THE TIME OF IT LEADERS

One of the most dynamic industries in the history of the world, IT, is going through yet another period of transformation. The shift caused by changes in the global economy and the ongoing political turmoil, the introduction of artificial intelligence in all spheres of life and the continuing development of technologies have visibly disturbed the landscape. What does it look like in Bulgaria – one of the most prospective locations for development in the global IT industry?

We, at Vagabond, deliberately decided to focus, again, on this segment of the Bulgarian economy. The IТО and ВРО companies do not make the largest part of it. According to current data, they give about 4.5% of the Bulgarian GDP. However, they play an instrumental role in it and the life of the modern Bulgarian society.

The human factor

The professionals engaged in the IT field are among the best paid in Bulgaria, significantly higher than people in other fields. The IT industry is one of the most effective ways that open the local economy to the world. It not just generates solid foreign investments – it also allows Bulgarian professionals to work on projects for international giants and on innovative ideas, to master the best practices around and to be adequate to the strictest requirements of the market. Thanks to this, they can be in line with the latest global trends and to not just follow them, but to also foresee them, to react adequately and to generate their own, prospective ideas.

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The sector also attracts a growing number of foreign talents who settle in Bulgaria attracted by the good salaries and work conditions, and the good quality of life. It may sound incredible for a country with a deepening demographic crisis and a constant brain drain, but it is a fact – the excellent working conditions and options for professional growth, and the high salaries in the IT industry in Bulgaria, are a key factor for the decision of many young Bulgarians to skip emigration and to continue pursuing their careers in their homeland. Tellingly, according to data by BASSCOM, the branch association of software developing companies in Bulgaria, an impressive 97% of computer sciences graduates in Bulgaria do not emigrate after they finish their studies. Instead, they just find a well-paid job that provides options for future growth in their homeland.

Another positive phenomenon of the local IT sector is the strong presence of women in a field which is traditionally considered a "male thing." According to the latest data, released in 2024, Bulgaria is first in the percentage of women in the field of information and communication technologies – not just in low and starting positions, but on all steps above, including the top management. Women make about 29% of the people in the field in Bulgaria, compared to average 19% in the EU. On this background it is really curious that Bulgaria is last in the EU in terms of people per capita working in this field – 3.8% compared to the average 4.6%.

Hunger for people

Bulgaria's IТ field plays transformational role in education as well. The severe shortage of qualified professionals has caused a couple of changes that appeared spontaneously, without any policies being involved.

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On the one hand, the business started actively partnering with the best Bulgarian universities, aiming to help them to provide specialised, modern education that meets the needs of the industry. This was how the industry pushed Bulgarian education towards more STEM subjects – this is relevant not only for universities, but also for schools.

The other significant change initiated by the IT companies in the country, who want to find the best talents – or to train them personally, was the founding of their own academies and education centres, and starting their own traineeship and mentorship programmes for young professionals.

Work in the IT field, with all of its perks and benefits, is also a strong motivator for people who are already on the labour market and have other professions. The relatively short time needed for retraining is alluring for many people. However, they have to be aware of a crucial principle in the IT sector. People who want to become really good in their new profession and to reach the true pinnacles of their field should never stop growing, learning and developing. The good companies care to provide their employees with all that they need to achieve this, like additional trainings and options to develop both horizontally and vertically within the organisation.

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The Bulgarian IT industry is definitely a preferred employer, and is actively working towards creating more jobs. By December 2023, it employed about 60,000 people and according to prognoses in 2024 it will add 6,000 people more. The expectations are that by the end of 2025 new 14,000 positions will be added. Taking in consideration the higher salaries and, logically, the higher taxes and social security payments, this is a significant contribution to the modern Bulgarian society and economy. The taxes and social security paid to the state by the industry are three times higher than the average for the country. The employees' higher salaries also stimulate the consumption and pressure companies and organisations in other fields to raise the wages, too.

In the past year the shortage of applicants for free positions in the IT field is not that staggering, but it remains serious. According to BASSCOM data, today there is one applicant for two open positions.

A gulp of fresh air for startups

The IТ sector is one of the most effective ways for visionary entrepreneurs to found a successful company not just in Bulgaria, but also the world. The journey of Bulgarian technological startups is a bumpy one, because the tradition of developing IT companies in the country from zero is still being built. Furthermore, in 2023, the funding of new companies in the EU decreased dramatically with 39%. The good news, however, is that currently the EU is more focused on stimulating high technologies and that in the past 10 years it invested significantly in creating an established ecosystem for risk ventures and talent diversity.

