Moldova Moving into the Premier League of IT Nearshoring

Chisinau-based software development firm ISD is small but powerful. Its primary team of developers has exceptional expertise in core programming languages and platforms. They also specialize in voice recognition technology, giving them a competitive edge when it comes to key tasks such as speaker recognition, speaker adaptation, phonetic transcript creations, and support for different dialects. By deploying an agile customer-focused development methodology, they have secured contracts in the Netherlands, Germany, Belgium, Spain, Finland, and other European Union (EU) countries. Marquee clients include global powerhouses DHL, Xerox, Ford, Estee Lauder, and LG.

That IT developers based in Moldova service major international brands speaks to the country’s emerging strength as an IT nearshoring and offshoring destination. While ISD is a home-grown firm, it works with partners to secure international contracts. Meanwhile, companies such as Endava and Pentalog have set up centers in the country to leverage local expertise. Just like Poland, the Czech Republic, Hungary, and Romania, Moldova has generated a disproportionate amount of IT talent given its size. The country has strong technical and educational traditions and a solid IT sector that provides invaluable experience to ambitious graduates. The country is also geographically well positioned and comes equipped with a linguistic and professional culture coMoreover, the government has actively developed policies and initiatives designed to promote foreign and domestic investment in the country, creating highly favorable corporate tax regimes and free economic zones and industrial parks. Information technology is a particular focus. Virtual IT parks, incentives designed to spur the software sector, tax programs to prevent brain drain, and training programs for IT specialists are all contributing to an IT ecosystem that increasingly exports development, quality control, and application customization and support to Europe, North America, and Russian-speaking countries.

The country is not perfect. It is too small for service centers requiring thousands of workers handling tens of thousands of questions or requests per day. An efficiency-minded business culture is still developing. Although management practices and leadership have improved considerably in the past decade, more is still to be done in terms of best practices, expectations, and process establishment. And industrial sectors such as finance, telecom, manufacturing, and retail receive most of the focus of software and IT services firms. mpatible with both Europe to the west and the Commonwealth of Independent States to the north and east.

That said, Moldova’s IT environment is proving a competitive alternative to “classic” destinations. Second-tier IT companies have been successfully using Chisinau for sourcing operations for fifteen years. It is probably just a matter of time before large global players open centers. Moreover, a number of home-grown IT firms such as Allied Testing, Deeplace, and the route-optimization firm Noction have garnered international acclaim, customers, and backing.

Moldova may not be suited to all organizations looking to locate a sourcing center offshore, but it could do the job for many, particularly for companies interested in smaller, high-end operations.

Researched and written on behalf of the Competitiveness Enhancement and Enterprise Development II (CEED II) project, implemented by Chemonics International, Inc., and funded by the United States Agency for International Development (USAID) and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), this IDC White Paper reviews the possible benefits of opening an ICT nearshore/offshore center in Moldova, what organizations should plan for if they do set up shop, and IDC’s perspective of overall viability.

Ready to Go — the Moldovan Hat-Trick

Moldovan IT professionals have been growing progressively more skilled as both training and opportunities grow within their country. It does not hurt that many speak two, and often three, languages, helping ensure a global outlook, as well as the ability to provide service abroad. And the government is lending a hand. It has developed numerous incentives for attracting foreign companies (including instituting a low corporate tax rate) and keeping IT experts at home. It has made it easier to start and do business in the country, while creating an environment conducive to growth.

ICT Talent – Strong, Growing, and Multilingual
Solid Players for Assembling Winning Teams

Anecdotal evidence has started piling up in support of the rising ability of Moldovan IT and technical specialists. One CEO of a small software firm has developers in the U.S., Moldova, and Mexico and has nothing but praise for his Moldovan team. Moreover, salaries have risen and more than a few Moldovan IT professionals have returned home, bringing their international experience with them.

In terms of hard numbers, proportionally, Moldova is on par with other Central and Eastern European countries in terms of the generation of technical talent. In 2013, the number of skilled ICT professionals in Moldova reached 21,000. Well over 80% are technical specialists, including software engineers, analysts, developers, and project managers. Depending on how you count, upward of one-quarter work in the software industry alone. IDC’s examination of the combination of available skills suggests that Moldova is particularly well positioned for core activities, such as web development and basic coding, and high-value activities, such as analysis and design and software development and testing. (It is not well suited to the kind of low-level and high-volume operations found in India and China.)

More on the Way

Universities and technical colleges are steadily producing graduates. For instance, the number of math and computer science graduates in Moldova was stable from 2010 to 2013, at just under 6% of the total number of graduates, well ahead of Bulgaria, Croatia, Hungary, and Slovenia. (Though these countries have increased the proportion of math and computer science graduates, they are still well below the rate in Moldova.) In Romania, the proportion actually dropped from 2010 to 2013. Moreover, engineering accounted for just under 13% of total graduates in 2013; not as high as regional leaders Romania (19.5%) and Slovenia (16.6%), but about the same as the Czech Republic (12.2%) and a good deal more than Hungary (10.7%).

Computer Science and Mathematics Graduates (% of Total Graduates), 2013

Skills Improving

And IT is about to get better. In cooperation with the Technical University, a consortium of organizations (including USAID, the Moldovan Association of Private Companies, Microsoft, and IBM) are launching an IT Excellence and Innovation Center. Set to open by the end of 2015, it will provide a combination of training courses, certification programs, startup accelerators (coaching, mentoring, workspace provision, and funding), and opportunities to host and attend events, run workshops, and conduct research. The multimedia and 3D labs will be designed to foster entrepreneurial, coding, design, architecture, and leadership skills. Every year, the center aims to provide training for 1,000+ individuals and to influence up to 50 startups, helping 20 of them accelerate. IDC believes it will be a driving force of the development of the Moldovan IT ecosystem.
Finally, while English proficiency among graduates is lower than in other Southeastern Europe (SEE) countries, French proficiency is much higher, meaning Moldova could easily follow in Romania’s footsteps to become a primary supplier to French-speaking countries. Moreover, Russian is widely spoken and still used at all levels of state and society, with around half of the population speaking the primary language of the CIS. (Offshoring firm Moldovan Call Center has taken advantage of this, offering services in six languages: English, German, French, Italian, Spanish, and Russian.)

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