Transcript IT Opportunities in Bulgaria - School of Business Administration

MIS 648 Country Study:
IT Opportunities in Bulgaria
Presented by:
Daniel Caratini
Sowmya Venugopal
Nicole Hensley
Janet Vasahlik
October 23, 2006
Agenda
•
•
•
•
•
Physical Picture
Socio-Cultural Facts
Economy
Demographics
IT Industry: Technology Scene, Penetration, Training,
Teledensity, Producers, Consumers, Strength and Weakness
•
•
•
•
•
•
E-commerce Picture
Business Climate of Bulgaria
Business Climate of Eastern Europe
Investment Opportunity #1: Internet Café
Investment Opportunity #2: Tourism Service / Website
Questions
Physical Picture
Location
Topography
Physical Picture (cont.)
• Total area: 42,823 sq mi
• Temperate weather:
– Cold damp winters
– Hot dry summers
• Transportation:
–
–
–
–
–
Crossroad between Europe, Asia and Africa
Roads (102,016 km), Railways (6,500 km)
4 int. airports
Seaports available
Public transportation available
Information taken from www.wikipedia.org
Socio-Cultural Facts
• Bulgarian flag =>
• Official language: Bulgarian (84.8%)
• Bulgaria is known for its folklore, traditional
music, rituals and tales
• Has nine UNESCO World Heritage Sites
• Currency: Lev ($1 US = 1.55 LEV)
– Cash economy
• Religion:
– Bulgarian Orthodox Church
– Islam, Roman Catholicism and Protestantism
Information taken from www.wikipedia.org
Socio-Cultural Facts
Politics:
• Parliamentary Democratic republic
• Executive power is exercised by the government
• The U.S. Freedom House rates the country as a free
country (1 on political rights and with a 2 on civil rights)
Educational System:
• Supported by the state
• Compulsory for children of ages seven to sixteen
• 41 state supported and private higher educational
institutions
Information taken from www.wikipedia.org
Socio-Cultural Facts
Hofstede’s Dimensions*
* Data taken from www.geert-hofstede.com
Economy
Brief economic history
•
•
•
•
•
•
Collapse of communist regime in 1989
Transitioning to market economy
1996-97 economic crash
Member of NATO since 2004
Scheduled to join the EU January 1, 2007
Plans to adopt the euro in 2010 – 2011
Major industries
• Agriculture / Farming (major crops: wheat, sunflower)
• Electricity
Economy
Economic Indicators
GDP (current US$)
GDP growth (annual %)
Foreign direct investment, net inflows (BoP, current US$)
Exports of goods and services (% of GDP)
Imports of goods and services (% of GDP)
Inflation, GDP deflator (annual %)
Present value of debt (current US$)
Revenue, excluding grants (% of GDP)
Agricultural land (% of land area)
Additional Economic Indicators
Energy use (kg of oil equivalent per capita)
Electric power consumption (kWh per capita)
Fixed line and mobile phone subscribers (per 1,000 people)
High-technology exports (% of manufactured exports)
Internet users (per 1,000 people)
Literacy rate, adult total (% of people ages 15 and above)
Military expenditure (% of GDP)
Personal computers (per 1,000 people)
School enrollment, secondary (% net)
Time required to start a business (days)
2001
13.6 Billion
4.1
813 Million
55.6
63.1
6.7
--35.7
49.7
2001
2462.3
3907.5
560.9
2.7
76.5
--2.7
48
84.4
---
2002
2003
2004
2005
15.6 Billion 19.9 Billion
24.3 Billion 26.6 Billion
4.9
4.5
5.7
5.5
905 Million 2,097 Million 2,005 Million
--53.1
53.6
58.0
60.8
59.8
63.0
68.2
77.4
3.8
2.2
4.8
3.9
----16.1 Billion
--35.7
37
40.2
--48.1
48.1
----2002
2417
3838.2
695.1
4
80.1
--2.7
51.5
87.1
---
2003
2493.9
3965
807.7
4.3
197.5
--2.6
55.2
88.3
32
2004
----966.4
4.0
283.5
98.2
2.4
59.4
88.5
32
2005
------------2.4
----32
* Data taken from The World Bank Group
Demographics
•
•
•
•
•
•
Population:
Population growth rate:
Net migration rate:
Life expectancy at birth:
Sex ratio:
Ethnic groups:
–
–
–
–
–
•
Bulgarian
Turk
Roma
Russian
Other
7,718,000
(2005)
-0.89% (est.)
