Romanian IT Labor Market - An Insider View

It looks like my corruption essay will have to wait a bit longer. Recently, there have been many articles, comments, and social media reactions about the so-called crisis in the Romanian IT industry. This linked to a serious extend with the new economy term and the 2022 word of the year permacrisis (a combination of two words, permanent + crisis). Well, let us dissect the subject from the perspective of, without any false modesty, a specialist in the matter.

About myself, I was part of the second wave of SAP consultants in Romania, trained at the Berlin SAP Academy. It was 1995, and SAP version 2.0 had just been released. After 2 years with SAP Romania/Integrator, I moved to the US for over 8 years, working for Atos Origin. In 2005, I came back to Romania and was employed by IBM. Since 2010, I had been running the IBM Delivery Centers until 2023.

When I took over, the IBM Consulting division had one global delivery center in Europe, specifically in Romania, with 430 people. I left IBM in December 2023, being responsible for delivery centers in EMEA with a presence in 24 countries, employing more than 10.000 professionals, and generating a business of 830 million dollars at the 2023 closing.

IBM Romania alone owns the largest center in the EMEA region, with billing of around 200 million dollars and more than 3.000 practitioners.

In the process, I reached the level of VP & Senior Partner with IBM. With all these being said, I assume that I have caught your attention and gained the right to speak about the matter as an authority - an authority that many of those predicting an apocalypse for the Romanian IT sector do not have. There are three groups of psychics with their own crystal balls.

The first group consists of journalists. I would not trust them too much. Their job is to stick the stick through the fence (stir up trouble), or very often, they are simply on somebody's payroll, paid to tell a certain story according to the payer's interest. While they may present accurate numbers, their interpretation is at least questionable. It is like I were to comment about ballet: I see it, but I do not know what is behind the image.

One of these Nostradamuses predicts that if NTT, Cognizant or Gameloft (all from Cluj, very interesting), and a few other players let some IT people go, the whole market is going to collapse. NTT or Cognizant bought Romanian top IT companies. In their run for a very fast growth requested by their new owners, along with a few other major players who entered the game late, (whom I will not mention as they are well-known), poached people from early starters. They inflated the market and used higher rates when selling Romanian professionals to Western Europe businesses. Nothing illegal about that; it is a free market. But they inflated the IT market with this move and even worse, created a perception of suddenly expensive IT Romanian specialists with some Western clients or markets.

As long as the demand was huge, they were fine. When the appetite of their clients decreased, they started to let people go. Gameloft let go 136 or so people simply because the gaming business has been in trouble for a few quarters. I discussed with some of the best recruiters in this business of gaming, who are very close to the IT sector. They were asked to hire in different markets like Australia or the US, as Romanians are now too expensive and too numerous for their current demand.

Also, judge for yourself: what is 136 out of almost 200.000 IT Romanian professionals? A drop in the ocean. The moment the truly important players, including IBM as the largest services provider in the country, start to let hundreds and hundreds of people go in Romania, I will be worried. Today I am not! Many of the contracts that these giant service providers have, extend as far as 2028-2029; pretty safe, I would say. Another positive example: NTT signed a support contract with a giant car manufacturer to help them during the set up of a delivery center of 1.000 people! You read that right, one thousand people! Well, it is going to take years but it is a very nice back up for NTT operations during a rather difficult period of time.

The second group is made up of people who know the market and have a personal interest in manipulating it. The best example, not in Romania (God forbid!), is Elon Musk. Remember when he allowed Teslas to be bought using cryptocurrency BTC and a few weeks later denounced the arrangement? No comment, other than we have our own Elon Musks in Romania.

The third group consists of people who are somehow in the IT business, but simply do not get it, thereby helping the detractors. A GM of a large non-IT company commented this week that his company invested 50 millions in the Romanian IT sector. Well, he was actually talking about a real estate investment - in land and buildings, not IT. But social media bought it right away. Along with a few other partners, I am in the process of starting an IT company, and it costs me almost nothing. I mean, any one of you reading my article can do it. It is about people and skills, not walls! My bad, you need laptops and software licenses!

I have to admit that there are a few things that have affected the local IT market. I will touch on three of them.

The income taxation relief was lifted by the government. Let's be honest here, it helped a lot over so many years. It helped the IT professionals, but much more, it was a brilliant marketing instrument for the industry, very, very attractive for investors. Luckily, the IT people's reaction to the change was rather mild. The whole story reminds me of Shakespeare's line from Othello: "The Moor has done his duty, the Moor can go." As a side note, the EU is extremely unhappy with tax exceptions within their country's members.

The second is related to the AI infusion. I will be brief here. Before AI replaces all of us, there is so much work to be done by IT professionals, which will take a few decades. In the meantime, check with your children if they still want to pursue an IT career. I think you are safe; they should think twice before choosing this path!

Start the discussion with your children +13 years old watching together the new movie on Netflix called "Atlas" (rate PG-13) with Jennifer Lopez, not a big fun of the lady, I must add. It is one of the very few movies where AI is portrayed in a positive light. Of course, there is also a villainous AI that Jenny is fighting. Even Hollywood is changing!

It is also true that there is a period of lesser demand in the Global IT market, which is driven by the US market. Large IT global companies announced lay offs but this is happening time to time, nothing extremely concerning there. And AI plays a role in this apprehensive atmosphere surrounding IT skills, I must say without a credible reason. On the other hand, Germany, for example, is still missing around 100.000 IT specialists. Switzerland, Austria, Benelux, and the Nordics together have a similar volume missing. The UK economy is also in search of IT professionals. All these markets are predominantly seeking seniors with specific language requirements, multiple skills per individual, or even niche skills. And they must be cost-effective!

The last factor, the third one, is crucial, and in my mind, explains a high percentage of the so-called crisis. The Romanian IT market has reached maturity - maturity in terms of skills, experience, and rates. Romanian IT professionals are not as cost-competitive as they were 3 to 4 years ago. I mean, they are still within a good range of labor arbitrage, but too far from Indians, Egyptians, or Filipinos, getting closer to other CEE countries that started earlier their IT endeavor, and traditionally offer better pay. In a way, for the IT services providers, this is a positive development. Attrition rates are decreasing, demands for higher salaries are milder, the value for money is improving, and there is a certain number of people floating in the market, seeking IT jobs.

The hiring/growth within IT sector in Romania is decreasing but is still in double digits. Overall, the IT labor market has become mature and more predictable, much like in Western Europe. Is that bad? I do not think so. Sooner or later, this trend would have reached us. It seems like is hitting us these days, hence the crisis label used by some commentators. But mark my words, I do not think for a second that IT professionals are going to suffer seriously for jobs lacking. They will just need to adapt to the new reality, a more mature one and maybe a slight shift of skills for some. Call it up-skilling if you wish!

Last week, I had lunch with an old, very respected friend who has been dealing with market research for many years. We practically aged together in this market. The prediction, based on his company's research data, is that during the second half of 2024, we might see a recovery in the IT sector in Romania and some other Central and Eastern European (CEE) countries. Let us watch closely the development. Our IT childhood has ended in Romania!

Let us behave as adults and be less spoiled!