Is the Western Balkans Europe’s Next Technology Hub?

00:00:08: When companies look beyond their borders for technology talent, countries like India and the Philippines have long been among the world's most established outsourcing destinations.

00:00:18: But another part of Europe is increasingly becoming a part of that conversation – The Western Balkans.

00:00:24: According to OECD, ICT service exports across the region relative to the size of its economies are approaching ninety percent of European Union benchmark and World Bank data showed that across the six Western Balkan economies, ICD's service exports were worth roughly USDXXUSD in twenty-twenty four.

00:00:46: To understand that wider shift we're going to look closely at Kosovo – one case study within the western Balkans' broader technology story.

00:00:55: In twenty-five, Kosova exported €三 hundred ninety eight point two million euros in telecommunications computer information services around fourteen percent more than the year before.

00:01:07: Those numbers show the scale, but they don't tell us how the industry got here or even what comes next.

00:01:14: so I spoke with four people who have seen different stages of that story from How The Industry began to the first movers Who proved a model To What Outsourcing Looks Like Today and Even What May Still Be Missing?

00:01:27: Four People For Perspectives.

00:01:29: One Question Is the Western Balkans becoming Europe's next technology hub?

00:01:35: You're watching ISA TED Talk powered by ISA Consulting.

00:01:41: Before we understand why international companies are choosing the Balkans today, We need to understand how this industry developed and for that I spoke with Violsa Ciavoli.

00:01:51: Violssa has served as Executive Director of STIC because it was ICTs Association since two thousand eight given her a front row view on sector development.

00:02:01: So I asked her to take me back.

00:02:29: This is when we started, you know talking with the companies and convincing them to look further more than then than Kosovo itself.

00:02:41: That's when we starting talking about exporting our services abroad And with help of some donors With the help of industry itself We created new opportunities.

00:02:57: You know, the biggest point was when government being a mean client they reduced their investment in ICT sector.

00:03:07: The budget was lower much lower that year In two thousand eight.

00:03:13: and this is where we started thinking out of box.

00:03:16: And it's starting...I must say That the biggest contributor to this Was our diaspora.

00:03:26: The diaspora became the bridge, a generation of Kosovars educated and working abroad already understood international companies their markets.

00:03:35: And what clients expected?

00:03:37: Some began connecting those companies with teams back home.

00:03:41: that helped create Kosovo's first outsourcing business in one company we also identified as a pioneer was three sys.

00:03:49: its influence she argues when beyond

00:03:55: biggest role of three CIS was that they have taught people to think differently in their company culture.

00:04:05: And from three CIs, we now having also probably more than fifty other companies that are developed or established by the ex-three CIS workers.

00:04:19: so this is why I'm saying pioneer because They, I think they opened the opportunity for Kosovars.

00:04:27: For youngsters from Kosovo you know and they told them how it should function?

00:04:32: How can it be

00:04:33: successful?".

00:04:35: That brought me directly to the person behind that company, Quitim Tolly.

00:04:40: He is a founder of ThreeSys.

00:04:42: Before ThreeSies, Quittim had spent years working in telecommunications internationally.

00:04:48: By two thousand eight.

00:04:49: he was working at Telapse after helping develop the architecture of AT&T, a three-G network in New York.

00:04:56: As that network moved into deployment, Kuytim saw an opportunity.

00:05:00: Could some other work be developed by engineers at Kosovo?

00:05:04: At Tel Avs The Idea met resistance.

00:05:07: Kosova was not yet seen as obvious place to entrust with critical telecom works.

00:05:12: Kuytin kept pushing.

00:05:14: Eventually he was given a test Five people A budget just under one hundred thousand dollars and one chance to prove it could work.

00:05:49: budget, correct?

00:05:50: So the person who approved that he said I can sign a ninety nine thousand dollars and you said this is your budget.

00:05:55: If we do it good if you don't be just gonna forget it.

00:05:59: contact Xeem couple of engineers.

00:06:01: then they started back on twenty oh eight And everybody thought his going to fail.

00:06:07: We just needed the manpower.

00:06:09: and down the man power You know we start with five people.

00:06:12: Be brought people to train them.

00:06:14: They didn't need lots.

00:06:15: training level very smart from the beginning.

00:06:19: The content was pretty simple and it started the first week of November, we start executing work.

00:06:27: And that's it!

00:06:28: I mean in three months... In four month be at forty people.

00:06:32: can you imagine?

00:06:33: Nobody believed that things may

00:06:35: happen.".

00:06:36: The experiment worked but proving the engineers could do their job was only the first obstacle.

