Software industry must not prejudge Eastern Europe

29 Apr 2004

The Irish software sector has more to gain than lose from the 10 accession countries joining the EU this Saturday and should not be blinded by unfounded fears, the Irish Software Association (ISA) annual conference at the Mansion House heard this morning.

Summarising the overall opportunities in the region, ISA chairman Cathal Friel commented: “We do not view the accession states as competitors who will steal our jobs; rather we view them as new markets where we can sell more software.”

His comments were echoed by Jan Muehlfelt, Microsoft’s vice president for Eastern Europe, who said: “I don’t believe that a lot of people from Eastern Europe will come and take your jobs. There’s much more demand for IT skills in those countries than there is supply. I don’t think there should be any prejudgement.”

Muelhfelt went on to say that the small business (SME) market – still very underdeveloped across the accession region – presented the biggest business opportunity for Irish software firms and would be the growth engine for these countries’ economies in the coming years. Microsoft, which has a presence in 16 accession and candidate countries and 1,000 employees across the region, has put the SME along with the public sector at the heart of its growth strategy, he added.

In terms of the countries that Irish firms should target first, Muelhfelt identified Russia as the “big, big opportunity” although the high levels of software piracy there was a concern.

Another speaker, Sean Melly, CEO of eTel, which has operations in a number of central and eastern European countries, observed that in Russia, with its widespread corruption, “you could easily get the arm ripped off you”. In his view better places to start would the Czech Republic and Hungary followed by Poland.

On the risks facing Irish firms in the region, Melly and Muelhfelt were agreed that while the eastern European countries had technical skills in abundance, it was much more difficult to find local people with strong commercial acumen and experience. At the same time, new entrants to the region needed to staff their businesses with local people who knew the markets and the culture.

In the legal area, too, there was no substitute to getting advice from local law firms or at the very least the local office of an international law firm, Melly emphasised.

He added that, on the positive side, Irish businesspeople were very highly rated in Eastern Europe and this was something that Irish companies should capitalise on. “You should realise that, and have confidence in doing business in Central and Eastern Europe.”

Muelhfelt meanwhile addressed the benefits he felt the enlargement would bring to Europe as a whole. As it currently stands, he doubted whether the Lisbon Agenda – which decrees that Europe become the world’s most competitive economy by 2010 – was attainable unless Europe moved out of its “comfort zone”. In particular he identified the social systems in place in France and Germany as being unsustainable and that change driven by “strong political leadership” was painful but necessary.

He identified education as a priority area. “The educational system in Europe has not changed in 300 years. The educational system needs to be much more connected to business. Businesspeople need to be more involved in education. At the moment, education is going in one director, while business goes in another.”

By Brian Skelly