Investment Opportunities in the Czech Republic Celje , September 17 th , 2012
Czech Republic IT Profile and Business Opportunities.
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Transcript of Czech Republic IT Profile and Business Opportunities.
AgendaCharacteristics of Czech Republic
GeographyHistoryDemographicsPoliticsCulture
Characteristics of the IT Industry in the Czech RepublicEconomic characteristics as related to IT in the Czech RepublicEconomic and IT comparison between Czech Republic & SlovakiaIT opportunities and Recommendation
Characteristics – GeographyArea: 78,866 sq km, roughly the size of South CarolinaLandlocked – no portsLocated astride some of oldest and most significant land routes in EuropeNeighbors economically sound nations Germany and Austria, as well as emerging nations Poland and SlovakiaRailways: 9,435 km; Roadways: 127,693 km (100% paved, 498 Highway); 114 Airports
South Carolina has 103,072 km Roadways and 68 Airports
What Does this mean?Czech Republic is highly accessible!
Characteristics - HistoryCommunist Nation from 1948 until after the fall of the Berlin Wall
Non-violent anti-communist coalition negotiated the governments resignation in 1989
1993 the “Velvet Divorce” separated Czech Republic and Slovakia into two nationsIn 2004 became a member of the European UnionCzech Republic financial experts do not believe the nation is emerging, but already “emerged”
Czech Republic has undergone recent and drastic changes!
Characteristic - DemographicsPopulation is 10,241,138
Labor Force 5.25 MillionGrowth rate is -.05%
The median age: males is 37.2 years oldfemales is 40.82 years old
90.4% of populous are of Czech ethnicity59% claim no religious affiliation
Catholic - 26.8%Literacy rate is very high at 99%
90.45% of populous has a secondary education (US – 88.35%)
What does this mean?
Czech Republic is educated but old!
Characteristics - Politics
Parliamentary GovernmentLegal modifications have occurred to:
bring Czech Republic in line with the obligations of the Organization on Security and Cooperation in Europe (OSCE)expunge Marxist-Leninist legal theory influences from former government regime
The Czech Republic is working toward a stable, legitimate government
Characteristics - Culture
Culture is heavily influence by neighbors
Prague 1-2 hours from GermanyAlso influenced by Western EuropeRapidly changing from Communist culture to Western culture.
Characteristics - Culture
Culture Model based on Hofstede:Environment – ConstraintTime – Multi-focus, fixed, future and pastAction – Doing and beingCommunication – High context, direct and indirect, instrumental, and formalSpace – Private and publicPower – Tend to be hierarchical
Characteristics - Culture
Culture Model based on Hofstede:Individualism – Collective and particularistic Competitiveness – CooperativeStructure – Mix of order and flexibleThinking – Tend to be inductive and deductive.
Characteristics - EconomicReal GDP Growth Rate
-2
-1
0
1
2
3
4
5
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Year
%
EU (15 countries)
Czech Republic
Unemployment Rate
0
2
4
6
8
10
1998 1999 2000 2001 2002 2003 2004
Year
%
EU (15 countries)
Czech Republic
Inflation Comparision
0
2
4
6
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10
12
1998 1999 2000 2001 2002 2003 2004
Year
Per
cen
t
Czech
Finland
Germany
Netherlands
IT Industry in the Czech Republic
Electricity Data71.75 bill kWh produced, 55.33 bill kWh consumed
Telephones3.6 Million land lines
Cellular Phones9.7 Million cellular unitsPrivatized industry (Eurotel, RadioMobil and Cesky Mobil)
• All provide wireless internet access and improved SMS
IT Industry in the Czech Republic, Cont.
86% Business Exchanges now digitalCopper subscriber systems now being enhanced with Asymmetrical Digital Subscriber Line (ADSL) equipment295,677 Internet Hosts2.7 Million Internet Users
Approximately 35% of population use internetDial-up, ISDN, Lease Line, Wireless, Cable all used as access methods
IT Industry in the Czech Republic, Cont.
Personal Computers in Czech Republic
500,000 PCs in use600,000 Networked PCsPCs in the home have the highest growth rates
IT Industry in the Czech Republic, Cont.
Government Initiatives Ministry of Information Technology
was established in 2003– Program to connect all Czech schools
to the Internet initiated in 2001 – 2003 – Launched National Computer
Literacy Program targeting middle-age and older people outside large cities
IT Industry in the Czech Republic, Cont.
