Nothing works as well as success. The founders of Nordeus know what success is and a few days ago it materialized when they sold the company to the global leader in the gaming industry, the American Take Two, for a safe 225 million, and a potential 378 million dollars.
This is only the last in a series of acquisitions of Serbian or at least startups that have development stationed in Serbia.
Last year, Comtrade sold its share of Digital Services to Endava, and a year earlier, Epic games entered our market with the purchase of the Novi Sad startup 3lateral, which specializes in computer-generated characters, so a year earlier Nutanix bought Frame, an American company. Serbian startup that deals with “cloud computing” for 165 million dollars, and in the meantime there have been a number of minor takeovers by which foreign IT companies have entered our market.
Some of them, such as Schneider Electric, which bought DMS, an IT company that makes software for power system management, are bought by companies with finished products that are already achieving success on the market.
However, there are many more who buy our companies just because of the people who work in them and who will continue their work on the development of parts of the final product or service of the new owner.
The difference is big in terms of the price of takeovers, but also in terms of the effects on the domestic IT sector and the entire economy.
Last year, the Serbian ICT sector managed to achieve higher exports than in 2019, although it was interrupted by double-digit growth rates.
In relation to 1.42 billion euros from 2019, exports in the last, pandemic year reached 1.44 billion euros, thanks to a big jump in the second half of the year.
According to Milovan Matijevic, owner of Mineko Computers, which monitors developments in the IT market, about 3,000 companies in this area have achieved record revenues of about three billion euros.
“Most of it came from the export of mostly software services, about 1.5 billion euros. Then, a little less than 700 million euros were realized on our market, and IT companies generate about 15 to 20 percent of income from the sale of accompanying equipment, consumables, electronics… and the rest goes to the import and distribution of computer equipment. The domestic IT market increased by about 10 percent and thus continued to grow at double-digit rates for the fourth year in a row. We came close to investing in IT of 100 euros per capita. The goal, although difficult to achieve, is to reach 150 euros per capita by 2025, because that is the level at which the CEE countries were when they joined the European Union,” explains Matijevic, adding that the amount of our investments is not very comparable to EU, because our services are cheaper, and in addition, companies are looking for cheaper solutions due to less economic power.
Last year was also specific because of the regulations regarding lump sums, which is why thousands of entrepreneurial agencies were closed, and these people either moved to existing companies or opened their own companies.
Since not everyone can be an entrepreneur and startup owner, the second most important motivation is salary. It is no secret that IT has far higher salaries than the average in Serbia, but still less than in developed countries.
Matijevic points out that the amount of salaries depends on many variables and that there are big differences both within companies and between companies, and that salaries mostly depend on experience and specialties, and that it is difficult to give a single figure that would describe how much developers earn.
According to the Helloworld website, which deals with the employment of IT experts, based on a survey that lasted until February this year, the salary of a senior programmer averaged 1,724 euros, a middle programmer 1,144 euros, and a junior 736 euros. Depending on the technology used by the salaries of senior programmers, they can go over 2,500 euros.
Matijevic points out that the primary reason why foreign companies buy domestic startups is to get quality staff at a good price.
“IT knowledge is global and standardized and usable for foreign companies. For the last seven, eight years, we have a trend of founding about 200-300 new companies a year, with the exception of last year, when many more were founded due to the independence test. The founders of about half of these companies are either foreign individuals or foreign companies. Most of them were established to support their solutions. Let’s say the biggest of them, Microsoft here makes parts of the solution or even whole solutions, but in the function of its products. Nordeus is one of the rare examples of selling ready-made solutions and development, and taking over an outsourcing company is far more common,” notes Matijevic.
Milos Djurkovic, managing partner of Amrop and digital transformation advisor, points out that the sale of Nordeus, as well as parts of Comtrade’s business, is a great thing.
“IT is pure business and the more rich people we create the better. They will push further and that is how the economy develops. A lot of our companies do outsourcing, but we also have examples of companies that have products and they have more value. The problem is that a local market is often needed to develop your own product. To sell the solution on the home market, where it will be tested and improved, and that mainly refers to professional software for companies. However, now globalization and digitalization have led to the whole world being one market, as shown by Nordeus, whose game is played by millions of people around the world. Let’s say a good example is the company Infobit from Croatia, which is the first “unicorn” (startup whose value is at least a billion dollars) from this region. Sales like Nordeus give motivation to other IT entrepreneurs that it is possible to succeed,” explains Djurkovic, Danas reports.
According to him, the fourth industrial revolution means that informatics is key for every area and that all companies are now IT companies, as well as media companies, considering the importance of communications in the time of social networks.
The question is what prevents our companies from becoming “unicorns”, so instead, as a rule, they are looking for bigger partners at a certain, earlier level of development. Đurković estimates that part of the problem is the unavailability of capital.
“This is not only our problem, but also the regions, and even Europe’s in relation to the United States. This is where the flexibility of the economy can be seen. Banks are highly regulated and do not have the flexibility that startups require. Venture capital funds, angel investors, etc. are needed. This is not a developed area and will be one of the key things for the further development of the IT sector “, notes Đurković.
The development of its own product that will compete on the global market with the noise of competitors is expensive, Matijevic points out.
“There is a lot of competition in the world and big companies are competitors. It is expensive to develop a product for the global market and market it next to many similar ones. In addition, there is great labor mobility in this area. You have an engineer in development, and the question is whether he will be there tomorrow or he will go for a higher salary. It is difficult to organize and develop expensively, with great risk “, estimates Matijević, adding that we do not have investors who would gamble with investments in startups, hoping for a big profit if someone succeeds, while everything comes down to a loan with a bank.
Another limiting factor may be the availability of quality labor. Đurković points out that there is a lack of quality people all over the world, as well as that educational systems have failed to respond to market demands.
“The workforce has become deficient, and we need experts, not only developers but from all fields. Education is crucial here, because when you have an unskilled workforce, you get low-tech investments that developed countries make in third world countries. When you have highly educated people, new technologies come, which are very important – clean “, notes Matijević, adding that the most important investments of a country are in the education and health of citizens.
According to the Startup Genome report for 2019, Serbia is among the top five countries in the “Affordable Talents” category.
