SBP Blog

Is Romania ready to sustain a global player in the software business?

Dec 12, 2008 by Mihai

The president of the Bucharest Stock Exchange, Stere Farmache, has recently stated that Romania is currently in the position to sustain the development of a very large software company, that could make it to the big league, alongside Google, Yahoo and all those other big players.

The statement is a bold one, to say the least - but then again, why not? To back up a big player in the software industry, there are 3 basic conditions to be fulfilled: technical know-how, business know-how, and financial capital.

Take point 1, technical know-how: Romania has been regarded, for many years now, as a major player in the software outsourcing market, and it is renowned for its very well trained software engineers. Considering that, in terms of software outsourcing, Romania is currently rivaling India, a country with a population 50 times larger (!), it's a fair bet to say that Romania has the technical skills for bringing the next big thing.

As far as point 2 is concerned, the business know-how: for the past 20 years Romania has been undergoing a transitional process, from the communist economy to the market economy. Currently the country economy is functioning within the boundaries and rules of the European Union, which confirms that the transition is largely completed. Whereas in the early ages, most of the top managers of the multinational companies operating in Romania were foreigners, over the years almost all of these companies resorted to the newly-trained and eager-to-succeed Romanian managers. Not to mention that there are quite a few Romanian-bred companies (some of them currently expanding their operations to a multinational level) that proved they can win in a market economy. In the software business, a good example is BitDefender, a Romanian company developing security software, which is in a global competition with big boys such as Symantec and Kaspersky.

What about point 3, the financial capital? Apart from the organic growth (i.e. financing a business' growth from the company's income), there are 3 major sources of capital: banks, the stock exchange, and the investment funds. The first one is not suitable for supporting the growth rate that is required for building a big player in the software industry, so this leaves 2 more options. So is Bucharest Stock Exchange ready to back up the huge investments that would be required in such a case? Stere Farmache says it is, and indeed, today's Stock Exchange market in Romania is hugely developed, as compared to its status 10 years ago. And if BSE proves to be inadequate for an IPO, still there are some interesting options nearby (e.g. the Polish Stock Exchange, which is larger than the Romanian one, and is constantly looking for new IPO candidates in the Central and Eastern Europe area).

How about investment funds? More and more such investment vehicles are operating in Romania, and actively looking for opportunities. So my guess is that, once a big idea comes into shape (something that could match e.g. Facebook or Twitter), it will meet no shortage of investment. Throughout 2009-2010, the economic slowdown will of course make it harder for entrepreneurs to access the funds they need, but on long term, Romania will be as good a bet as any, for venture capitalists to invest their funds.

New poles of economic power are emerging every year, and many of them are based in non-developed countries. Considering how dynamic the software business is nowadays, it wouldn't be that surprising to see a big player taking shape in Romania. After all, if India (Tata, Satyam and others) or Russsia (Kaspersky, Luxoft and others) did it, why not Romania?

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Magdalena Szarafin commented on 7/12/2009 2:22:21 PM

Romania has a chance to be one of the important BPO/ITO destinations. The membership in the EU, which implies the legal and institutional framework aligning this of other EU countries, good system of education and pool of talented, high-motivated people makes it possible. I have also dealt with this topic in another post, describing the CapGemini intending to establish IT service center in Romania:

Magdalena Szarafin

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