ICT in SerbiaAt a Glance

January 2012

english

ICT-Serbia.indd 1 09.12.11 12:56

Picture

ICT in Serbia At a Glance

January 2012

2

Published by:

Vojvodina ICT Cluster

In cooperation with

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

Program for Private Sector Development in Serbia ACCESS

Vojvodina ICT Cluster Office Novi Sad Vojvodjanskih brigada 28 21000 Novi Sad Serbia Tel: +381 21 21 00 306 office@ vojvodinaictcluster.org www.vojvodinaictcluster.org

GIZ/ACCESS Office Belgrade Makenzijeva 24/5 11000 Beograd Serbia Tel: +381 11 240 03 71 Fax:+381 11 240 03 70 www.giz.de

Picture

ICT in Serbia At a Glance

January 2012

2

Published by:

Vojvodina ICT Cluster

In cooperation with

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

Program for Private Sector Development in Serbia ACCESS

Vojvodina ICT Cluster Office Novi Sad Vojvodjanskih brigada 28 21000 Novi Sad Serbia Tel: +381 21 21 00 306 office@ vojvodinaictcluster.org www.vojvodinaictcluster.org

GIZ/ACCESS Office Belgrade Makenzijeva 24/5 11000 Beograd Serbia Tel: +381 11 240 03 71 Fax:+381 11 240 03 70 www.giz.de

3

GIZ Consultants:

Jürgen Kappenmann juergen.kappenmann@karer.com

Milovan Matijević milovan@mineco.rs

January 2012

1

Vojvodina ICT Cluster is a recognized partner in the development and application of new ICT products and services with high profit potential, and an important partner in the development of individuals, companies and regional businesses.

The mission of Vojvodina ICT Cluster is to create conditions for ICT development through coordination of both our and our partners’ efforts towards a strong positive influence on the social and business environment. To our members, the cluster serves as the platform for cooperation and provides a portfolio of services, such as building capacities and competitiveness of its members through training and education at the Cluster Academy, building links with the education system, creation of new business opportunities, access to new markets, lobbying activities etc. The cluster also plays an important role in building tighter bonds in the triple helix Business – Education – Government.

For further information on the Vojvodina ICT Cluster, please visit www.vojvodinaictcluster.org

Working efficiently, effectively and in a spirit of partnership, we support people and societies in developing, transitional and industrialized countries in shaping their own futures and improving living conditions. This is what the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) is all about. Established on 1 January 2011, it brought together under one roof the long-standing expertise of the Deutscher Entwicklungsdienst (DED) gGmbH (German Development Service), the Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH (German Technical Cooperation) and Inwent – Capacity Building International, Germany. As a federally owned enterprise, we support the German Government in achieving its objectives in the field of international cooperation for sustainable development.

For further information on GIZ, please visit www.giz.de.

ACCESS is a Program implemented by GIZ on behalf of the German Ministry for Economic Cooperation and Development (BMZ). It aims to promote the Serbian economic development and to facilitate the future membership of Serbia in the European Union (EU) by supporting the implementation of the Serbian “National Strategy for Development of Small and Medium Sized Enterprises and Entrepreneurship” as well as the “National Strategy for EU Accession”.

ACCESS assists Serbian intermediaries in their support to SMEs in selected sectors to make better use of their production, employment and growth potentials and to explore new markets in South Eastern Europe as well as in the EU. The overall objective of the project is the improvement of the competitiveness of small and medium-sized enterprises and start-up companies in selected sectors and regions.

The ACCESS project works with a diversified implementation structure (including public and private institutions). Consequently, the elements of the projects are (i) support to local and regional economies, (ii) support to industries, including associations and clusters, and (iii) creation of a climate favorable to business and investment. The support components include advising the Government and institutions, companies and groups of companies, as well as training of local labor through both international and national experts, and providing local subsidies for seminars, trainings and promotional activities.

For further information on GIZ/ACCESS, please contact tobias.stolz@giz.de.

CIP - Каталогизација у публикацији Народна библиотека Србије, Београд

004(497.11)”2010/2012”

KAPPENMANN, Jürgen ICT in Serbia : at a glance / [Jürgen Kappenraann, Milovan Matijević]. - Novi Sad :Vojvodina ICT cluster, 2012 (Novi Sad : ABC studio). - 61 str. : graf. prikazi, tabele ; 24 cm

Tiraž 200. - Str. 3: Foreword / Milan Šolaj - Terminology: str. 52-54. - Bibliografija: str. 57-59.

ISBN 978-86-87737-50-11. Matijević, Milovan, 1960 - [аутор]a) Информациона технологија - Србија - 2010-2012COBISS.SR-ID 190597900

3

GIZ Consultants:

Jürgen Kappenmann juergen.kappenmann@karer.com

Milovan Matijević milovan@mineco.rs

January 2012

1

Vojvodina ICT Cluster is a recognized partner in the development and application of new ICT products and services with high profit potential, and an important partner in the development of individuals, companies and regional businesses.

The mission of Vojvodina ICT Cluster is to create conditions for ICT development through coordination of both our and our partners’ efforts towards a strong positive influence on the social and business environment. To our members, the cluster serves as the platform for cooperation and provides a portfolio of services, such as building capacities and competitiveness of its members through training and education at the Cluster Academy, building links with the education system, creation of new business opportunities, access to new markets, lobbying activities etc. The cluster also plays an important role in building tighter bonds in the triple helix Business – Education – Government.

For further information on the Vojvodina ICT Cluster, please visit www.vojvodinaictcluster.org

Working efficiently, effectively and in a spirit of partnership, we support people and societies in developing, transitional and industrialized countries in shaping their own futures and improving living conditions. This is what the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) is all about. Established on 1 January 2011, it brought together under one roof the long-standing expertise of the Deutscher Entwicklungsdienst (DED) gGmbH (German Development Service), the Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH (German Technical Cooperation) and Inwent – Capacity Building International, Germany. As a federally owned enterprise, we support the German Government in achieving its objectives in the field of international cooperation for sustainable development.

For further information on GIZ, please visit www.giz.de.

ACCESS is a Program implemented by GIZ on behalf of the German Ministry for Economic Cooperation and Development (BMZ). It aims to promote the Serbian economic development and to facilitate the future membership of Serbia in the European Union (EU) by supporting the implementation of the Serbian “National Strategy for Development of Small and Medium Sized Enterprises and Entrepreneurship” as well as the “National Strategy for EU Accession”.

ACCESS assists Serbian intermediaries in their support to SMEs in selected sectors to make better use of their production, employment and growth potentials and to explore new markets in South Eastern Europe as well as in the EU. The overall objective of the project is the improvement of the competitiveness of small and medium-sized enterprises and start-up companies in selected sectors and regions.

The ACCESS project works with a diversified implementation structure (including public and private institutions). Consequently, the elements of the projects are (i) support to local and regional economies, (ii) support to industries, including associations and clusters, and (iii) creation of a climate favorable to business and investment. The support components include advising the Government and institutions, companies and groups of companies, as well as training of local labor through both international and national experts, and providing local subsidies for seminars, trainings and promotional activities.

For further information on GIZ/ACCESS, please contact tobias.stolz@giz.de.

2

TABLE OF CONTENTS

FOREWORD ....................................................................................................................................... 3

INTRODUCTION ................................................................................................................................. 4

GENERAL BUSINESS ENVIRONMENT ................................................................................................... 5

ASSESSMENT OF THE SERBIAN ICT SECTOR ......................................................................................... 9

A. STATISTICAL OVERVIEW OF THE ICT SECTOR ...................................................................................9 IT Market Value and Structure .......................................................................................................9

IT Spending and Investments ...................................................................................................... 13

Overview of the Telecommunication Market ............................................................................. 17

IT Industry ................................................................................................................................... 20

IT and Internet Usage.................................................................................................................. 27

ICT Clusters and Support Organizations ..................................................................................... 29

B. EDUCATION AND HUMAN RESOURCE DEVELOPMENT ................................................................. 30 Overview of the ICT Labour Market ............................................................................................ 30

ICT and Tertiary Education .......................................................................................................... 31

C. RESEARCH AND DEVELOPMENT .................................................................................................... 36 Current Situation Regarding R&D in Serbia - in General and ICT Related .................................. 36

EU Support Dimension ................................................................................................................ 43

OUTSOURCING – Opportunities and Barriers for Serbian IT Companies on International Markets ...... 46

CURRENT SITUATION, TRENDS AND POTENTIALS ............................................................................. 48

APPENDIX ....................................................................................................................................... 52

Terminology ................................................................................................................................ 52

Abbreviations .............................................................................................................................. 55

References and Key ICT Publications .......................................................................................... 57

List of Tables ............................................................................................................................... 60

List of Figures .............................................................................................................................. 60

2

TABLE OF CONTENTS

FOREWORD ....................................................................................................................................... 3

INTRODUCTION ................................................................................................................................. 4

GENERAL BUSINESS ENVIRONMENT ................................................................................................... 5

ASSESSMENT OF THE SERBIAN ICT SECTOR ......................................................................................... 9

A. STATISTICAL OVERVIEW OF THE ICT SECTOR ...................................................................................9 IT Market Value and Structure .......................................................................................................9

IT Spending and Investments ...................................................................................................... 13

Overview of the Telecommunication Market ............................................................................. 17

IT Industry ................................................................................................................................... 20

IT and Internet Usage.................................................................................................................. 27

ICT Clusters and Support Organizations ..................................................................................... 29

B. EDUCATION AND HUMAN RESOURCE DEVELOPMENT ................................................................. 30 Overview of the ICT Labour Market ............................................................................................ 30

ICT and Tertiary Education .......................................................................................................... 31

C. RESEARCH AND DEVELOPMENT .................................................................................................... 36 Current Situation Regarding R&D in Serbia - in General and ICT Related .................................. 36

EU Support Dimension ................................................................................................................ 43

OUTSOURCING – Opportunities and Barriers for Serbian IT Companies on International Markets ...... 46

CURRENT SITUATION, TRENDS AND POTENTIALS ............................................................................. 48

APPENDIX ....................................................................................................................................... 52

Terminology ................................................................................................................................ 52

Abbreviations .............................................................................................................................. 55

References and Key ICT Publications .......................................................................................... 57

List of Tables ............................................................................................................................... 60

List of Figures .............................................................................................................................. 60

3

FOREWORD

Soon after its inception in 2010, Vojvodina ICT Cluster has emerged as one of the strongest Serbian institutions in the field of ICT. Our strategic documents keep focus on long-term effects: Serbia as the place of choice for development of sophisticated software, Novi Sad as the hotbed of regional ICT, moving from pure outsourcing towards solution providing etc. Immediate focus, however, is distributed on several types of activities aligned together to help in achievement of those goals.

This entire process requires positioning of our organization and seeking cooperation with multitude of different stakeholders. Among them, German Organization for International Cooperation – GIZ, stands out as the partner who recognized our potentials and made the strategic decision to support and assist us on a long-term basis.

What you are reading now represents one of the results of this cooperation. The second edition of the study, ICT in Serbia – At a Glance, would have never seen the light of day without the engagement of GIZ, their consultants and the resources it committed to this project. ‘ICT in Serbia…’ is the only publication on the topic that comprises all relevant data in one place, saving a lot of time and research for those who want to learn more about the topic. Thus, it is already becoming the key reference for all interested in doing business in the ICT field in Serbia.

Whether you are an investor or a scholar, a businessperson or a student – we hope that you will also find this study interesting and useful. We welcome your interest and look forward to seeing you in Serbia!

Milan Šolaja

Chief Executive Officer

Vojvodina ICT Cluster

milan.solaja@vojvodinaictcluster.org

+381 21 21 00 306

3

2

TABLE OF CONTENTS

FOREWORD ....................................................................................................................................... 3

INTRODUCTION ................................................................................................................................. 4

GENERAL BUSINESS ENVIRONMENT ................................................................................................... 5

ASSESSMENT OF THE SERBIAN ICT SECTOR ......................................................................................... 9

A. STATISTICAL OVERVIEW OF THE ICT SECTOR ...................................................................................9 IT Market Value and Structure .......................................................................................................9

IT Spending and Investments ...................................................................................................... 13

Overview of the Telecommunication Market ............................................................................. 17

IT Industry ................................................................................................................................... 20

IT and Internet Usage.................................................................................................................. 27

ICT Clusters and Support Organizations ..................................................................................... 29

B. EDUCATION AND HUMAN RESOURCE DEVELOPMENT ................................................................. 30 Overview of the ICT Labour Market ............................................................................................ 30

ICT and Tertiary Education .......................................................................................................... 31

C. RESEARCH AND DEVELOPMENT .................................................................................................... 36 Current Situation Regarding R&D in Serbia - in General and ICT Related .................................. 36

EU Support Dimension ................................................................................................................ 43

OUTSOURCING – Opportunities and Barriers for Serbian IT Companies on International Markets ...... 46

CURRENT SITUATION, TRENDS AND POTENTIALS ............................................................................. 48

APPENDIX ....................................................................................................................................... 52

Terminology ................................................................................................................................ 52

Abbreviations .............................................................................................................................. 55

References and Key ICT Publications .......................................................................................... 57

List of Tables ............................................................................................................................... 60

List of Figures .............................................................................................................................. 60

2

TABLE OF CONTENTS

FOREWORD ....................................................................................................................................... 3

INTRODUCTION ................................................................................................................................. 4

GENERAL BUSINESS ENVIRONMENT ................................................................................................... 5

ASSESSMENT OF THE SERBIAN ICT SECTOR ......................................................................................... 9

A. STATISTICAL OVERVIEW OF THE ICT SECTOR ...................................................................................9 IT Market Value and Structure .......................................................................................................9

IT Spending and Investments ...................................................................................................... 13

Overview of the Telecommunication Market ............................................................................. 17

IT Industry ................................................................................................................................... 20

IT and Internet Usage.................................................................................................................. 27

ICT Clusters and Support Organizations ..................................................................................... 29

B. EDUCATION AND HUMAN RESOURCE DEVELOPMENT ................................................................. 30 Overview of the ICT Labour Market ............................................................................................ 30

ICT and Tertiary Education .......................................................................................................... 31

C. RESEARCH AND DEVELOPMENT .................................................................................................... 36 Current Situation Regarding R&D in Serbia - in General and ICT Related .................................. 36

EU Support Dimension ................................................................................................................ 43

OUTSOURCING – Opportunities and Barriers for Serbian IT Companies on International Markets ...... 46

CURRENT SITUATION, TRENDS AND POTENTIALS ............................................................................. 48

APPENDIX ....................................................................................................................................... 52

Terminology ................................................................................................................................ 52

Abbreviations .............................................................................................................................. 55

References and Key ICT Publications .......................................................................................... 57

List of Tables ............................................................................................................................... 60

List of Figures .............................................................................................................................. 60

3

FOREWORD

Soon after its inception in 2010, Vojvodina ICT Cluster has emerged as one of the strongest Serbian institutions in the field of ICT. Our strategic documents keep focus on long-term effects: Serbia as the place of choice for development of sophisticated software, Novi Sad as the hotbed of regional ICT, moving from pure outsourcing towards solution providing etc. Immediate focus, however, is distributed on several types of activities aligned together to help in achievement of those goals.

This entire process requires positioning of our organization and seeking cooperation with multitude of different stakeholders. Among them, German Organization for International Cooperation – GIZ, stands out as the partner who recognized our potentials and made the strategic decision to support and assist us on a long-term basis.

What you are reading now represents one of the results of this cooperation. The second edition of the study, ICT in Serbia – At a Glance, would have never seen the light of day without the engagement of GIZ, their consultants and the resources it committed to this project. ‘ICT in Serbia…’ is the only publication on the topic that comprises all relevant data in one place, saving a lot of time and research for those who want to learn more about the topic. Thus, it is already becoming the key reference for all interested in doing business in the ICT field in Serbia.

Whether you are an investor or a scholar, a businessperson or a student – we hope that you will also find this study interesting and useful. We welcome your interest and look forward to seeing you in Serbia!

Milan Šolaja

Chief Executive Officer

Vojvodina ICT Cluster

milan.solaja@vojvodinaictcluster.org

+381 21 21 00 306

3

4

INTRODUCTION Information and Communication Technologies (ICT) undoubtedly constitute one of the key innovations of the last century. ICT are composed of a wide range of products and service technologies including computer hardware, software and services and a host of telecommunication functions. ICT strongly influenced the fields of socio-economic development, international development and human rights. The basic hypothesis behind the approach is that more and better information and communication furthers development of a society (whether to improve income, education, health, security, or any other aspect of human development).

Various studies define the ICT sector differently. OECD defines ICT sector as a combination of manufacturing and service industries, whose products capture, transmit or display data and information electronically. In addition, “The production (goods and services) of a candidate industry must primarily be intended to fulfill or enable the function of information processing and communication by electronic means, including transmission and display” (OECD, 2007). This includes also production of electronic components.

In this report will be applied the traditional and simple definition of the ICT sector. According to this definition, the ICT sector comprises two sub-sectors: telecommunications and information technologies (IT). Furthermore, the IT sub-sector comprises three segments, which are hardware, software and services. The main reasons for choosing this definition are: whether a clear and simple review of the particular sub-sectors (IT and telecommunications) which still have not significantly converged in Serbia is possible, and finally, since it is the focus of this study, to enable presentation of IT sub-sectors (Hardware, IT Services, Software) characteristics. The chart below gives an overview of the segmentation described.

Tab l e 1 I CT Sec t o r De f i n i t i on

With a two-digit annual growth in the years prior to the crisis, ICT is among the most vibrant and the fastest growing sectors in Serbia, which illustrates this sector’s development potential. However, the economic crisis hit Serbia heavily, creating significant negative consequences to the ICT industry as well. In 2009 alone, the IT market in Serbia fell by 22.2%. Results from 2010 show that market value of €405 million, which equals a year-to-year drop of 5%. After two years of decrease, in 2011, Serbian IT sector shows all signs of stagnation.

This study presents an overview of the ICT sector in Serbia. The structure of this analysis consists of four thematic areas: General Business Environment, Assessment of the ICT Sector (Statistical overview of the Serbian ICT sector, Education and Human Recourses Development, Research and Development), SWOT and a review of the current situation, trends and potentials.

The study with its analyses and information was designed to serve primarily companies interested in business and investment related to the ICT in Serbia.

ICT Industry

Telecomunication Sector IT Sector

IT Hardware Software IT Services

Industry

Sector

Sub-sector

4 4

INTRODUCTION Information and Communication Technologies (ICT) undoubtedly constitute one of the key innovations of the last century. ICT are composed of a wide range of products and service technologies including computer hardware, software and services and a host of telecommunication functions. ICT strongly influenced the fields of socio-economic development, international development and human rights. The basic hypothesis behind the approach is that more and better information and communication furthers development of a society (whether to improve income, education, health, security, or any other aspect of human development).

Various studies define the ICT sector differently. OECD defines ICT sector as a combination of manufacturing and service industries, whose products capture, transmit or display data and information electronically. In addition, “The production (goods and services) of a candidate industry must primarily be intended to fulfill or enable the function of information processing and communication by electronic means, including transmission and display” (OECD, 2007). This includes also production of electronic components.

In this report will be applied the traditional and simple definition of the ICT sector. According to this definition, the ICT sector comprises two sub-sectors: telecommunications and information technologies (IT). Furthermore, the IT sub-sector comprises three segments, which are hardware, software and services. The main reasons for choosing this definition are: whether a clear and simple review of the particular sub-sectors (IT and telecommunications) which still have not significantly converged in Serbia is possible, and finally, since it is the focus of this study, to enable presentation of IT sub-sectors (Hardware, IT Services, Software) characteristics. The chart below gives an overview of the segmentation described.

Tab l e 1 I CT Sec t o r De f i n i t i on

With a two-digit annual growth in the years prior to the crisis, ICT is among the most vibrant and the fastest growing sectors in Serbia, which illustrates this sector’s development potential. However, the economic crisis hit Serbia heavily, creating significant negative consequences to the ICT industry as well. In 2009 alone, the IT market in Serbia fell by 22.2%. Results from 2010 show that market value of €405 million, which equals a year-to-year drop of 5%. After two years of decrease, in 2011, Serbian IT sector shows all signs of stagnation.

This study presents an overview of the ICT sector in Serbia. The structure of this analysis consists of four thematic areas: General Business Environment, Assessment of the ICT Sector (Statistical overview of the Serbian ICT sector, Education and Human Recourses Development, Research and Development), SWOT and a review of the current situation, trends and potentials.

The study with its analyses and information was designed to serve primarily companies interested in business and investment related to the ICT in Serbia.

5

GENERAL BUSINESS ENVIRONMENT This chapter provides the following information:

overview of current business environment in Serbia

legislation framework – in general, and ICT related

General Statistics

Population: 7.36 million Capital: Belgrade Territory area: 88,361 km2 GDP (absolute): €29.5 billion (per capita: €3,994) GDP - composition by sector: Manufacturing (18.3%); Real estate, renting and other business

services (16.4%); Wholesale, retail and repairs (12.8%); Agriculture, hunting, forestry and water works supply (11.2%); Transport, storage and communications (8,1%) and Others (33.1%)

Percentage of GDP spent on R&D: less than 0.8% (Government fund estimated on 0.5%) (EU10 average)

Percentage of GDP spent on Education: 2.4% Percentage of GDP spent on Healthcare: 3.5%

Current Business Environment in Serbia

Ten years after democratic change, the Serbian economy is still in transition, having a roller coaster ride between years of growth and recovery and economic stagnation. Although Serbian economy grew healthily in the period 2004-2007 with an average GDP growth rate of 6.8% (with peaks of 8.4% in 2004 and 7.5% in 2007), it reached only 70% of the country's 1990 GDP. In the period of on-going economic crisis, (2008-2011) the Serbian economy has been mostly stagnating. According to World Bank estimates, even with solid annual GDP growth, it will take many years before Serbian GDP reaches the previous solid level.

To overcome this situation, economic development policies in Serbia mainly focus on the attraction of FDIs. However, since achieving a maximum in 2005 with $5.47 billion USD, a dramatic reduction of FDI inflows becomes apparent. The main reasons are slow process of joining the EU and the global financial crisis. Among key reasons for not having more FDI in Serbia are bureaucratic and insufficiently reformed public administration and high level of corruption.

Serbia has a problem with macroeconomic stability. The inflation rate is above 10% and unemployment is above 18%. Based on the Global Competitiveness Index (GCI) for 2010-2011, Serbia is placed 96th 14

(among the 139 economies), behind almost all European countries. This position of Serbia could discourage foreign investors. However, such a bad Serbian position should not cause concern that much since the reasons for it are mainly found in presentation of the weak qualitative indicators (source: Forum’s executive opinion survey) instead of quantitative ones (marked with * in Table 2, source: data from international organization and national sources).

Significant discrepancies between qualitative and quantitative indicators highlight the criticism expressed by the surveyed, which could be perceived as a positive point, since the respondents wish the situation to be improved, but could also lead to wrong general conclusions.

5

4

INTRODUCTION Information and Communication Technologies (ICT) undoubtedly constitute one of the key innovations of the last century. ICT are composed of a wide range of products and service technologies including computer hardware, software and services and a host of telecommunication functions. ICT strongly influenced the fields of socio-economic development, international development and human rights. The basic hypothesis behind the approach is that more and better information and communication furthers development of a society (whether to improve income, education, health, security, or any other aspect of human development).

Various studies define the ICT sector differently. OECD defines ICT sector as a combination of manufacturing and service industries, whose products capture, transmit or display data and information electronically. In addition, “The production (goods and services) of a candidate industry must primarily be intended to fulfill or enable the function of information processing and communication by electronic means, including transmission and display” (OECD, 2007). This includes also production of electronic components.

In this report will be applied the traditional and simple definition of the ICT sector. According to this definition, the ICT sector comprises two sub-sectors: telecommunications and information technologies (IT). Furthermore, the IT sub-sector comprises three segments, which are hardware, software and services. The main reasons for choosing this definition are: whether a clear and simple review of the particular sub-sectors (IT and telecommunications) which still have not significantly converged in Serbia is possible, and finally, since it is the focus of this study, to enable presentation of IT sub-sectors (Hardware, IT Services, Software) characteristics. The chart below gives an overview of the segmentation described.

Tab l e 1 I CT Sec t o r De f i n i t i on

With a two-digit annual growth in the years prior to the crisis, ICT is among the most vibrant and the fastest growing sectors in Serbia, which illustrates this sector’s development potential. However, the economic crisis hit Serbia heavily, creating significant negative consequences to the ICT industry as well. In 2009 alone, the IT market in Serbia fell by 22.2%. Results from 2010 show that market value of €405 million, which equals a year-to-year drop of 5%. After two years of decrease, in 2011, Serbian IT sector shows all signs of stagnation.

This study presents an overview of the ICT sector in Serbia. The structure of this analysis consists of four thematic areas: General Business Environment, Assessment of the ICT Sector (Statistical overview of the Serbian ICT sector, Education and Human Recourses Development, Research and Development), SWOT and a review of the current situation, trends and potentials.

The study with its analyses and information was designed to serve primarily companies interested in business and investment related to the ICT in Serbia.

ICT Industry

Telecomunication Sector IT Sector

IT Hardware Software IT Services

Industry

Sector

Sub-sector

4 4

INTRODUCTION Information and Communication Technologies (ICT) undoubtedly constitute one of the key innovations of the last century. ICT are composed of a wide range of products and service technologies including computer hardware, software and services and a host of telecommunication functions. ICT strongly influenced the fields of socio-economic development, international development and human rights. The basic hypothesis behind the approach is that more and better information and communication furthers development of a society (whether to improve income, education, health, security, or any other aspect of human development).

Various studies define the ICT sector differently. OECD defines ICT sector as a combination of manufacturing and service industries, whose products capture, transmit or display data and information electronically. In addition, “The production (goods and services) of a candidate industry must primarily be intended to fulfill or enable the function of information processing and communication by electronic means, including transmission and display” (OECD, 2007). This includes also production of electronic components.

In this report will be applied the traditional and simple definition of the ICT sector. According to this definition, the ICT sector comprises two sub-sectors: telecommunications and information technologies (IT). Furthermore, the IT sub-sector comprises three segments, which are hardware, software and services. The main reasons for choosing this definition are: whether a clear and simple review of the particular sub-sectors (IT and telecommunications) which still have not significantly converged in Serbia is possible, and finally, since it is the focus of this study, to enable presentation of IT sub-sectors (Hardware, IT Services, Software) characteristics. The chart below gives an overview of the segmentation described.

Tab l e 1 I CT Sec t o r De f i n i t i on

With a two-digit annual growth in the years prior to the crisis, ICT is among the most vibrant and the fastest growing sectors in Serbia, which illustrates this sector’s development potential. However, the economic crisis hit Serbia heavily, creating significant negative consequences to the ICT industry as well. In 2009 alone, the IT market in Serbia fell by 22.2%. Results from 2010 show that market value of €405 million, which equals a year-to-year drop of 5%. After two years of decrease, in 2011, Serbian IT sector shows all signs of stagnation.

This study presents an overview of the ICT sector in Serbia. The structure of this analysis consists of four thematic areas: General Business Environment, Assessment of the ICT Sector (Statistical overview of the Serbian ICT sector, Education and Human Recourses Development, Research and Development), SWOT and a review of the current situation, trends and potentials.

The study with its analyses and information was designed to serve primarily companies interested in business and investment related to the ICT in Serbia.

