Report on nearshoring in Romania 2014 situation

Nearshoring is "the transfer of business or IT processes to the same or another company in a

nearby country, often sharing a border with your own country", where both parties expect to

benefit from one or more of the following dimensions of proximity: geographic, temporal

(time zone), cultural, linguistic, economic, political, or historical linkages. The service work

that is being sourced may be a business process or software development. Almost always

work is moved because of a lower cost of operations in the new location.

Romania is considered as the IT and outsourcing leader in central and SEE and one of the

top 5 outsourcing destinations in the world. Its comparative advantage is based on the

highly skilled labour force, geographical and cultural proximity to Western Europe and the

welcoming business environment (there is no salary tax for software developers).

Romania is first in Europe and sixth in the world in terms of number of IT certified

specialists per capita.

Romania General Info:

1. Area: 231,391 km2 (92,043 sq mi.) (9th in EU)

2. Population: 21.6 Million (7th in EU)

3. GDP: 131,5 Bn EUR (2012)

4. Corporate tax: 16% flat, VAT level: 24%

5. Member of: EU, WTO, IMF, WB, NATO

6. Strategic location: at the crossing of 3 pan European transport corridors, holding the

Eastern border of the inland European Union and at the turning point where EU meets

the Balkans and CIS countries

Romania, having joined the European Union at the beginning of 2007, is the second

largest of the 12 New Member States. The country benefits from a multilingual labor

force and boasts one of the fastest developing IT sectors in Europe. Romania is

home to a thriving software development sector that has generated a number of

internationally known companies and products.

Romania is well-placed to attract a substantial portion of new nearshoring business

located to CEE. The country has the largest labor force among the new EU Member

States after Poland. The level of education rivals that of any country in the CEE

region while salaries, although increasing rapidly, remain well below those found in

Central Europe. Romania is already home to a significant amount of offshore

business, with a plethora of companies engaged in custom application development

for foreign clients. The majority of these developers are small enterprises operating

below-the-radar of mainstream international attention. But as this study shows, larger

well-established Romanian firms have also been developing long-term relationships

with foreign clientele. Romania is gaining more experience in the offshore business

and, based on its development potential, will be able to serve as a reliable sourcing

operation for many years to come.

Romania has a strong position for attracting a significant amount of the incoming nearshoring

business to be located in CEE countries. Romania is already home to a significant amount of

offshore business, with many companies – small enterprises operating below-the-radar of

mainstream international attention - engaged in custom application development for foreign

clients. These companies have been gaining experience in the offshore business, with growing

projects and extended sector expertise, and based on their development potential, will be able

to serve as a reliable sourcing operation in the following years, as well. Half of the 50

significant offshore centers present in Romania are software development and respectively

research & development centers, while the rest consists in BPO and support centers.

Romania is not the lowest cost location for nearshoring, but when performance is added to

the equation it can be highly competitive. There is already a visible trend in projects shifting

to higher added value operations and opportunities.

An area in which Romania is regarded as particularly strong compared with other

countries in Eastern, or even Central, Europe is in the language skills of both

management and technical staff. Romania boasts one of the highest rates in CEE of

participation in language classes at secondary school level. Language proficiency

among the adult population is similarly high. In addition to a significant proportion of

the labor force having a high degree of competency in English, there is widespread

knowledge of other European languages, most notably French but also Italian and

German.

In 2014 the expansion of the companies will create approximately new 5,000 IT jobs.

Companies from various IT & Telecom sectors are planning to expand their teams / enter the

market: gaming, NOC centers, outsourcing, technical support with complex skills (e.g. SAP)

etc.

ICT talent and quality:

1. Over 95,000 IT&C specialists at national level

2. Technical education includes 5 top polytechnic universities, 59 domain-specific

universities

3. 174 private colleges

4. Romanian universities have been Top 3 in the IEEE Design Competition every year

since 2001

5. Romania has more Informatics and Math Olympiad medals than any other European

nation and is 3rd globally after Russia (URSS) and China

6. The number of engineers per capita is greater than the US, India, China, or Russia

7. Top 10 globally in the number of certified IT specialists

8. Almost 90% of IT professionals speak English

The Romanian Government also supports the IT industry growth through specific measures:

1. 100% exemption on income tax for IT employees

2. Public financing for development of IT innovation parks

3. State aid for regional development, job creation and investment support for new

technologies creation

4. 50% tax deduction for R&D related cost of operations

5. Export promotion program to assist companies in reaching their international

customers through participation in fairs and exhibitions.

Government support will promote the industry's growth and further expansion of the software

development and IT outsourcing service ecosystem in 2014-2016 and further (subventions

and structural funds from Europe during the period 2014 – 2020).

You can find info on company creation and assistance for startup and recruitment on:

www.investromania.be

http://www.recruitment-company-romania.ro

Freddy Jacobs

President

Belgian Romanian Real Estate Chamber

frjacobs@telenet.be