Cluj 2030 a vision on IT - will it thrive or will it flop - Mihai Nadas

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Cluj 2030: a vision on IT. Will it

thrive or will it flop?

Mihai Nadăș

Managing Director / Yonder


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Hello, world!

• Mihai NADĂȘ

• 29 years old, married, proud father of a

wonderful daughter

• 10 years ago (2006) I started my career

as a Junior Developer

• Today I’m Managing Director at


1. What are the facts about Cluj’s IT sector today?

2. What is likely to happen next?

3. What should you do about all this tomorrow?

My goal for today: answering these three questions


WHAT ARE THE FACTS ABOUT CLUJ’S IT

SECTOR TODAY?


Romania – Total SITS Industry - Volumes and Growth Rates

source: anis.ro


• Romania’s SITS Industry is growing handsomely

• Projection suggest that it will slow down, yet double digit

growth will still be the norm by 2019

• How does Cluj stand in this equation?

Romania – Total SITS Industry - Volumes and Growth Rates

source: anis.ro


Romania – Total SITS Industry – Geographical Split

source: mfinante.ro

• Cluj County (with Cluj-Napoca taking

96% of the pie) represents 11% of the

total SITS industry

• Bucharest is the distant leader

outperforming Cluj sixfold

• But what about growth?


Romania – Total SITS Industry – CJ vs. B

source: mfinante.ro

2012 2014

CJ CJ

2010

CJ

B B B

9% vs 61% 10% vs 62% 10% vs 62%


Romania – Total SITS Industry – CJ vs. B

source: mfinante.ro

• Cluj grows slightly faster than Bucharest considering 2010 – 2014

• However, it seems that Cluj grows at the expense of other regions

• At this pace, all else being equal, Cluj will take over Bucharest’s position by 2116

• All in all, Cluj displays patterns that are inline with the national ones

2012 2014

CJ CJ

2010

CJ

B B B


The Sixfold Phenomenon

Bucharest

Cluj-Napoca=

1.920.610

304.527= 6.30

source: mfinante.ro

source: ins.ro

Bucharest

Cluj-Napoca=

€ 1.431.860 K

€ 221.015 K= 6.47

2012


WHAT IS LIKELY TO HAPPEN NEXT?


1. By 2030 Cluj will still be dominated by foreign (non-

domestic) revenue

2. By 2030 Cluj will still sustain a double digit growth

rate

3. By 2030 a Senior Developer will earn relatively the

same as a Senior Developer in 2016

Cluj 2030: Some Hypotheses on IT



domestic) revenue


rate




Yes / No ?


Foreign Revenue vs. Domestic Revenue - Romania

source: anis.ro


Foreign Revenue vs. Domestic Revenue - Romania

source: anis.ro

• Foreign Revenue exploded in the past years (27% vs. 5% AVG NRG)

• By 2019, projections suggest that the split will reach 73% / 27%

• Assuming Foreign Revenue NRG will drop at an average of 5% for 2020 – 2013, Domestic Revenue’s should rise to an average of 16,5% in order to take the first spot by the end of the period



domestic) revenue


rate




Yes



domestic) revenue


rate




Yes / No ?

Yes


The 5 Parts of Every Business

1. Creates and delivers something of value...

2. That other people want or need...

3. At a price they’re willing to pay...

4. In a way that satisfies the customer’s needs and

expectations...

5. So that the business brings in sufficient profit to

make it worthwhile for the owners to continue

operation.

Every business…


The 5 Parts of Every Business

1. Creates and delivers something of value...

2. That other people want or need...

3. At a price they’re willing to pay...

4. In a way that satisfies the customer’s needs and

expectations...

5. So that the business brings in sufficient profit to

make it worthwhile for the owners to continue

operation.

Every business…

Value Creation

Marketing

Sales

Value Delivery

Finance


1. We deliver something of value (software and software development services)

2. That Western European, North American and local (to a lesser extent) companies want or need

3. At a price they’re willing to pay

4. In a way that satisfies the customer’s needs and expectations

5. While businesses capture satisfying profitability rates

Why are we having double digit growth today?


But why double digit growth?