00:06:42: to resist also had to satisfy the legal security financial and corporate requirements of major international clients.

00:06:51: And because the company was among the first doing this at scale, Kosovo's institutions were learning at the same time.

00:06:58: that created a surprisingly basic problem How do you export something that never physically crossed the border?

00:07:05: They couldn't understand the concept of exporting services.

00:07:09: just to give an idea Because when you export you don't pay sales tax, correct?

00:07:16: You don't collect sales tax.

00:07:18: And we would go and ask for exemption.

00:07:20: that will tell us to the customs and get some kind of DUD which gives me a number.

00:07:27: what do I export it?

00:07:29: Xeem would say okay let's see what are you exporting.

00:07:32: how can i show them right?

00:07:35: so they did put request To be relieved from this type of sale taxes back when he started The legislation was on Votel sometime in the year of ten.

00:07:46: And then when the legislation was voted, I still remember it from July twenty-ten.

00:07:52: so they took us almost two and a half years for them to understand.

00:07:58: how can you export something that is outgoing through customs?

00:08:03: Customs would give some kind of notification saying this left the country!

00:08:09: Quitim says a later tax dispute removed roughly half-a-million euros from the company's operating budget.

00:08:16: For the first time, Thricez had to let around forty people go but being first met running into problems and ecosystem built for that kind of businesses has not yet learned how to solve.

00:08:29: But it also meant that companies followed didn't have start in the same place.

00:08:35: We were the first one to go through a bad and good time, so that other companies came in.

00:08:39: it was little bit better for them.

00:08:40: It was paved.

00:08:41: I mean just think about when we first come here people trying to find the company's who do technology stuff.

00:08:47: if you went to cut this crap he didn't know anyone else.

00:08:50: So now somebody comes even after three CISs was created.

00:08:53: Somebody could have come into us then.

00:08:54: they would explain whom we work with.

00:08:57: So your are the first ones to break lies on many ways.

00:09:02: Once that ice had been broken, the question changed.

00:09:05: It was no longer can this work?

00:09:07: Instead it became how far Can This Model Go?

00:09:13: More than a decade later Nuri Kola is building in very different environments.

00:09:18: After years working with international technology companies and helping build teams for global markets Nu went on to co-found Vertica's group.

00:09:28: His experience represents new generation of outsourcing.

00:09:31: The question is no longer simply whether a company can hire people on the Balkans, it's whether part of that company could actually be built here.

00:09:41: No describes its shift in five words from cost to confidence.

00:09:46: I think the biggest change and you know just learning from the past well...the biggest change is that conversation has moved from the costs to confidence.

00:09:57: Meaning, ten or fifteen years ago cost was probably one of the biggest reasons companies looked at the Balkans.

00:10:04: And I remember back then a lot international presence through call centers telemarketing and these are some of the roles that started initially.

00:10:17: however today company's looking at region very differently.

00:10:23: so talent has matured.

00:10:25: Now, you have engineers.

00:10:26: You have tech leads and architects product people managers who spent years working with international companies on International products.

00:10:34: so

00:10:35: I've experienced that myself at CodeLabs.

00:10:39: we were able to build a significant technology organization in Kosovo and serve the global market.

00:10:46: And now through verticals i'm seeing companies ask different questions.

00:10:51: They're not just asking can give me salespeople or developers.

00:10:58: I think the question is more like, can i build a port of my team here?

00:11:02: And that's a big shift!

00:11:05: That changes what outsourcing looks like.

00:11:08: The early model was about proving that work could be delivered from Kosovo .The model new is building it much more integrated.

00:11:17: At Verticus we help international companies built and grow technology teams in the Balkans.

00:11:23: But we're not just trying to be another company that simply provides developers on demand or, you know a certain specific role.

00:11:32: We what really help clients is build the team that can become a genuine extension of their

00:11:39: organization.".

00:11:40: For new The Real Opportunity goes beyond filling roles.

00:11:45: It's What Happens When Talented People Are Given International Exposure Responsibility And A Right Environment To Grow.

00:11:53: He has seen interns become engineering leaders, he has seen people in the Balkans take responsibility for major international projects.

00:12:01: And that experience became part of a reason he decided to build Verticos.

00:12:06: What's biggest value is what happens over time.

00:12:10: We help companies find people with potential.

00:12:14: I can't stress this enough and how important it was Because once we put them in the right environment and allow them to grow into, they can become increasingly important roles within the business.

00:12:29: So it's more like not just a placement but I lack of strategic decision And i think that is reason why really We build verticals .I've experienced this repeatedly over through different companies such as The ones I mentioned ,and have seen interns taking directorals and executive rules, I've seen people here take the responsibility from an internship several years later managing a multi-million dollar international project.

