IT - a promising industry

The concept of "digital" has a new meaning today compared to the past decade when it was almost synonymous with information technology or two decades ago when it meant acquiring new computers and replacing typewriters and fax machines.

Hence, Professor Rogers' words that "the key to digital transformation does not lie in technology but in strategy and new ways of thinking" are more relevant than ever.

So, transformation in the digital age requires much greater and faster changes in strategic thinking than in the IT infrastructure of your business. The primary goal of IT management in companies has transitioned from process optimization and risk management to strategy and a focus on using technology for innovation and improvement. It is simply inconceivable to talk about innovation, increased economic efficiency, and competitiveness while ignoring the digital services and solutions provided by IT companies.

An information society built on the development and comprehensive application of IT in all aspects of social and economic life is reflected in relativized spatial and temporal differences thanks to technological progress, along with the simultaneous globalization of markets, which have created unprecedented opportunities for business development. The business environment, characterized by extremely turbulent market conditions, economic and political crises, and dynamic technical and technological changes, poses IT challenges that require new responses.

In the last decade, following the logic mentioned above, Serbia has been trying to identify strategic directions for economic development, giving exceptional importance to the IT sector in the country's development and investment endeavours aimed at achieving dynamic GDP growth and export performance in the Serbian economy. Recognizing immense advantages compared to traditional industrial sectors - manufacturing and agriculture - economic policymakers have recognized the IT sector as a priority for economic development. Legislation has been liberalized, the education system has been adapted, and budget projections have generously invested in the IT sector, cumulatively encouraging domestic companies to measure their potential in the production and sale of IT services and products on the international market. This has allowed us to quickly join the global market and become an equal participant, even a competitor to more developed countries.

Price competitiveness, a skilled workforce, and entrepreneurial initiative are three key factors that have contributed to the IT sector becoming a relevant player in the international market in just the last five years.

Thanks to this, large global companies are moving their centres from Western Europe to Serbia. To illustrate, here are some data points.

The significance of these changes is best seen when looking at the export potential of the Serbian economy. While two decades ago, the export of the IT sector was almost negligible (2004 - 40 million euros), today it surpasses the export results of traditional industrial sectors. Over the last five years, IT exports have increased two and a half times and amount to 1.7 billion euros, with a tendency for further growth. Today, IT exports are twice the size of imports, which significantly contributes to consolidating our foreign trade imbalance.

What is negative - and has been improving for years - is the structure of the mentioned exports. For years, services made up over two-thirds of exports, while software solutions were negligible. However, today, the software-oriented sector includes over 400 companies with revenues of around 650 million euros and more than 13,000 employees, resulting in constant growth in software exports. There has been a 30% annual growth rate. Starting from 62 million euros in revenue in 2019, this number has reached over 1.3 billion euros.

At the same time, the per capita investment rate in IT has risen to over 100 euros (1.4% of GDP), and although it is significantly lower than the European average, projections indicate that by 2025, it will reach a minimum value of 150 euros per capita, which was the level in Central and Eastern European countries when they joined the EU in 2004. Interestingly, state and state-owned company investments account for more than a third of total investments.

The fact that Serbia has created an attractive investment environment for the growth and development of the IT sector is evidenced by numerous investments that have come to Serbia recently. Here are the most important: "Microsoft" has a development centre that has been operating in Belgrade for over a decade; the American company "NCR" has opened a technology campus in New Belgrade worth $100 million, employing 5,000 people; the German company "Continental" opened an electronic component factory in Novi Sad last year; the Japanese "Nidec" will produce electric motors for electric vehicles in Novi Sad, and so on.

Additionally, it is interesting that domestic startup companies have attracted the attention of major global companies. The company "Nordeus" was acquired by the American company "Take Two", the owner of some of the most famous names in the world of video games, for 225 million euros. Two years ago, "Epic Games" acquired the startup company "3lateral", specializing in computer-generated characters, and the American-Serbian startup "Frame", dealing with "cloud computing", was acquired by the American "Nutanix" for $165 million. "Hatek", currently the fastest-growing technology company in the region, engaged in software engineering and digital product development, acquired "Momentum Design Lab", demonstrating that startups originating in Serbia can be competitive on the global market. In the field of energy, "Schneider Electric" acquired "DMS", an IT company that produces software for managing power systems and so on. It is expected that the number of acquisitions and partnerships will be dynamic as startup companies are increasingly developing and finding foreign partners.

The multiplicative effect of the growth of the IT industry and the arrival of global companies in Serbia is also reflected in the opening of jobs outside the IT sector, primarily in providing services to IT employees - renting office spaces, apartments, buying cars, etc.

All of the above indicates that by 2025, the number of employees in the IT industry could increase to 120,000, which is three times the current number. The largest number of jobs is expected to be created in the fields of software development, cloud technologies, data science, and cybersecurity.

Given the growth trend that has been ongoing for over a decade, it is evident that the IT sector will play a very important role in the economic development of Serbia in the future. Therefore, the development of the IT sector emerges as a priority in Serbia's economic development strategy. The growing popularity of the IT sector among young people is confirmed by the increasing number of students in faculties focused on IT. This implies the need to increase the capacity of these faculties, which would contribute to the development of the entire IT sector by strengthening the competitive advantage of domestic companies.

In addition, it is necessary to establish more comprehensive cooperation between faculties, research institutions, and IT companies. Through their synergy, the necessary knowledge would be more detailed, and educational programs would be modernized to train professionals in line with market needs.

The key challenges facing the further development of the IT sector are a shortage of educated personnel, legal regulations, and the tax system. On the other hand, the advantages of the Serbian IT industry are competitive prices in the global market, along with established high-quality products and services. Furthermore, Serbia enjoys a dominant position in the market of the Balkan Peninsula, and significant progress has been made in creating awareness at the state level regarding the importance and potential of the IT sector. This cumulative effort creates the conditions for establishing a long-term competitive advantage for Serbian IT companies and further strengthening the IT sector as one of the key drivers of economic development.