Fundamental facts about Cluj-Napoca’s IT sector

development between 2010 and 2014

TO FTE TOGr FTEGr TO/FTE TO/FTEGr

2010 129.799.983,00€ 3.950 32.860,76€

2011 159.927.068,00€ 5.464 23% 38% 29.269,23€ -11%

2012 221.015.643,00€ 7.224 38% 32% 30.594,63€ 5%

2013 279.053.454,00€ 8.475 26% 17% 32.926,66€ 8%

2014 355.140.710,00€ 10.081 27% 19% 35.228,72€ 7%

5YAVG 228.987.371,60€ 7.039 29% 27% 32.176,00€ 2%

1. On average, double digit growth in turnover means double digit growth in FTEs

2. The r2 (Coefficient of Determination) between TO and FTE values is 0.97 (which means that

97% of the variance is predictable)

3. In essence, this suggests that double digit growth in turnover can happen as long as double

digit growth in FTEs is possible

source: mfinante.ro

Some observations:


1. Slowdown in supply

2. Slowdown in demand

3. Cost surges

4. Declining delivery quality

5. Declining profits

What could go wrong?


1. Slowdown in supply

2. Slowdown in demand

3. Cost surges

4. Declining delivery quality

5. Declining profits

What could go wrong?

likely

unlikely

somewhat likely

somewhat likely

somewhat likely


1. Considering the maximum

“absorption rate” of 2010 – 2014

as the average for 2015 – 2030,

growth drops to single digits by

2023 (6 years from now)

2. The other parameters are likely

to stay relatively the same as the

2010 – 2014 averages

Slowdown in Supply: The Most Likely Growth Killer

TO FTE TOGr FTEGr(%) FTEGr(ABS) TO/FTE TO/FTEGr

2010 129.799.983,00€ 3.950 32.860,76€

2011 159.927.068,00€ 5.464 23% 38% 1.514 29.269,23€ -11%

2012 221.015.643,00€ 7.224 38% 32% 1.760 30.594,63€ 5%

2013 279.053.454,00€ 8.475 26% 17% 1.251 32.926,66€ 8%

2014 355.140.710,00€ 10.081 27% 19% 1.606 35.228,72€ 7%

5YAVG 228.987.371,60€ 7.039 29% 27% 1.533 32.176,00€ 2%

2015 425.486.119,44€ 11.841 20% 17% 1.760 35.933,29€ 12%

2016 498.503.288,97€ 13.601 17% 15% 1.760 36.651,96€ 2%

2017 574.270.950,83€ 15.361 15% 13% 1.760 37.385,00€ 2%

2018 652.869.917,86€ 17.121 14% 11% 1.760 38.132,70€ 2%

2019 734.383.135,18€ 18.881 12% 10% 1.760 38.895,35€ 2%

2020 818.895.733,23€ 20.641 12% 9% 1.760 39.673,26€ 2%

2021 906.495.081,95€ 22.401 11% 9% 1.760 40.466,72€ 2%

2022 997.270.846,32€ 24.161 10% 8% 1.760 41.276,06€ 2%

2023 1.091.315.043,24€ 25.921 9% 7% 1.760 42.101,58€ 2%

2024 1.188.722.099,69€ 27.681 9% 7% 1.760 42.943,61€ 2%

2025 1.289.588.912,39€ 29.441 8% 6% 1.760 43.802,48€ 2%

2026 1.394.014.908,75€ 31.201 8% 6% 1.760 44.678,53€ 2%

2027 1.502.102.109,40€ 32.961 8% 6% 1.760 45.572,10€ 2%

2028 1.613.955.192,12€ 34.721 7% 5% 1.760 46.483,55€ 2%

2029 1.729.681.557,30€ 36.481 7% 5% 1.760 47.413,22€ 2%

2030 1.849.391.395,01€ 38.241 7% 5% 1.760 48.361,48€ 2%

16YAVG 1.079.184.143,23€ 25.041 11% 9% 1.760 41.860,68€ 3%

Some observations:


Slowdown in Supply: Coincidence or Not?