5

GENERAL BUSINESS ENVIRONMENT This chapter provides the following information:

overview of current business environment in Serbia

legislation framework – in general, and ICT related

General Statistics

Population: 7.36 million Capital: Belgrade Territory area: 88,361 km2 GDP (absolute): €29.5 billion (per capita: €3,994) GDP - composition by sector: Manufacturing (18.3%); Real estate, renting and other business

services (16.4%); Wholesale, retail and repairs (12.8%); Agriculture, hunting, forestry and water works supply (11.2%); Transport, storage and communications (8,1%) and Others (33.1%)

Percentage of GDP spent on R&D: less than 0.8% (Government fund estimated on 0.5%) (EU10 average)

Percentage of GDP spent on Education: 2.4% Percentage of GDP spent on Healthcare: 3.5%

Current Business Environment in Serbia

Ten years after democratic change, the Serbian economy is still in transition, having a roller coaster ride between years of growth and recovery and economic stagnation. Although Serbian economy grew healthily in the period 2004-2007 with an average GDP growth rate of 6.8% (with peaks of 8.4% in 2004 and 7.5% in 2007), it reached only 70% of the country's 1990 GDP. In the period of on-going economic crisis, (2008-2011) the Serbian economy has been mostly stagnating. According to World Bank estimates, even with solid annual GDP growth, it will take many years before Serbian GDP reaches the previous solid level.

To overcome this situation, economic development policies in Serbia mainly focus on the attraction of FDIs. However, since achieving a maximum in 2005 with $5.47 billion USD, a dramatic reduction of FDI inflows becomes apparent. The main reasons are slow process of joining the EU and the global financial crisis. Among key reasons for not having more FDI in Serbia are bureaucratic and insufficiently reformed public administration and high level of corruption.

Serbia has a problem with macroeconomic stability. The inflation rate is above 10% and unemployment is above 18%. Based on the Global Competitiveness Index (GCI) for 2010-2011, Serbia is placed 96th 14

(among the 139 economies), behind almost all European countries. This position of Serbia could discourage foreign investors. However, such a bad Serbian position should not cause concern that much since the reasons for it are mainly found in presentation of the weak qualitative indicators (source: Forum’s executive opinion survey) instead of quantitative ones (marked with * in Table 2, source: data from international organization and national sources).

Significant discrepancies between qualitative and quantitative indicators highlight the criticism expressed by the surveyed, which could be perceived as a positive point, since the respondents wish the situation to be improved, but could also lead to wrong general conclusions.

5

6

Tab l e 2 D i s c r epanc i e s be tween Qua l i t a t i v e and Q uan t i t a t i v e GC I I nd i c a t o r s s e l e c t i on

1st pillar: Institutions Rank/139 1.01 Property rights 122 1.02 Intellectual property protection 111 1.21 Strength of investor protection* 59*

2nd pillar: Infrastructure 2.01 Quality of overall infrastructure 122 2.08 Fixed telephone lines* 41* 2.09 Mobile telephone subscriptions* 57*

5th pillar: Tertiary education and training 5.02 Tertiary education enrolment rate* 49* 5.08 Extent of staff training 130

6th pillar: Goods market efficiency 6.02 Extent of market dominance 138 6.04 Extent and effect of taxation 120 6.05 Total tax rate* 46* 6.07 Time required to start a business* 45*

7th pillar: Labor market efficiency Rank/139 7.01 Cooperation in labor-employer relations 135 7.05 Redundancy costs* 47* 7.07 Reliance on professional management 128 7.09 Female participation in labour force* 59*

8th pillar: Financial market development 8.01 Availability of financial services 111 8.07 Soundness of banks 115 8.09 Legal rights index* 20*

9th pillar: Technological readiness 9.01 Availability of latest technologies 117 9.02 Firm-level technology absorption 134 9.04 Internet users* 54* 9.06 Internet bandwidth* 30*

Source: WEF, Global Competitiveness Index (GCI) for 2010-2011

As a measure for reducing the negative impact of the current economic crisis, the Government has increased a package for foreign companies interested in setting-up their businesses in Serbia. Besides having one of the lowest corporate tax rates in Europe (10%), the Serbian Government is giving non-refundable grants reaching up to €10,000 per employee. Recently, these measures have also become available to Serbian companies capable of investment in new factories.

IT Environment, Drivers and Barriers

Tab l e 3 Key P a r ame te r s f o r t he Se rb i an I T M a r ke t F o r e c a s t , i n Q4 -2011

Economic and Political Factors Factor Power

Factor Value (Intensity)

Modest growth in gross domestic product. Projected real growth of around 2% in 2011.

3 25 50 75

Investments. The slowdown in foreign direct investments. 2 25 50 75

Exchange rate. Stable Euro-RSD exchange rate (around psychological boundaries of 100)

2 25 50 75

Accession to EU. The slowdown in the accession process. 1 25 50

IT economy. The need for IT investment (yearly growth of at least 20% until 2015). 1 25 50

Consumers

Companies without a serious profit, postpone their investments and IT investments 2 25 50

Governance and budget institutions may initiate several major tenders before the end of the year

1 25 50 75

IT replacement cycle. Annual delivery of more than 350,000 PC 2 25 50

IT Market

Company competitiveness decrease. SME IT players in escalating problems. 2 25 50 75

Financing options (loans, leasing...) for investments getting weaker 1 25 50

Source: Mineco 2011

Legend: Factor Power 3 – very strong factor; 2 – strong factor; 1 – moderate factor Examples for Factor Value: 25 50 75 Indicates a barrier for IT sales, which reached 75% of the maximum 100 % intensity

25 50 Indicates a driver for IT sales, which reached 50% of the maximum 100% intensity

1st pillar: Institutions Rank/1391.01 Property rights 1221.02 Intellectual property protection 1111.21 Strength of investor protection* 59*

2nd pillar: Infrastructure2.01 Quality of overall infrastructure 1222.08 Fixed telephone lines* 41*2.09 Mobile telephone subscriptions* 57*

5th pillar: Higher education and training

5.02 Tertiary education enrolment rate* 49*5.08 Extent of staff training 130

6th pillar: Goods market efficiency

6.02 Extent of market dominance 1386.04 Extent and effect of taxation 1206.05 Total tax rate* 46*6.07 Time required to start a business* 45*

7th pillar: Labour market efficiency Rank/1397.01 Cooperation in labor-employer relations

1357.05 Redundancy costs* 47*7.07 Reliance on professional management

1287.09 Female participation in labour force* 59*

8th pillar: Financial market development

8.01 Availability of financial services 1118.07 Soundness of banks 1158.09 Legal rights index* 20*

9th pillar: Technological readiness9.01 Availability of latest technologies 1179.02 Firm-level technology absorption 1349.04 Internet users* 54*9.06 Internet bandwidth* 30*

6 6

Tab l e 2 D i s c r epanc i e s be tween Qua l i t a t i v e and Q uan t i t a t i v e GC I I nd i c a t o r s s e l e c t i on

1st pillar: Institutions Rank/139 1.01 Property rights 122 1.02 Intellectual property protection 111 1.21 Strength of investor protection* 59*

2nd pillar: Infrastructure 2.01 Quality of overall infrastructure 122 2.08 Fixed telephone lines* 41* 2.09 Mobile telephone subscriptions* 57*

5th pillar: Tertiary education and training 5.02 Tertiary education enrolment rate* 49* 5.08 Extent of staff training 130

6th pillar: Goods market efficiency 6.02 Extent of market dominance 138 6.04 Extent and effect of taxation 120 6.05 Total tax rate* 46* 6.07 Time required to start a business* 45*

7th pillar: Labor market efficiency Rank/139 7.01 Cooperation in labor-employer relations 135 7.05 Redundancy costs* 47* 7.07 Reliance on professional management 128 7.09 Female participation in labour force* 59*

8th pillar: Financial market development 8.01 Availability of financial services 111 8.07 Soundness of banks 115 8.09 Legal rights index* 20*

9th pillar: Technological readiness 9.01 Availability of latest technologies 117 9.02 Firm-level technology absorption 134 9.04 Internet users* 54* 9.06 Internet bandwidth* 30*

Source: WEF, Global Competitiveness Index (GCI) for 2010-2011

As a measure for reducing the negative impact of the current economic crisis, the Government has increased a package for foreign companies interested in setting-up their businesses in Serbia. Besides having one of the lowest corporate tax rates in Europe (10%), the Serbian Government is giving non-refundable grants reaching up to €10,000 per employee. Recently, these measures have also become available to Serbian companies capable of investment in new factories.

IT Environment, Drivers and Barriers

Tab l e 3 Key P a r ame te r s f o r t he Se rb i an I T M a r ke t F o r e c a s t , i n Q4 -2011

Economic and Political Factors Factor Power

Factor Value (Intensity)

Modest growth in gross domestic product. Projected real growth of around 2% in 2011.

3 25 50 75

Investments. The slowdown in foreign direct investments. 2 25 50 75

Exchange rate. Stable Euro-RSD exchange rate (around psychological boundaries of 100)

2 25 50 75

Accession to EU. The slowdown in the accession process. 1 25 50

IT economy. The need for IT investment (yearly growth of at least 20% until 2015). 1 25 50

Consumers

Companies without a serious profit, postpone their investments and IT investments 2 25 50

Governance and budget institutions may initiate several major tenders before the end of the year

1 25 50 75

IT replacement cycle. Annual delivery of more than 350,000 PC 2 25 50

IT Market

Company competitiveness decrease. SME IT players in escalating problems. 2 25 50 75

Financing options (loans, leasing...) for investments getting weaker 1 25 50

Source: Mineco 2011

Legend: Factor Power 3 – very strong factor; 2 – strong factor; 1 – moderate factor Examples for Factor Value: 25 50 75 Indicates a barrier for IT sales, which reached 75% of the maximum 100 % intensity

25 50 Indicates a driver for IT sales, which reached 50% of the maximum 100% intensity

7

From the perspective of local companies operating in ICT sector, FDIs perception turns out to be more of a threat than benefit, due to the limited human resources available on the market. Namely, foreign companies tend to attract good ICT experts with higher salaries, often putting national companies in the situation where they cannot compete.

Although the quality of Serbian ICT infrastructure is not at the level of EU countries, it is getting better each year. Quality of the ICT infrastructure has improved impressively during the past few years. In addition, the quality of ICT infrastructure does not present a significant obstacle for doing business in Serbia since most of the ICT companies are concentrated in Belgrade, Novi Sad and to some extent Nis, where the quality of ICT infrastructure is much better than in other parts of the country.

A general conclusion is that the demand from foreign partners importing from Serbia appears to drive the standardization of Serbian companies. Requirements for standardization also relate to the nature of the produced goods. For instance, embedded industry produces innovative goods in the field of medical appliances, which requires sector-related standards.

Legislation Framework

Doing business in the ICT field in Serbia is not easy. Although legislation has impressively improved in the recent years, remaining obstacles are still numerous. Due to out-dated regulations and bureaucracy, business operations in Serbia are still expensive.

Conduct of business in telecommunications received better regulation than in the IT sector. In 2009, there was a harmonization of the new Law on Electronic Communication with the EU Regulatory Framework from 2002. Due to its size, the telecommunications sector has attracted some of the major multinational companies in that sphere (such as Telenor and VIP in terms of mobile phone providers). However, state-owned Telekom Srbija remains the major provider of public voice telephony services.

The Republic Telecommunications Agency (RATEL), an autonomous national regulatory authority, regulates the telecommunication sector. RATEL developed into a strong agency with a strong reputation, among all actors in the sector. Since 2006, RATEL publishes an annual overview of the telecom market in Serbia, which presents a good source of information in this field.

However, doing business in the IT sector has far more difficulties, mostly due to its small size, segregated/fragmented industry, lack of specialization, small turnover and many other issues, which mostly come from inconsistent appliance of regulations. Most misunderstandings relate to VAT and custom regulations.

The old regulations, which cannot adequately resolve the IT sector issues, bring about uncertainties. Export of software has also not seen proper regulation since it is not yet clear whether the export of software is considered as export of goods or export of services (there is a significant difference in the tax base). All companies that calculate export of software as a service have to pay a significant tax penalty. Expectations are that the new regulation will be in line with best EU practices.

The ICT sector also faces common business difficulties in Serbia. Difficulties in obtaining necessary state licenses (especially construction licenses), long trials at court and insufficiently transparent public procurement are only some of the numerous obstacles that cause harm to the business sector in Serbia.

7

6

Tab l e 2 D i s c r epanc i e s be tween Qua l i t a t i v e and Q uan t i t a t i v e GC I I nd i c a t o r s s e l e c t i on

1st pillar: Institutions Rank/139 1.01 Property rights 122 1.02 Intellectual property protection 111 1.21 Strength of investor protection* 59*

2nd pillar: Infrastructure 2.01 Quality of overall infrastructure 122 2.08 Fixed telephone lines* 41* 2.09 Mobile telephone subscriptions* 57*

5th pillar: Tertiary education and training 5.02 Tertiary education enrolment rate* 49* 5.08 Extent of staff training 130

6th pillar: Goods market efficiency 6.02 Extent of market dominance 138 6.04 Extent and effect of taxation 120 6.05 Total tax rate* 46* 6.07 Time required to start a business* 45*

7th pillar: Labor market efficiency Rank/139 7.01 Cooperation in labor-employer relations 135 7.05 Redundancy costs* 47* 7.07 Reliance on professional management 128 7.09 Female participation in labour force* 59*

8th pillar: Financial market development 8.01 Availability of financial services 111 8.07 Soundness of banks 115 8.09 Legal rights index* 20*

9th pillar: Technological readiness 9.01 Availability of latest technologies 117 9.02 Firm-level technology absorption 134 9.04 Internet users* 54* 9.06 Internet bandwidth* 30*

Source: WEF, Global Competitiveness Index (GCI) for 2010-2011

As a measure for reducing the negative impact of the current economic crisis, the Government has increased a package for foreign companies interested in setting-up their businesses in Serbia. Besides having one of the lowest corporate tax rates in Europe (10%), the Serbian Government is giving non-refundable grants reaching up to €10,000 per employee. Recently, these measures have also become available to Serbian companies capable of investment in new factories.

IT Environment, Drivers and Barriers

Tab l e 3 Key P a r ame te r s f o r t he Se rb i an I T M a r ke t F o r e c a s t , i n Q4 -2011

Economic and Political Factors Factor Power

Factor Value (Intensity)

Modest growth in gross domestic product. Projected real growth of around 2% in 2011.

3 25 50 75

Investments. The slowdown in foreign direct investments. 2 25 50 75

Exchange rate. Stable Euro-RSD exchange rate (around psychological boundaries of 100)

2 25 50 75

Accession to EU. The slowdown in the accession process. 1 25 50

IT economy. The need for IT investment (yearly growth of at least 20% until 2015). 1 25 50

Consumers

Companies without a serious profit, postpone their investments and IT investments 2 25 50

Governance and budget institutions may initiate several major tenders before the end of the year

1 25 50 75

IT replacement cycle. Annual delivery of more than 350,000 PC 2 25 50

IT Market

Company competitiveness decrease. SME IT players in escalating problems. 2 25 50 75

Financing options (loans, leasing...) for investments getting weaker 1 25 50

Source: Mineco 2011

Legend: Factor Power 3 – very strong factor; 2 – strong factor; 1 – moderate factor Examples for Factor Value: 25 50 75 Indicates a barrier for IT sales, which reached 75% of the maximum 100 % intensity

25 50 Indicates a driver for IT sales, which reached 50% of the maximum 100% intensity

1st pillar: Institutions Rank/1391.01 Property rights 1221.02 Intellectual property protection 1111.21 Strength of investor protection* 59*

2nd pillar: Infrastructure2.01 Quality of overall infrastructure 1222.08 Fixed telephone lines* 41*2.09 Mobile telephone subscriptions* 57*

5th pillar: Higher education and training

5.02 Tertiary education enrolment rate* 49*5.08 Extent of staff training 130

6th pillar: Goods market efficiency

6.02 Extent of market dominance 1386.04 Extent and effect of taxation 1206.05 Total tax rate* 46*6.07 Time required to start a business* 45*

7th pillar: Labour market efficiency Rank/1397.01 Cooperation in labor-employer relations

1357.05 Redundancy costs* 47*7.07 Reliance on professional management

1287.09 Female participation in labour force* 59*

8th pillar: Financial market development

8.01 Availability of financial services 1118.07 Soundness of banks 1158.09 Legal rights index* 20*

9th pillar: Technological readiness9.01 Availability of latest technologies 1179.02 Firm-level technology absorption 1349.04 Internet users* 54*9.06 Internet bandwidth* 30*

6 6

Tab l e 2 D i s c r epanc i e s be tween Qua l i t a t i v e and Q uan t i t a t i v e GC I I nd i c a t o r s s e l e c t i on

1st pillar: Institutions Rank/139 1.01 Property rights 122 1.02 Intellectual property protection 111 1.21 Strength of investor protection* 59*

2nd pillar: Infrastructure 2.01 Quality of overall infrastructure 122 2.08 Fixed telephone lines* 41* 2.09 Mobile telephone subscriptions* 57*

5th pillar: Tertiary education and training 5.02 Tertiary education enrolment rate* 49* 5.08 Extent of staff training 130

6th pillar: Goods market efficiency 6.02 Extent of market dominance 138 6.04 Extent and effect of taxation 120 6.05 Total tax rate* 46* 6.07 Time required to start a business* 45*

7th pillar: Labor market efficiency Rank/139 7.01 Cooperation in labor-employer relations 135 7.05 Redundancy costs* 47* 7.07 Reliance on professional management 128 7.09 Female participation in labour force* 59*

8th pillar: Financial market development 8.01 Availability of financial services 111 8.07 Soundness of banks 115 8.09 Legal rights index* 20*

9th pillar: Technological readiness 9.01 Availability of latest technologies 117 9.02 Firm-level technology absorption 134 9.04 Internet users* 54* 9.06 Internet bandwidth* 30*

Source: WEF, Global Competitiveness Index (GCI) for 2010-2011

As a measure for reducing the negative impact of the current economic crisis, the Government has increased a package for foreign companies interested in setting-up their businesses in Serbia. Besides having one of the lowest corporate tax rates in Europe (10%), the Serbian Government is giving non-refundable grants reaching up to €10,000 per employee. Recently, these measures have also become available to Serbian companies capable of investment in new factories.

IT Environment, Drivers and Barriers

Tab l e 3 Key P a r ame te r s f o r t he Se rb i an I T M a r ke t F o r e c a s t , i n Q4 -2011

Economic and Political Factors Factor Power

Factor Value (Intensity)

Modest growth in gross domestic product. Projected real growth of around 2% in 2011.

3 25 50 75

Investments. The slowdown in foreign direct investments. 2 25 50 75

Exchange rate. Stable Euro-RSD exchange rate (around psychological boundaries of 100)

2 25 50 75

Accession to EU. The slowdown in the accession process. 1 25 50

IT economy. The need for IT investment (yearly growth of at least 20% until 2015). 1 25 50

Consumers

Companies without a serious profit, postpone their investments and IT investments 2 25 50

Governance and budget institutions may initiate several major tenders before the end of the year

1 25 50 75

IT replacement cycle. Annual delivery of more than 350,000 PC 2 25 50

IT Market

Company competitiveness decrease. SME IT players in escalating problems. 2 25 50 75

Financing options (loans, leasing...) for investments getting weaker 1 25 50

Source: Mineco 2011

Legend: Factor Power 3 – very strong factor; 2 – strong factor; 1 – moderate factor Examples for Factor Value: 25 50 75 Indicates a barrier for IT sales, which reached 75% of the maximum 100 % intensity

25 50 Indicates a driver for IT sales, which reached 50% of the maximum 100% intensity

7

From the perspective of local companies operating in ICT sector, FDIs perception turns out to be more of a threat than benefit, due to the limited human resources available on the market. Namely, foreign companies tend to attract good ICT experts with higher salaries, often putting national companies in the situation where they cannot compete.

Although the quality of Serbian ICT infrastructure is not at the level of EU countries, it is getting better each year. Quality of the ICT infrastructure has improved impressively during the past few years. In addition, the quality of ICT infrastructure does not present a significant obstacle for doing business in Serbia since most of the ICT companies are concentrated in Belgrade, Novi Sad and to some extent Nis, where the quality of ICT infrastructure is much better than in other parts of the country.

A general conclusion is that the demand from foreign partners importing from Serbia appears to drive the standardization of Serbian companies. Requirements for standardization also relate to the nature of the produced goods. For instance, embedded industry produces innovative goods in the field of medical appliances, which requires sector-related standards.

Legislation Framework

Doing business in the ICT field in Serbia is not easy. Although legislation has impressively improved in the recent years, remaining obstacles are still numerous. Due to out-dated regulations and bureaucracy, business operations in Serbia are still expensive.

Conduct of business in telecommunications received better regulation than in the IT sector. In 2009, there was a harmonization of the new Law on Electronic Communication with the EU Regulatory Framework from 2002. Due to its size, the telecommunications sector has attracted some of the major multinational companies in that sphere (such as Telenor and VIP in terms of mobile phone providers). However, state-owned Telekom Srbija remains the major provider of public voice telephony services.

The Republic Telecommunications Agency (RATEL), an autonomous national regulatory authority, regulates the telecommunication sector. RATEL developed into a strong agency with a strong reputation, among all actors in the sector. Since 2006, RATEL publishes an annual overview of the telecom market in Serbia, which presents a good source of information in this field.

However, doing business in the IT sector has far more difficulties, mostly due to its small size, segregated/fragmented industry, lack of specialization, small turnover and many other issues, which mostly come from inconsistent appliance of regulations. Most misunderstandings relate to VAT and custom regulations.

The old regulations, which cannot adequately resolve the IT sector issues, bring about uncertainties. Export of software has also not seen proper regulation since it is not yet clear whether the export of software is considered as export of goods or export of services (there is a significant difference in the tax base). All companies that calculate export of software as a service have to pay a significant tax penalty. Expectations are that the new regulation will be in line with best EU practices.

The ICT sector also faces common business difficulties in Serbia. Difficulties in obtaining necessary state licenses (especially construction licenses), long trials at court and insufficiently transparent public procurement are only some of the numerous obstacles that cause harm to the business sector in Serbia.

7

8

Finance (Demand and Supply)

The expensive credit market in Serbia presents an obstacle for a company dealing with wholesale of IT hardware and software. However, due to the small scale of the ICT sector in Serbia, especially its IT part, this obstacle is not so significant for those companies that are focusing primarily on outsourcing. On the other hand, for companies trying to increase the level or their operations obtaining the needed capital this does present an issue. Developing, patenting and marketing of own products take not just the time but also the capital that Serbian IT companies are lacking. At this moment, there is no seed or early stage capital available and there are almost no venture capital funds active in this market (especially focused on SMEs).

That is why instead of developing products IT companies are focusing on outsourcing projects (which do not generate any IP/patent relevant knowledge or directly marketable product) and only the time left between outsourcing contracts is used for work on their own products which is hardly sufficient. Outsourcing is not an option of choice or following a well-defined strategy and business model but rather a mechanism and necessity for pure survival. It is also symptomatic that clients looking for a Serbian company to do outsourcing do not ask for a specific reference list from a company. Instead, they ask for CVs of all personnel and select the programmers on their own, which is also kind of a constraint for a company to build its image and profile as well as its field(s) of expertise.

Serbian companies aiming to develop their own product are in need of additional capital on all levels of the business cycle: from patenting the product, through market entry and finely maintaining the stability of the company:

It takes about 5-7 years, sufficient funds provided, to prepare a company for IPO.

Work on development of a new product requires about 20 people/programmers.

Companies such as DMS and Typhoon are already successful examples of Serbian companies developing and internationalizing their own products.

8 8

Finance (Demand and Supply)

The expensive credit market in Serbia presents an obstacle for a company dealing with wholesale of IT hardware and software. However, due to the small scale of the ICT sector in Serbia, especially its IT part, this obstacle is not so significant for those companies that are focusing primarily on outsourcing. On the other hand, for companies trying to increase the level or their operations obtaining the needed capital this does present an issue. Developing, patenting and marketing of own products take not just the time but also the capital that Serbian IT companies are lacking. At this moment, there is no seed or early stage capital available and there are almost no venture capital funds active in this market (especially focused on SMEs).

That is why instead of developing products IT companies are focusing on outsourcing projects (which do not generate any IP/patent relevant knowledge or directly marketable product) and only the time left between outsourcing contracts is used for work on their own products which is hardly sufficient. Outsourcing is not an option of choice or following a well-defined strategy and business model but rather a mechanism and necessity for pure survival. It is also symptomatic that clients looking for a Serbian company to do outsourcing do not ask for a specific reference list from a company. Instead, they ask for CVs of all personnel and select the programmers on their own, which is also kind of a constraint for a company to build its image and profile as well as its field(s) of expertise.

Serbian companies aiming to develop their own product are in need of additional capital on all levels of the business cycle: from patenting the product, through market entry and finely maintaining the stability of the company:

It takes about 5-7 years, sufficient funds provided, to prepare a company for IPO.

Work on development of a new product requires about 20 people/programmers.

Companies such as DMS and Typhoon are already successful examples of Serbian companies developing and internationalizing their own products.

9

ASSESSMENT OF THE SERBIAN ICT SECTOR

A. STATISTICAL OVERVIEW OF THE ICT SECTOR

This chapter provides basic information needed for an insight into the Serbian ICT sector, such as:

Market value

Market structure

Geographical market dispersion

Number of companies, employees, income/turnover in Serbian ICT industry

IT spending and investment in Serbia

Usage of IT by households and business in Serbia

IT Market Value and Structure After two years of decrease, in 2011, Serbian IT sector shows all signs of stagnation. Results from 2010 show that market value was €405 million, which is a year-to-year drop of 5%. In comparison with the year 2008, where market value reached its record of €545 million, IT sector shrank for one quarter! The structure of investments in this area remains the same: IT hardware dominates with 63% share, followed by IT services with 25% and software with remaining 12%. According to the European standards, this structure visibly illustrates the modest situation on the market that is still in the early stages of IT maturity.

Tab l e 4 Se rb i an I T Ma r ke t Va l ue i n 2 010 and T r ends f o r 2011 -2012 [€ mi l l i on ]

IT MARKET 2010 2011 2012

IT SERVICES - TOTAL 99,4 107,6 120,5

IT services 99,4 107,6 120,5

SOFTWARE – TOTAL 48,7 51,6 58,8

System software 22,3 24,1 27,0

Application software 26,4 27,5 31,8

IT HARDWARE - TOTAL 255,7 272,3 300,0

Server and Storage Systems 27,4 30,9 33,2

Personal computers 156,7 164,4 178,9

Peripherals 41,4 44,7 52,0

Networking equipment 30,2 32,3 36,0

TOTAL 403,8 431,5 479,4 Source: Mineco 2011

9

8

Finance (Demand and Supply)

The expensive credit market in Serbia presents an obstacle for a company dealing with wholesale of IT hardware and software. However, due to the small scale of the ICT sector in Serbia, especially its IT part, this obstacle is not so significant for those companies that are focusing primarily on outsourcing. On the other hand, for companies trying to increase the level or their operations obtaining the needed capital this does present an issue. Developing, patenting and marketing of own products take not just the time but also the capital that Serbian IT companies are lacking. At this moment, there is no seed or early stage capital available and there are almost no venture capital funds active in this market (especially focused on SMEs).

That is why instead of developing products IT companies are focusing on outsourcing projects (which do not generate any IP/patent relevant knowledge or directly marketable product) and only the time left between outsourcing contracts is used for work on their own products which is hardly sufficient. Outsourcing is not an option of choice or following a well-defined strategy and business model but rather a mechanism and necessity for pure survival. It is also symptomatic that clients looking for a Serbian company to do outsourcing do not ask for a specific reference list from a company. Instead, they ask for CVs of all personnel and select the programmers on their own, which is also kind of a constraint for a company to build its image and profile as well as its field(s) of expertise.

Serbian companies aiming to develop their own product are in need of additional capital on all levels of the business cycle: from patenting the product, through market entry and finely maintaining the stability of the company:

It takes about 5-7 years, sufficient funds provided, to prepare a company for IPO.