-4.3 migrant(s)/1,000 population (est.)
72.03 years
0.93 male)/female (est.)
83.9%
9.4%
4.7%
0.2%
1.8%
Religion:
–
–
–
–
–
Bulgarian Orthodox
Muslim
Roman Catholic
Protestant
Other
82.6%
12.2%
0.6%
0.5%
4.1%
IT Industry - Technology Scene
• 1980s, leading supplier of 5th generation computer
systems to soviet union research institutes, Electronics &
telecommunications counted for 25% of industrial
production
• 1990’s, modem technologies were introduced, mobile
wireless technologies became famous in later 1990s.
• Telecommunication infrastructure like DSL and fiber
optics were built by Bulgarian Telecommunication
Company (BTC)
• ISP and telephony services are expensive
• Approximately 10.4% of the Bulgarian population access
internet.15% of internet access are provided by public
access points like internet cafes, schools and workplace.
Less than 3% of internet users are from smaller towns.
IT Industry - Penetration
• Bulgarian gov., banking & telecommunication
sectors are the major users of IT.
• Foreign investors entered telecommunication
market by acquiring ownership of existing
companies or by joint ventures.
• International software and hardware producers
do not consider Bulgaria as a primary target.
• Study and self-sufficient technology growth
• Continuous growth of technology penetration,
access affordability and connectivity
• Growing digital divide in terms of accessibility to
IT infrastructure and provision of internet-related
services
IT Industry - Training
• Uneven Penetration of internet access in
universities - AUBG (almost 1:1, other universities
1:100)
• Internet usage is not integrated into learning
process
• Absence of technology infrastructure leads to
theoretical knowledge in secondary schools
IT Industry - Teledensity
• Teledensity – 37 lines (PSTN) per 100
households. Difficulty in finding out information on
companies teledensity. Digital phone lines are
growing and contribute to 22% of total phone
lines. ISDN lines were introduced only in year
2000 and hence a lower percentage of .34% of
total phone lines. 14.3% of the population
reported to have cell phones, 3/4th of the
household possess at least one cell phone
device.
IT Industry - Producers
•
•
•
•
•
•
•
•
Most of the electronic transactions fall into B2C category, B2B transactions
occur only in about 100 small and tiny consumer segments.
In Bulgarian government, 18% of all workplaces in public administration are
computerized. 20% of them have internet access. Bulgarian government is well
prepared to adopt technology compared to the industry sectors.
Financial services sector and telecommunication sector are the only economy
sectors who have greater IT penetration.
30% of companies use computers at work, only 12% of them have internet
access, 3% of employees access internet for email and communication
purposes only.
Tendency towards increased company presence on the internet, basic and
static information like Company Profile, Contact information and Listing of
products
The number of hosts in “.bg” domain was 1860, 2500 sites under “.com”, “.net”
and “.org” domains, about 800 others use Bulgarian portals – www.hit.bg,
www.dir.bg, www.online.bg, www.search.bg
The population of IT professionals fall between 4000 & 15000, (if we include
telecom engineers and IT teachers falls between 45-50000)
Uneven penetration of technology, low-level of internet access, low level of trust
in security issues and lack of clear legal environment for electronic business
are the main causes for the small & inefficient local producers.
IT Industry - Consumers
•
•
•
•
•
•
IT specialists jobs are attractive 220% the average monthly salary,
specialized professionals (systems admin, programmers) are paid
340% the average monthly salary
According to Bulgarian Association for Internet Technologies (BAIT),
about 15000 IT professional have left the country in the past 10-12
years. Severe brain drain cause of unavailability of challenging IT
opportunities.