00:13:04: So if we know this works why are not doing more of it?

00:13:12: Essentially that's where kind of the Vertikos idea comes from.

00:13:16: There are thousands of talented people in the Balkans who could be working on a much bigger international problems, and there were thousands of international companies that could benefit from VATAL.

00:13:28: So Vertikus is really about connecting those two sides and doing it in a way that creates a long-term value for both.

00:13:37: News argument is ultimately an optimistic one!

00:13:40: The talent is already here.

00:13:42: The opportunity is to give more of that talent, access through international work and create companies That can connect the two sides at a greater scale.

00:13:52: But proving that model works Is not the same as proving that Western blockhounds are becoming technology hub.

00:13:59: For this we need ask what still missing?

00:14:03: And This where story becomes difficult.

00:14:07: A growing outsourcing industry tells us that International companies trust the talent, but it doesn't necessarily mean that the region has everything required to become a technology hub.

00:14:18: For this I wanted the perspective of someone who looks at the Balkans through the eyes of capital.

00:14:24: Richard Luca is the founder and managing partner of Bank Street Holings with more than three decades experience in investment banking particularly across technology media and communications.

00:14:36: Richard and his colleagues have been involved well over half a trillion dollars in transactions around the world.

00:14:44: So I asked him, what might still make an investor hesitate?

00:14:48: His first concern had little to do with

00:14:50: technology."

00:15:10: And I think the political elites, including an interview from yesterday commenting on looming conflicts to come strikes me as very regressive and negatively impacting development of not only Serbia but rest.

00:15:37: that threat is being cast in multiple directions.

00:15:41: So those kinds of factors probably cause larger scale, longer duration investing activity to be maybe set aside for other more inviting environments.

00:16:00: Investors don't evaluate companies in isolation.

00:16:04: political stability, predictable institutions rule of law protection of intellectual property all influence where long-term capital goes and while Richard believes Kosovo has made a significant progress the wider perception other region can still affect investment decisions.

00:16:22: then there is a capital itself.

00:16:24: There's a mix of external factors that are also in play.

00:16:29: you know, most of the capital that explores opportunity in the Balkans still considers itself to be bold capital.

00:16:37: You know I would say the preponderance of capital is cowardly.

00:16:44: so if Leaders of the region need to really embrace.

00:16:56: The fact that capital comes through those places that are stable, but act in a way that is responsible long term minded and at support of let's call it citizenry is embracing of direction as well.

00:17:16: That's the beginning of an ecosystem that has a long-term appeal for people who are looking at such opportunities.

00:17:25: We're starting to hear voices in the region, I would say many entrepreneurs have begun thinking beyond their current state and look at some of these companies is very comfortable.

00:17:41: they do relatively well there able support families employees so forth.

00:17:47: But in the tech world, that's not a stable state.

00:17:50: There is a need to constantly break and reinvent and recognize what works today will not work five years from

00:17:57: now.".

00:17:59: That's an demanding backdrop.

00:18:01: I also think some of the entrepreneurs who have been able to build companies employing hundreds maybe thousands people has done so with one or two or three partners.

00:18:16: That creates another challenge.

00:18:18: Many of these companies were built by founders who spent years taking the risk themselves By that time outside investors arrive, The business can feel less like an asset and more something personal.

00:18:31: I think the folks that have found third-party capital Have been those that recognize that the capital is worth more than money And in many of those cases the capital provider affords a network of incremental opportunities set.

00:18:50: If they write people are connected, there's a synergy that is much more than just the liquidity event if you

00:18:56: will.".

00:18:59: I would also say to my comment earlier about many of these companies that have done reasonably well, They're quite comfortable.

00:19:16: It's called their baby and they are not really receptive to both partnership or partner capital.

00:19:27: because partnership in partner capital requires an embrace, it requires governance sharing.

00:19:33: It requires controls being shared on other variables that many of the companies And so, you know there will be examples of those that have gotten over that and managed to partner well and succeed beyond what they could've done as individuals.

00:19:58: I think that would incentivize others to change their ways but... But iIthink it's an evolution.

00:20:05: It is not something unfamiliar.

00:20:08: These kinds of developments I call it precedented in other geographies as well.

00:20:17: So, wouldn't view this is a critique?

00:20:20: It's very natural thing particularly the area that said challenges.

00:20:24: when you finally develop good things just don't want to mess up and by yourself regretting those elements.

00:20:35: but its risk must be taken.

00:20:42: But

00:20:42: building something much larger means accepting that the founder cannot take control over everything.