Work on development of a new product requires about 20 people/programmers.

Companies such as DMS and Typhoon are already successful examples of Serbian companies developing and internationalizing their own products.

8 8

Finance (Demand and Supply)

The expensive credit market in Serbia presents an obstacle for a company dealing with wholesale of IT hardware and software. However, due to the small scale of the ICT sector in Serbia, especially its IT part, this obstacle is not so significant for those companies that are focusing primarily on outsourcing. On the other hand, for companies trying to increase the level or their operations obtaining the needed capital this does present an issue. Developing, patenting and marketing of own products take not just the time but also the capital that Serbian IT companies are lacking. At this moment, there is no seed or early stage capital available and there are almost no venture capital funds active in this market (especially focused on SMEs).

That is why instead of developing products IT companies are focusing on outsourcing projects (which do not generate any IP/patent relevant knowledge or directly marketable product) and only the time left between outsourcing contracts is used for work on their own products which is hardly sufficient. Outsourcing is not an option of choice or following a well-defined strategy and business model but rather a mechanism and necessity for pure survival. It is also symptomatic that clients looking for a Serbian company to do outsourcing do not ask for a specific reference list from a company. Instead, they ask for CVs of all personnel and select the programmers on their own, which is also kind of a constraint for a company to build its image and profile as well as its field(s) of expertise.

Serbian companies aiming to develop their own product are in need of additional capital on all levels of the business cycle: from patenting the product, through market entry and finely maintaining the stability of the company:

It takes about 5-7 years, sufficient funds provided, to prepare a company for IPO.

Work on development of a new product requires about 20 people/programmers.

Companies such as DMS and Typhoon are already successful examples of Serbian companies developing and internationalizing their own products.

9

ASSESSMENT OF THE SERBIAN ICT SECTOR

A. STATISTICAL OVERVIEW OF THE ICT SECTOR

This chapter provides basic information needed for an insight into the Serbian ICT sector, such as:

Market value

Market structure

Geographical market dispersion

Number of companies, employees, income/turnover in Serbian ICT industry

IT spending and investment in Serbia

Usage of IT by households and business in Serbia

IT Market Value and Structure After two years of decrease, in 2011, Serbian IT sector shows all signs of stagnation. Results from 2010 show that market value was €405 million, which is a year-to-year drop of 5%. In comparison with the year 2008, where market value reached its record of €545 million, IT sector shrank for one quarter! The structure of investments in this area remains the same: IT hardware dominates with 63% share, followed by IT services with 25% and software with remaining 12%. According to the European standards, this structure visibly illustrates the modest situation on the market that is still in the early stages of IT maturity.

Tab l e 4 Se rb i an I T Ma r ke t Va l ue i n 2 010 and T r ends f o r 2011 -2012 [€ mi l l i on ]

IT MARKET 2010 2011 2012

IT SERVICES - TOTAL 99,4 107,6 120,5

IT services 99,4 107,6 120,5

SOFTWARE – TOTAL 48,7 51,6 58,8

System software 22,3 24,1 27,0

Application software 26,4 27,5 31,8

IT HARDWARE - TOTAL 255,7 272,3 300,0

Server and Storage Systems 27,4 30,9 33,2

Personal computers 156,7 164,4 178,9

Peripherals 41,4 44,7 52,0

Networking equipment 30,2 32,3 36,0

TOTAL 403,8 431,5 479,4 Source: Mineco 2011

9

10

F i gu r e 1 Se rb i an I T Ma r ke t and G row th Ra te s f o r 2008 -2012 . (%)

545,5

423,8 403,8429,0

474,6

19%

-22%

-5%

6%11%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

-300

-200

-100

0

100

200

300

400

500

600

2008 2009 2010 2011 2012

Value (million EUR) Growth Rate (%)

Source: Mineco 2011

Key observations:

Serbian IT market will most probably stay in the “tunnel” for almost 5 years in the period 2008-2013.

After the two digit turbulences of +19% (in 2008) and -22% (in 2009), IT market growth has stabilized in 2011. This financial toboggan caused closure of a few hundred IT companies and significantly changed the order of the leading IT companies

IT Market Structure

F i gu r e 2 Se rb i an I T Ma r ke t S t r u c tu r e i n 2 010 . R evenue and P r o f i t

63,3%12,1%

24,6%

19,8%

14,8%65,4%

IT Hardware

Software

IT Services

Source: Mineco 2011

Key observations from the above figure:

In the IT market structure – segment of the IT hardware with 63.4% share is still dominating in 2010; followed by IT services segment with 24.6% and remaining 12% come from software distribution.

Although IT hardware drives the IT market in Serbia, profit margins of hardware companies are close to zero and consequently their profit is very low. The biggest available capital (almost 2/3) preserved the companies from the IT service segment.

545.5

423.8 403.8

429.0 474.6

19%

-22%

-5%

6% 11%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

-300

-200

-100

0

100

200

300

400

500

600

2008 2009 2010 2011 2012

Value (million EUR) Growth Rate (%)

63.3% 12.1%

24.6%

63.3% 12.1%

24.6% 19.8%

14.8%

65.4%

IT Hardware

Software

IT Services

10 10

F i gu r e 1 Se rb i an I T Ma r ke t and G row th Ra te s f o r 2008 -2012 . (%)

545,5

423,8 403,8429,0

474,6

19%

-22%

-5%

6%11%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

-300

-200

-100

0

100

200

300

400

500

600

2008 2009 2010 2011 2012

Value (million EUR) Growth Rate (%)

Source: Mineco 2011

Key observations:

Serbian IT market will most probably stay in the “tunnel” for almost 5 years in the period 2008-2013.

After the two digit turbulences of +19% (in 2008) and -22% (in 2009), IT market growth has stabilized in 2011. This financial toboggan caused closure of a few hundred IT companies and significantly changed the order of the leading IT companies

IT Market Structure

F i gu r e 2 Se rb i an I T Ma r ke t S t r u c tu r e i n 2 010 . R evenue and P r o f i t

63,3%12,1%

24,6%

19,8%

14,8%65,4%

IT Hardware

Software

IT Services

Source: Mineco 2011

Key observations from the above figure:

In the IT market structure – segment of the IT hardware with 63.4% share is still dominating in 2010; followed by IT services segment with 24.6% and remaining 12% come from software distribution.

Although IT hardware drives the IT market in Serbia, profit margins of hardware companies are close to zero and consequently their profit is very low. The biggest available capital (almost 2/3) preserved the companies from the IT service segment.

11

IT Services Structure

Tab l e 5 I T s e r v i c e i n Se rb i a - Ma r ke t Va l ue i n 2 010 and Fo re c a s t 2 011 -2012 [ € mi l l i on ]

IT Service 2010 2011 2012 Hardware Support and Installation 28,6 29,8 31,7 Software Support and Installation 16,0 17,9 20,6 IT Training and Education 3,3 3,7 3,8 Network Consulting and Integration 9,0 9,3 10,6 Systems Integration 13,3 14,2 16,5 Outsourcing – nearshoring 3,7 4,0 4,8 Application Consulting and Customization 8,4 9,8 11,5 Custom Application Development 12,1 13,4 14,7 IT Consulting 5,0 5,4 6,3

Total 99,4 107,6 120,5 Source: Mineco 2011

F i gu r e 3 S t r u c tu r e o f I T Se r v i c e i n S e rb i a and Compound Annua l G row th Ra te (5 yea r pe r i od )

28,6

16,0

13,312,1

8,4 9,0

5,03,7 3,36%

10% 11%

7%

10% 11%

12%

13%

2% 0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

0,0

5,0

10,0

15,0

20,0

25,0

30,0

Har

dw

are

Sup

por

t and

In

stal

latio

n

Soft

war

e Su

pp

ort a

nd

Inst

alla

tion

Syst

ems

Inte

gra

tion

Cus

tom

A

pp

licat

ion

Dev

elop

men

t

Ap

plic

atio

n C

ons

ultin

g an

d

Cus

tom

izat

ion

Net

wo

rk

Co

nsul

ting

and

In

teg

ratio

n

IT C

ons

ultin

g

Out

sour

cing

-ne

arsh

orin

g[1]

IT T

rain

ing

and

Ed

ucat

ion

Value (million EUR) CAGR (%)

Source: Mineco 2011

CAGR – [%] Compound Annual Growth Rate for the five year period (2006-2010)

While the hardware support and installation market will see continued demand in the future, its share of the total services market is expected to contract.

The four major vertical markets – Government, finance, manufacturing, and telecommunications – are likely to be the largest spenders on IT services in Serbia in the coming years. As Serbia continues to stabilize both economically and politically, it has the potential to increase FDI. As in other developing countries in the region, these four sectors have been the prime beneficiaries of the inflow of FDI, which has fostered spending on IT services.

Significant part of IT services is internal (End-user companies rely on their own IT departments). These services are not included in the analysis.

28.6

16.0

13.3 12.1

8.4 9.0

5.0 3.7 3.3 6%

10% 11%

7%

10% 11%

12%

13%

2% 0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Har

dwar

e Su

ppor

tan

d In

stal

latio

n

Soft

war

e Su

ppor

tan

d In

stal

latio

n

Syst

ems

Inte

grat

ion

Cust

om A

pplic

atio

nD

evel

opm

ent

Appl

icat

ion

Cons

ultin

g an

dCu

stom

izat

ion

Net

wor

k Co

nsul

ting

and

Inte

grat

ion

IT C

onsu

lting

Out

sour

cing

-ne

arsh

orin

g[1]

IT T

rain

ing

and

Educ

atio

n

Value (million EUR) CAGR (%)

11

IT Hardware 256Software 49IT Services 99.4

404

IT Hardware 47Software 35IT Services 155

237

63.3% 12.1%

24.6%

19.8%

14.8%

65.4%

IT Hardware

Software

IT Services

IT Hardware 256Software 49IT Services 99.4

404

IT Hardware 47Software 35IT Services 155

237

63.3% 12.1%

24.6%

19.8%

14.8%

65.4%

IT Hardware

Software

IT Services

10

F i gu r e 1 Se rb i an I T Ma r ke t and G row th Ra te s f o r 2008 -2012 . (%)

545,5

423,8 403,8429,0

474,6

19%

-22%

-5%

6%11%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

-300

-200

-100

0

100

200

300

400

500

600

2008 2009 2010 2011 2012

Value (million EUR) Growth Rate (%)

Source: Mineco 2011

Key observations:

Serbian IT market will most probably stay in the “tunnel” for almost 5 years in the period 2008-2013.

After the two digit turbulences of +19% (in 2008) and -22% (in 2009), IT market growth has stabilized in 2011. This financial toboggan caused closure of a few hundred IT companies and significantly changed the order of the leading IT companies

IT Market Structure

F i gu r e 2 Se rb i an I T Ma r ke t S t r u c tu r e i n 2 010 . R evenue and P r o f i t

63,3%12,1%

24,6%

19,8%

14,8%65,4%

IT Hardware

Software

IT Services

Source: Mineco 2011

Key observations from the above figure:

In the IT market structure – segment of the IT hardware with 63.4% share is still dominating in 2010; followed by IT services segment with 24.6% and remaining 12% come from software distribution.

Although IT hardware drives the IT market in Serbia, profit margins of hardware companies are close to zero and consequently their profit is very low. The biggest available capital (almost 2/3) preserved the companies from the IT service segment.

545.5

423.8 403.8

429.0 474.6

19%

-22%

-5%

6% 11%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

-300

-200

-100

0

100

200

300

400

500

600

2008 2009 2010 2011 2012

Value (million EUR) Growth Rate (%)

63.3% 12.1%

24.6%

63.3% 12.1%

24.6% 19.8%

14.8%

65.4%

IT Hardware

Software

IT Services

10 10

F i gu r e 1 Se rb i an I T Ma r ke t and G row th Ra te s f o r 2008 -2012 . (%)

545,5

423,8 403,8429,0

474,6

19%

-22%

-5%

6%11%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

-300

-200

-100

0

100

200

300

400

500

600

2008 2009 2010 2011 2012

Value (million EUR) Growth Rate (%)

Source: Mineco 2011

Key observations:

Serbian IT market will most probably stay in the “tunnel” for almost 5 years in the period 2008-2013.

After the two digit turbulences of +19% (in 2008) and -22% (in 2009), IT market growth has stabilized in 2011. This financial toboggan caused closure of a few hundred IT companies and significantly changed the order of the leading IT companies

IT Market Structure

F i gu r e 2 Se rb i an I T Ma r ke t S t r u c tu r e i n 2 010 . R evenue and P r o f i t

63,3%12,1%

24,6%

19,8%

14,8%65,4%

IT Hardware

Software

IT Services

Source: Mineco 2011

Key observations from the above figure:

In the IT market structure – segment of the IT hardware with 63.4% share is still dominating in 2010; followed by IT services segment with 24.6% and remaining 12% come from software distribution.

Although IT hardware drives the IT market in Serbia, profit margins of hardware companies are close to zero and consequently their profit is very low. The biggest available capital (almost 2/3) preserved the companies from the IT service segment.

11

IT Services Structure

Tab l e 5 I T s e r v i c e i n Se rb i a - Ma r ke t Va l ue i n 2 010 and Fo re c a s t 2 011 -2012 [ € mi l l i on ]

IT Service 2010 2011 2012 Hardware Support and Installation 28,6 29,8 31,7 Software Support and Installation 16,0 17,9 20,6 IT Training and Education 3,3 3,7 3,8 Network Consulting and Integration 9,0 9,3 10,6 Systems Integration 13,3 14,2 16,5 Outsourcing – nearshoring 3,7 4,0 4,8 Application Consulting and Customization 8,4 9,8 11,5 Custom Application Development 12,1 13,4 14,7 IT Consulting 5,0 5,4 6,3

Total 99,4 107,6 120,5 Source: Mineco 2011

F i gu r e 3 S t r u c tu r e o f I T Se r v i c e i n S e rb i a and Compound Annua l G row th Ra te (5 yea r pe r i od )

28,6

16,0

13,312,1

8,4 9,0

5,03,7 3,36%

10% 11%

7%

10% 11%

12%

13%

2% 0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

0,0

5,0

10,0

15,0

20,0

25,0

30,0

Har

dw

are

Sup

por

t and

In

stal

latio

n

Soft

war

e Su

pp

ort a

nd

Inst

alla

tion

Syst

ems

Inte

gra

tion

Cus

tom

A

pp

licat

ion

Dev

elop

men

t

Ap

plic

atio

n C

ons

ultin

g an

d

Cus

tom

izat

ion

Net

wo

rk

Co

nsul

ting

and

In

teg

ratio

n

IT C

ons

ultin

g

Out

sour

cing

-ne

arsh

orin

g[1]

IT T

rain

ing

and

Ed

ucat

ion

Value (million EUR) CAGR (%)

Source: Mineco 2011

CAGR – [%] Compound Annual Growth Rate for the five year period (2006-2010)

While the hardware support and installation market will see continued demand in the future, its share of the total services market is expected to contract.

The four major vertical markets – Government, finance, manufacturing, and telecommunications – are likely to be the largest spenders on IT services in Serbia in the coming years. As Serbia continues to stabilize both economically and politically, it has the potential to increase FDI. As in other developing countries in the region, these four sectors have been the prime beneficiaries of the inflow of FDI, which has fostered spending on IT services.

Significant part of IT services is internal (End-user companies rely on their own IT departments). These services are not included in the analysis.

28.6

16.0

13.3 12.1

8.4 9.0

5.0 3.7 3.3 6%

10% 11%

7%

10% 11%

12%

13%

2% 0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Har

dwar

e Su

ppor

tan

d In

stal

latio

n

Soft

war

e Su

ppor

tan

d In

stal

latio

n

Syst

ems

Inte

grat

ion

Cust

om A

pplic

atio

nD

evel

opm

ent

Appl

icat

ion

Cons

ultin

g an

dCu

stom

izat

ion

Net

wor

k Co

nsul

ting

and

Inte

grat

ion

IT C

onsu

lting

Out

sour

cing

-ne

arsh

orin

g[1]

IT T

rain

ing

and

Educ

atio

n

Value (million EUR) CAGR (%)

11

12

Strength and number of international vendors operating in the region and Serbia will increase and will have the following implications:

Because service business requires more intricate and specific solutions, local services firms will have to form strategic partnerships with traditional product vendors or with international service companies in order to meet customer demands.

A number of local IT services companies are staffed with highly skilled employees and the acquisition of these companies can be a useful tool for international vendor entry into one of the IT markets, as it has already been seen all over the CEE region.

Application Software Structure

F i gu r e 4 P r oduc t s i n Se rb i an So f tw a re I ndus t r y

Source: Serbian Chamber of Commerce 2009

In 2010, the Serbian market for application software reached the value of €26 million. ERP hold the largest part, constituting nearly 13%, followed by Accounting, CRM, Business intelligence, Content management, Document management and Portals - everyone with a market share of around 10% respectively.

Local software producers dominate the Accounting and ERP market in Serbia, given their flexibility in developing custom software applications. Custom application development represents an option for a large number of companies (particularly SMEs) seeking a software solution.

Increasing demand for software applications – both ready-made and custom developed packages – will drive growth in this foundation market in the period 2011-2015.

12

12

Strength and number of international vendors operating in the region and Serbia will increase and will have the following implications:

Because service business requires more intricate and specific solutions, local services firms will have to form strategic partnerships with traditional product vendors or with international service companies in order to meet customer demands.

A number of local IT services companies are staffed with highly skilled employees and the acquisition of these companies can be a useful tool for international vendor entry into one of the IT markets, as it has already been seen all over the CEE region.

Application Software Structure

F i gu r e 4 P r oduc t s i n Se rb i an So f tw a re I ndus t r y

Source: Serbian Chamber of Commerce 2009

In 2010, the Serbian market for application software reached the value of €26 million. ERP hold the largest part, constituting nearly 13%, followed by Accounting, CRM, Business intelligence, Content management, Document management and Portals - everyone with a market share of around 10% respectively.

Local software producers dominate the Accounting and ERP market in Serbia, given their flexibility in developing custom software applications. Custom application development represents an option for a large number of companies (particularly SMEs) seeking a software solution.

Increasing demand for software applications – both ready-made and custom developed packages – will drive growth in this foundation market in the period 2011-2015.

12

12

Strength and number of international vendors operating in the region and Serbia will increase and will have the following implications:

Because service business requires more intricate and specific solutions, local services firms will have to form strategic partnerships with traditional product vendors or with international service companies in order to meet customer demands.

A number of local IT services companies are staffed with highly skilled employees and the acquisition of these companies can be a useful tool for international vendor entry into one of the IT markets, as it has already been seen all over the CEE region.

Application Software Structure

F i gu r e 4 P r oduc t s i n Se rb i an So f tw a re I ndus t r y

Source: Serbian Chamber of Commerce 2009

In 2010, the Serbian market for application software reached the value of €26 million. ERP hold the largest part, constituting nearly 13%, followed by Accounting, CRM, Business intelligence, Content management, Document management and Portals - everyone with a market share of around 10% respectively.

Local software producers dominate the Accounting and ERP market in Serbia, given their flexibility in developing custom software applications. Custom application development represents an option for a large number of companies (particularly SMEs) seeking a software solution.

Increasing demand for software applications – both ready-made and custom developed packages – will drive growth in this foundation market in the period 2011-2015.

13

IT Spending and Investments

F i gu r e 5 I T Spend i ng and I nve s tmen t s i n Se rb i a

4,0

6,3

0,5

1,5

6,0%

4,0%

0,0%

5,0%

10,0%

0

5

10

(%) IT spending as a Percentage of Revenue

(%) IT Employees as Percentage of Total Employees

CAGR [%]2006-2010 u SRB

(%) IT spending as a Percentage of Revenue(%) IT Employees as Percentage of Total Employees

World Serbia CAGR [%] 2006-2010 in SRB

Source: Mineco 2010, Gartner – IT Spending and Staffing Report 2008

Serbian companies invest in IT round 0.5% of their revenue - significantly lower than the competitive international companies do. Taking into consideration that revenues of Serbian companies are low, the absolute amount of their IT spending looks even smaller.

Similar situation is with IT employment. Diagram above shows that Serbian companies employ even four times less IT experts than their competition abroad.

The growth rate of IT investments (6%) as well as the growth rate of IT employment (4%), are above the world average, so detected gap could be overcome, but quite a few years will be needed to accomplish this.

It is a paradox that the backbone of the IT investments in Serbia is composed of households, entrepreneurs and micro companies followed by the Government and financial sector – when the medium and large business sector should be in the lead! In decomposition of this order lies the huge growth potential, although it is hard to believe that this goal will be achieved by 2012. The election year favors spending and causes a slowdown in short-term investments, especially in case of the coalition Government that has to stick to the populist agenda.

The Government, with its relevant ministries and public agencies, has started the project of e- Government Services development. Based on a UNDP study, current status of implemented e-Government services is above the SEE average (UNDP 2010), with Serbia providing G2B at an average of 56,67% (SEE average 50,54%) and G2C at 41,88% (SEE average: 37,06%). However, development of e-Government portals at the national and local level did not significantly improve market opportunities in Serbia, contrary to what the majority of local IT business had expected. As discussed above, the recipients of e-Government contracts were the international and Belgrade-based companies, leaving local companies behind the market.

4.0

6.3

0.5

1.5

6.0%

4.0%

0.0%

5.0%

10.0%

0

5

10

(%) IT spending as a Percentageof Revenue

(%) IT Emloyees as Percentage ofTotal Employees

CAGR [%] 2006-2010 in SRB

(%) IT spending as a Percentage of Revenue (%) IT Emloyees as Percentage of Total Employees

World Serbia CAGR [%] 2006-2010 in SRB

13

Appsinfrastructure

8%

CAD/CAM3% ERP

13%

Acconnting 11%

SCM6%

Content management

10%

Document management

9%

CRM11%

Business intelligence

10%

Portali 10%

E-commerce7%

12

Strength and number of international vendors operating in the region and Serbia will increase and will have the following implications:

Because service business requires more intricate and specific solutions, local services firms will have to form strategic partnerships with traditional product vendors or with international service companies in order to meet customer demands.

A number of local IT services companies are staffed with highly skilled employees and the acquisition of these companies can be a useful tool for international vendor entry into one of the IT markets, as it has already been seen all over the CEE region.

Application Software Structure

F i gu r e 4 P r oduc t s i n Se rb i an So f tw a re I ndus t r y

Source: Serbian Chamber of Commerce 2009

In 2010, the Serbian market for application software reached the value of €26 million. ERP hold the largest part, constituting nearly 13%, followed by Accounting, CRM, Business intelligence, Content management, Document management and Portals - everyone with a market share of around 10% respectively.

Local software producers dominate the Accounting and ERP market in Serbia, given their flexibility in developing custom software applications. Custom application development represents an option for a large number of companies (particularly SMEs) seeking a software solution.

Increasing demand for software applications – both ready-made and custom developed packages – will drive growth in this foundation market in the period 2011-2015.

12

12

Strength and number of international vendors operating in the region and Serbia will increase and will have the following implications:

Because service business requires more intricate and specific solutions, local services firms will have to form strategic partnerships with traditional product vendors or with international service companies in order to meet customer demands.

A number of local IT services companies are staffed with highly skilled employees and the acquisition of these companies can be a useful tool for international vendor entry into one of the IT markets, as it has already been seen all over the CEE region.

Application Software Structure

F i gu r e 4 P r oduc t s i n Se rb i an So f tw a re I ndus t r y

Source: Serbian Chamber of Commerce 2009

In 2010, the Serbian market for application software reached the value of €26 million. ERP hold the largest part, constituting nearly 13%, followed by Accounting, CRM, Business intelligence, Content management, Document management and Portals - everyone with a market share of around 10% respectively.

Local software producers dominate the Accounting and ERP market in Serbia, given their flexibility in developing custom software applications. Custom application development represents an option for a large number of companies (particularly SMEs) seeking a software solution.

Increasing demand for software applications – both ready-made and custom developed packages – will drive growth in this foundation market in the period 2011-2015.

12

12

Strength and number of international vendors operating in the region and Serbia will increase and will have the following implications:

Because service business requires more intricate and specific solutions, local services firms will have to form strategic partnerships with traditional product vendors or with international service companies in order to meet customer demands.

A number of local IT services companies are staffed with highly skilled employees and the acquisition of these companies can be a useful tool for international vendor entry into one of the IT markets, as it has already been seen all over the CEE region.

Application Software Structure

F i gu r e 4 P r oduc t s i n Se rb i an So f tw a re I ndus t r y

Source: Serbian Chamber of Commerce 2009

In 2010, the Serbian market for application software reached the value of €26 million. ERP hold the largest part, constituting nearly 13%, followed by Accounting, CRM, Business intelligence, Content management, Document management and Portals - everyone with a market share of around 10% respectively.

Local software producers dominate the Accounting and ERP market in Serbia, given their flexibility in developing custom software applications. Custom application development represents an option for a large number of companies (particularly SMEs) seeking a software solution.

Increasing demand for software applications – both ready-made and custom developed packages – will drive growth in this foundation market in the period 2011-2015.

13

IT Spending and Investments

F i gu r e 5 I T Spend i ng and I nve s tmen t s i n Se rb i a

4,0

6,3

0,5

1,5

6,0%

4,0%

0,0%

5,0%

10,0%

0

5

10

(%) IT spending as a Percentage of Revenue

(%) IT Employees as Percentage of Total Employees

CAGR [%]2006-2010 u SRB

(%) IT spending as a Percentage of Revenue(%) IT Employees as Percentage of Total Employees

World Serbia CAGR [%] 2006-2010 in SRB

Source: Mineco 2010, Gartner – IT Spending and Staffing Report 2008

Serbian companies invest in IT round 0.5% of their revenue - significantly lower than the competitive international companies do. Taking into consideration that revenues of Serbian companies are low, the absolute amount of their IT spending looks even smaller.

Similar situation is with IT employment. Diagram above shows that Serbian companies employ even four times less IT experts than their competition abroad.

The growth rate of IT investments (6%) as well as the growth rate of IT employment (4%), are above the world average, so detected gap could be overcome, but quite a few years will be needed to accomplish this.

It is a paradox that the backbone of the IT investments in Serbia is composed of households, entrepreneurs and micro companies followed by the Government and financial sector – when the medium and large business sector should be in the lead! In decomposition of this order lies the huge growth potential, although it is hard to believe that this goal will be achieved by 2012. The election year favors spending and causes a slowdown in short-term investments, especially in case of the coalition Government that has to stick to the populist agenda.

The Government, with its relevant ministries and public agencies, has started the project of e- Government Services development. Based on a UNDP study, current status of implemented e-Government services is above the SEE average (UNDP 2010), with Serbia providing G2B at an average of 56,67% (SEE average 50,54%) and G2C at 41,88% (SEE average: 37,06%). However, development of e-Government portals at the national and local level did not significantly improve market opportunities in Serbia, contrary to what the majority of local IT business had expected. As discussed above, the recipients of e-Government contracts were the international and Belgrade-based companies, leaving local companies behind the market.

4.0

6.3

0.5

1.5

6.0%

4.0%

0.0%

5.0%

10.0%

0

5

10

(%) IT spending as a Percentageof Revenue

(%) IT Emloyees as Percentage ofTotal Employees

CAGR [%] 2006-2010 in SRB

(%) IT spending as a Percentage of Revenue (%) IT Emloyees as Percentage of Total Employees

World Serbia CAGR [%] 2006-2010 in SRB

13

14

Why Information Systems?