800,000 debit car holders vs. 10,000 credit card holders. 400-700
credit cards are being issued by Bulgarian banks each month.
Only 1.4% of the debit card holders are registered with ePay.bg
(Bulgaria’s most popular online payment system) due to lack of trust
in the systems security.
Common categories of goods traded on the internet : Books(45%),
Prepaid internet access cards(10%), Flowers & souvenirs 10-12%),
music (7-8%), electronic items & cell phones (6-7%), online payment
of utility bills in Sofia (12-15%). Here processing is done on internet,
payment is still by the conventional manner upon delivery.
Online Payments by prepaid cards called “Net-Card” are gaining
popularity.
IT Industry - Strengths & Weaknesses
• Strengths
–
–
–
–
–
–
98% literacy rate, rated among the top 5 in the world
No.2 in certified skills, after U.S.
4-6% increase in GDP for consecutive 5 years
Robust Banking sector
Existence of foreign investment initiatives
Closer location to central Europe
• Weakness
–
–
–
–
Brain drain
Volatile transition economy
Low access to computers, internet
Strong presence of mafia culture
E-commerce picture
Bulgarian Firms
•
•
24% of local enterprises have websites
11% of which allow online ordering
Bulgarian Consumers
•
•
•
•
•
Estimated that only 3.8% of population made online purchases in
2004
Reasons for low eCommerce activity
Weak economy
Low wages
High unemployment rate (11.5%)
Most popular online purchases are books and
magazines!
Information taken from ARC Fund’s eBulgaria 2004 Report
E-commerce picture (cont.)
E-commerce picture (cont.)
Information taken from www.knigopolis.com
Samples of IT Industries
• Value-added SMS services – e-Commerce
• PIAPs / Internet cafes
• Government administrative services: e-Government, ePolicy http://www.daits.government.bg
• IT outsourcing services such as BGITExchange
http://www.bgitexchange.com
• BASSCOM – Bulgarian association of software companies
http://www.basscom.org
• Academics and education, aerospace and defense,
CAD/CAM systems, charity,
construction, entertainment, finance and banking, freight
forwarding, healthcare, insurance, pharmaceuticals,
telecommunications and tourism.
• Competitive academic IT teams, winners
• Potential brain drain present
Business Climate of Bulgaria
Advantages
–
–
–
–
Low inflation rates
Average 4% economic growth since 2000
Low corporate tax rates
Pending EU membership
Disadvantages
–
–
–
–
High unemployment rate (11.5%)
Low wages
Inefficient judicial system
Strong organized crime presence
Information taken from Bulgaria Country Commercial Guide 2006, U.S. Department of Commerce
Business Climate of Eastern Europe
The UN defines Eastern Europe as:
•
•
•
•
•
Belarus
Bulgaria
Czech Republic
Hungary
Poland
•
•
•
•
•
•
Moldova
Romania
Russian
Federation
Slovakia
Ukraine
Information taken from the CIA World Factbook
Business Climate of Eastern Europe
Business Overview
• Former communist regimes
• Transforming economies
• 2005 average growth of 5%
• High unemployment
• Low wages
Information taken from the CIA World Factbook
Investment Opportunity #1: Internet
Cafe
Internet Cafes staffed with Bulgarian University IT
students to provide:
• Internet access
• PC usage training
• Internet and software training
Investment Opportunity #1 (cont.)
Why do we think this idea is viable?
Reason #1
• Estimated 2006 Internet usage in Bulgaria is only
26%
• 2004 survey identified reasons for low usage:
• Too expensive (30.2% of respondents)
• Don’t know how to use the Internet (18.9% of
respondents)
• Don’t have computer access (18.9%)
Investment Opportunity #1 (cont.)
Why do we think this idea is viable?
Reason #2
• Bulgarian higher education standards
• Globally recognized
• Produces highly skilled certified IT specialists
• Low wages
• Low employment opportunities
Investment Opportunity #1 (cont.)