1. Even if Cluj-Napoca will find a way to double the average ”absorption rate” of 2010 – 2014 to 3.520 yearly graduates, growth will hit single digits by 2016 (10 years from now)

2. Considering this, it is highly unlikely that Cluj-Napoca will manage to sustain double digit growth in IT by 2030

3. Hence, anywhere between 6 and 10 years from now we can safely assume that Cluj-Napoca’s IT sector will reach single digit growth rates

Slowdown in Supply: The Most Likely Growth Killer

Double or nothing!TO FTE TOGr FTEGr(%) FTEGr(ABS) TO/FTE TO/FTEGr

2010 129.799.983,00€ 3.950 32.860,76€

2011 159.927.068,00€ 5.464 23% 38% 1.514 29.269,23€ -11%

2012 221.015.643,00€ 7.224 38% 32% 1.760 30.594,63€ 5%

2013 279.053.454,00€ 8.475 26% 17% 1.251 32.926,66€ 8%

2014 355.140.710,00€ 10.081 27% 19% 1.606 35.228,72€ 7%

5YAVG 228.987.371,60€ 7.039 29% 27% 1.533 32.176,00€ 2%

2015 488.728.714,68€ 13.601 38% 35% 3.520 35.933,29€ 12%

2016 627.518.183,25€ 17.121 28% 26% 3.520 36.651,96€ 2%

2017 771.663.739,09€ 20.641 23% 21% 3.520 37.385,00€ 2%

2018 921.324.109,89€ 24.161 19% 17% 3.520 38.132,70€ 2%

2019 1.076.662.230,02€ 27.681 17% 15% 3.520 38.895,35€ 2%

2020 1.237.845.345,31€ 31.201 15% 13% 3.520 39.673,26€ 2%

2021 1.405.045.120,32€ 34.721 14% 11% 3.520 40.466,72€ 2%

2022 1.578.437.748,20€ 38.241 12% 10% 3.520 41.276,06€ 2%

2023 1.758.204.063,14€ 41.761 11% 9% 3.520 42.101,58€ 2%

2024 1.944.529.655,58€ 45.281 11% 8% 3.520 42.943,61€ 2%

2025 2.137.604.990,10€ 48.801 10% 8% 3.520 43.802,48€ 2%

2026 2.337.625.526,13€ 52.321 9% 7% 3.520 44.678,53€ 2%

2027 2.544.791.841,61€ 55.841 9% 7% 3.520 45.572,10€ 2%

2028 2.759.309.759,49€ 59.361 8% 6% 3.520 46.483,55€ 2%

2029 2.981.390.477,36€ 62.881 8% 6% 3.520 47.413,22€ 2%

2030 3.211.250.700,03€ 66.401 8% 6% 3.520 48.361,48€ 2%

16YAVG 1.736.370.762,76€ 40.001 15% 13% 3.520 41.860,68€ 3%



domestic) revenue


rate




Yes

No



domestic) revenue


rate




Yes / No ?

Yes

No


Cost Surges: what are the odds?