According to GDP, IT investments in Serbia are below 1% of GDP, while EU standards are 2-3% of GDP. High unemployment rate and modest purchasing power make the Serbian long awaited recovery more uncertain. While the companies, which are IT end-users, were ready to invest in technology before economic crisis, at present they get involved into new information systems or similar infrastructure projects very carefully. Although there is a need for this type of investment, every ROI (Return on Investment) analysis, in the conditions where the companies are working without a profit, provides additional reason for saving. Without serious profits, there will be no serious IT investments.

Due to the economic crisis, IT purchasing power of Serbian companies drastically declined in 2009, though there were signs of a slight recovery in 2010. Running business in Serbia also troubles the low payment of contractual obligations and debts, which maintains a high demand for money. Besides, most companies have trouble with cash flow and liquidity. The business sector is waiting for a ‘miracle’ to happen and recover the economy. Whenever that happens, the IT sector will for sure continue with the two-digit annual growth.

However, it is certain that the recovery and transformation of Serbian society are not possible without transformation and huge development of information and communication technologies - in all segments/sectors.

Where is Serbia on EU Technological Map?

The diagram of IT investment according to economic strength (presented by GDP), best illustrates the economic competitiveness as well as the society organization and its transparency.

14 14

Why Information Systems?

According to GDP, IT investments in Serbia are below 1% of GDP, while EU standards are 2-3% of GDP. High unemployment rate and modest purchasing power make the Serbian long awaited recovery more uncertain. While the companies, which are IT end-users, were ready to invest in technology before economic crisis, at present they get involved into new information systems or similar infrastructure projects very carefully. Although there is a need for this type of investment, every ROI (Return on Investment) analysis, in the conditions where the companies are working without a profit, provides additional reason for saving. Without serious profits, there will be no serious IT investments.

Due to the economic crisis, IT purchasing power of Serbian companies drastically declined in 2009, though there were signs of a slight recovery in 2010. Running business in Serbia also troubles the low payment of contractual obligations and debts, which maintains a high demand for money. Besides, most companies have trouble with cash flow and liquidity. The business sector is waiting for a ‘miracle’ to happen and recover the economy. Whenever that happens, the IT sector will for sure continue with the two-digit annual growth.

However, it is certain that the recovery and transformation of Serbian society are not possible without transformation and huge development of information and communication technologies - in all segments/sectors.

Where is Serbia on EU Technological Map?

The diagram of IT investment according to economic strength (presented by GDP), best illustrates the economic competitiveness as well as the society organization and its transparency.

15

F i gu r e 6 I T I nve s tmen t a c co rd i ng t o E conom i c S t r eng th (GDP ) .

BelgiumGermany

Greece

Spain

France

Italy

Netherlands

Austria

Portugal

Finland

Sweden

United Kingdom

Bulgaria

Czech Republic

Estonia

LatviaLithuania

Hungary

Poland

Romania

Slovenia

SlovakiaScroatia

SerbiaMontenegro

MacedoniaB i HAlbanija

0

200

400

600

800

1000

1200

1400

0 5 10 15 20 25 30 35 40

IT s

pend

ing

per c

apita

[€]

GDP per capita [000 €]

mediana

Source: EITO 2007, Eurostat, Mineco 2010

Key observations for the above diagram:

North and west European countries have strong economy and high IT investments (all significantly above average) in visible correlation.

Mediterranean countries characterize strong economy but low IT investments. Provocative, pejorative acronym PIGS for these countries (Portugal, Italy, Greece and Spain) indicate that they belong to the “second league”.

All the countries from EU 10 (10 new members, which joined the EU in 2004) are lagging behind: they are in the quadrant of weak economy and low IT investments.

There is a few decades long technological gap between Serbia and its Northwestern neighbors. Serbia’s positioned in the root of the coordinate system together with Albania, FYROM, Montenegro, Bosnia and Herzegovina, Romania and Bulgaria.

According to the key observations above and treating the IT investments as the early indicator of economic and social trends, the following hypothesis can be formulated:” If the IT investments in Serbia do not double in the following 5-year period, Serbian economy and society will descend to even deeper crisis. In order to “catch up with the EU train”, it is necessary to triple IT investments in Serbia in the period 2011-2015.”

Belgium Germany

Greece

Spain

France

Italy

Netherlands

Austria

Portugal

Finland

Sweden

United Kingdom

Bulgaria

Czech Republic

Estonia

Latvia Lithuania

Hungary

Poland

Romania

Slovenia

Slovakia Scroatia

Serbia Montenegro

Macedonia B i H Albanija

0

200

400

600

800

1000

1200

1400

0 5 10 15 20 25 30 35 40

IT s

pen

din

g p

er c

apita

[€]

GDP per capita [000 €]

mediana

15

14

Why Information Systems?

According to GDP, IT investments in Serbia are below 1% of GDP, while EU standards are 2-3% of GDP. High unemployment rate and modest purchasing power make the Serbian long awaited recovery more uncertain. While the companies, which are IT end-users, were ready to invest in technology before economic crisis, at present they get involved into new information systems or similar infrastructure projects very carefully. Although there is a need for this type of investment, every ROI (Return on Investment) analysis, in the conditions where the companies are working without a profit, provides additional reason for saving. Without serious profits, there will be no serious IT investments.

Due to the economic crisis, IT purchasing power of Serbian companies drastically declined in 2009, though there were signs of a slight recovery in 2010. Running business in Serbia also troubles the low payment of contractual obligations and debts, which maintains a high demand for money. Besides, most companies have trouble with cash flow and liquidity. The business sector is waiting for a ‘miracle’ to happen and recover the economy. Whenever that happens, the IT sector will for sure continue with the two-digit annual growth.

However, it is certain that the recovery and transformation of Serbian society are not possible without transformation and huge development of information and communication technologies - in all segments/sectors.

Where is Serbia on EU Technological Map?

The diagram of IT investment according to economic strength (presented by GDP), best illustrates the economic competitiveness as well as the society organization and its transparency.

14 14

Why Information Systems?

According to GDP, IT investments in Serbia are below 1% of GDP, while EU standards are 2-3% of GDP. High unemployment rate and modest purchasing power make the Serbian long awaited recovery more uncertain. While the companies, which are IT end-users, were ready to invest in technology before economic crisis, at present they get involved into new information systems or similar infrastructure projects very carefully. Although there is a need for this type of investment, every ROI (Return on Investment) analysis, in the conditions where the companies are working without a profit, provides additional reason for saving. Without serious profits, there will be no serious IT investments.

Due to the economic crisis, IT purchasing power of Serbian companies drastically declined in 2009, though there were signs of a slight recovery in 2010. Running business in Serbia also troubles the low payment of contractual obligations and debts, which maintains a high demand for money. Besides, most companies have trouble with cash flow and liquidity. The business sector is waiting for a ‘miracle’ to happen and recover the economy. Whenever that happens, the IT sector will for sure continue with the two-digit annual growth.

However, it is certain that the recovery and transformation of Serbian society are not possible without transformation and huge development of information and communication technologies - in all segments/sectors.

Where is Serbia on EU Technological Map?

The diagram of IT investment according to economic strength (presented by GDP), best illustrates the economic competitiveness as well as the society organization and its transparency.

15

F i gu r e 6 I T I nve s tmen t a c co rd i ng t o E conom i c S t r eng th (GDP ) .

BelgiumGermany

Greece

Spain

France

Italy

Netherlands

Austria

Portugal

Finland

Sweden

United Kingdom

Bulgaria

Czech Republic

Estonia

LatviaLithuania

Hungary

Poland

Romania

Slovenia

SlovakiaScroatia

SerbiaMontenegro

MacedoniaB i HAlbanija

0

200

400

600

800

1000

1200

1400

0 5 10 15 20 25 30 35 40

IT s

pend

ing

per c

apita

[€]

GDP per capita [000 €]

mediana

Source: EITO 2007, Eurostat, Mineco 2010

Key observations for the above diagram:

North and west European countries have strong economy and high IT investments (all significantly above average) in visible correlation.

Mediterranean countries characterize strong economy but low IT investments. Provocative, pejorative acronym PIGS for these countries (Portugal, Italy, Greece and Spain) indicate that they belong to the “second league”.

All the countries from EU 10 (10 new members, which joined the EU in 2004) are lagging behind: they are in the quadrant of weak economy and low IT investments.

There is a few decades long technological gap between Serbia and its Northwestern neighbors. Serbia’s positioned in the root of the coordinate system together with Albania, FYROM, Montenegro, Bosnia and Herzegovina, Romania and Bulgaria.

According to the key observations above and treating the IT investments as the early indicator of economic and social trends, the following hypothesis can be formulated:” If the IT investments in Serbia do not double in the following 5-year period, Serbian economy and society will descend to even deeper crisis. In order to “catch up with the EU train”, it is necessary to triple IT investments in Serbia in the period 2011-2015.”

Belgium Germany

Greece

Spain

France

Italy

Netherlands

Austria

Portugal

Finland

Sweden

United Kingdom

Bulgaria

Czech Republic

Estonia

Latvia Lithuania

Hungary

Poland

Romania

Slovenia

Slovakia Scroatia

Serbia Montenegro

Macedonia B i H Albanija

0

200

400

600

800

1000

1200

1400

0 5 10 15 20 25 30 35 40

IT s

pen

din

g p

er c

apita

[€]

GDP per capita [000 €]

mediana

15

16

Why IT Investments in Particular?

Investments are always important, especially in the crisis. Since information technologies are in the base of every optimization, the crisis is the right time for strategic investments. The main reasons are:

(1) IT infrastructure is the important condition for economy, society and Government development;

(2) For taking part in global economy, IT industry requires significantly smaller resources than other industries;

(3) IT industry is significantly cheaper but more profitable than other industries;

(4) ICT industry development prevents the “brain drain”.

Trends and Potentials - New IT Goals for the Period 2011-2015.

Tab l e 6 Se rb i an I T Ma r ke t Va l ue and S t r u c tu r e , 2 010 and Po t en t i a l s 2 011 -2015 [€ mi l l i on ]

IT MARKET 2010 2015(v1) 2015(v2) Market Share (%) Market Share (%) Market Share (%)

IT Services 99,4 24,6% 211,8 29,5% 325,5 32,1% System Software 22,3 5,5% 42,0 5,8% 60,5 6,0% Applications 26,4 6,5% 49,4 6,9% 71,1 7,0% Server systems and storage 27,4 6,8% 41,8 5,8% 53,9 5,3% Personal computers 156,7 38,8% 226,3 31,5% 282,5 27,8% Peripherals 41,4 10,3% 86,8 12,1% 132,4 13,0% Networking equipment 30,2 7,5% 59,8 8,3% 88,7 8,7%

TOTAL 403,8 100,0% 717,9 100,0% 1.014,5 100,0% CAGR (%) Annual Growth Rate 12,2% 20,0%

Source: Mineco 2011

Key comments on the table above:

The potential of Serbian IT market is significantly higher than the realization shows. For the needed progress (double digit IT market growth of 20% CAGR (v2) - CAGR (v2) - Compound Annual Growth Rate with which Serbian economy could catch up with EU countries), the basic precondition is a yearly GDP growth bigger than 4%.

In the following five years (2011-2015) it is necessary that Serbian IT marked growth rate exceeds 12,2 % CAGR (v1) (CAGR (v1)- Compound Annual Growth Rate under which Serbian economy will fall deeper into economic crisis), or the Serbian economy is going to fall in even deeper crisis. It is obvious that Serbian economy in 2011 and 2012 will be under this required level. It is necessary to compensate whatever missed in the period 2013 – 2015.

In their previous analysis, MINECO gave the projection of 17% CAGR (v2), for the period (2005-2010) which did not materialize. Trend was good up to 2008, but the year 2009 was catastrophic for IT and influenced the average growth rate for period 2005-2009 to fall to modest 8,5% CAGR. Stagnation in 2010 lowered this rate to 5.5% CAGR that is three times less than required in MINECO projections.

16 16

Why IT Investments in Particular?

Investments are always important, especially in the crisis. Since information technologies are in the base of every optimization, the crisis is the right time for strategic investments. The main reasons are:

(1) IT infrastructure is the important condition for economy, society and Government development;

(2) For taking part in global economy, IT industry requires significantly smaller resources than other industries;

(3) IT industry is significantly cheaper but more profitable than other industries;

(4) ICT industry development prevents the “brain drain”.

Trends and Potentials - New IT Goals for the Period 2011-2015.

Tab l e 6 Se rb i an I T Ma r ke t Va l ue and S t r u c tu r e , 2 010 and Po t en t i a l s 2 011 -2015 [€ mi l l i on ]

IT MARKET 2010 2015(v1) 2015(v2) Market Share (%) Market Share (%) Market Share (%)

IT Services 99,4 24,6% 211,8 29,5% 325,5 32,1% System Software 22,3 5,5% 42,0 5,8% 60,5 6,0% Applications 26,4 6,5% 49,4 6,9% 71,1 7,0% Server systems and storage 27,4 6,8% 41,8 5,8% 53,9 5,3% Personal computers 156,7 38,8% 226,3 31,5% 282,5 27,8% Peripherals 41,4 10,3% 86,8 12,1% 132,4 13,0% Networking equipment 30,2 7,5% 59,8 8,3% 88,7 8,7%

TOTAL 403,8 100,0% 717,9 100,0% 1.014,5 100,0% CAGR (%) Annual Growth Rate 12,2% 20,0%

Source: Mineco 2011

Key comments on the table above:

The potential of Serbian IT market is significantly higher than the realization shows. For the needed progress (double digit IT market growth of 20% CAGR (v2) - CAGR (v2) - Compound Annual Growth Rate with which Serbian economy could catch up with EU countries), the basic precondition is a yearly GDP growth bigger than 4%.

In the following five years (2011-2015) it is necessary that Serbian IT marked growth rate exceeds 12,2 % CAGR (v1) (CAGR (v1)- Compound Annual Growth Rate under which Serbian economy will fall deeper into economic crisis), or the Serbian economy is going to fall in even deeper crisis. It is obvious that Serbian economy in 2011 and 2012 will be under this required level. It is necessary to compensate whatever missed in the period 2013 – 2015.

In their previous analysis, MINECO gave the projection of 17% CAGR (v2), for the period (2005-2010) which did not materialize. Trend was good up to 2008, but the year 2009 was catastrophic for IT and influenced the average growth rate for period 2005-2009 to fall to modest 8,5% CAGR. Stagnation in 2010 lowered this rate to 5.5% CAGR that is three times less than required in MINECO projections.

17

Overview of the Telecommunication Market Informatics and Telecommunication in Serbia, as two separate segments of ICT Industry, have had different performances and trends: while IT characterizes a fragmented and liberal market with significant present of SME segmentation, more mature telecommunication sector practically consists of three big mobile operators and one cable operator. As this analysis has been obtained primarily from the perspective of potential investors in new ICT areas, the focus is on the SME segment and IT service companies. For that reason, the Telecommunication part has been reduced to a few key observations.

According to RATEL’s data, the revenues from telecom services in 2010 amounted to €1.46 billion. The average annual growth rate of the telecom sector revenues in the period from 2005 to 2010 was 9.4%. The share of telecom sector revenues in GDP was around 4.98% (cf. 4.76% in 2009). The total investments in the telecom sector in 2010 amounted to €274 million.

In terms of different services, in 2010, the largest share of total revenues, approximately 53%, went to the mobile market, whereas VoIP services with 0.2% represented the smallest share. Accordingly, investments in the mobile market had the largest share in the total revenues, 48% in 2010, whereas investments in VoIP only 0.1%. The structure of telecommunications sector revenues is provided below (Figure 7).

F i gu r e 7 Revenue and I nve s tmen t s b y Te l e c ommun i c a t i on Se r v i c e s , i n 2 010

52,7%

28,9%

9,0%

5,9% 3,4% 0,2% Mobile

Fixed

Internet

Media contents distributionBroadcasting

VoIP

48,2%

27,4%

12,7%

11,6% 0,2% Mobile

Fixed

Media contents distribution

Internet

VoIP

Source: RATEL

Telecom service baskets represent monthly expenditure per subscriber. The low usage basket shows the average monthly expenditure for basic telecom services, which include TV, fixed and mobile telephone services, whereas the high usage basket shows using Internet and CATV in addition to the basic package. In 2010, the cost of the basic package equaled 4.8% of the average monthly salary, and that of the extended package amounted to approximately 13%.

ICT Development Index

In 2007, the International Telecommunication Union (ITU) initiated the process of creating a single Index used in measuring the development of information society, the so-called ICT Development Index (IDI). This single IDI Index serves as a benchmarking tool for measuring the development of the ICT market in U N Member States, digital divide between the developed and developing countries; developmental potential of the ICT market.

52.7%

28.9%

9.0%

5.9% 3.4% 0.2% Mobile

Fixed

Internet

Media contentsdistributionBroadcasting

VoIP

48.2%

27.4%

12.7%

11.6% 0.2% Mobile

Fixed

Media contentsdistribution

Internet

VoIP

17

16

Why IT Investments in Particular?

Investments are always important, especially in the crisis. Since information technologies are in the base of every optimization, the crisis is the right time for strategic investments. The main reasons are:

(1) IT infrastructure is the important condition for economy, society and Government development;

(2) For taking part in global economy, IT industry requires significantly smaller resources than other industries;

(3) IT industry is significantly cheaper but more profitable than other industries;

(4) ICT industry development prevents the “brain drain”.

Trends and Potentials - New IT Goals for the Period 2011-2015.

Tab l e 6 Se rb i an I T Ma r ke t Va l ue and S t r u c tu r e , 2 010 and Po t en t i a l s 2 011 -2015 [€ mi l l i on ]

IT MARKET 2010 2015(v1) 2015(v2) Market Share (%) Market Share (%) Market Share (%)

IT Services 99,4 24,6% 211,8 29,5% 325,5 32,1% System Software 22,3 5,5% 42,0 5,8% 60,5 6,0% Applications 26,4 6,5% 49,4 6,9% 71,1 7,0% Server systems and storage 27,4 6,8% 41,8 5,8% 53,9 5,3% Personal computers 156,7 38,8% 226,3 31,5% 282,5 27,8% Peripherals 41,4 10,3% 86,8 12,1% 132,4 13,0% Networking equipment 30,2 7,5% 59,8 8,3% 88,7 8,7%

TOTAL 403,8 100,0% 717,9 100,0% 1.014,5 100,0% CAGR (%) Annual Growth Rate 12,2% 20,0%

Source: Mineco 2011

Key comments on the table above:

The potential of Serbian IT market is significantly higher than the realization shows. For the needed progress (double digit IT market growth of 20% CAGR (v2) - CAGR (v2) - Compound Annual Growth Rate with which Serbian economy could catch up with EU countries), the basic precondition is a yearly GDP growth bigger than 4%.

In the following five years (2011-2015) it is necessary that Serbian IT marked growth rate exceeds 12,2 % CAGR (v1) (CAGR (v1)- Compound Annual Growth Rate under which Serbian economy will fall deeper into economic crisis), or the Serbian economy is going to fall in even deeper crisis. It is obvious that Serbian economy in 2011 and 2012 will be under this required level. It is necessary to compensate whatever missed in the period 2013 – 2015.

In their previous analysis, MINECO gave the projection of 17% CAGR (v2), for the period (2005-2010) which did not materialize. Trend was good up to 2008, but the year 2009 was catastrophic for IT and influenced the average growth rate for period 2005-2009 to fall to modest 8,5% CAGR. Stagnation in 2010 lowered this rate to 5.5% CAGR that is three times less than required in MINECO projections.

16 16

Why IT Investments in Particular?

Investments are always important, especially in the crisis. Since information technologies are in the base of every optimization, the crisis is the right time for strategic investments. The main reasons are:

(1) IT infrastructure is the important condition for economy, society and Government development;

(2) For taking part in global economy, IT industry requires significantly smaller resources than other industries;

(3) IT industry is significantly cheaper but more profitable than other industries;

(4) ICT industry development prevents the “brain drain”.

Trends and Potentials - New IT Goals for the Period 2011-2015.

Tab l e 6 Se rb i an I T Ma r ke t Va l ue and S t r u c tu r e , 2 010 and Po t en t i a l s 2 011 -2015 [€ mi l l i on ]

IT MARKET 2010 2015(v1) 2015(v2) Market Share (%) Market Share (%) Market Share (%)

IT Services 99,4 24,6% 211,8 29,5% 325,5 32,1% System Software 22,3 5,5% 42,0 5,8% 60,5 6,0% Applications 26,4 6,5% 49,4 6,9% 71,1 7,0% Server systems and storage 27,4 6,8% 41,8 5,8% 53,9 5,3% Personal computers 156,7 38,8% 226,3 31,5% 282,5 27,8% Peripherals 41,4 10,3% 86,8 12,1% 132,4 13,0% Networking equipment 30,2 7,5% 59,8 8,3% 88,7 8,7%

TOTAL 403,8 100,0% 717,9 100,0% 1.014,5 100,0% CAGR (%) Annual Growth Rate 12,2% 20,0%

Source: Mineco 2011

Key comments on the table above:

The potential of Serbian IT market is significantly higher than the realization shows. For the needed progress (double digit IT market growth of 20% CAGR (v2) - CAGR (v2) - Compound Annual Growth Rate with which Serbian economy could catch up with EU countries), the basic precondition is a yearly GDP growth bigger than 4%.

In the following five years (2011-2015) it is necessary that Serbian IT marked growth rate exceeds 12,2 % CAGR (v1) (CAGR (v1)- Compound Annual Growth Rate under which Serbian economy will fall deeper into economic crisis), or the Serbian economy is going to fall in even deeper crisis. It is obvious that Serbian economy in 2011 and 2012 will be under this required level. It is necessary to compensate whatever missed in the period 2013 – 2015.

In their previous analysis, MINECO gave the projection of 17% CAGR (v2), for the period (2005-2010) which did not materialize. Trend was good up to 2008, but the year 2009 was catastrophic for IT and influenced the average growth rate for period 2005-2009 to fall to modest 8,5% CAGR. Stagnation in 2010 lowered this rate to 5.5% CAGR that is three times less than required in MINECO projections.

17

Overview of the Telecommunication Market Informatics and Telecommunication in Serbia, as two separate segments of ICT Industry, have had different performances and trends: while IT characterizes a fragmented and liberal market with significant present of SME segmentation, more mature telecommunication sector practically consists of three big mobile operators and one cable operator. As this analysis has been obtained primarily from the perspective of potential investors in new ICT areas, the focus is on the SME segment and IT service companies. For that reason, the Telecommunication part has been reduced to a few key observations.

According to RATEL’s data, the revenues from telecom services in 2010 amounted to €1.46 billion. The average annual growth rate of the telecom sector revenues in the period from 2005 to 2010 was 9.4%. The share of telecom sector revenues in GDP was around 4.98% (cf. 4.76% in 2009). The total investments in the telecom sector in 2010 amounted to €274 million.

In terms of different services, in 2010, the largest share of total revenues, approximately 53%, went to the mobile market, whereas VoIP services with 0.2% represented the smallest share. Accordingly, investments in the mobile market had the largest share in the total revenues, 48% in 2010, whereas investments in VoIP only 0.1%. The structure of telecommunications sector revenues is provided below (Figure 7).

F i gu r e 7 Revenue and I nve s tmen t s b y Te l e c ommun i c a t i on Se r v i c e s , i n 2 010

52,7%

28,9%

9,0%

5,9% 3,4% 0,2% Mobile

Fixed

Internet

Media contents distributionBroadcasting

VoIP

48,2%

27,4%

12,7%

11,6% 0,2% Mobile

Fixed

Media contents distribution

Internet

VoIP

Source: RATEL

Telecom service baskets represent monthly expenditure per subscriber. The low usage basket shows the average monthly expenditure for basic telecom services, which include TV, fixed and mobile telephone services, whereas the high usage basket shows using Internet and CATV in addition to the basic package. In 2010, the cost of the basic package equaled 4.8% of the average monthly salary, and that of the extended package amounted to approximately 13%.

ICT Development Index

In 2007, the International Telecommunication Union (ITU) initiated the process of creating a single Index used in measuring the development of information society, the so-called ICT Development Index (IDI). This single IDI Index serves as a benchmarking tool for measuring the development of the ICT market in U N Member States, digital divide between the developed and developing countries; developmental potential of the ICT market.

52.7%

28.9%

9.0%

5.9% 3.4% 0.2% Mobile

Fixed

Internet

Media contentsdistributionBroadcasting

VoIP

48.2%

27.4%

12.7%

11.6% 0.2% Mobile

Fixed

Media contentsdistribution

Internet

VoIP

17

18

F i gu r e 8 I CT Deve l opmen t I ndex , I D I S t r u c tu r e

Source: RATEL

This Index combines 11 indicators divided into three sub-groups: (1) ICT Readiness (infrastructure and access); (2) ICT use (primarily by individuals, but also households and entrepreneurs) and the intensity of use; (3) ICT Capability (skills necessary for the effective use of ICTs).

The value of IDI Index for the Republic of Serbia in 2010 amounts to 5.10, which shows a significant growth compared to 4.23 in 2008 and 4.80 in 2009. Considering the previous ITU data, we may anticipate that, based on the IDI Index value, Serbia will secure a place among the first 40 countries on the list.

The fact that indicators for ICT access have significantly higher values than indicators for ICT usage is apparent and serves as an illustration of the disparity between the capacity of the existing telecommunication infrastructure and its use in terms of services transmitted through such infrastructure in Serbia. The same applies to usage of broadband Internet services. On the other hand, ICT skills indicators are of the appropriate value.

18 18

F i gu r e 8 I CT Deve l opmen t I ndex , I D I S t r u c tu r e

Source: RATEL

This Index combines 11 indicators divided into three sub-groups: (1) ICT Readiness (infrastructure and access); (2) ICT use (primarily by individuals, but also households and entrepreneurs) and the intensity of use; (3) ICT Capability (skills necessary for the effective use of ICTs).

The value of IDI Index for the Republic of Serbia in 2010 amounts to 5.10, which shows a significant growth compared to 4.23 in 2008 and 4.80 in 2009. Considering the previous ITU data, we may anticipate that, based on the IDI Index value, Serbia will secure a place among the first 40 countries on the list.

The fact that indicators for ICT access have significantly higher values than indicators for ICT usage is apparent and serves as an illustration of the disparity between the capacity of the existing telecommunication infrastructure and its use in terms of services transmitted through such infrastructure in Serbia. The same applies to usage of broadband Internet services. On the other hand, ICT skills indicators are of the appropriate value.

19

Serbian Internet Services Market in 2010 Total revenues earned from provision of Internet services reached 13.5 billion RSD (around €135 million) in 2010, which represents a growth of 22% compared to 2009. Incomes multiplied six times in comparison to year 2006 when this trend was recorded for the first time. [See Terminology - no difference between income, revenue and turnover as used in this text]

F i gu r e 9 I n comes E a rned f r om I n t e r ne t ( i n m i l l i o n s o f RSD)

2.166

4.743

8.762

11.108

13.527

0%

20%

40%

60%

80%

100%

120%

140%

0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

2006 2007 2008 2009 2010

Internet Access in Households (%) Year on Year Growth (%)

Source: RATEL [Republic Telecommunication Agency]

Internet Operators 192 Internet operators were registered in Serbia in December 2010, approximately the same number as it was in 2009.

Tab l e 7 To t a l N umbe r o f I n t e r ne t Ope r a t o r s i n Se rb i a

Period 2006 2007 2008 2009 2010 Number of operators 109 159 197 199 192

Source: RATEL [Republic Telecommunication Agency]

Internet Penetration: The number of Internet connections per 100 citizens was approximately 23 and the number of broadband Internet connections per 100 citizens was approximately 19.

Broadband Internet Penetration: Unless 3G mobile network subscribers are taken into consideration, the penetration of broadband Internet access amounts to 9.2%, which is above the average in the SEE region (8.01%). However, the penetration of broadband Internet access in Serbia is significantly below the EU27 average (24%).