Result
• IT professionals leaving Bulgaria after graduation
• IT knowledge learned at university level not being
diffused back into the country
• Local and rural residents not gaining benefit of
world class IT education in Bulgarian universities
Investment Opportunity #1 (cont.)
Internet Cafes staffed with university
students would provide consumers:
• PC access
• Internet access
• PC usage training
• Internet and software training
Investment Opportunity #1 (cont.)
Internet Cafes staffed with university
students would provide investors:
• Low cost labor by employing university students
• Access to a growing, yet untapped market
• Increasing profit potential as Internet usage
increases
Investment Opportunity #1 (cont.)
Internet Cafes staffed with University students
would provide Bulgaria:
• Increased Internet usage resulting from:
– PC access
– Internet access
– PC and software training
• Opportunity for Bulgarians to benefit from strong
university IT programs despite high number of
graduates leaving the country
Investment Opportunity #1 (cont.)
TAM
Ease of Use
Usability
Accessibility
Evaluation
Acceptance
Usefulness
Functionality
Potential
Information taken from Lecture 2
Investment Opportunity #1 (cont.)
Comparison to Latvia
Household income statistics
• Bulgaria:
• Latvia:
lowest 10%: 4.5%
lowest 10%: 2.9%
GDP growth
• Bulgaria:
• Latvia:
5.5%
10.2%
Unemployment
• Bulgaria:
• Latvia:
11.5%
7.5%
highest 10%: 22.8%
highest 10%: 25.9%
Investment Opportunity #2: Tourism
Service / Website
• Climate
• Geographic proximity
to Oriental/Southern /
European locations
• Natural resources,
mountains,
hydrothermal sources
• Traditional hospitality
• Historical sites
Information taken from http://www.geographic.org/maps/bulgaria_maps.html
Investment Opportunity #2 (cont.)
Black Sea, Sofia
Black Sea Coast
Sofia
Information taken from http://www.orienttravel-bg.com
Investment Opportunity #2 (cont.)
Golf, Ski, Spa, Water sports
•
•
•
•
•
Ideal Spa and Recreational Resorts
More than 500 natural mineral
hydrothermal sources
Ski Resorts, Mountains
Golf Resorts
Professional Sports Training Camps
Information taken from http://www.orienttravel-bg.com
Investment Opportunity #2 (cont.)
Business Climate
• Black Sea area hub: close to any Eastern
European as well as Southern tourist locations
• Tourism, hospitality is the most important
• Tourism as business driver
• Credit card acceptance at tourist locations
• English/Russian/German
Investment Opportunity #2 (cont.)
Potential Business Opportunities
• With the IT sector still not a large source of
income, tourism with use of IT is still a good
source of income
• Internet based central Tourism websites with
discounts, advertisement can grow e-commerce
• Maintains Bulgaria’s niche in tourism while
improving IT penetration
• E-commerce tourist kiosks, e-reservation
• Property investment for tourism, time share
Investment Opportunity #2 (cont.)
Specifics
• Establish e-Ticket, e-Commerce websites
• Provide safe online credit card transactions,
flexible packages
• Use local resources
• Establish B2B Tourism/Reservation web services
• Recruit and use talents from
Colleges/Universities/IT firms
Investment Opportunity #2 (cont.)
IT-Led Development
Industrial
Policy
Environmental
Factors
Political, Social,
Economic and
Geographic
Environment
Indigenous vs.
MNC R&D
Industry
Structure
Education & Skills
Technology Policy
Infrastructure
IT Diffusion
IT Production
and Use
Economic
Payoffs
Employment,
Productivity and
Economic Growth
Information taken from Lecture 4
Investment Opportunity #2 (cont.)
Why investment in this country can differ from
Latvia?
• Attractive sea-side locations
• Warm climate allows for more days for prime sea
side tourism which translate to more income
• Close to other famous southern and oriental
tourist destination
• Mountains and ski resorts attract winter
vacationers
• Bulgaria is geared towards tourism
Questions