TO FTE TOGr FTEGr(%) FTEGr(ABS) TO/FTE TO/FTEGr

2010 129.799.983,00€ 3.950 32.860,76€

2011 159.927.068,00€ 5.464 23% 38% 1.514 29.269,23€ -11%

2012 221.015.643,00€ 7.224 38% 32% 1.760 30.594,63€ 5%

2013 279.053.454,00€ 8.475 26% 17% 1.251 32.926,66€ 8%

2014 355.140.710,00€ 10.081 27% 19% 1.606 35.228,72€ 7%

5YAVG 228.987.371,60€ 7.039 29% 27% 1.533 32.176,00€ 2%

2015 488.728.714,68€ 13.601 38% 35% 3.520 35.933,29€ 12%

2016 627.518.183,25€ 17.121 28% 26% 3.520 36.651,96€ 2%

2017 771.663.739,09€ 20.641 23% 21% 3.520 37.385,00€ 2%

2018 921.324.109,89€ 24.161 19% 17% 3.520 38.132,70€ 2%

2019 1.076.662.230,02€ 27.681 17% 15% 3.520 38.895,35€ 2%

2020 1.237.845.345,31€ 31.201 15% 13% 3.520 39.673,26€ 2%

2021 1.405.045.120,32€ 34.721 14% 11% 3.520 40.466,72€ 2%

2022 1.578.437.748,20€ 38.241 12% 10% 3.520 41.276,06€ 2%

2023 1.758.204.063,14€ 41.761 11% 9% 3.520 42.101,58€ 2%

2024 1.944.529.655,58€ 45.281 11% 8% 3.520 42.943,61€ 2%

2025 2.137.604.990,10€ 48.801 10% 8% 3.520 43.802,48€ 2%

2026 2.337.625.526,13€ 52.321 9% 7% 3.520 44.678,53€ 2%

2027 2.544.791.841,61€ 55.841 9% 7% 3.520 45.572,10€ 2%

2028 2.759.309.759,49€ 59.361 8% 6% 3.520 46.483,55€ 2%

2029 2.981.390.477,36€ 62.881 8% 6% 3.520 47.413,22€ 2%

2030 3.211.250.700,03€ 66.401 8% 6% 3.520 48.361,48€ 2%

16YAVG 1.736.370.762,76€ 40.001 15% 13% 3.520 41.860,68€ 3%


1. Companies go extra miles to conserve profits

2. Assuming the above, the only wiggle room the industry gets is from the TO/FTEGr which averages at 2% in 2010 – 2014

3. As long as TO/FTEGr will stay in the low, single digit range, Senior Developers will, on average, earn in 2030 similar wages as they earn today, relative to the cost of living

Cost Surges: what are the odds?

Some observations:TO FTE TOGr FTEGr(%) FTEGr(ABS) TO/FTE TO/FTEGr

2010 129.799.983,00€ 3.950 32.860,76€

2011 159.927.068,00€ 5.464 23% 38% 1.514 29.269,23€ -11%

2012 221.015.643,00€ 7.224 38% 32% 1.760 30.594,63€ 5%

2013 279.053.454,00€ 8.475 26% 17% 1.251 32.926,66€ 8%

2014 355.140.710,00€ 10.081 27% 19% 1.606 35.228,72€ 7%

5YAVG 228.987.371,60€ 7.039 29% 27% 1.533 32.176,00€ 2%

2015 425.486.119,44€ 11.841 20% 17% 1.760 35.933,29€ 12%

2016 498.503.288,97€ 13.601 17% 15% 1.760 36.651,96€ 2%

2017 574.270.950,83€ 15.361 15% 13% 1.760 37.385,00€ 2%

2018 652.869.917,86€ 17.121 14% 11% 1.760 38.132,70€ 2%

2019 734.383.135,18€ 18.881 12% 10% 1.760 38.895,35€ 2%

2020 818.895.733,23€ 20.641 12% 9% 1.760 39.673,26€ 2%

2021 906.495.081,95€ 22.401 11% 9% 1.760 40.466,72€ 2%

2022 997.270.846,32€ 24.161 10% 8% 1.760 41.276,06€ 2%

2023 1.091.315.043,24€ 25.921 9% 7% 1.760 42.101,58€ 2%

2024 1.188.722.099,69€ 27.681 9% 7% 1.760 42.943,61€ 2%

2025 1.289.588.912,39€ 29.441 8% 6% 1.760 43.802,48€ 2%

2026 1.394.014.908,75€ 31.201 8% 6% 1.760 44.678,53€ 2%

2027 1.502.102.109,40€ 32.961 8% 6% 1.760 45.572,10€ 2%

2028 1.613.955.192,12€ 34.721 7% 5% 1.760 46.483,55€ 2%

2029 1.729.681.557,30€ 36.481 7% 5% 1.760 47.413,22€ 2%

2030 1.849.391.395,01€ 38.241 7% 5% 1.760 48.361,48€ 2%

16YAVG 1.079.184.143,23€ 25.041 11% 9% 1.760 41.860,68€ 3%



domestic) revenue


rate




Yes

No

Probably


OPEN DISCUSSION

Cluj 2030 a vision on IT - will it thrive or will it flop - Mihai Nadas

Technology

Transcript of Cluj 2030 a vision on IT - will it thrive or will it flop - Mihai Nadas