00:20:48: Outside.

00:20:48: capital brings partners, partners bring accountability and accountability requires systems that can survive beyond anyone individual.

00:20:58: The ability to scale from there requires good governance.

00:21:02: it requires transparency.

00:21:04: It requires you know financial and tech reporting.

00:21:25: Richard's argument is not that the Balkans lacks entrepreneurs.

00:21:29: Companies have been built, talent has been proven, international clients have arrived.

00:21:35: But the next stage requires something different.

00:21:38: An environment capital is comfortable entering and companies capable of becoming institutions, rather than remaining founder-led businesses.

00:21:50: So we have an industry that began by looking beyond a smaller domestic market.

00:21:55: Pioneers who proved international technology work could be delivered from Kosovo.

00:21:59: A new generation building more integrated outsourcing model And an investor arguing.

00:22:04: the next steps depend on stability, capital and ability of companies to scale.

00:22:10: Which brings us back to our question for people four perspectives.

00:22:15: one question is that Western Balkans becoming Europe's Next Technology Hub?

00:22:21: I believe we

00:22:21: have a

00:22:23: great opportunity Great chance to be coming Europe Tech Hub The news Balkan hub.

00:22:32: but you need to work more together.

00:22:35: Other than that we cannot do, you know?

00:22:37: We need to involve Daspora...we need to involved private investment venture capitals which are missing right now.

00:22:45: so we need to to involve local forces and local communities.

00:22:51: Daspora knows how.

00:22:55: it's a very big factor Daspora.

00:22:58: And then government with other programs You know, like helping startups etc.

00:23:04: Startups innovation and then working with international capital bigger one.

00:23:12: Then we will become technology hub.

00:23:15: So there should be a cooperation between all of these parts Of the puzzle.

00:23:23: We need to put them together.

00:23:26: I don't see right now that western Balkans would be in hub.

00:23:30: Not not correct But that doesn't mean it's not going to happen in five years, right?

00:23:35: Another good thing would be C. We didn't see any bias behavior because we were able to build themself as the outsourcing or knowledge based region of country used to be much different.

00:23:48: You know I will go into a different conference and say oh they're from Kosovo They don't have anything.

00:23:54: I'm talking about ten years ago, fifteen years ago.

00:23:56: It seems like concept is changing which is very good.

00:23:59: No more precept things on their hats which is very good, correct?

00:24:03: You have educated engineers.

00:24:06: Engineers who can present themselves in different aspects.

00:24:08: you go to conferences.

00:24:09: they can present things.

00:24:10: They speak very well English.

00:24:12: Other countries in Russia are not speaking English so we don't really need to be biased towards each other or younger people.

00:24:18: So it may change in five years.

00:24:20: I hope that will change

00:24:22: Yes but i think were still in the process of becoming one.

00:24:26: The talent here and international demand.

00:24:31: The track record is increasingly there, but Talent alone doesn't create a technology hub.

00:24:39: So what we need I believe it's more capital More companies being built here More innovation and then more of that talent creating value in the region.

00:24:52: so i wouldn't say We're already fully developed Technology Hub But I think That we are at A very interesting point where If we get the next ten years right, We absolutely can become one of Europe's more important technology ecosystems.

00:25:10: The talent is already here?

00:25:11: The question is whether we could turn that talent into companies innovation and global value.

00:25:18: I don't know if this short answer because it depends highly on what somebody means by.

00:25:28: It's very hard, for example to see a massive tech hub opportunity developing in an area that still has intermittent power.

00:25:39: For example the distribution of connectivity capability is still relatively nascent and In some respects I think The Balkans can potential to be a material differentiated player on the world stage, but I don't see a coherent strategy for doing that.

00:26:06: It's a question of what leadership in the tech sphere does in the coming years?

00:26:12: That is going to determine whether or not it becomes a real tech hub.

00:26:15: or was there spot-in-the-pan an outsourcing supply demand human arbitrage moment?

00:26:24: you know.

00:26:25: i remain hopeful that it'll be the former.

00:26:29: So, is a Western Balkans becoming Europe's next technology hub?

00:26:34: It looks like the answer isn't yet but...it can be!

00:26:39: The talent here and future look promising.

00:26:43: International companies are already building teams across the region And they're continuing to grow Foundations being built.

00:26:51: But perhaps biggest opportunity Is not what each country can build alone but other region can build together.

00:26:57: Because the Western Balkans may be six markets, however its opportunity is much bigger if they stand together!

00:27:05: Thank you so much for listening to the ISA TED Talk podcast.

00:27:08: my name is Vissar and I'll see you on next episode.