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Bulgaria: Eastern Europe's Newest Hot Spot?

By Bill Robinson, Business Writer

London, England--If there's a migration of global IT customers from India to other locations around the world, then the important vision for corporate IT managers, CIOs, and CTOs will be, Where else should I look before I make a decision?

China? The Philippines? Vietnam?

These Asia-Pacific rim locales are making the shortlist to be sure; however, could they be farther away from where the North American and European customers are? What about the well-publicized cultural, economic, and social differences from that of their Western clients?

These challenging differences have some key decision-makers in the US, UK, Scandinavia, and Europe locales scratching their heads and wishing for a closer, more culturally comfortable, and less Third World destination for their billions in critical IT budget projects.

Russia and Eastern Europe are collectively stepping forward in a big way to grab more and more of this business. Their goal: to find customers disenchanted with the Indian outsourcing providers.

And with few exceptions, Bulgaria is boxing way above its weight.
Why Bulgaria?

Bulgaria has an unusually well-developed educational system specializing in electronics, engineering, and computer sciences. There are more than 47 universities in Bulgaria, located in 26 different towns. At any one time, there are more than 5,000 Bulgarian students majoring in computer science and another 5,000 majoring in electrical engineering, mathematics, physics, and biotechnology.

Bulgaria's advanced education is right up with the top countries in the world, ranking fifth amongst all countries in sciences and eleventh in mathematics, according to The World Bank and The Economist. Ranking second in the world in IQ tests (MENSA International), Bulgaria also ranks second in the world in SAT scores.

Lastly, Bulgaria ranked 8th globally in certified IT professionals, according to the Brainbench Global IT IQ Report.

This tiny country was in the shadow of the mighty Soviet Union. Now its former partner has turned around its economy and harnessed the Russian-like superiority of its programmers. If you listen to the Bulgarians promote themselves, they have the advanced coding skills of the Soviet techies and don't have many of the most difficult personality traits of their former parents. This makes Bulgaria a very attractive geography for Western businesses with an important need in the software, innovative IT, or general technology areas.
SAP Establishes a Beachhead

A few years back, SAP, a German enterprise software company, decided almost begrudgingly to set up a small operation in Sofia, Bulgaria's capital city.

SAP did not send unimportant work to Bulgaria; to the contrary, SAP is placing a big bet by having its Bulgarian counterparts work with laser-like focus on the all-important Java software development area for its worldwide product line. Plamen Tilev, the Managing Director of SAP Bulgaria, says much of this work is only done in Sofia and SAP's German headquarters.

Steve Keil, the CEO of Sofia-based Sciant, another outsourcing service provider, says that Bulgaria is more innovative. He tells potential customers, "When SAP wanted to develop new, really advanced software, they chose not to send their NetWeaver Java-based platform to their big, established operation in India and made the bold decision to send it here to Bulgaria."

Currently, SAP has 270 people based in Sofia and plans to "double that in two years," Tilev says. The company is moving to a bigger building at the end of the year. "SAP loves Bulgaria," Tilev says.

IBM has been in Bulgaria since the 1930's, when it came to the country to help calculate the Bulgarian national census by providing the tabulators. Having officially set up IBM Bulgaria more than ten years ago, Big Blue now has about 50 people working there.

In addition to IBM, HP has about 40 people in the country and has been active for more than 20 years there Cisco Systems and Oracle have also established Bulgarian presences, according to Vessel Gagov, now Chairman of Sofia-based Rila Solutions, a Bulgarian IT services firm, and a former 11-year IBM employee in Bulgaria.

The Challenges of Offshoring Success

Keil says SAP's success creates a whole host of complications for a Bulgarian company interested in finding the right technical personnel at the right rates. "SAP has something like $14 billion in cash, comes in recruiting 300 developers, and pays well over the market rate. Now there's a huge sucking sound as SAP takes the lower and medium-level programming talent off the market," Keil observes. He says Bull, Siemens Business Services, Ericsson, and others are also now in Bulgaria, "which makes the recruitment cycle much longer for us." Given what's happening in India, these are two big problems (higher wages and longer ramp-up time) for Bulgaria to overcome.

In order to make Sciant's offerings more competitive, Keil recently set up an operation in Vietnam, where he hopes to integrate its lower local costs and salaries with the advanced complex code and project management skills of his staff in Sofia. The goal: to overcome India's rising pricing. According to executives at firms such as Sapient and Capgemini, customers like this hybrid model.

Another challenge: Bulgaria's pending inclusion in the European Union in 2007. Both suppliers and customers alike aren't sure whether this is a good or bad thing. Of course joining means access to larger markets and customers abroad but as new member countries and their clients have been discovering, this almost certainly also means raising wages and costs for the customer.
Will Bulgaria Win Additional Business?

What is Bulgaria's real strength? Gagov reflects for a moment, then explains, "These young Bulgarians are very technically aware; they speak English predominantly; and they can program extremely well."

Already established as an Eastern European destination, Bulgaria is still somewhat mysterious to those facing a steep learning curve about the region. But owing to SAP and others taking a keen interest and the Bulgarian programmers' unique ability to reverse engineer complex software code, this is slowing fading away.

The fact that SAP is establishing an increasingly larger presence says it's happy with Bulgaria as an offshore destination. And that has to be a very good thing in the long run.

Publish Date: August 2005,

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