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This is why professionals expect that this year tech startups will do better than the expected, although they should abstain from dreaming of returning to the investment boom of 2021.

Is it realistic to expect another Bulgarian unicorn, after Payhawk made news in 2022? Optimists believe that this is absolutely possible and point to the various and exciting ideas that a number of young Bulgarian companies are trying to turn into viable businesses.

Global trends, local peculiarities

In 2024, the conversation about the IT industry in Bulgaria still revolves around several globally and locally important topics. The most crucial international themes are the transformation caused by the implementation of AI and machine learning (ML); the layoffs initiated by some of the technological giants; the disputes about the best model of work (remote, hybrid, office based); the matter of cybersecurity and the EU regulations that are getting stricter and stricter; the ongoing global shortage of talents.

The companies from the local IT industry are interested in both how to find and retain the right professionals, and how Bulgaria should position itself on the global map of the industry in this new environment. Traditionally, the country has the established image of a destination with a cheap, but highly qualified workforce that is fluent in many foreign languages, can maintain effective connections with the clients and is capable of fulfilling the projects well and in time. Bulgaria has also attracted foreign clients and investors with its law taxes and the comfortable time zone that allows work with clients in both the East and the West.

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In the past year, however, the industry has started more clearly to seek a new road for development and a new face to show to the world. According to a survey by BASSCOM, a growing number of companies and managers in the field have realised that Bulgaria needs to systematically build its own brand in the IT industry. They believe that this will positively affect not just the industry, but the entire country. A crucial problem that needs consideration is how smart it is to continue advertising Bulgaria as a cheap destination and focusing on outsourcing services. Indeed, in 2022 export of software services made one third of Bulgaria's entire export. Currently, 85% of the profits in Bulgaria's software sector are from export of software products and services. The employees who are most in demand are the ones capable of working on outsourced software projects – back-end, front-end and full stack programmers, and QA experts.

This transformation is imperative, especially when we consider the increasingly popular trend among companies to focus on their own software development, instead of relying on outsourcing. These organisations have realised that this approach gives them more control over their processes, increases their added value and innovation, and makes them more independent and competitive.

The Bulgarian society also has to rethink its attitude towards the IT field. Sadly, many people, including politicians and decision makers, administrators, managers of companies and large private and public organisations still do not realise that the IT technologies are not so exotic or remote anymore. They are a part of the entire economy and social life, and can be effectively used to improve each field in them – from communication with the state administration, the infrastructure and the healthcare, to finance, education, environment protection and smart use of resources. Sadly, and to a significant extent paradoxically, despite its immense IT capacity, Bulgaria is still in the bottom place in the EU in digitisation of the business and the public sector.

On this background it is hardly a surprise that local IT companies increasingly apply AI in their operations. According to BASSCOM, over 16% of companies in the field have integrated AI at all positions, and almost 60% – at some positions. The managers and engineers of these companies have realised that artificial intelligence is an opportunity to boost the effectiveness of some developers and entire teams. Instead of a threat for their jobs, they see in AI a tool to save humans time, nerves and efforts from performing mundane tasks, and for focusing instead on the creative part of the processes.

How will the global expense-cutting in the large companies that followed the excessive boom of 2020-2022, and the reduction of activities by their business partners affect the Bulgarian IT market? An effect is definitely felt, as evident by the fact that some companies stopped hiring new people and restructured their operations. However, data shows that in Bulgaria companies will just slow down their growth and talents will rethink their unrealistic expectations for their wages.

In other words, the Bulgarian IT sector is undergoing a healthy cooling that will make it more resilient and competitive. In the past 20 years it had the opportunity to build a comprehensive ecosystem that made it more stable – with IT companies, investors, funds, educational institutions, hubs, startups. The good news is that the cooperation between the state administration and the IT field is getting deeper and more effective, and the investment environment in the country is still positive and promising. In the increasingly digital world that we live in, the IT companies, managers and teams in Bulgaria are ready for the challenges of tomorrow, because the foundations they stand on are strong, built upon skill, talent, knowledge and bravery.