24 August 2006 - 17:13Some effects of IT outsourcing in Romania
I was talking to my cousin in the beautiful(??) country of Romania about developments in the IT industry over there. From what I remember it looks like the wages in the IT industry have shot up significantly, being one of the very few drivers of salary growth over there. From some email I got from a friend in Romania it looks like positions which require 3 to 4 years of experience are going for at least 1000-1500 euros a month. Unfortunately for IT professionals some costs (such as the cost of owning a home) have greatly outpaced salary growth…
One of the effects on the locals will be the slow disappearance of in-house IT departments. Many businesses have in-house IT deparments covering pretty much all the spectrum of an IT operation: Oracle DBAs, JEE specialists, sys-admins, etc… Obviously, this cannot be supported anymore because of the migration of IT specialists towards better-paying jobs coming from foreign corporations. The local businesses are left with a problem: who will continue to carry out our in-house, incredibly customized and brittle IT operations?
In the problem lies the opportunity: an entrepreneur could create an IT company that implements these processes (preferrably using an open-architecture in order to accomodate customers as diverse as possible), have the businesses shed their IT departments (they cannot afford them anyway) and have them outsource their IT operations to its company. Outsourcing in the land of off-shoring seems contrarian, but it is one of the few viable options that a business can use in order to continue to automate its processes (book-keeping, customer relations, etc…).
Open-source could play a very important role in the implementation of an outsourced environment, please remember that SE Europe is dirt poor. Operations Support Systems for Java could answer some questions about an open architecture for creating very diverse and customized implementations of various business processes.
Opportunity lays with providing IT services to home-grown businesses as well as to the off-shoring behemoths that are visiting the area.
1 Comment | Tags: IT in S-E Europe
09 Sep 2006 - 16:26
[...] In Romania copying a successful business idea is the norm. It happens across all business types: from the dozens of sites for dating, job-hunting, etc… to the huge number of music groups of all types, to the huge number of second-hand taxi drivers that are rounding their monthly income by driving a taxi after work. The result is that everybody is poorer than before. The huge supply which results from merciless copying drives prices to levels so low that the business stops being profitable. For example, the taxi drivers used to have a decent standard of living in early 90’s, today they are driving cars due for scrap decades ago 18 hours a day in order to make a living. I remember getting into a taxi and telling the driver my destination. The driver turned around with a thousand yard stare that I still see… The urge to copy a successful business model is understandable in a country with the lowest standard of living in Europe. Everybody wants a better life so they jump on whatever initiative without realizing that that particular line of business can support only so much. At the first sight the huge supply generated by copying would appear to work in the consumer’s best interest, after all they are getting a service for less. The fact is that the service is of a very poor quality due to the poverty of the people sustaining it. For example, taxis in Bucharest are horrible to ride: sweaty in the summer, cold in the winter, cramped, smelling of gasoline and motor-oil, etc… Another example: an employee looking for a job on a job-hunting site is not sure if the job offers it sees are the best job offers on the market because the job offers are spread across 5-10 sites. A job-hunter has to look on multiple sites in order to find what it looks for. An employer looking to advertise a job has to advertise it on more job-sites because the job-referral business is so fragmented. One way to avoid being swamped in a sea of copy-cats is to propose a service with a high entry barrier (financial, technological, social, human, etc…). Your competition should not be allowed to enter your market for free. How would you turn a service into a high-entry barrier service is pretty much particular to the nature of the business, but you should realize that a service that is easy to implement will be copied mercilessly and in the end turned unprofitable. In my previous post in this category I suggested outsourcing the IT operations of a regular business as a business initiative. The entry barriers of this business model would be salaries (salaries are growing right now in Romania), social (connections with various business leaders in the process of outsourcing their IT operations) and technological (good knowledge of various systems which wil be phased out). [...]