Taking into consideration all relevant parameters, the Serbian Internet market has projected a constant growth in the following few years. Assumption is that the number of broadband connections per 100 citizens will reach the present level in developed European countries by 2013.

2,166

4,743

8,762

11,108

13,527

0%

20%

40%

60%

80%

100%

120%

140%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2006 2007 2008 2009 2010

Internet Access in Households (%) Year on Year Growth (%)

19

ICT Readiness (infrastructure,

access)

ICTDevelopment Index

ICT Capability (skills)

ICT Use(intensity)

ICT Impact (outcomes)

18

F i gu r e 8 I CT Deve l opmen t I ndex , I D I S t r u c tu r e

Source: RATEL

This Index combines 11 indicators divided into three sub-groups: (1) ICT Readiness (infrastructure and access); (2) ICT use (primarily by individuals, but also households and entrepreneurs) and the intensity of use; (3) ICT Capability (skills necessary for the effective use of ICTs).

The value of IDI Index for the Republic of Serbia in 2010 amounts to 5.10, which shows a significant growth compared to 4.23 in 2008 and 4.80 in 2009. Considering the previous ITU data, we may anticipate that, based on the IDI Index value, Serbia will secure a place among the first 40 countries on the list.

The fact that indicators for ICT access have significantly higher values than indicators for ICT usage is apparent and serves as an illustration of the disparity between the capacity of the existing telecommunication infrastructure and its use in terms of services transmitted through such infrastructure in Serbia. The same applies to usage of broadband Internet services. On the other hand, ICT skills indicators are of the appropriate value.

18 18

F i gu r e 8 I CT Deve l opmen t I ndex , I D I S t r u c tu r e

Source: RATEL

This Index combines 11 indicators divided into three sub-groups: (1) ICT Readiness (infrastructure and access); (2) ICT use (primarily by individuals, but also households and entrepreneurs) and the intensity of use; (3) ICT Capability (skills necessary for the effective use of ICTs).

The value of IDI Index for the Republic of Serbia in 2010 amounts to 5.10, which shows a significant growth compared to 4.23 in 2008 and 4.80 in 2009. Considering the previous ITU data, we may anticipate that, based on the IDI Index value, Serbia will secure a place among the first 40 countries on the list.

The fact that indicators for ICT access have significantly higher values than indicators for ICT usage is apparent and serves as an illustration of the disparity between the capacity of the existing telecommunication infrastructure and its use in terms of services transmitted through such infrastructure in Serbia. The same applies to usage of broadband Internet services. On the other hand, ICT skills indicators are of the appropriate value.

19

Serbian Internet Services Market in 2010 Total revenues earned from provision of Internet services reached 13.5 billion RSD (around €135 million) in 2010, which represents a growth of 22% compared to 2009. Incomes multiplied six times in comparison to year 2006 when this trend was recorded for the first time. [See Terminology - no difference between income, revenue and turnover as used in this text]

F i gu r e 9 I n comes E a rned f r om I n t e r ne t ( i n m i l l i o n s o f RSD)

2.166

4.743

8.762

11.108

13.527

0%

20%

40%

60%

80%

100%

120%

140%

0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

2006 2007 2008 2009 2010

Internet Access in Households (%) Year on Year Growth (%)

Source: RATEL [Republic Telecommunication Agency]

Internet Operators 192 Internet operators were registered in Serbia in December 2010, approximately the same number as it was in 2009.

Tab l e 7 To t a l N umbe r o f I n t e r ne t Ope r a t o r s i n Se rb i a

Period 2006 2007 2008 2009 2010 Number of operators 109 159 197 199 192

Source: RATEL [Republic Telecommunication Agency]

Internet Penetration: The number of Internet connections per 100 citizens was approximately 23 and the number of broadband Internet connections per 100 citizens was approximately 19.

Broadband Internet Penetration: Unless 3G mobile network subscribers are taken into consideration, the penetration of broadband Internet access amounts to 9.2%, which is above the average in the SEE region (8.01%). However, the penetration of broadband Internet access in Serbia is significantly below the EU27 average (24%).

Taking into consideration all relevant parameters, the Serbian Internet market has projected a constant growth in the following few years. Assumption is that the number of broadband connections per 100 citizens will reach the present level in developed European countries by 2013.

2,166

4,743

8,762

11,108

13,527

0%

20%

40%

60%

80%

100%

120%

140%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2006 2007 2008 2009 2010

Internet Access in Households (%) Year on Year Growth (%)

19

20

IT Industry For the needs of this report the 2007, OECD ICT sector definition (ISIC Rev. 4) is used.

Tab l e 8 OECD ICT Sec t o r De f i n i t i o n

ICT manufacturing industries IT industry

IT Converged industry

2610 Manufacture of electronic components and boards Y

2620 Manufacture of computers and peripheral equipment PC Hardware

2630 Manufacture of communication equipment Y

2640 Manufacture of consumer electronics Y

2680 Manufacture of magnetic and optical media Y

ICT manufacturing industries

4651 Wholesale of computers, computer peripheral equipment and software

IT Channels - Wholesale and retail

4652 Wholesale of electronic and telecommunications equipment and parts Y

5820 Software publishing Software 61 Telecommunications Y 62 Computer programming, consultancy and related activities IT services

Software

631 Data processing, hosting and related activities; Web portals Y 951 Repair of computers and communication equipment IT services

The IT industry in this study consists only from those companies whose real activities fall within the above presented NACE classes. This is not an easy thing to do in Serbia and presented analysis is excerpt from the study “Serbian IT Industry 2010”, which treats this issue in detail.

In order to get the precise insight of Serbian IT industry structure, in “Serbian IT Industry 2010”, IT companies are grouped into four clearly defined categories, relying, at the same time, on new NACE classes. Those categories are: (1) IT Channels - Wholesale and retail, (2) IT services, (3) Software and (4) PC Hardware. All those companies that did not have clear product portfolio and by their size belong to micro companies, belong into the category “Other - unclassified”. This report also includes companies with noticeable dealing in information technologies but coming from the converging industries: telecommunication, office equipment and consumer/home electronic. These companies are in the category “Converged industry”.

Characteristics of the IT industry in this report rely on non-consolidated publicly available data of IT companies taken from their financial reports for 2010. The SBRA (Serbian Business Registers Agency) – Register of Financial Statements and Solvency, provided the data contained in the report on Mineco’s demand. Following is the presentation of Serbian IT industry through the number of IT companies, their size, structure and number of employees. The terms: revenue, added value and net asset in Serbian IT sector are used for the whole IT sector where all active IT companies revenues, added values and net assets are summarized, respectively [see Terminology].

In 2010, 1,614 active enterprises, which accomplished revenues higher than 400,000 RSD, formed the Serbian IT industry. Total number of employees was 13.816 and represented 0.9% of the total workforce in Serbia. Average number of employees was 8.6 and average revenue and added value - per employee, were €80,034 and €26,598 respectively.

In their study on the Belgrade Service Sector, FREN claimed that productivity of ICT companies was 68% higher than any other business sector in Serbia and more than three times higher than the Serbian average (FREN 2007). They also found that ICT companies have the highest average gross wage.

20 20

IT Industry For the needs of this report the 2007, OECD ICT sector definition (ISIC Rev. 4) is used.

Tab l e 8 OECD ICT Sec t o r De f i n i t i o n

ICT manufacturing industries IT industry

IT Converged industry

2610 Manufacture of electronic components and boards Y

2620 Manufacture of computers and peripheral equipment PC Hardware

2630 Manufacture of communication equipment Y

2640 Manufacture of consumer electronics Y

2680 Manufacture of magnetic and optical media Y

ICT manufacturing industries

4651 Wholesale of computers, computer peripheral equipment and software

IT Channels - Wholesale and retail

4652 Wholesale of electronic and telecommunications equipment and parts Y

5820 Software publishing Software 61 Telecommunications Y 62 Computer programming, consultancy and related activities IT services

Software

631 Data processing, hosting and related activities; Web portals Y 951 Repair of computers and communication equipment IT services

The IT industry in this study consists only from those companies whose real activities fall within the above presented NACE classes. This is not an easy thing to do in Serbia and presented analysis is excerpt from the study “Serbian IT Industry 2010”, which treats this issue in detail.

In order to get the precise insight of Serbian IT industry structure, in “Serbian IT Industry 2010”, IT companies are grouped into four clearly defined categories, relying, at the same time, on new NACE classes. Those categories are: (1) IT Channels - Wholesale and retail, (2) IT services, (3) Software and (4) PC Hardware. All those companies that did not have clear product portfolio and by their size belong to micro companies, belong into the category “Other - unclassified”. This report also includes companies with noticeable dealing in information technologies but coming from the converging industries: telecommunication, office equipment and consumer/home electronic. These companies are in the category “Converged industry”.

Characteristics of the IT industry in this report rely on non-consolidated publicly available data of IT companies taken from their financial reports for 2010. The SBRA (Serbian Business Registers Agency) – Register of Financial Statements and Solvency, provided the data contained in the report on Mineco’s demand. Following is the presentation of Serbian IT industry through the number of IT companies, their size, structure and number of employees. The terms: revenue, added value and net asset in Serbian IT sector are used for the whole IT sector where all active IT companies revenues, added values and net assets are summarized, respectively [see Terminology].

In 2010, 1,614 active enterprises, which accomplished revenues higher than 400,000 RSD, formed the Serbian IT industry. Total number of employees was 13.816 and represented 0.9% of the total workforce in Serbia. Average number of employees was 8.6 and average revenue and added value - per employee, were €80,034 and €26,598 respectively.

In their study on the Belgrade Service Sector, FREN claimed that productivity of ICT companies was 68% higher than any other business sector in Serbia and more than three times higher than the Serbian average (FREN 2007). They also found that ICT companies have the highest average gross wage.

21

Number of IT Companies in Serbia

In 2010, 1,614 active enterprises, which accomplished revenues higher than 400,000 RSD, formed the Serbian IT industry. In comparison to 2009, the number of IT companies increased for 2.8%, where the share of software companies raised for 1 percentage point, similarly to the number of IT service companies. IT Channels - Wholesale and retail companies, decreased their share in total number of IT companies.

Tab l e 9 Numbe r o f I T c ompan i e s i n Se rb i a , 2 010 a cco rd i ng t o t he I T Sub - s e c t o r and Company s i z e

IT industry sub-sector

Mic

ro

ente

rpris

es

Smal

l en

terp

rises

Med

ium

en

terp

rises

Big

ente

rpris

es

Tota

l

IT Channels - Wholesale and retail 15 25 10 1 51 IT services 244 102 19 3 368 Software 336 52 3 391 PC Hardware 253 14 267 Other – unclassified 355 355 Converged industry 146 32 4 182 Total 1349 225 36 4 1614 Total [%] 83,6% 13,9% 2,2% 0,2% 100,0%

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

Key comments for the above table:

Serbian IT industry has only four big IT enterprises (with more than 250 employees), three of them with international owners and defined corporate standards.

A huge number of micro companies (1,349), which have low financial capacities, insufficient technological and managing skills, visibly characterize Serbian IT industry. In contrast, positioned in between, SME segment shows strong vitality.

SME segment with 261 enterprises represents 16% of all IT enterprises. Almost half of companies from the SME segment have been active in IT services segment (121 of 261). Investments and support to SME segment could be the decisive factor in the fast development of IT industry.

F i gu r e 1 0 S t r u c tu r e o f I T Compan i e s i n Se rb i a , 2 010

3%

23%

24%17%

22%

11% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

3%

23%

24% 17%

22%

11% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

21

20

IT Industry For the needs of this report the 2007, OECD ICT sector definition (ISIC Rev. 4) is used.

Tab l e 8 OECD ICT Sec t o r De f i n i t i o n

ICT manufacturing industries IT industry

IT Converged industry

2610 Manufacture of electronic components and boards Y

2620 Manufacture of computers and peripheral equipment PC Hardware

2630 Manufacture of communication equipment Y

2640 Manufacture of consumer electronics Y

2680 Manufacture of magnetic and optical media Y

ICT manufacturing industries

4651 Wholesale of computers, computer peripheral equipment and software

IT Channels - Wholesale and retail

4652 Wholesale of electronic and telecommunications equipment and parts Y

5820 Software publishing Software 61 Telecommunications Y 62 Computer programming, consultancy and related activities IT services

Software

631 Data processing, hosting and related activities; Web portals Y 951 Repair of computers and communication equipment IT services

The IT industry in this study consists only from those companies whose real activities fall within the above presented NACE classes. This is not an easy thing to do in Serbia and presented analysis is excerpt from the study “Serbian IT Industry 2010”, which treats this issue in detail.

In order to get the precise insight of Serbian IT industry structure, in “Serbian IT Industry 2010”, IT companies are grouped into four clearly defined categories, relying, at the same time, on new NACE classes. Those categories are: (1) IT Channels - Wholesale and retail, (2) IT services, (3) Software and (4) PC Hardware. All those companies that did not have clear product portfolio and by their size belong to micro companies, belong into the category “Other - unclassified”. This report also includes companies with noticeable dealing in information technologies but coming from the converging industries: telecommunication, office equipment and consumer/home electronic. These companies are in the category “Converged industry”.

Characteristics of the IT industry in this report rely on non-consolidated publicly available data of IT companies taken from their financial reports for 2010. The SBRA (Serbian Business Registers Agency) – Register of Financial Statements and Solvency, provided the data contained in the report on Mineco’s demand. Following is the presentation of Serbian IT industry through the number of IT companies, their size, structure and number of employees. The terms: revenue, added value and net asset in Serbian IT sector are used for the whole IT sector where all active IT companies revenues, added values and net assets are summarized, respectively [see Terminology].

In 2010, 1,614 active enterprises, which accomplished revenues higher than 400,000 RSD, formed the Serbian IT industry. Total number of employees was 13.816 and represented 0.9% of the total workforce in Serbia. Average number of employees was 8.6 and average revenue and added value - per employee, were €80,034 and €26,598 respectively.

In their study on the Belgrade Service Sector, FREN claimed that productivity of ICT companies was 68% higher than any other business sector in Serbia and more than three times higher than the Serbian average (FREN 2007). They also found that ICT companies have the highest average gross wage.

20 20

IT Industry For the needs of this report the 2007, OECD ICT sector definition (ISIC Rev. 4) is used.

Tab l e 8 OECD ICT Sec t o r De f i n i t i o n

ICT manufacturing industries IT industry

IT Converged industry

2610 Manufacture of electronic components and boards Y

2620 Manufacture of computers and peripheral equipment PC Hardware

2630 Manufacture of communication equipment Y

2640 Manufacture of consumer electronics Y

2680 Manufacture of magnetic and optical media Y

ICT manufacturing industries

4651 Wholesale of computers, computer peripheral equipment and software

IT Channels - Wholesale and retail

4652 Wholesale of electronic and telecommunications equipment and parts Y

5820 Software publishing Software 61 Telecommunications Y 62 Computer programming, consultancy and related activities IT services

Software

631 Data processing, hosting and related activities; Web portals Y 951 Repair of computers and communication equipment IT services

The IT industry in this study consists only from those companies whose real activities fall within the above presented NACE classes. This is not an easy thing to do in Serbia and presented analysis is excerpt from the study “Serbian IT Industry 2010”, which treats this issue in detail.

In order to get the precise insight of Serbian IT industry structure, in “Serbian IT Industry 2010”, IT companies are grouped into four clearly defined categories, relying, at the same time, on new NACE classes. Those categories are: (1) IT Channels - Wholesale and retail, (2) IT services, (3) Software and (4) PC Hardware. All those companies that did not have clear product portfolio and by their size belong to micro companies, belong into the category “Other - unclassified”. This report also includes companies with noticeable dealing in information technologies but coming from the converging industries: telecommunication, office equipment and consumer/home electronic. These companies are in the category “Converged industry”.

Characteristics of the IT industry in this report rely on non-consolidated publicly available data of IT companies taken from their financial reports for 2010. The SBRA (Serbian Business Registers Agency) – Register of Financial Statements and Solvency, provided the data contained in the report on Mineco’s demand. Following is the presentation of Serbian IT industry through the number of IT companies, their size, structure and number of employees. The terms: revenue, added value and net asset in Serbian IT sector are used for the whole IT sector where all active IT companies revenues, added values and net assets are summarized, respectively [see Terminology].

In 2010, 1,614 active enterprises, which accomplished revenues higher than 400,000 RSD, formed the Serbian IT industry. Total number of employees was 13.816 and represented 0.9% of the total workforce in Serbia. Average number of employees was 8.6 and average revenue and added value - per employee, were €80,034 and €26,598 respectively.

In their study on the Belgrade Service Sector, FREN claimed that productivity of ICT companies was 68% higher than any other business sector in Serbia and more than three times higher than the Serbian average (FREN 2007). They also found that ICT companies have the highest average gross wage.

21

Number of IT Companies in Serbia

In 2010, 1,614 active enterprises, which accomplished revenues higher than 400,000 RSD, formed the Serbian IT industry. In comparison to 2009, the number of IT companies increased for 2.8%, where the share of software companies raised for 1 percentage point, similarly to the number of IT service companies. IT Channels - Wholesale and retail companies, decreased their share in total number of IT companies.

Tab l e 9 Numbe r o f I T c ompan i e s i n Se rb i a , 2 010 a cco rd i ng t o t he I T Sub - s e c t o r and Company s i z e

IT industry sub-sector

Mic

ro

ente

rpris

es

Smal

l en

terp

rises

Med

ium

en

terp

rises

Big

ente

rpris

es

Tota

l

IT Channels - Wholesale and retail 15 25 10 1 51 IT services 244 102 19 3 368 Software 336 52 3 391 PC Hardware 253 14 267 Other – unclassified 355 355 Converged industry 146 32 4 182 Total 1349 225 36 4 1614 Total [%] 83,6% 13,9% 2,2% 0,2% 100,0%

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

Key comments for the above table:

Serbian IT industry has only four big IT enterprises (with more than 250 employees), three of them with international owners and defined corporate standards.

A huge number of micro companies (1,349), which have low financial capacities, insufficient technological and managing skills, visibly characterize Serbian IT industry. In contrast, positioned in between, SME segment shows strong vitality.

SME segment with 261 enterprises represents 16% of all IT enterprises. Almost half of companies from the SME segment have been active in IT services segment (121 of 261). Investments and support to SME segment could be the decisive factor in the fast development of IT industry.

F i gu r e 1 0 S t r u c tu r e o f I T Compan i e s i n Se rb i a , 2 010

3%

23%

24%17%

22%

11% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

3%

23%

24% 17%

22%

11% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

21

22

Workforce in Serbian IT Industry

Serbian IT industry employed 13,816 workers in 2010. This is a modest number in comparison to 1.45 million, which is the number of the entire workforce (without entrepreneurs). However, the estimate is that this number is just a smaller part of much bigger ICT work corpus of nearly 50,000 ICT specialists. Besides IT industry, the estimates indicate that around 35,000 ICT specialists work in telecommunications sector, end user companies (which are IT users) and entrepreneurial ICT sector.

In comparison to 2007 (a year before the crisis), all IT sub-sectors have increased the number of employees which confirms the developing character of IT sector.

Tab l e 1 0 Wo r k f o r c e i n I T i ndus t r y i n Se rb i a , a c c o r d i ng t o t he I T Sub - s e c t o r and Company S i z e

IT industry sub-sector M

icro

en

terp

rises

Smal

l en

terp

rises

Med

ium

en

terp

rises

Big

ente

rpris

es

Tota

l IT

indu

stry

IT Channels - Wholesale and retail 102 570 893 272 1.837 IT services 1.018 2.391 1.811 985 6.205 Software 1.160 1.031 289 0 2.480 PC Hardware 818 314 0 0 1.132 Other – unclassified 575 0 0 0 575 Converged industry 619 635 333 0 1.587 Total 4.292 4.941 3.326 1.257 13.816 Total [%] 31,1% 35,8% 24,1% 9,1% 100,0%

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

Key comments for the above table:

The employment in IT service sub-sector increased significantly above average in 2010 and achieved the number of 6,205 employees, which is 44.9% of total IT sector work force. Following is the Software sub-sector with 17.9% share in total IT sector work force.

SME segment in IT services sub-sector also shows a significant number of employees (4.202). More than half employees from SME segment work in IT service sub-sector.

Average number of employees in SME segment is 31.7 - almost 4 times more than the IT industry average (8.6).

Slightly more than 4% employees (314) from the whole SME segment work in the PC hardware sub-sector. Micro enterprises are dominating in PC equipment sub-sector total employment.

F i gu r e 1 1 Sha r e o f I T I ndus t r y S ub - s e c t o r (%) i n To t a l Numbe r o f Emp loyee s i n I CT I ndus t r y

13%

45%18%

8%4%

12% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

13%

45% 18%

8%

4% 12% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

22 22

Workforce in Serbian IT Industry

Serbian IT industry employed 13,816 workers in 2010. This is a modest number in comparison to 1.45 million, which is the number of the entire workforce (without entrepreneurs). However, the estimate is that this number is just a smaller part of much bigger ICT work corpus of nearly 50,000 ICT specialists. Besides IT industry, the estimates indicate that around 35,000 ICT specialists work in telecommunications sector, end user companies (which are IT users) and entrepreneurial ICT sector.

In comparison to 2007 (a year before the crisis), all IT sub-sectors have increased the number of employees which confirms the developing character of IT sector.

Tab l e 1 0 Wo r k f o r c e i n I T i ndus t r y i n Se rb i a , a c c o r d i ng t o t he I T Sub - s e c t o r and Company S i z e

IT industry sub-sector M

icro

en

terp

rises

Smal

l en

terp

rises

Med

ium

en

terp

rises

Big

ente

rpris

es

Tota

l IT

indu

stry

IT Channels - Wholesale and retail 102 570 893 272 1.837 IT services 1.018 2.391 1.811 985 6.205 Software 1.160 1.031 289 0 2.480 PC Hardware 818 314 0 0 1.132 Other – unclassified 575 0 0 0 575 Converged industry 619 635 333 0 1.587 Total 4.292 4.941 3.326 1.257 13.816 Total [%] 31,1% 35,8% 24,1% 9,1% 100,0%

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

Key comments for the above table:

The employment in IT service sub-sector increased significantly above average in 2010 and achieved the number of 6,205 employees, which is 44.9% of total IT sector work force. Following is the Software sub-sector with 17.9% share in total IT sector work force.

SME segment in IT services sub-sector also shows a significant number of employees (4.202). More than half employees from SME segment work in IT service sub-sector.

Average number of employees in SME segment is 31.7 - almost 4 times more than the IT industry average (8.6).

Slightly more than 4% employees (314) from the whole SME segment work in the PC hardware sub-sector. Micro enterprises are dominating in PC equipment sub-sector total employment.

F i gu r e 1 1 Sha r e o f I T I ndus t r y S ub - s e c t o r (%) i n To t a l Numbe r o f Emp loyee s i n I CT I ndus t r y

13%

45%18%

8%4%

12% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

23

Revenue in the Serbian IT Industry

Revenue (or turnover) of the IT industry represents the revenue of the whole IT sector - all IT companies revenues summarized. Compared to the value of IT market, IT industry revenue is typically two times bigger, due to the selling multiplications in the distribution channel, export and the non-IT part of companies’ business.

Serbian IT Industry accomplished revenues of more than €1.1 billion in 2010. Based on previous researches, it is estimated that the revenues from the IT goods and services make around 80% of IT industry revenues (nearly €900 million), while the remaining 20% come from converging and non-ICT products.

Tab l e 1 1 R evenue i n Se rb i an I T I ndus t r y [€ mi l l i on ] , a c c o rd i ng t o t he Sub - s e c t o r and Company

S i z e

IT industry sub-sector

Mic

ro

ente

rpris

es

Smal

l en

terp

rises

Med

ium

en

terp

rises

Big

ente

rpris

es

Tota

l IT

indu

stry

IT Channels - Wholesale and retail 14,1 101,0 302,5 34,3 451,9 IT services 52,3 147,7 104,9 79,4 384,2 Software 34,2 33,2 9,1 - 76,5 PC Hardware 62,4 19,7 - - 82,1 Other – unclassified 14,7 - - - 14,7 Converged industry 34,7 41,3 20,3 - 96,4 Total 212,3 342,9 436,8 113,7 1,105,8 Total [%] 19,2% 31,0% 39,5% 10,3% 100,0%

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

Key comments for the above table:

In comparison with 2009, total IT industry revenue in 2010 went up by 5% - similarly to the entire IT market growth.

The biggest revenue of 41% IT industry sector revenues were in the Wholesale and Retail sub-sector (€451.9 million). Following is IT service sub-sector with €384.2 million (35%).

With the revenues of almost €780 million, SME gathered 70% share in total IT industry revenues. In the SME segment, the biggest revenues also came from the Wholesale and Retail sub-sector – more than the half of this segment revenue.

F i gu r e 1 2 S t r u c tu r e o f I T I ndus t r y S ub -Sec to r (%) i n R evenues

41%

35%

7%

7%1%9% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

41%

35%

7%

7% 1%

9% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

23

22

Workforce in Serbian IT Industry

Serbian IT industry employed 13,816 workers in 2010. This is a modest number in comparison to 1.45 million, which is the number of the entire workforce (without entrepreneurs). However, the estimate is that this number is just a smaller part of much bigger ICT work corpus of nearly 50,000 ICT specialists. Besides IT industry, the estimates indicate that around 35,000 ICT specialists work in telecommunications sector, end user companies (which are IT users) and entrepreneurial ICT sector.

In comparison to 2007 (a year before the crisis), all IT sub-sectors have increased the number of employees which confirms the developing character of IT sector.

Tab l e 1 0 Wo r k f o r c e i n I T i ndus t r y i n Se rb i a , a c c o r d i ng t o t he I T Sub - s e c t o r and Company S i z e

IT industry sub-sector

Mic

ro

ente

rpris

es

Smal

l en

terp

rises

Med

ium

en

terp

rises

Big

ente

rpris

es

Tota

l IT

indu

stry

IT Channels - Wholesale and retail 102 570 893 272 1.837 IT services 1.018 2.391 1.811 985 6.205 Software 1.160 1.031 289 0 2.480 PC Hardware 818 314 0 0 1.132 Other – unclassified 575 0 0 0 575 Converged industry 619 635 333 0 1.587 Total 4.292 4.941 3.326 1.257 13.816 Total [%] 31,1% 35,8% 24,1% 9,1% 100,0%

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

Key comments for the above table:

The employment in IT service sub-sector increased significantly above average in 2010 and achieved the number of 6,205 employees, which is 44.9% of total IT sector work force. Following is the Software sub-sector with 17.9% share in total IT sector work force.

SME segment in IT services sub-sector also shows a significant number of employees (4.202). More than half employees from SME segment work in IT service sub-sector.

Average number of employees in SME segment is 31.7 - almost 4 times more than the IT industry average (8.6).

Slightly more than 4% employees (314) from the whole SME segment work in the PC hardware sub-sector. Micro enterprises are dominating in PC equipment sub-sector total employment.

F i gu r e 1 1 Sha r e o f I T I ndus t r y S ub - s e c t o r (%) i n To t a l Numbe r o f Emp loyee s i n I CT I ndus t r y

13%

45%18%

8%4%

12% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

13%

45% 18%

8%

4% 12% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

22 22

Workforce in Serbian IT Industry

Serbian IT industry employed 13,816 workers in 2010. This is a modest number in comparison to 1.45 million, which is the number of the entire workforce (without entrepreneurs). However, the estimate is that this number is just a smaller part of much bigger ICT work corpus of nearly 50,000 ICT specialists. Besides IT industry, the estimates indicate that around 35,000 ICT specialists work in telecommunications sector, end user companies (which are IT users) and entrepreneurial ICT sector.

