressure on prices generated new clients; many clients started to outsource these services and, secondly, many centres moved from western Europe to Slovakia. This upward trend is visible in the cases of IBM, HP, Accenture, T-Systems and others which are monthly hiring hundreds of people for these positions.
To sum up, the sector as a whole has not registered any big decrease but the structure has changed. There are certain companies that ousted hundreds of people but there are other companies which took up these hundreds of employees.
I would like to recall the situation in Slovakia’s ICT segment before the global financial and economic crisis. Before the crisis hit, ICT was thriving in Slovakia – driven by economic growth and high interest in IT services from businesses. The circumstances were very positive for the business. The euro was coming and that meant all companies were changing IT systems or at least adjusting them. Then there were two segments receiving huge investments – telecom, i.e. 3G, mobile services and TV via the internet, and the banking sector, which was facing changes due to BASEL II and the development of internet-based banking and similar services. Thus growth would have slowed anyway, but the crisis decelerated it even more. The sector, in a certain way, expected that this slowdown would be compensated for by the development of eGovernment, but that has not happened even though there is about €1 billion in EU funds that can be invested in it. Only about 7 percent of these EU funds have been drawn so far. Moreover, a ‘modernisation debt’ has developed and ordinary renewal of IT systems is not taking place, with the argument being that EU funds should be used for that purpose.
TSS: Several global IT companies have hinted that they might create large numbers of new jobs in Slovakia. What is the current situation? What draws global companies to Slovakia?
JS: I do not have any information about any huge expansions. Actually, I think these decisions are being made outside Slovakia by the parent companies. I would say that IT companies in Slovakia are naturally growing by some 2,000 to 3,000 people annually. When looking at the sector from the longer point of view, this industry did not exist here about 20 years ago and now there are about 35,000 people working in it.
With regards to the interest of global IT companies in launching branches here, it is certainly the more similar culture and the time zone, when compared, for example, with India, that is drawing them here. When compared with western Europe, it is also certainly labour cost. Even though the salary gap between IT experts in Slovakia and, for example, Germany or France is narrowing, wages in Slovakia are still significantly lower and there are still – relatively – enough people who are well-educated in IT. But here I would point out the disproportion between the required level of education and the actual education these people receive. Because of a poor knowledge of languages, non-existent IT secondary schools, as well as faculties not generating the required skills, often university-educated people end up doing routine work, contrary to their expectations of creative work. This creates tensions between employees and employers.
TSS: IT is one of those sectors complaining loudly that Slovakia’s education system is not preparing students with the skills needed by the business world. How would you improve this?
JS: Since I do not have any experience in education, I do not have any tangible and instant solutions. I would just like to juxtapose the education system to the business environment. Steve Jobs would never have created the iPad or iPhone if he had been just sitting in his office and waiting for someone to come and tell him what functions it should have. Schools and faculties should be more active; they should look at what similar schools are doing abroad as well as ask businesses about their needs. It is good when businesses also get involved in the education process but here I see a danger that they may push through their needs linked with the technologies they use and that, in the end, may be detrimental to the general development of students’ creativity and independent thinking. But poorly instilling creativity and independent thinking is a problem for other kinds of Slovak schools as well – not only those with IT-related programmes.
Nevertheless, there are several examples of successful cooperation between businesses and schools, and most of those initiatives have come from companies either for mercenary or unselfish reasons. This is the situation with Jozef Ondáš who, when launching T-Systems in Košice, knew that he needed 3,000 people and that it would be impossible to do that without involvement by local schools. Now Košice has a thriving IT valley.
TSS: What challenges does cloud computing and green IT bring to Slovakia’s ICT sector?
JS: The challenge for Slovak companies is to change their business model so that they are able to provide their services and products effectively via cloud services – including that clients will pay only for services used and not for licences for supplied software.
19. Sep 2011 at 0:00 | Jana Liptáková