Page 22 - bne_Magazine_February_2019

22 I Cover story bne February 2019
the VOIP telephony service Skype that is a standard feature on many people’s phones and computers.
But there have been many other unlikely success stories. Belarus is
also surprisingly a hotbed of tech development and gave birth to EPAM,
a software engineering firm that is listed on Nasdaq and works with the biggest companies in the world.
EPAM’s boss Arkadiy Dobkin told bne IntelliNews in an interview “EPAM,
the software giant that strode out
of Belarus” that he was the one who persuaded the authoritarian former collective farm boss and now president of the republic Alexander Lukashenko to set up a tech centre to train engineers that has become the kernel of a thriving offshore software engineering exports sector. EPAM software is used now in banks from New York to Moscow and the company is constantly loading
up on new skills through a perpetual acquisition programme.
“We set up the high tech park in Minsk basically as we were growing so fast we needed more engineers,” Dobkin said. “And Belarus is an ideal place to find engineers. They have a high education level, most speak English, the geography makes the time zone good to serve
most of Europe and Belarusians are hard workers. We have very little churn amongst the employees.”
The government is the process of setting up a second park together with Chinese investors.
“Share and enjoy” in CEE
But the investment goes beyond software. The high concentration of automotive plants in Central Europe has made the region amongst the world’s heaviest users of robots. And as the region is now suffering from a growing labour shortage, made worse by decaying demographics, companies in Central Europe are ramping up their investment into robots.
A recent McKinsey report stressed that the countries in the region have no choice and have to act quickly. “We
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believe that to benefit fully from digital transformation, the time for CEE to
act is now,” said McKinsey, pointing
to the growing problems in the labour market, but also arguing that the world is “on the cusp of a fourth Industrial Revolution, in which new technology will fundamentally transform the economy and the labour market. This seismic change will drive growth and create many new professions: big data scientists, machine-learning engineers, and new technology designers, to name just a few.”
And the companies get it. The number of robots in use in Slovakia has nearly dou- bled in the last two years, with a third (33%) being used in the automotive industry, but are now being increasingly adopted by the electrical engineering sector and the most dynamic increases have been seen in the metal processing industry last year. The logistics sector is going to be next, say local experts.
According to the International Robotics Federation, in 2015 there were 79 robots per 10,000 employees in Slovakia, up to 135 in 2016 and 151 in 2017
The story is similar for Czechia (which coined the word “robot”). For every 10,000 employees in the Czech Republic,
growing so fast without either more immigrants or robots.
e-commerce
The biggest story of all is the explosion of e-commerce in the region and in Russia especially, which is particularly well suited to online shopping thanks to the large number of large cities; e-commerce is well suited to dense urban populations and just the cities of Moscow and St Petersburg are the size of most Central European countries.
e-commerce in Russia has come into
its own and consumers are migrating from stores to online stores so fast now that the Watcom Shopping index that measures footfall in Moscow’s largest malls has been falling steadily every year for the last four despite a recovery in real incomes.
The problem of growing an online business is firstly setting up the site
and then putting the logistics into place to get the product to the customers.
But by far the hardest thing is to get punters comfortable with plugging their credit card number into a website. That literally takes years.
The online shopping business is becoming very serious, very fast. Oskar
“The number of robots in use in Slovakia has nearly doubled in the last two years”
there are 101 robots, according to a recent HSBC study. That puts both Czechia and Slovakia well ahead of the global average of 74 robots per 10,000 workers.
CEE has been booming over the last
few years, but HSBC estimates the Czech economy is going to double in size again by 2030, while the working population will shrink by 1.5% over the same period – and Czechia already has 25-year low unemployment now, while Slovakia’s unemployment is the lowest it has been since 1993. Neither can keep
Hartmann, CEO and founder of Kupi- VIP, an early entry into online retail- ing, a high fashion discounter, told bne IntelliNews in an interview in 2013
that users typically start to buy things three years after getting hooked up to the internet. They start with obvious products that can be commoditized
like plane and cinema tickets before moving onto more expensive items like posh clothes or jewellery after seven years. KupiVIP’s business was to sell last season’s branded fashion items at a dis- count as the producers want to get rid of old stock once a new season starts.