In comparison to 2007 (a year before the crisis), all IT sub-sectors have increased the number of employees which confirms the developing character of IT sector.

Tab l e 1 0 Wo r k f o r c e i n I T i ndus t r y i n Se rb i a , a c c o r d i ng t o t he I T Sub - s e c t o r and Company S i z e

IT industry sub-sector

Mic

ro

ente

rpris

es

Smal

l en

terp

rises

Med

ium

en

terp

rises

Big

ente

rpris

es

Tota

l IT

indu

stry

IT Channels - Wholesale and retail 102 570 893 272 1.837 IT services 1.018 2.391 1.811 985 6.205 Software 1.160 1.031 289 0 2.480 PC Hardware 818 314 0 0 1.132 Other – unclassified 575 0 0 0 575 Converged industry 619 635 333 0 1.587 Total 4.292 4.941 3.326 1.257 13.816 Total [%] 31,1% 35,8% 24,1% 9,1% 100,0%

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

Key comments for the above table:

The employment in IT service sub-sector increased significantly above average in 2010 and achieved the number of 6,205 employees, which is 44.9% of total IT sector work force. Following is the Software sub-sector with 17.9% share in total IT sector work force.

SME segment in IT services sub-sector also shows a significant number of employees (4.202). More than half employees from SME segment work in IT service sub-sector.

Average number of employees in SME segment is 31.7 - almost 4 times more than the IT industry average (8.6).

Slightly more than 4% employees (314) from the whole SME segment work in the PC hardware sub-sector. Micro enterprises are dominating in PC equipment sub-sector total employment.

F i gu r e 1 1 Sha r e o f I T I ndus t r y S ub - s e c t o r (%) i n To t a l Numbe r o f Emp loyee s i n I CT I ndus t r y

13%

45%18%

8%4%

12% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

23

Revenue in the Serbian IT Industry

Revenue (or turnover) of the IT industry represents the revenue of the whole IT sector - all IT companies revenues summarized. Compared to the value of IT market, IT industry revenue is typically two times bigger, due to the selling multiplications in the distribution channel, export and the non-IT part of companies’ business.

Serbian IT Industry accomplished revenues of more than €1.1 billion in 2010. Based on previous researches, it is estimated that the revenues from the IT goods and services make around 80% of IT industry revenues (nearly €900 million), while the remaining 20% come from converging and non-ICT products.

Tab l e 1 1 R evenue i n Se rb i an I T I ndus t r y [€ mi l l i on ] , a c c o rd i ng t o t he Sub - s e c t o r and Company

S i z e

IT industry sub-sector

Mic

ro

ente

rpris

es

Smal

l en

terp

rises

Med

ium

en

terp

rises

Big

ente

rpris

es

Tota

l IT

indu

stry

IT Channels - Wholesale and retail 14,1 101,0 302,5 34,3 451,9 IT services 52,3 147,7 104,9 79,4 384,2 Software 34,2 33,2 9,1 - 76,5 PC Hardware 62,4 19,7 - - 82,1 Other – unclassified 14,7 - - - 14,7 Converged industry 34,7 41,3 20,3 - 96,4 Total 212,3 342,9 436,8 113,7 1,105,8 Total [%] 19,2% 31,0% 39,5% 10,3% 100,0%

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

Key comments for the above table:

In comparison with 2009, total IT industry revenue in 2010 went up by 5% - similarly to the entire IT market growth.

The biggest revenue of 41% IT industry sector revenues were in the Wholesale and Retail sub-sector (€451.9 million). Following is IT service sub-sector with €384.2 million (35%).

With the revenues of almost €780 million, SME gathered 70% share in total IT industry revenues. In the SME segment, the biggest revenues also came from the Wholesale and Retail sub-sector – more than the half of this segment revenue.

F i gu r e 1 2 S t r u c tu r e o f I T I ndus t r y S ub -Sec to r (%) i n R evenues

41%

35%

7%

7%1%9% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

41%

35%

7%

7% 1%

9% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

23

24

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

Added Value in the Serbian IT Industry

IT companies have accomplished added value amounting to €367 million, which is 33% of the IT industry revenues. This amount makes 1.2 % of Serbian GDP.

Tab l e 1 2 Added Va l ue i n t he Se rb i an I T I ndus t r y [€ mi l l i on ] , 2 010 .

IT industry sub-sector

Mic

ro

ente

rpris

es

Smal

l en

terp

rises

Med

ium

en

terp

rises

Big

ente

rpris

es

Tota

l IT

indu

stry

IT Channels - Wholesale and retail 1,6 11,2 25,4 3,1 41,4 IT services 29,2 76,2 61,5 41,2 208,1 Software 24,1 26,2 7,3 0,0 57,6 PC Hardware 9,6 3,5 0,0 0,0 13,0 Other – unclassified 7,9 0,0 0,0 0,0 7,9 Converged industry 12,1 15,5 11,9 0,0 39,5 Total 84,5 132,6 106,2 44,3 367,5 Total [%] 23,0% 36,1% 28,9% 12,0% 100,0%

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

Key comments for the above table:

IT services sub-sector with 57% share achieved the highest added value (€208 million), while the shares of other sub-sectors were significantly lower.

The SME segment with a 65% share in total added value of the IT industry accomplished €240 million in 2010.

In addition, In the SME segment the biggest part of added value came from IT service sub-sector. Added value in SME segment was 8.5% higher than the IT industry average.

The IT service segment began forming the most challenging market. System integrators and software companies who recognized the fast growing service market and became attached to it, achieved success. Additionally, companies that collaborated with global vendors progressed rapidly thanks to their prestigious international experience and knowledge.

International vendors significantly strengthened their local presence during the past few years by establishing their own companies for global services. Microsoft, Cisco and Red Hat have set up their development centers in Belgrade, one of the few in the world.

International IT companies are advancing into the Serbian IT market attracted by its potential. Local companies will face a strong globalization effect, but at the same time, the global IT companies have to localize – which means they will have to establish their own companies and local offices and employ local staff.

24 24

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

Added Value in the Serbian IT Industry

IT companies have accomplished added value amounting to €367 million, which is 33% of the IT industry revenues. This amount makes 1.2 % of Serbian GDP.

Tab l e 1 2 Added Va l ue i n t he Se rb i an I T I ndus t r y [€ mi l l i on ] , 2 010 .

IT industry sub-sector

Mic

ro

ente

rpris

es

Smal

l en

terp

rises

Med

ium

en

terp

rises

Big

ente

rpris

es

Tota

l IT

indu

stry

IT Channels - Wholesale and retail 1,6 11,2 25,4 3,1 41,4 IT services 29,2 76,2 61,5 41,2 208,1 Software 24,1 26,2 7,3 0,0 57,6 PC Hardware 9,6 3,5 0,0 0,0 13,0 Other – unclassified 7,9 0,0 0,0 0,0 7,9 Converged industry 12,1 15,5 11,9 0,0 39,5 Total 84,5 132,6 106,2 44,3 367,5 Total [%] 23,0% 36,1% 28,9% 12,0% 100,0%

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

Key comments for the above table:

IT services sub-sector with 57% share achieved the highest added value (€208 million), while the shares of other sub-sectors were significantly lower.

The SME segment with a 65% share in total added value of the IT industry accomplished €240 million in 2010.

In addition, In the SME segment the biggest part of added value came from IT service sub-sector. Added value in SME segment was 8.5% higher than the IT industry average.

The IT service segment began forming the most challenging market. System integrators and software companies who recognized the fast growing service market and became attached to it, achieved success. Additionally, companies that collaborated with global vendors progressed rapidly thanks to their prestigious international experience and knowledge.

International vendors significantly strengthened their local presence during the past few years by establishing their own companies for global services. Microsoft, Cisco and Red Hat have set up their development centers in Belgrade, one of the few in the world.

International IT companies are advancing into the Serbian IT market attracted by its potential. Local companies will face a strong globalization effect, but at the same time, the global IT companies have to localize – which means they will have to establish their own companies and local offices and employ local staff.

25

F i gu r e 1 3 Sha r e o f t he Va l ue Added ( %) i n R evenues o f I CT Indus t r y S ub - s e c t o r s

11%

57%

16%

3%2%11% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

Net Assets of the Serbian IT Industry

Serbian IT industry continued to grow in 2010 despite the crisis with around €256 million of net assets [see Terminology]. Compared to 2006, when the IT industry net assets were round €150 million, the industry accomplished an impressive 58% growth. This trend is “spiritus movens” for the private sector, which dominates in IT industry. The high return rates on net assets will certainly attract foreign investors willing to take risk and use the opportunity for making a good profit. It is certain that IT services and Software sub-sectors have a good perspective.

Tab l e 1 3 Ne t A s s e t s o f Se rb i an I T I ndus t r y [€ mi l l i on ] , 2 010

IT industry Sub-Sector

Mic

ro

ente

rpris

es

Smal

l en

terp

rises

Med

ium

en

terp

rises

Big

ente

rpris

es

Tota

l IT

indu

stry

IT Channels - Wholesale and retail 1,0 6,4 21,1 0,2 28,7

IT services 23,4 58,9 33,3 35,1 150,8

Software 10,4 18,0 3,7 - 32,1

PC Hardware 9,7 4,0 - - 13,7

Other – unclassified 2,8 - - - 2,8

Converged industry 9,0 12,6 6,3 - 27,9

Total 56,4 99,9 64,5 35,3 256,1

Total [%] 22,0% 39,0% 25,2% 13,8% 100,0% Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

Key comments for the above table:

The highest volumes of assets, over €150 million, which form 59% of the IT industry net assets, own companies in the IT service sub-sector.

With €164 million, the SME share in IT industry net assets in 2010 was 64%.

F i gu r e 1 4 S t r u c tu r e o f I T I ndus t r y S ub - s e c t o r (%) i n Ne t A s s e t s

11%

57%

16%

3% 2%

11% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

25

24

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

Added Value in the Serbian IT Industry

IT companies have accomplished added value amounting to €367 million, which is 33% of the IT industry revenues. This amount makes 1.2 % of Serbian GDP.

Tab l e 1 2 Added Va l ue i n t he Se rb i an I T I ndus t r y [€ mi l l i on ] , 2 010 .

IT industry sub-sector

Mic

ro

ente

rpris

es

Smal

l en

terp

rises

Med

ium

en

terp

rises

Big

ente

rpris

es

Tota

l IT

indu

stry

IT Channels - Wholesale and retail 1,6 11,2 25,4 3,1 41,4 IT services 29,2 76,2 61,5 41,2 208,1 Software 24,1 26,2 7,3 0,0 57,6 PC Hardware 9,6 3,5 0,0 0,0 13,0 Other – unclassified 7,9 0,0 0,0 0,0 7,9 Converged industry 12,1 15,5 11,9 0,0 39,5 Total 84,5 132,6 106,2 44,3 367,5 Total [%] 23,0% 36,1% 28,9% 12,0% 100,0%

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

Key comments for the above table:

IT services sub-sector with 57% share achieved the highest added value (€208 million), while the shares of other sub-sectors were significantly lower.

The SME segment with a 65% share in total added value of the IT industry accomplished €240 million in 2010.

In addition, In the SME segment the biggest part of added value came from IT service sub-sector. Added value in SME segment was 8.5% higher than the IT industry average.

The IT service segment began forming the most challenging market. System integrators and software companies who recognized the fast growing service market and became attached to it, achieved success. Additionally, companies that collaborated with global vendors progressed rapidly thanks to their prestigious international experience and knowledge.

International vendors significantly strengthened their local presence during the past few years by establishing their own companies for global services. Microsoft, Cisco and Red Hat have set up their development centers in Belgrade, one of the few in the world.

International IT companies are advancing into the Serbian IT market attracted by its potential. Local companies will face a strong globalization effect, but at the same time, the global IT companies have to localize – which means they will have to establish their own companies and local offices and employ local staff.

24 24

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

Added Value in the Serbian IT Industry

IT companies have accomplished added value amounting to €367 million, which is 33% of the IT industry revenues. This amount makes 1.2 % of Serbian GDP.

Tab l e 1 2 Added Va l ue i n t he Se rb i an I T I ndus t r y [€ mi l l i on ] , 2 010 .

IT industry sub-sector

Mic

ro

ente

rpris

es

Smal

l en

terp

rises

Med

ium

en

terp

rises

Big

ente

rpris

es

Tota

l IT

indu

stry

IT Channels - Wholesale and retail 1,6 11,2 25,4 3,1 41,4 IT services 29,2 76,2 61,5 41,2 208,1 Software 24,1 26,2 7,3 0,0 57,6 PC Hardware 9,6 3,5 0,0 0,0 13,0 Other – unclassified 7,9 0,0 0,0 0,0 7,9 Converged industry 12,1 15,5 11,9 0,0 39,5 Total 84,5 132,6 106,2 44,3 367,5 Total [%] 23,0% 36,1% 28,9% 12,0% 100,0%

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

Key comments for the above table:

IT services sub-sector with 57% share achieved the highest added value (€208 million), while the shares of other sub-sectors were significantly lower.

The SME segment with a 65% share in total added value of the IT industry accomplished €240 million in 2010.

In addition, In the SME segment the biggest part of added value came from IT service sub-sector. Added value in SME segment was 8.5% higher than the IT industry average.

The IT service segment began forming the most challenging market. System integrators and software companies who recognized the fast growing service market and became attached to it, achieved success. Additionally, companies that collaborated with global vendors progressed rapidly thanks to their prestigious international experience and knowledge.

International vendors significantly strengthened their local presence during the past few years by establishing their own companies for global services. Microsoft, Cisco and Red Hat have set up their development centers in Belgrade, one of the few in the world.

International IT companies are advancing into the Serbian IT market attracted by its potential. Local companies will face a strong globalization effect, but at the same time, the global IT companies have to localize – which means they will have to establish their own companies and local offices and employ local staff.

25

F i gu r e 1 3 Sha r e o f t he Va l ue Added ( %) i n R evenues o f I CT Indus t r y S ub - s e c t o r s

11%

57%

16%

3%2%11% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

Net Assets of the Serbian IT Industry

Serbian IT industry continued to grow in 2010 despite the crisis with around €256 million of net assets [see Terminology]. Compared to 2006, when the IT industry net assets were round €150 million, the industry accomplished an impressive 58% growth. This trend is “spiritus movens” for the private sector, which dominates in IT industry. The high return rates on net assets will certainly attract foreign investors willing to take risk and use the opportunity for making a good profit. It is certain that IT services and Software sub-sectors have a good perspective.

Tab l e 1 3 Ne t A s s e t s o f Se rb i an I T I ndus t r y [€ mi l l i on ] , 2 010

IT industry Sub-Sector

Mic

ro

ente

rpris

es

Smal

l en

terp

rises

Med

ium

en

terp

rises

Big

ente

rpris

es

Tota

l IT

indu

stry

IT Channels - Wholesale and retail 1,0 6,4 21,1 0,2 28,7

IT services 23,4 58,9 33,3 35,1 150,8

Software 10,4 18,0 3,7 - 32,1

PC Hardware 9,7 4,0 - - 13,7

Other – unclassified 2,8 - - - 2,8

Converged industry 9,0 12,6 6,3 - 27,9

Total 56,4 99,9 64,5 35,3 256,1

Total [%] 22,0% 39,0% 25,2% 13,8% 100,0% Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

Key comments for the above table:

The highest volumes of assets, over €150 million, which form 59% of the IT industry net assets, own companies in the IT service sub-sector.

With €164 million, the SME share in IT industry net assets in 2010 was 64%.

F i gu r e 1 4 S t r u c tu r e o f I T I ndus t r y S ub - s e c t o r (%) i n Ne t A s s e t s

11%

57%

16%

3% 2%

11% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

25

26

11%

59%

13%

5%1%

11% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

When it comes to geographic distribution of ICT companies in Serbia, most companies are located in Belgrade, Nis and Novi Sad. The vast majority of other municipalities have an insignificant concentration of ICT companies.

IT Park Indjija

Building of “IT Park” in Indjija began in July of 2011. In the first phase, 25.000 m2 of office space would provide jobs for 2.500 staff according to the plan. Completion of this investment, worth €50 million, will probably be in the mid-2012.

There was an announcement for Project for building “IT Park” in Indjija, worth 600 million USD, in September 2007, but it stopped due to the word economic crisis. The investor, Indian company “Embassy Group“, announced building of 250,000 m2 office space in the period of five years, up to 2013, making that space the Europe’s largest. The Park should provide housing to IT services and technology providers employing up to 25,000 individuals (though not exclusively IT experts).

Potentials of the standardization of Serbian companies

When it comes to the standardization of Serbian companies, the general conclusions appears to be that the demand from foreign partners importing from Serbia drives it. However, one can conclude that, in many cases companies are not aware which set of standards they need to introduce, nor where or how they can get those standards. These issues significantly undermine the competitiveness of Serbian industry.

Lack of specialization among Serbian IT companies has been recognized as a big issue. Serbian market is not big enough, so IT companies do not have the incentive to specialize in any specific areas. In order to survive, they need to cover a broad scope of activities. Many, if not most of micro and SME companies tend to take the approach of being able to perform any kind of activity, even though some of them might be doing that for the first time. Moreover, there is no local offer of human resources with specialization in particular areas since most of the IT professionals have a broad expertise. If companies need professionals with specialization in certain fields, they would rather train some of their existing staff than engage external professionals or companies with the specialization in the required field.

11%

59%

13%

5% 1%

11% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

26 26

11%

59%

13%

5%1%

11% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

When it comes to geographic distribution of ICT companies in Serbia, most companies are located in Belgrade, Nis and Novi Sad. The vast majority of other municipalities have an insignificant concentration of ICT companies.

IT Park Indjija

Building of “IT Park” in Indjija began in July of 2011. In the first phase, 25.000 m2 of office space would provide jobs for 2.500 staff according to the plan. Completion of this investment, worth €50 million, will probably be in the mid-2012.

There was an announcement for Project for building “IT Park” in Indjija, worth 600 million USD, in September 2007, but it stopped due to the word economic crisis. The investor, Indian company “Embassy Group“, announced building of 250,000 m2 office space in the period of five years, up to 2013, making that space the Europe’s largest. The Park should provide housing to IT services and technology providers employing up to 25,000 individuals (though not exclusively IT experts).

Potentials of the standardization of Serbian companies

When it comes to the standardization of Serbian companies, the general conclusions appears to be that the demand from foreign partners importing from Serbia drives it. However, one can conclude that, in many cases companies are not aware which set of standards they need to introduce, nor where or how they can get those standards. These issues significantly undermine the competitiveness of Serbian industry.

Lack of specialization among Serbian IT companies has been recognized as a big issue. Serbian market is not big enough, so IT companies do not have the incentive to specialize in any specific areas. In order to survive, they need to cover a broad scope of activities. Many, if not most of micro and SME companies tend to take the approach of being able to perform any kind of activity, even though some of them might be doing that for the first time. Moreover, there is no local offer of human resources with specialization in particular areas since most of the IT professionals have a broad expertise. If companies need professionals with specialization in certain fields, they would rather train some of their existing staff than engage external professionals or companies with the specialization in the required field.

27

IT and Internet Usage Since 2006, Statistical Office of the Republic of Serbia publishes annually statistics of ICT usage in households and businesses (RZS 2006, 2007, 2008, 2009, 2010, 2011). The report for 2011 showed that 98,9% of households own TV sets, 82,5% have mobile phones, 52,1% personal computers and 15,5% laptop computers. Ownership of ICT equipment is mostly concentrated in the urban population with a monthly income of more than €600 (87,1%).

The overall usage of computers in Serbia is still unsatisfactory, with 40.1% of the population having no access to computers. The number of users has increased by a solid 3.5% in 2011. Among different groups in the population, students are the most active in computer use (99.5%), followed by employees (74.2%). In real figures, more than 2.5 million people in Serbia use computers every day, which is about 200,000 more than in 2010.

Internet access In Serbia has 41.2% of households, which is 2.2% more than in 2010. In Belgrade, 51.6% of households have Internet access, in Vojvodina 42.0% and in Central Serbia 36.3%. Digital divide (gap) in both economical and geographical spheres is apparent.

F i gu r e 1 5 D i g i t a l D i v i d e . Househo l d s w i t h I n t e r ne t Connec t i o n , b y Mon th l y I n comes L e ve l

Source: Statistical Office of the Republic of Serbia

The Internet is mostly accessed by DSL (ADSL) connections (50,6%), followed by other Cable/LAN connections (29,6%) and WAP/GPRS (24,1%). In 2011, Internet access through modem/dial-up connections has decreased by 7.8%, as a direct result of recent investments in broadband infrastructure.

In Serbia, 1.9 million people use the Internet on a daily basis. Most of them use the Internet at home (86.4%). The survey estimates that more than 680.000 people use e-Government services in Serbia, which represents an increase of 330.000 compared to the data from 2010.

Use of ICT within companies is more widely spread than in households, with 98.1% of companies using computers in running of business. All large and medium-sized companies (100%) own computers, while the percentage is a bit smaller within micro- and small-sized enterprises (98.0%). Among companies that use computers, 79.7% have Wire-based LAN, 57.3% Intranet, 46.9% Wireless LAN and 13.7% Extranet (RZS 2010).

The majority of companies (97.2%) in Serbia have access to the Internet, using mostly DSL (xDSL, ADSL) as the connection (75.2%). The majority of companies that have Internet connection use e-Government

56,0%

31,4%

12,6%

100,0%

10,8% 17,5% 10,5%

38,8%

under 300 € 300 - 600 € 600 € andmore

All Housholds

Monthlyincomes

InternetConnection

56.0%

31.4%

12.6%

100.0%

10.8% 17.5% 10.5%

38.8%

under 300 € 300 - 600 € 600 € and more All Housholds

Monthlyincomes

InternetConnection

27

26

11%

59%

13%

5%1%

11% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

When it comes to geographic distribution of ICT companies in Serbia, most companies are located in Belgrade, Nis and Novi Sad. The vast majority of other municipalities have an insignificant concentration of ICT companies.

IT Park Indjija

Building of “IT Park” in Indjija began in July of 2011. In the first phase, 25.000 m2 of office space would provide jobs for 2.500 staff according to the plan. Completion of this investment, worth €50 million, will probably be in the mid-2012.

There was an announcement for Project for building “IT Park” in Indjija, worth 600 million USD, in September 2007, but it stopped due to the word economic crisis. The investor, Indian company “Embassy Group“, announced building of 250,000 m2 office space in the period of five years, up to 2013, making that space the Europe’s largest. The Park should provide housing to IT services and technology providers employing up to 25,000 individuals (though not exclusively IT experts).

Potentials of the standardization of Serbian companies

When it comes to the standardization of Serbian companies, the general conclusions appears to be that the demand from foreign partners importing from Serbia drives it. However, one can conclude that, in many cases companies are not aware which set of standards they need to introduce, nor where or how they can get those standards. These issues significantly undermine the competitiveness of Serbian industry.

Lack of specialization among Serbian IT companies has been recognized as a big issue. Serbian market is not big enough, so IT companies do not have the incentive to specialize in any specific areas. In order to survive, they need to cover a broad scope of activities. Many, if not most of micro and SME companies tend to take the approach of being able to perform any kind of activity, even though some of them might be doing that for the first time. Moreover, there is no local offer of human resources with specialization in particular areas since most of the IT professionals have a broad expertise. If companies need professionals with specialization in certain fields, they would rather train some of their existing staff than engage external professionals or companies with the specialization in the required field.

11%

59%

13%

5% 1%

11% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

26 26

11%

59%

13%

5%1%

11% IT Channels

IT services

Software

PC Hardware

Other - unclassified

Converged industry

Source: Register of Financial Statement and Solvency, SBRA, prepared on Mineco’s demand

When it comes to geographic distribution of ICT companies in Serbia, most companies are located in Belgrade, Nis and Novi Sad. The vast majority of other municipalities have an insignificant concentration of ICT companies.

IT Park Indjija

Building of “IT Park” in Indjija began in July of 2011. In the first phase, 25.000 m2 of office space would provide jobs for 2.500 staff according to the plan. Completion of this investment, worth €50 million, will probably be in the mid-2012.

There was an announcement for Project for building “IT Park” in Indjija, worth 600 million USD, in September 2007, but it stopped due to the word economic crisis. The investor, Indian company “Embassy Group“, announced building of 250,000 m2 office space in the period of five years, up to 2013, making that space the Europe’s largest. The Park should provide housing to IT services and technology providers employing up to 25,000 individuals (though not exclusively IT experts).

Potentials of the standardization of Serbian companies

When it comes to the standardization of Serbian companies, the general conclusions appears to be that the demand from foreign partners importing from Serbia drives it. However, one can conclude that, in many cases companies are not aware which set of standards they need to introduce, nor where or how they can get those standards. These issues significantly undermine the competitiveness of Serbian industry.

Lack of specialization among Serbian IT companies has been recognized as a big issue. Serbian market is not big enough, so IT companies do not have the incentive to specialize in any specific areas. In order to survive, they need to cover a broad scope of activities. Many, if not most of micro and SME companies tend to take the approach of being able to perform any kind of activity, even though some of them might be doing that for the first time. Moreover, there is no local offer of human resources with specialization in particular areas since most of the IT professionals have a broad expertise. If companies need professionals with specialization in certain fields, they would rather train some of their existing staff than engage external professionals or companies with the specialization in the required field.

27

IT and Internet Usage Since 2006, Statistical Office of the Republic of Serbia publishes annually statistics of ICT usage in households and businesses (RZS 2006, 2007, 2008, 2009, 2010, 2011). The report for 2011 showed that 98,9% of households own TV sets, 82,5% have mobile phones, 52,1% personal computers and 15,5% laptop computers. Ownership of ICT equipment is mostly concentrated in the urban population with a monthly income of more than €600 (87,1%).

The overall usage of computers in Serbia is still unsatisfactory, with 40.1% of the population having no access to computers. The number of users has increased by a solid 3.5% in 2011. Among different groups in the population, students are the most active in computer use (99.5%), followed by employees (74.2%). In real figures, more than 2.5 million people in Serbia use computers every day, which is about 200,000 more than in 2010.

Internet access In Serbia has 41.2% of households, which is 2.2% more than in 2010. In Belgrade, 51.6% of households have Internet access, in Vojvodina 42.0% and in Central Serbia 36.3%. Digital divide (gap) in both economical and geographical spheres is apparent.

F i gu r e 1 5 D i g i t a l D i v i d e . Househo l d s w i t h I n t e r ne t Connec t i o n , b y Mon th l y I n comes L e ve l

Source: Statistical Office of the Republic of Serbia

The Internet is mostly accessed by DSL (ADSL) connections (50,6%), followed by other Cable/LAN connections (29,6%) and WAP/GPRS (24,1%). In 2011, Internet access through modem/dial-up connections has decreased by 7.8%, as a direct result of recent investments in broadband infrastructure.

In Serbia, 1.9 million people use the Internet on a daily basis. Most of them use the Internet at home (86.4%). The survey estimates that more than 680.000 people use e-Government services in Serbia, which represents an increase of 330.000 compared to the data from 2010.

Use of ICT within companies is more widely spread than in households, with 98.1% of companies using computers in running of business. All large and medium-sized companies (100%) own computers, while the percentage is a bit smaller within micro- and small-sized enterprises (98.0%). Among companies that use computers, 79.7% have Wire-based LAN, 57.3% Intranet, 46.9% Wireless LAN and 13.7% Extranet (RZS 2010).

The majority of companies (97.2%) in Serbia have access to the Internet, using mostly DSL (xDSL, ADSL) as the connection (75.2%). The majority of companies that have Internet connection use e-Government

56,0%

31,4%

12,6%

100,0%

10,8% 17,5% 10,5%

38,8%

under 300 € 300 - 600 € 600 € andmore

All Housholds

Monthlyincomes

InternetConnection

56.0%

31.4%

12.6%

100.0%

10.8% 17.5% 10.5%

38.8%

under 300 € 300 - 600 € 600 € and more All Housholds

Monthlyincomes

InternetConnection

27

28

services (79.8%). Only 67.6% of companies that have Internet connection have their own company websites.