Prague establishing itself as a center for financial and IT servicesNew Investors are attracted to Czech Republic due to:
quality of the city's infrastructurethe availability of modern office spacegood telecommunicationsimproved services
SAP, Intel, DHL, ExxonMobil and Siemens all have Czech Republic OperationsTop Tier Czech Tech Firms include Auto-Cont on Line, ICZ, LogicaCMG, PVT
Economic Characteristics as related to IT
GDP $107 BillionUnemployment rate is 8.5%Work week mandated at a minimum of 40 hours a weekDouble Digit growth in IT IndustryIT market value is $760 Million$26 Million in IT services in 2003
Economic Characteristics as related to IT
4 Modes of Software Development in CRLocalization – software imported from other countries and translated in CzechCustomized – software created from scratch for Czech usersOffshoring – developing software domestically to be sold to other countriesDevelopment – developing software for domestic market as well as translating to other languages for foreign market
Economic Characteristics as related to IT
Czech Software EngineersLower salaried that Western European Counter parts (60% of salary)
• $18,000/year for programmer in Prague with 2-3 years experience
• Smaller cities, salary is 15-20% lowerTend to be very skilledTargeted for software development by foreign companies50,000 Czech university students are enrolled in software engineering course
• 33% of degrees are technical in nature (US – 18%)• Czech Technical Institute compares favorably to MIT
Slovak Republic
Member of European UnionCzech Republic is also a member of EU
Population is 5.4 Million10.2 Million in the Czech Republic
Originally behind economic growth of other Eastern European nations
Has since caught up economically
Very High Unemployment rate 15%Czech Republic is 8.5%
Slovak Republic
GDP is $41.1 Billion with 5.5% growth rate
GDP $107 Billion in Czech Republic
Services make up 53.6% of GDP58.8% in Czech Republic
Hi Tech Exports Made up 3.7% of exports in 2004
Down from 4.1% in 2003
Slovak RepublicHi level of phone usage
Fixed Line/Mobile Phones combined at .925 phones per person
• Czech Republic is over 1 per person
Internet usage is 53%35% of Czech Republic
89,592 Internet Hosts295,677 in Czech Republic
PC’s owned is 15% Czech Republic is 27% (2001 est.)
IT Opportunities/Recommendations
Call Center servicing Europe and/or USA and Canada
Call center for Germany is likely the best possibility due to labor cost differences35% of Czech Republic speak German, higher proficiency than EnglishAdvanced telecommunicationsSAP European Call Center serves as model
IT Opportunities/Recommendations
Tourist IT ServicesTourism is increasing in Prague http://www.mikesbiketours.com/index_munich.html“Mike’s Bike Tours” has leveraged IT to market itself
Relocation Assistance for AmericansPrague becoming biggest European Relocation destination for AmericansAssistance would include Czech language instruction, social and business cultural instruction as well as helping emigrés to set-up their basic needs
IT Opportunities/Recommendations
Outsource engineering and/or computer science projects
Leverage IT in order to have a satellite center that tackles engineering and computer science projects for a companyHigh number of graduates with technical degree8.5% unemployment approximates to 1,400 unemployed high tech graduates each yearOpportunity for Czech’s to work in their own country and not be forced to emigrate
IT Opportunities/Recommendations
Advantages to establishing in Czech Republic
No foreign investment restrictionsHigh “Knowledge Pipeline”Skilled and disciplined workforceExpansive telecommunications networkIT is a national priorityVarious domestic tools to facilitate investmentStable, democratically elected government
IT Opportunities/Recommendations
Advantages, continuedLower labor costs when compared to other European nations
Czech
Czech
Czech
Opportunities/RecommendationsDisadvantages
Labor costs are rising with admittance into the EU• Real wage growth is 4% (US 1.2%)
Unemployed work force is primarily unskilledOnly 4.38% of 530,297 unemployed workers have a university degree
Czech Republic government’s weak enforcement of Intellectual Property Laws
Czech Republic added to U.S. government’s Special 301 priority watch list that identifies nations that have failed to establish fair and effective legal protections outlined under international obligations for intellectual property rights
SummaryWhile labor costs are still low, and IT skills
are high, the Czech Republic represents an excellent opportunity for IT investors. Call centers, software development, and IT services are a few possible investment areas. However, as the Czech Republic
continues to thrive economically and remains an attractive destination for other
investors and immigrants, the odds of a successful venture will continue to
decrease in the near future.