The survey also showed rather weak results in e-Commerce. Only 24.0% of companies that have the Internet were engaged in purchasing goods/services online (0.7% more than in 2009) and 20,7% of companies were approached through the Internet to deliver goods/services (0,7% more than in 2009).

According to the previous edition of (RZS 2010), only 11.5% of Serbian companies use Enterprise Resource Planning (ERP), most of which are large companies (43.1%) then medium-sized companies (17.8%) and finally, small companies (7.6%). Use of Customer Relationship Management (CRM) systems is even weaker - only 8.5%.

The survey showed that the usage of IT in Serbia is still in a developing phase. High penetration of IT into Serbian households and companies has been slowing down in the past two years, mostly due to the economic crisis. However, the main question is how much the ICT sector would be able to grow in the years of, and directly following, the recession. The Statistical Office data showed a great market potential in providing services for introduction of IT solutions such as ERP and CRM. Website development also has a good market potential. Demand for delivery of hardware solutions continues to remain high.

In their analysis, MINECO argues on the necessity of IT sector growth at 12.2% per year for the period 2011-2015 (5 years), otherwise the Serbian economy will fall into a deeper crisis (MINECO 2011). In that regard, the role of the Government is very important. In order to support the ICT sector, last year the Government of Serbia adopted a bylaw that gives subvention loans for purchasing domestically produced hardware and software. However, this action has not materialized so far.

28 28

services (79.8%). Only 67.6% of companies that have Internet connection have their own company websites.

The survey also showed rather weak results in e-Commerce. Only 24.0% of companies that have the Internet were engaged in purchasing goods/services online (0.7% more than in 2009) and 20,7% of companies were approached through the Internet to deliver goods/services (0,7% more than in 2009).

According to the previous edition of (RZS 2010), only 11.5% of Serbian companies use Enterprise Resource Planning (ERP), most of which are large companies (43.1%) then medium-sized companies (17.8%) and finally, small companies (7.6%). Use of Customer Relationship Management (CRM) systems is even weaker - only 8.5%.

The survey showed that the usage of IT in Serbia is still in a developing phase. High penetration of IT into Serbian households and companies has been slowing down in the past two years, mostly due to the economic crisis. However, the main question is how much the ICT sector would be able to grow in the years of, and directly following, the recession. The Statistical Office data showed a great market potential in providing services for introduction of IT solutions such as ERP and CRM. Website development also has a good market potential. Demand for delivery of hardware solutions continues to remain high.

In their analysis, MINECO argues on the necessity of IT sector growth at 12.2% per year for the period 2011-2015 (5 years), otherwise the Serbian economy will fall into a deeper crisis (MINECO 2011). In that regard, the role of the Government is very important. In order to support the ICT sector, last year the Government of Serbia adopted a bylaw that gives subvention loans for purchasing domestically produced hardware and software. However, this action has not materialized so far.

29

ICT Clusters and Support Organizations As seen earlier, Serbian ICT companies have a low degree of specialization since the majority of them are trying to be involved in a widespread set of business activities. This kind of business strategy limits networking and cooperation opportunities since the majority of companies are competing over the same market opportunities. However, in recent years, networking of companies increased, mostly related to the creation of consortia for tendering on public procurements and EU/internationally funded projects.

In recent years, Serbian IT companies have managed to create a strong presence on foreign markets through marketing of their own solutions, but also by being able to provide the highest-level quality outsourcing services and collaborating with IT companies worldwide. Thus, Serbia has emerged as a very interesting alternative location for development of sophisticated software.

The field research has confirmed that ICT companies from Novi Sad have much stronger networking and cooperation potential compared to the ones from Belgrade. Their relations with the University and Provincial Government are more substantial and dynamic than in Belgrade. Because of this cooperation, private and public actors (including the University) from Novi Sad have launched an initiative to set-up the Vojvodina ICT Cluster.

The ICT Net Cluster, established in 2011 by merger of two cluster initiatives, is located in Belgrade: The Serbian Software Cluster (SSC) was established in 2006 as a business association of 16 members (13 companies and 3 faculties) from Belgrade and Novi Sad. Main goal of the Cluster was provision of various kinds of services to the software industry nationwide, although their activities are mostly Belgrade-based. SSC has been recognized as an important partner in IT/software industry development by all key stakeholders in Serbia - from national line ministries through international development organizations to the Chamber of Commerce, business associations and private companies. The cluster has served a good role of communication between Government ministries and members of the clusters that include the most important software companies in Serbia. However, the cluster has failed to increase their membership with all remaining software companies, research centers and universities that are active in their field of mission.

Embedded.rs gathered 10 companies in the embedded sector, two universities and one research institute. Similar to the case of SSC, Embedded.rs became, in a short period, a good channel of communication between national line ministries and key private actors in the field of the embedded industry.

The Vojvodina ICT Cluster is a bottom-up initiative of 25 ICT companies from the Vojvodina, the Faculty of Technical Sciences in Novi Sad, the development agency Alma Mons – Novi Sad, VIP (Vojvodina Investment Promotion Agency) and the Centre for Competitiveness and Cluster Development.

The Cluster, formally registered in May 2010, saw its presentation to public in October 2010. The Cluster has strategic goals focused on better networking, joint advocacy and marketing, applying for EU/international grants and joint tendering.

VOICT members employ about 1,500 people and they reached annual turnover of 26 million Euros in 2009. In spite of the crisis, the cluster members realized annual growth of 23.4% (in 2008) and 30.61% (in 2009).

Although still in the phase of being established, Vojvodina ICT cluster will be one of the key players in the ICT field in Serbia, especially bearing in mind the number of ICT companies located in Novi Sad and the importance of the Faculty of Technical Sciences in Novi Sad.

29

28

services (79.8%). Only 67.6% of companies that have Internet connection have their own company websites.

The survey also showed rather weak results in e-Commerce. Only 24.0% of companies that have the Internet were engaged in purchasing goods/services online (0.7% more than in 2009) and 20,7% of companies were approached through the Internet to deliver goods/services (0,7% more than in 2009).

According to the previous edition of (RZS 2010), only 11.5% of Serbian companies use Enterprise Resource Planning (ERP), most of which are large companies (43.1%) then medium-sized companies (17.8%) and finally, small companies (7.6%). Use of Customer Relationship Management (CRM) systems is even weaker - only 8.5%.

The survey showed that the usage of IT in Serbia is still in a developing phase. High penetration of IT into Serbian households and companies has been slowing down in the past two years, mostly due to the economic crisis. However, the main question is how much the ICT sector would be able to grow in the years of, and directly following, the recession. The Statistical Office data showed a great market potential in providing services for introduction of IT solutions such as ERP and CRM. Website development also has a good market potential. Demand for delivery of hardware solutions continues to remain high.

In their analysis, MINECO argues on the necessity of IT sector growth at 12.2% per year for the period 2011-2015 (5 years), otherwise the Serbian economy will fall into a deeper crisis (MINECO 2011). In that regard, the role of the Government is very important. In order to support the ICT sector, last year the Government of Serbia adopted a bylaw that gives subvention loans for purchasing domestically produced hardware and software. However, this action has not materialized so far.

28 28

services (79.8%). Only 67.6% of companies that have Internet connection have their own company websites.

The survey also showed rather weak results in e-Commerce. Only 24.0% of companies that have the Internet were engaged in purchasing goods/services online (0.7% more than in 2009) and 20,7% of companies were approached through the Internet to deliver goods/services (0,7% more than in 2009).

According to the previous edition of (RZS 2010), only 11.5% of Serbian companies use Enterprise Resource Planning (ERP), most of which are large companies (43.1%) then medium-sized companies (17.8%) and finally, small companies (7.6%). Use of Customer Relationship Management (CRM) systems is even weaker - only 8.5%.

The survey showed that the usage of IT in Serbia is still in a developing phase. High penetration of IT into Serbian households and companies has been slowing down in the past two years, mostly due to the economic crisis. However, the main question is how much the ICT sector would be able to grow in the years of, and directly following, the recession. The Statistical Office data showed a great market potential in providing services for introduction of IT solutions such as ERP and CRM. Website development also has a good market potential. Demand for delivery of hardware solutions continues to remain high.

In their analysis, MINECO argues on the necessity of IT sector growth at 12.2% per year for the period 2011-2015 (5 years), otherwise the Serbian economy will fall into a deeper crisis (MINECO 2011). In that regard, the role of the Government is very important. In order to support the ICT sector, last year the Government of Serbia adopted a bylaw that gives subvention loans for purchasing domestically produced hardware and software. However, this action has not materialized so far.

29

ICT Clusters and Support Organizations As seen earlier, Serbian ICT companies have a low degree of specialization since the majority of them are trying to be involved in a widespread set of business activities. This kind of business strategy limits networking and cooperation opportunities since the majority of companies are competing over the same market opportunities. However, in recent years, networking of companies increased, mostly related to the creation of consortia for tendering on public procurements and EU/internationally funded projects.

In recent years, Serbian IT companies have managed to create a strong presence on foreign markets through marketing of their own solutions, but also by being able to provide the highest-level quality outsourcing services and collaborating with IT companies worldwide. Thus, Serbia has emerged as a very interesting alternative location for development of sophisticated software.

The field research has confirmed that ICT companies from Novi Sad have much stronger networking and cooperation potential compared to the ones from Belgrade. Their relations with the University and Provincial Government are more substantial and dynamic than in Belgrade. Because of this cooperation, private and public actors (including the University) from Novi Sad have launched an initiative to set-up the Vojvodina ICT Cluster.

The ICT Net Cluster, established in 2011 by merger of two cluster initiatives, is located in Belgrade: The Serbian Software Cluster (SSC) was established in 2006 as a business association of 16 members (13 companies and 3 faculties) from Belgrade and Novi Sad. Main goal of the Cluster was provision of various kinds of services to the software industry nationwide, although their activities are mostly Belgrade-based. SSC has been recognized as an important partner in IT/software industry development by all key stakeholders in Serbia - from national line ministries through international development organizations to the Chamber of Commerce, business associations and private companies. The cluster has served a good role of communication between Government ministries and members of the clusters that include the most important software companies in Serbia. However, the cluster has failed to increase their membership with all remaining software companies, research centers and universities that are active in their field of mission.

Embedded.rs gathered 10 companies in the embedded sector, two universities and one research institute. Similar to the case of SSC, Embedded.rs became, in a short period, a good channel of communication between national line ministries and key private actors in the field of the embedded industry.

The Vojvodina ICT Cluster is a bottom-up initiative of 25 ICT companies from the Vojvodina, the Faculty of Technical Sciences in Novi Sad, the development agency Alma Mons – Novi Sad, VIP (Vojvodina Investment Promotion Agency) and the Centre for Competitiveness and Cluster Development.

The Cluster, formally registered in May 2010, saw its presentation to public in October 2010. The Cluster has strategic goals focused on better networking, joint advocacy and marketing, applying for EU/international grants and joint tendering.

VOICT members employ about 1,500 people and they reached annual turnover of 26 million Euros in 2009. In spite of the crisis, the cluster members realized annual growth of 23.4% (in 2008) and 30.61% (in 2009).

Although still in the phase of being established, Vojvodina ICT cluster will be one of the key players in the ICT field in Serbia, especially bearing in mind the number of ICT companies located in Novi Sad and the importance of the Faculty of Technical Sciences in Novi Sad.

29

30

NiCAT Ni CAT - Nis Cluster of Advanced Technologies to the list of abbreviations The Niš Cluster of Advanced Technologies is a cluster initiative that comprises 22 local companies, two scientific research institutions (Faculty of Electronic Engineering and Faculty of Mechanical Engineering – University of Niš) and three economical development support institutions (Regional Development Agency ORA JUG, Regional Chamber of Commerce and Business Incubator Niš). The Cluster represents companies from five different industries which are Electromedicine, Electronics and Automation, Electronics and Mechanical Engineering, ICT and Optoelectronics. The Niš Cluster of Advanced Technologies was formally registered in March 2011 and started its full operational work in October 2011. Its members employ about 400 people and reached a combined annual turnover of 11 million Euros in 2010. The Cluster´s goals are to increase the turnover of the cluster members both on national and international markets, strengthening of the capacities of the companies for technological development and innovations and the development of new technological products and services. Furthermore, the promotion of the City of Niš as a favorable location for business operations in the advanced technology field is also a strategic focus. The Serbian Chamber of Commerce also serves as a good role model in mobilizing and networking ICT sector companies and professionals. The Chamber has good communication lines and potential for policy advocacy, recognized by ICT companies. In cooperation with line ministries, SIEPA, clusters and business and professional organizations, the Chamber is active in organizing conferences, forums, international and domestic fairs, vocational training and other events that serve the purpose of development in the ICT sector. The Chamber is also active in organizing Business-to-Business (B2B) events, networking Serbian ICT companies with their peers from the Western Balkan region and other countries. The Chamber has developed good relationships with ICT companies in Montenegro and Croatia, and slightly less so with companies in Slovenia. Serbia Investment and Export Promotion Agency: The Serbian Investment and Export Promotion Agency (SIEPA) is a Government agency established in 2001 with the mission of assisting foreign investors and buyers on successful establishment of their businesses in Serbia, as well as supporting the export of Serbian industries and services abroad. SIEPA recognizes ICT and electronics as key industries in Serbia and actively promotes investment and export opportunities in these fields. In that regard, SIEPA is very active in helping Serbian companies with promotion at the most important ICT fairs, such as CeBIT and Embedded World. SIEPA is also active in organizing B2B and B2C events, as well as in providing financial support for the certification processes for Serbian companies.

B. EDUCATION AND HUMAN RESOURCE DEVELOPMENT This chapter provides the following information:

An overview of ICT labor market in Serbia ICT and tertiary education in Serbia Cooperation between Universities and the Private Sector ICT and vocational trainings Available skills and skills gaps

Overview of the ICT Labor Market According to the Skills Gaps Study, done by USAID in 2008, technical skills on Serbian ICT labor market are strong and stable (software development, hardware design, IT services and system integration). A total number of graduates in the technical areas relevant to ICT was 26,963 in 2005 (note that the number of graduates reflects technical studies in general).

The same study shows that in the surveyed IT companies, 63% employees are industry specific, while remaining 37% are in managerial and administrative positions. Around 21% of employees are in general management positions, project managers and sales.

30 30

NiCAT Ni CAT - Nis Cluster of Advanced Technologies to the list of abbreviations The Niš Cluster of Advanced Technologies is a cluster initiative that comprises 22 local companies, two scientific research institutions (Faculty of Electronic Engineering and Faculty of Mechanical Engineering – University of Niš) and three economical development support institutions (Regional Development Agency ORA JUG, Regional Chamber of Commerce and Business Incubator Niš). The Cluster represents companies from five different industries which are Electromedicine, Electronics and Automation, Electronics and Mechanical Engineering, ICT and Optoelectronics. The Niš Cluster of Advanced Technologies was formally registered in March 2011 and started its full operational work in October 2011. Its members employ about 400 people and reached a combined annual turnover of 11 million Euros in 2010. The Cluster´s goals are to increase the turnover of the cluster members both on national and international markets, strengthening of the capacities of the companies for technological development and innovations and the development of new technological products and services. Furthermore, the promotion of the City of Niš as a favorable location for business operations in the advanced technology field is also a strategic focus. The Serbian Chamber of Commerce also serves as a good role model in mobilizing and networking ICT sector companies and professionals. The Chamber has good communication lines and potential for policy advocacy, recognized by ICT companies. In cooperation with line ministries, SIEPA, clusters and business and professional organizations, the Chamber is active in organizing conferences, forums, international and domestic fairs, vocational training and other events that serve the purpose of development in the ICT sector. The Chamber is also active in organizing Business-to-Business (B2B) events, networking Serbian ICT companies with their peers from the Western Balkan region and other countries. The Chamber has developed good relationships with ICT companies in Montenegro and Croatia, and slightly less so with companies in Slovenia. Serbia Investment and Export Promotion Agency: The Serbian Investment and Export Promotion Agency (SIEPA) is a Government agency established in 2001 with the mission of assisting foreign investors and buyers on successful establishment of their businesses in Serbia, as well as supporting the export of Serbian industries and services abroad. SIEPA recognizes ICT and electronics as key industries in Serbia and actively promotes investment and export opportunities in these fields. In that regard, SIEPA is very active in helping Serbian companies with promotion at the most important ICT fairs, such as CeBIT and Embedded World. SIEPA is also active in organizing B2B and B2C events, as well as in providing financial support for the certification processes for Serbian companies.

B. EDUCATION AND HUMAN RESOURCE DEVELOPMENT This chapter provides the following information:

An overview of ICT labor market in Serbia ICT and tertiary education in Serbia Cooperation between Universities and the Private Sector ICT and vocational trainings Available skills and skills gaps

Overview of the ICT Labor Market According to the Skills Gaps Study, done by USAID in 2008, technical skills on Serbian ICT labor market are strong and stable (software development, hardware design, IT services and system integration). A total number of graduates in the technical areas relevant to ICT was 26,963 in 2005 (note that the number of graduates reflects technical studies in general).

The same study shows that in the surveyed IT companies, 63% employees are industry specific, while remaining 37% are in managerial and administrative positions. Around 21% of employees are in general management positions, project managers and sales.

31

F i gu r e 1 6 ICT , P e r c en t age o f Emp loyee s i n a l l R epo r t ed A c cusa t i on s ( s amp l e 1122 emp loyee s )

Source: USAID

The study also acknowledged that the number of marketing and sales managers is very low (only 1 %, according to USAID), although experts and local recognize these positions, companies as very important for future development and growth.

However, technical skills have been further growing in the few past years. In 2009, 3,256 ICT experts have graduated, from which 1.957 on the first level degree (B.Sc.), 1,233 on the second level (M.Sc.) and 66 on the third level degree (Ph.D.). There is a certain amount of graduated in 2009, which have enrolled for studies before the Bologna reforms of the Serbian High Education sector. In addition, the quotes for new ICT related enrollees are rising from year to year.

F i gu r e 1 7 Numbe r o f S t uden t s ( vo ca t i ona l and a c adem i c ) w i t h I CT T i t l e s , i n 2 009

Source: Mineco 2011

ICT and Higher Education The tradition of training personnel in electrical engineering in Serbia is over one century long. The need for qualified graduates in the field of information technologies was recognized in the ’80es within the Faculty of Electrical Engineering, Faculty of Mathematics and Faculty of Organizational Sciences, in Belgrade; Electronic Faculty in Nis; Faculty of Technical Science and Faculty for Natural and Mathematical Sciences, in Novi Sad. With around 700 annually graduating IT experts, the Faculties mentioned above form the backbone of Serbian tertiary education (Tertiary-type A) in the IT area, as well as the base for research and development in this area. There is almost the same number of IT

I Level (B.Sc)1.95760%

II Level (M.Sc)1.23338%

III Level (Ph.D)662%

I Level (B.Sc), 1,957, 60%

II Level (M.Sc), 1,233, 38%

III Level (Ph.D), 66,

2%

31

30

NiCAT Ni CAT - Nis Cluster of Advanced Technologies to the list of abbreviations The Niš Cluster of Advanced Technologies is a cluster initiative that comprises 22 local companies, two scientific research institutions (Faculty of Electronic Engineering and Faculty of Mechanical Engineering – University of Niš) and three economical development support institutions (Regional Development Agency ORA JUG, Regional Chamber of Commerce and Business Incubator Niš). The Cluster represents companies from five different industries which are Electromedicine, Electronics and Automation, Electronics and Mechanical Engineering, ICT and Optoelectronics. The Niš Cluster of Advanced Technologies was formally registered in March 2011 and started its full operational work in October 2011. Its members employ about 400 people and reached a combined annual turnover of 11 million Euros in 2010. The Cluster´s goals are to increase the turnover of the cluster members both on national and international markets, strengthening of the capacities of the companies for technological development and innovations and the development of new technological products and services. Furthermore, the promotion of the City of Niš as a favorable location for business operations in the advanced technology field is also a strategic focus. The Serbian Chamber of Commerce also serves as a good role model in mobilizing and networking ICT sector companies and professionals. The Chamber has good communication lines and potential for policy advocacy, recognized by ICT companies. In cooperation with line ministries, SIEPA, clusters and business and professional organizations, the Chamber is active in organizing conferences, forums, international and domestic fairs, vocational training and other events that serve the purpose of development in the ICT sector. The Chamber is also active in organizing Business-to-Business (B2B) events, networking Serbian ICT companies with their peers from the Western Balkan region and other countries. The Chamber has developed good relationships with ICT companies in Montenegro and Croatia, and slightly less so with companies in Slovenia. Serbia Investment and Export Promotion Agency: The Serbian Investment and Export Promotion Agency (SIEPA) is a Government agency established in 2001 with the mission of assisting foreign investors and buyers on successful establishment of their businesses in Serbia, as well as supporting the export of Serbian industries and services abroad. SIEPA recognizes ICT and electronics as key industries in Serbia and actively promotes investment and export opportunities in these fields. In that regard, SIEPA is very active in helping Serbian companies with promotion at the most important ICT fairs, such as CeBIT and Embedded World. SIEPA is also active in organizing B2B and B2C events, as well as in providing financial support for the certification processes for Serbian companies.

B. EDUCATION AND HUMAN RESOURCE DEVELOPMENT This chapter provides the following information:

An overview of ICT labor market in Serbia ICT and tertiary education in Serbia Cooperation between Universities and the Private Sector ICT and vocational trainings Available skills and skills gaps

Overview of the ICT Labor Market According to the Skills Gaps Study, done by USAID in 2008, technical skills on Serbian ICT labor market are strong and stable (software development, hardware design, IT services and system integration). A total number of graduates in the technical areas relevant to ICT was 26,963 in 2005 (note that the number of graduates reflects technical studies in general).

The same study shows that in the surveyed IT companies, 63% employees are industry specific, while remaining 37% are in managerial and administrative positions. Around 21% of employees are in general management positions, project managers and sales.

30 30

NiCAT Ni CAT - Nis Cluster of Advanced Technologies to the list of abbreviations The Niš Cluster of Advanced Technologies is a cluster initiative that comprises 22 local companies, two scientific research institutions (Faculty of Electronic Engineering and Faculty of Mechanical Engineering – University of Niš) and three economical development support institutions (Regional Development Agency ORA JUG, Regional Chamber of Commerce and Business Incubator Niš). The Cluster represents companies from five different industries which are Electromedicine, Electronics and Automation, Electronics and Mechanical Engineering, ICT and Optoelectronics. The Niš Cluster of Advanced Technologies was formally registered in March 2011 and started its full operational work in October 2011. Its members employ about 400 people and reached a combined annual turnover of 11 million Euros in 2010. The Cluster´s goals are to increase the turnover of the cluster members both on national and international markets, strengthening of the capacities of the companies for technological development and innovations and the development of new technological products and services. Furthermore, the promotion of the City of Niš as a favorable location for business operations in the advanced technology field is also a strategic focus. The Serbian Chamber of Commerce also serves as a good role model in mobilizing and networking ICT sector companies and professionals. The Chamber has good communication lines and potential for policy advocacy, recognized by ICT companies. In cooperation with line ministries, SIEPA, clusters and business and professional organizations, the Chamber is active in organizing conferences, forums, international and domestic fairs, vocational training and other events that serve the purpose of development in the ICT sector. The Chamber is also active in organizing Business-to-Business (B2B) events, networking Serbian ICT companies with their peers from the Western Balkan region and other countries. The Chamber has developed good relationships with ICT companies in Montenegro and Croatia, and slightly less so with companies in Slovenia. Serbia Investment and Export Promotion Agency: The Serbian Investment and Export Promotion Agency (SIEPA) is a Government agency established in 2001 with the mission of assisting foreign investors and buyers on successful establishment of their businesses in Serbia, as well as supporting the export of Serbian industries and services abroad. SIEPA recognizes ICT and electronics as key industries in Serbia and actively promotes investment and export opportunities in these fields. In that regard, SIEPA is very active in helping Serbian companies with promotion at the most important ICT fairs, such as CeBIT and Embedded World. SIEPA is also active in organizing B2B and B2C events, as well as in providing financial support for the certification processes for Serbian companies.

B. EDUCATION AND HUMAN RESOURCE DEVELOPMENT This chapter provides the following information:

An overview of ICT labor market in Serbia ICT and tertiary education in Serbia Cooperation between Universities and the Private Sector ICT and vocational trainings Available skills and skills gaps

Overview of the ICT Labor Market According to the Skills Gaps Study, done by USAID in 2008, technical skills on Serbian ICT labor market are strong and stable (software development, hardware design, IT services and system integration). A total number of graduates in the technical areas relevant to ICT was 26,963 in 2005 (note that the number of graduates reflects technical studies in general).

The same study shows that in the surveyed IT companies, 63% employees are industry specific, while remaining 37% are in managerial and administrative positions. Around 21% of employees are in general management positions, project managers and sales.

31

F i gu r e 1 6 ICT , P e r c en t age o f Emp loyee s i n a l l R epo r t ed A c cusa t i on s ( s amp l e 1122 emp loyee s )

Source: USAID

The study also acknowledged that the number of marketing and sales managers is very low (only 1 %, according to USAID), although experts and local recognize these positions, companies as very important for future development and growth.

However, technical skills have been further growing in the few past years. In 2009, 3,256 ICT experts have graduated, from which 1.957 on the first level degree (B.Sc.), 1,233 on the second level (M.Sc.) and 66 on the third level degree (Ph.D.). There is a certain amount of graduated in 2009, which have enrolled for studies before the Bologna reforms of the Serbian High Education sector. In addition, the quotes for new ICT related enrollees are rising from year to year.

F i gu r e 1 7 Numbe r o f S t uden t s ( vo ca t i ona l and a c adem i c ) w i t h I CT T i t l e s , i n 2 009

Source: Mineco 2011

ICT and Higher Education The tradition of training personnel in electrical engineering in Serbia is over one century long. The need for qualified graduates in the field of information technologies was recognized in the ’80es within the Faculty of Electrical Engineering, Faculty of Mathematics and Faculty of Organizational Sciences, in Belgrade; Electronic Faculty in Nis; Faculty of Technical Science and Faculty for Natural and Mathematical Sciences, in Novi Sad. With around 700 annually graduating IT experts, the Faculties mentioned above form the backbone of Serbian tertiary education (Tertiary-type A) in the IT area, as well as the base for research and development in this area. There is almost the same number of IT

I Level (B.Sc)1.95760%

II Level (M.Sc)1.23338%

III Level (Ph.D)662%

I Level (B.Sc), 1,957, 60%

II Level (M.Sc), 1,233, 38%

III Level (Ph.D), 66,

2%

31

Management7% Sales

8%

Admin, supprt,customer

servise16%

ProjectManagers

6%Industyspecific

63%

32

experts, graduating from other departments with skills related to information technologies. Tertiary- A type education is of strategic importance for ICT industry developing capacities.

ICT education is taught on 36 Tertiary Education institutions; among them14 are state owned, 5 belong to the private institutions and 17 are state owned Vocational Higher Schools. In addition, there are 17 cities with ICT tertiary education institutions, which helps recruiting a wide base of ICT students for two studying programs (Tertiary-type A and type B) and six studying sub-programs.

The Serbian ICT sector absorbs the vast majority of ICT graduates. This wasn´t always the case as for years Serbia faced a massive “brain drain” of ICT graduates and professionals. Considering the current raising of demand for ICT products and services, which is a general trend not only in Serbia but also throughout Europe; Serbian educational institutions face the challenge of attracting even more students and supplying more experts to the market.

Tab l e 1 4 Te r t i a r y - t ype A and t ype B Educa t i on P r og r ams i n Se rb i a

Serbian notation Type Level Studying programs- translation Title

ОSS Osnovne strukovne studije B I Basic Vocational studies B.Sc.

SSS Specijalističke strukovne studije B II Specialist Vocational studies S.Sc

ОАS Osnovne akademske studije A I Bachelor Academic studies B.Sc

DAS Diplomske akademske studije A II Graduate Academic studies - Masters

M.Sc

SAS Specijalističke akademske studije A II Specialist Academic studies S.Sc

DS Doktorske studije A III PhD studies Ph.D.

Capacity of new ICT Enrollees according to Study Programs

Total number of new ICT enrollees in school year 2011/2012 was 5,483, from which 2,986 students begun their ICT education with tertiary type A studying program (OAS) and remaining 2,497 with tertiary type B (OSS).

F i gu r e 1 8 Capac i t y o f New En ro l l e e s a c co rd i ng t o I C T S tudy i n g P r og r ams , i n 2011 /2012

Source: Mineco 2011

Key messages on the table and figure above:

OSS; 2.497

SSS; 457

OAS; 2.986

DAS; 2.269DS; 457

OSS, 2,497

SSS, 457 OAS, 2,986

DAS, 2,269 DS, 457

32 32

experts, graduating from other departments with skills related to information technologies. Tertiary- A type education is of strategic importance for ICT industry developing capacities.

ICT education is taught on 36 Tertiary Education institutions; among them14 are state owned, 5 belong to the private institutions and 17 are state owned Vocational Higher Schools. In addition, there are 17 cities with ICT tertiary education institutions, which helps recruiting a wide base of ICT students for two studying programs (Tertiary-type A and type B) and six studying sub-programs.

The Serbian ICT sector absorbs the vast majority of ICT graduates. This wasn´t always the case as for years Serbia faced a massive “brain drain” of ICT graduates and professionals. Considering the current raising of demand for ICT products and services, which is a general trend not only in Serbia but also throughout Europe; Serbian educational institutions face the challenge of attracting even more students and supplying more experts to the market.

Tab l e 1 4 Te r t i a r y - t ype A and t ype B Educa t i on P r og r ams i n Se rb i a

Serbian notation Type Level Studying programs- translation Title

ОSS Osnovne strukovne studije B I Basic Vocational studies B.Sc.

SSS Specijalističke strukovne studije B II Specialist Vocational studies S.Sc

ОАS Osnovne akademske studije A I Bachelor Academic studies B.Sc

DAS Diplomske akademske studije A II Graduate Academic studies - Masters

M.Sc

SAS Specijalističke akademske studije A II Specialist Academic studies S.Sc

DS Doktorske studije A III PhD studies Ph.D.

Capacity of new ICT Enrollees according to Study Programs

Total number of new ICT enrollees in school year 2011/2012 was 5,483, from which 2,986 students begun their ICT education with tertiary type A studying program (OAS) and remaining 2,497 with tertiary type B (OSS).

F i gu r e 1 8 Capac i t y o f New En ro l l e e s a c co rd i ng t o I C T S tudy i n g P r og r ams , i n 2011 /2012

Source: Mineco 2011

Key messages on the table and figure above:

OSS; 2.497

SSS; 457

OAS; 2.986

DAS; 2.269DS; 457

33

The OAS (dark blue color) presents the first level degree of tertiary- A type education (B.Sc.) and a large number (2.269 candidates or 75%) continues with further studies towards DAS and second level degree (M.Sc.), thus securing HR for ICT development.

The most successful in tertiary A type education, complete studies with DS (Doctoral Studies), and third level degree (Ph.D.), for which 457 places have been provided.

The education beginning with the OSS (dark green color) preserved mostly B.Sc. ICT experts (2,497 candidates) from which only 457 candidates (18%) continued the (SSS) specialist studies, which shows the practical character of these studies.

Number of new ICT enrollees according to cities – geographical availability

In Serbia, there are 17 cities where ICT studies are offered, providing a very good geographical coverage. Education of personnel near industry centers has always been Serbian historical (traditional) heritage, which turned out to be a good practice. Unfortunately, during the past two decades, the industry has gradually downsized, but these preserved educational capacities give hope that faster economic recovery is still possible.

F i gu r e 1 9 Numbe r o f New ICT En ro l l e e s a c co rd i ng t o C i t i e s , i n 2 011 /2012

Source: Mineco 2011

Number of New ICT Enrollees according to the Faculties’ Founders

ICT programs are offered at 36 tertiary education institutions; 14 among them are state owned, five are private and 17 are state owned (Vocational) Secondary Schools.

Low number of students opt for private faculties, only 445 (8%). This is because tradition and studying expenses are in favor of the state owned faculties. ICT studies on state owned faculties are in more than 80% covered from the budget.

0

500

1.000

1.500

2.000

2.500

Beograd Novi Sad Niš Čačak Ostali

0

500

1,000

1,500

2,000

2,500

Beograd Novi Sad Niš Čačak Ostali

33

32

experts, graduating from other departments with skills related to information technologies. Tertiary- A type education is of strategic importance for ICT industry developing capacities.

ICT education is taught on 36 Tertiary Education institutions; among them14 are state owned, 5 belong to the private institutions and 17 are state owned Vocational Higher Schools. In addition, there are 17 cities with ICT tertiary education institutions, which helps recruiting a wide base of ICT students for two studying programs (Tertiary-type A and type B) and six studying sub-programs.

The Serbian ICT sector absorbs the vast majority of ICT graduates. This wasn´t always the case as for years Serbia faced a massive “brain drain” of ICT graduates and professionals. Considering the current raising of demand for ICT products and services, which is a general trend not only in Serbia but also throughout Europe; Serbian educational institutions face the challenge of attracting even more students and supplying more experts to the market.

Tab l e 1 4 Te r t i a r y - t ype A and t ype B Educa t i on P r og r ams i n Se rb i a

Serbian notation Type Level Studying programs- translation Title

ОSS Osnovne strukovne studije B I Basic Vocational studies B.Sc.

SSS Specijalističke strukovne studije B II Specialist Vocational studies S.Sc

ОАS Osnovne akademske studije A I Bachelor Academic studies B.Sc

DAS Diplomske akademske studije A II Graduate Academic studies - Masters

M.Sc

SAS Specijalističke akademske studije A II Specialist Academic studies S.Sc

DS Doktorske studije A III PhD studies Ph.D.

Capacity of new ICT Enrollees according to Study Programs

Total number of new ICT enrollees in school year 2011/2012 was 5,483, from which 2,986 students begun their ICT education with tertiary type A studying program (OAS) and remaining 2,497 with tertiary type B (OSS).

F i gu r e 1 8 Capac i t y o f New En ro l l e e s a c co rd i ng t o I C T S tudy i n g P r og r ams , i n 2011 /2012

Source: Mineco 2011

Key messages on the table and figure above:

OSS; 2.497

SSS; 457

OAS; 2.986

DAS; 2.269DS; 457

OSS, 2,497

SSS, 457 OAS, 2,986

DAS, 2,269 DS, 457

32 32

experts, graduating from other departments with skills related to information technologies. Tertiary- A type education is of strategic importance for ICT industry developing capacities.

ICT education is taught on 36 Tertiary Education institutions; among them14 are state owned, 5 belong to the private institutions and 17 are state owned Vocational Higher Schools. In addition, there are 17 cities with ICT tertiary education institutions, which helps recruiting a wide base of ICT students for two studying programs (Tertiary-type A and type B) and six studying sub-programs.

The Serbian ICT sector absorbs the vast majority of ICT graduates. This wasn´t always the case as for years Serbia faced a massive “brain drain” of ICT graduates and professionals. Considering the current raising of demand for ICT products and services, which is a general trend not only in Serbia but also throughout Europe; Serbian educational institutions face the challenge of attracting even more students and supplying more experts to the market.

Tab l e 1 4 Te r t i a r y - t ype A and t ype B Educa t i on P r og r ams i n Se rb i a

Serbian notation Type Level Studying programs- translation Title

ОSS Osnovne strukovne studije B I Basic Vocational studies B.Sc.

SSS Specijalističke strukovne studije B II Specialist Vocational studies S.Sc

ОАS Osnovne akademske studije A I Bachelor Academic studies B.Sc

DAS Diplomske akademske studije A II Graduate Academic studies - Masters

M.Sc

SAS Specijalističke akademske studije A II Specialist Academic studies S.Sc

DS Doktorske studije A III PhD studies Ph.D.

Capacity of new ICT Enrollees according to Study Programs

Total number of new ICT enrollees in school year 2011/2012 was 5,483, from which 2,986 students begun their ICT education with tertiary type A studying program (OAS) and remaining 2,497 with tertiary type B (OSS).

F i gu r e 1 8 Capac i t y o f New En ro l l e e s a c co rd i ng t o I C T S tudy i n g P r og r ams , i n 2011 /2012

Source: Mineco 2011

Key messages on the table and figure above:

OSS; 2.497

SSS; 457

OAS; 2.986

DAS; 2.269DS; 457

33

The OAS (dark blue color) presents the first level degree of tertiary- A type education (B.Sc.) and a large number (2.269 candidates or 75%) continues with further studies towards DAS and second level degree (M.Sc.), thus securing HR for ICT development.

The most successful in tertiary A type education, complete studies with DS (Doctoral Studies), and third level degree (Ph.D.), for which 457 places have been provided.

The education beginning with the OSS (dark green color) preserved mostly B.Sc. ICT experts (2,497 candidates) from which only 457 candidates (18%) continued the (SSS) specialist studies, which shows the practical character of these studies.

Number of new ICT enrollees according to cities – geographical availability

In Serbia, there are 17 cities where ICT studies are offered, providing a very good geographical coverage. Education of personnel near industry centers has always been Serbian historical (traditional) heritage, which turned out to be a good practice. Unfortunately, during the past two decades, the industry has gradually downsized, but these preserved educational capacities give hope that faster economic recovery is still possible.

F i gu r e 1 9 Numbe r o f New ICT En ro l l e e s a c co rd i ng t o C i t i e s , i n 2 011 /2012

Source: Mineco 2011

Number of New ICT Enrollees according to the Faculties’ Founders

ICT programs are offered at 36 tertiary education institutions; 14 among them are state owned, five are private and 17 are state owned (Vocational) Secondary Schools.

Low number of students opt for private faculties, only 445 (8%). This is because tradition and studying expenses are in favor of the state owned faculties. ICT studies on state owned faculties are in more than 80% covered from the budget.

0

500

1.000

1.500

2.000

2.500

Beograd Novi Sad Niš Čačak Ostali

0

500

1,000

1,500

2,000

2,500

Beograd Novi Sad Niš Čačak Ostali

33

34

F i gu r e 2 0 Numbe r o f New ICT En ro l l e e s ac co rd i ng t o F a cu l t i e s ’ F ounde r s , i n 2 011 / 2012

Source: Mineco 2011

Number of ICT Enrollees and Enrolment capacity – Estimations and Trends

More than 10% of Serbian total newly enrolled students in 2009 (53,153) were ICT enrollees (5,483), which illustrates noticeable interest of Serbian young people for studies related to informatics. The overall enrolment capacity of around 8,811 is still larger, because all studying programs are split into three level degrees. After first level degree (B.Sc. academic title), students can continue studies towards second (M.Sc.) and third level degrees (Ph.D.). Therefore, a student can achieve several academic titles during her/his studies. Consequently, the number of future ICT experts is limited to the number of newly enrolled ICT students per year, but not the number of academic titles achieved in that year (referred to as “overall enrolment capacity”).

Therefore, consolidated data show the structure in which the first level degree graduates are the most numerous (2,612 or 47.6%); followed by the second level degree graduates (2,414 or 44.0%) and finally, as expected, the lowest number represents the third level degree (457 or 8.4%).

Realistic estimation is that Serbia can count on around 2,000 ICT experts out of 3,256 ICT graduates in 2009, as the others continued their studies towards second and third level degree.

The reform of the Tertiary education sector (according the Bologna reform) and increasing number of ICT profiled experts are yet to show positive results in the years to come. It seems reasonable to expect that Serbia will have an annual yield of more than 3,500 new ICT experts.

The present analysis covers only technical and technological professions and does not include around 800 IT graduates from Economics and around 500 from Mathematics faculties. Additionally, the corpus of machine engineers of almost 1,500 graduates per year is interesting from the aspect of HR with ICT skills.

Cooperation between Universities and the Private Sector

Although cooperation between universities and the private sector in Serbia is insufficient, the Faculty of Technical Sciences at Novi Sad University and at the group of faculties of technical sciences of the University of Belgrade, which created a Business-Technology Incubator for start-up companies in the ICT field reported on successful collaboration between companies and universities. Creation of internship opportunities for students and their recognition by the universities should strengthen this cooperation.

State owned (Vocational)

2.28242%

State owned Univesity

2.75650%

Private University

4458%

State owned (Vocational) , 2,282, 42%

State owned Univesity, 2,756,

50%

Private University, 445,

8%

34 34

F i gu r e 2 0 Numbe r o f New ICT En ro l l e e s ac co rd i ng t o F a cu l t i e s ’ F ounde r s , i n 2 011 / 2012

Source: Mineco 2011

Number of ICT Enrollees and Enrolment capacity – Estimations and Trends

More than 10% of Serbian total newly enrolled students in 2009 (53,153) were ICT enrollees (5,483), which illustrates noticeable interest of Serbian young people for studies related to informatics. The overall enrolment capacity of around 8,811 is still larger, because all studying programs are split into three level degrees. After first level degree (B.Sc. academic title), students can continue studies towards second (M.Sc.) and third level degrees (Ph.D.). Therefore, a student can achieve several academic titles during her/his studies. Consequently, the number of future ICT experts is limited to the number of newly enrolled ICT students per year, but not the number of academic titles achieved in that year (referred to as “overall enrolment capacity”).

Therefore, consolidated data show the structure in which the first level degree graduates are the most numerous (2,612 or 47.6%); followed by the second level degree graduates (2,414 or 44.0%) and finally, as expected, the lowest number represents the third level degree (457 or 8.4%).

Realistic estimation is that Serbia can count on around 2,000 ICT experts out of 3,256 ICT graduates in 2009, as the others continued their studies towards second and third level degree.

The reform of the Tertiary education sector (according the Bologna reform) and increasing number of ICT profiled experts are yet to show positive results in the years to come. It seems reasonable to expect that Serbia will have an annual yield of more than 3,500 new ICT experts.

The present analysis covers only technical and technological professions and does not include around 800 IT graduates from Economics and around 500 from Mathematics faculties. Additionally, the corpus of machine engineers of almost 1,500 graduates per year is interesting from the aspect of HR with ICT skills.

Cooperation between Universities and the Private Sector

Although cooperation between universities and the private sector in Serbia is insufficient, the Faculty of Technical Sciences at Novi Sad University and at the group of faculties of technical sciences of the University of Belgrade, which created a Business-Technology Incubator for start-up companies in the ICT field reported on successful collaboration between companies and universities. Creation of internship opportunities for students and their recognition by the universities should strengthen this cooperation.

State owned (Vocational)

2.28242%

State owned Univesity

2.75650%

Private University

4458%

35

ICT and Vocational Trainings

According to the results of the Regional Capability Survey presented in the OECD report, only 13.3% of enterprises provided training to their IT experts, and 10.1% of these have done so within their own firms (OECD 2009, p.197).

The most prominent institutions that provide informal trainings and certifications for technical skills are Microsoft and Cisco. More recently, Vojvodina ICT Cluster joined the efforts in the field of informal education for ICT through establishment of its own Cluster Academy. Apart from facilitation of trainings for the cluster member employees, it provides informal courses to supply more entry-level programmers to the ICT sector.

Microsoft Serbia has two major educational programs: (1) academic programs (MSDN Academic Alliance and IT academy) for accredited educational institutions in Serbia and (2) partner in learning program for individuals and educational institutions providing trainings for teachers, instructional resources and e learning for teachers. The program of the IT academy prepares students for jobs such as Network Administrators, Technical support, Programmers, Designers and Programmers for MS office and qualifications for Microsoft certificates. Five faculties and one University are members of the Microsoft IT academy.

CISCO Entrepreneurship Institute (CEI) in Serbia and Southeast Europe has been established at the Faculty of Technical Sciences at the University in Novi Sad, as the result of cooperation between CISCO, entrepreneurship education on a commercial basis for Serbian entrepreneurs, SMEs and public sector. The driving idea was provision of future employees in the following areas of expertise: Starting a Business, Growing a Business, and Business and Public Service Improvement through ICT. The CEI also provides training and certification in various programs such as IP Communications, Routing and Switching, Security, as well as training for technical staff, including Curriculum Planning Service and access to comprehensive technical knowledge library.

Available Skills and Skills Gaps

The OECD study concludes that strong technical knowledge, coupled with the development of soft skills and a deeper understanding of business processes and verticals23, which would put Serbia in a leading position for attracting IT operations from abroad.

In 2008, USAID did a survey among Serbian companies on identifying skill gaps among ICT professionals. The survey identified that 64% of current workers lack soft skills, 24% technology skills, and 12% basic skills such as attitude, appearance, etc. (USAID 2008). Among the soft skills, the most common shortcomings were in communication, problem solving, time management and negotiations. The Study recommends that ICT companies undertake soft skills training on the above-mentioned skills, including project and conflict management, and change of managerial skills.

Serbian IT experts generally have a good command of English language, achieving significant results in TOEFL tests, better than most other countries of the Western Balkans, but still weaker than in Croatia, Bulgaria and Romania (OECD 2009). Besides, Serbia in general, has the highest percentage of English speaking working population (49%) in the SEE region (Bednarik, 2010).

Command of other languages (German and French) is significantly weaker than English. The OECD Study also claims the necessity for an improvement of cultural understanding and ‘soft skills’, despite strong ties with Western Europe.

35

34

F i gu r e 2 0 Numbe r o f New ICT En ro l l e e s ac co rd i ng t o F a cu l t i e s ’ F ounde r s , i n 2 011 / 2012

Source: Mineco 2011

Number of ICT Enrollees and Enrolment capacity – Estimations and Trends

More than 10% of Serbian total newly enrolled students in 2009 (53,153) were ICT enrollees (5,483), which illustrates noticeable interest of Serbian young people for studies related to informatics. The overall enrolment capacity of around 8,811 is still larger, because all studying programs are split into three level degrees. After first level degree (B.Sc. academic title), students can continue studies towards second (M.Sc.) and third level degrees (Ph.D.). Therefore, a student can achieve several academic titles during her/his studies. Consequently, the number of future ICT experts is limited to the number of newly enrolled ICT students per year, but not the number of academic titles achieved in that year (referred to as “overall enrolment capacity”).

Therefore, consolidated data show the structure in which the first level degree graduates are the most numerous (2,612 or 47.6%); followed by the second level degree graduates (2,414 or 44.0%) and finally, as expected, the lowest number represents the third level degree (457 or 8.4%).

Realistic estimation is that Serbia can count on around 2,000 ICT experts out of 3,256 ICT graduates in 2009, as the others continued their studies towards second and third level degree.

The reform of the Tertiary education sector (according the Bologna reform) and increasing number of ICT profiled experts are yet to show positive results in the years to come. It seems reasonable to expect that Serbia will have an annual yield of more than 3,500 new ICT experts.

The present analysis covers only technical and technological professions and does not include around 800 IT graduates from Economics and around 500 from Mathematics faculties. Additionally, the corpus of machine engineers of almost 1,500 graduates per year is interesting from the aspect of HR with ICT skills.

Cooperation between Universities and the Private Sector

Although cooperation between universities and the private sector in Serbia is insufficient, the Faculty of Technical Sciences at Novi Sad University and at the group of faculties of technical sciences of the University of Belgrade, which created a Business-Technology Incubator for start-up companies in the ICT field reported on successful collaboration between companies and universities. Creation of internship opportunities for students and their recognition by the universities should strengthen this cooperation.

State owned (Vocational)

2.28242%

State owned Univesity

2.75650%

Private University

4458%

State owned (Vocational) , 2,282, 42%

State owned Univesity, 2,756,

50%

Private University, 445,

8%

34 34

F i gu r e 2 0 Numbe r o f New ICT En ro l l e e s ac co rd i ng t o F a cu l t i e s ’ F ounde r s , i n 2 011 / 2012

Source: Mineco 2011

Number of ICT Enrollees and Enrolment capacity – Estimations and Trends

More than 10% of Serbian total newly enrolled students in 2009 (53,153) were ICT enrollees (5,483), which illustrates noticeable interest of Serbian young people for studies related to informatics. The overall enrolment capacity of around 8,811 is still larger, because all studying programs are split into three level degrees. After first level degree (B.Sc. academic title), students can continue studies towards second (M.Sc.) and third level degrees (Ph.D.). Therefore, a student can achieve several academic titles during her/his studies. Consequently, the number of future ICT experts is limited to the number of newly enrolled ICT students per year, but not the number of academic titles achieved in that year (referred to as “overall enrolment capacity”).

Therefore, consolidated data show the structure in which the first level degree graduates are the most numerous (2,612 or 47.6%); followed by the second level degree graduates (2,414 or 44.0%) and finally, as expected, the lowest number represents the third level degree (457 or 8.4%).

Realistic estimation is that Serbia can count on around 2,000 ICT experts out of 3,256 ICT graduates in 2009, as the others continued their studies towards second and third level degree.

The reform of the Tertiary education sector (according the Bologna reform) and increasing number of ICT profiled experts are yet to show positive results in the years to come. It seems reasonable to expect that Serbia will have an annual yield of more than 3,500 new ICT experts.

The present analysis covers only technical and technological professions and does not include around 800 IT graduates from Economics and around 500 from Mathematics faculties. Additionally, the corpus of machine engineers of almost 1,500 graduates per year is interesting from the aspect of HR with ICT skills.

Cooperation between Universities and the Private Sector

Although cooperation between universities and the private sector in Serbia is insufficient, the Faculty of Technical Sciences at Novi Sad University and at the group of faculties of technical sciences of the University of Belgrade, which created a Business-Technology Incubator for start-up companies in the ICT field reported on successful collaboration between companies and universities. Creation of internship opportunities for students and their recognition by the universities should strengthen this cooperation.

State owned (Vocational)

2.28242%

State owned Univesity

2.75650%

Private University

4458%

35

ICT and Vocational Trainings

According to the results of the Regional Capability Survey presented in the OECD report, only 13.3% of enterprises provided training to their IT experts, and 10.1% of these have done so within their own firms (OECD 2009, p.197).

The most prominent institutions that provide informal trainings and certifications for technical skills are Microsoft and Cisco. More recently, Vojvodina ICT Cluster joined the efforts in the field of informal education for ICT through establishment of its own Cluster Academy. Apart from facilitation of trainings for the cluster member employees, it provides informal courses to supply more entry-level programmers to the ICT sector.

Microsoft Serbia has two major educational programs: (1) academic programs (MSDN Academic Alliance and IT academy) for accredited educational institutions in Serbia and (2) partner in learning program for individuals and educational institutions providing trainings for teachers, instructional resources and e learning for teachers. The program of the IT academy prepares students for jobs such as Network Administrators, Technical support, Programmers, Designers and Programmers for MS office and qualifications for Microsoft certificates. Five faculties and one University are members of the Microsoft IT academy.

CISCO Entrepreneurship Institute (CEI) in Serbia and Southeast Europe has been established at the Faculty of Technical Sciences at the University in Novi Sad, as the result of cooperation between CISCO, entrepreneurship education on a commercial basis for Serbian entrepreneurs, SMEs and public sector. The driving idea was provision of future employees in the following areas of expertise: Starting a Business, Growing a Business, and Business and Public Service Improvement through ICT. The CEI also provides training and certification in various programs such as IP Communications, Routing and Switching, Security, as well as training for technical staff, including Curriculum Planning Service and access to comprehensive technical knowledge library.

Available Skills and Skills Gaps

The OECD study concludes that strong technical knowledge, coupled with the development of soft skills and a deeper understanding of business processes and verticals23, which would put Serbia in a leading position for attracting IT operations from abroad.

In 2008, USAID did a survey among Serbian companies on identifying skill gaps among ICT professionals. The survey identified that 64% of current workers lack soft skills, 24% technology skills, and 12% basic skills such as attitude, appearance, etc. (USAID 2008). Among the soft skills, the most common shortcomings were in communication, problem solving, time management and negotiations. The Study recommends that ICT companies undertake soft skills training on the above-mentioned skills, including project and conflict management, and change of managerial skills.

Serbian IT experts generally have a good command of English language, achieving significant results in TOEFL tests, better than most other countries of the Western Balkans, but still weaker than in Croatia, Bulgaria and Romania (OECD 2009). Besides, Serbia in general, has the highest percentage of English speaking working population (49%) in the SEE region (Bednarik, 2010).

Command of other languages (German and French) is significantly weaker than English. The OECD Study also claims the necessity for an improvement of cultural understanding and ‘soft skills’, despite strong ties with Western Europe.

35

36

C. RESEARCH AND DEVELOPMENT

This chapter provides the following information:

Current situation regarding R&D in Serbia, in general and ICT related

Government R&D policy

EU support dimension

Current Situation Regarding R&D in Serbia - in General and ICT Related

There are about 12,000 scientists in Serbia involved in research and development carried out in 68 registered scientific and research institutes and 93 faculties. Most of them are State funded as well as the largest research organizations from the business sector. To avoid misunderstandings about the business sector presence, it needs mentioning that the official statistics only cover market-oriented institutes that are State funded (e.g. IMP, IRITEL).

Tab l e 1 5 R e sea r che r s i n Se rb i a . Numbe r o f I CT Resea r che r s and FTE , i n 2 009

Indicator SRB Total

FTE (Full time Equivalent)

SRB FTE Business Government Tertiary

Education Other

No. of researchers 12.006 10.444 600 2.718 7.120 6

No. of ICT researchers 890 817 346 35 436 -

IT - Software Development 615 611 313 - 298 -

Electrical engineering* 275 206 33 35 138 -

*Electrical engineering, communication technology, instrumentation, computer technology-hardware Source: Statistical Office of the Republic Serbia

Key messages on the table above:

12,006 – Number of researchers in Serbia, 2009

10,444 – Number of researchers in Serbia, according to FTE (Full time Equivalent) in 2009

The Serbian business sub-sector counts only 600 researchers. This indicates that the official statistics cover only state-owned companies.

In the total number of FTE researchers, in 2009, the business sector was involved with about 6% (600/10,444), Government sector with 26%, tertiary education with 68%.

The number of researchers employed in the R&D increased in 2009 by more than 4% compared to the previous year, and 13.5% more than in 2007.

In the total expenses for the R&D (€249 million) in 2009, the share of gross investments (investments in infrastructure) is 8.5% while 91.5% comprise the actual salaries for researchers, and a small amount for the actual cost of experiments.

36 36

C. RESEARCH AND DEVELOPMENT

This chapter provides the following information:

Current situation regarding R&D in Serbia, in general and ICT related

Government R&D policy

EU support dimension

Current Situation Regarding R&D in Serbia - in General and ICT Related

There are about 12,000 scientists in Serbia involved in research and development carried out in 68 registered scientific and research institutes and 93 faculties. Most of them are State funded as well as the largest research organizations from the business sector. To avoid misunderstandings about the business sector presence, it needs mentioning that the official statistics only cover market-oriented institutes that are State funded (e.g. IMP, IRITEL).

Tab l e 1 5 R e sea r che r s i n Se rb i a . Numbe r o f I CT Resea r che r s and FTE , i n 2 009

Indicator SRB Total

FTE (Full time Equivalent)

SRB FTE Business Government Tertiary

Education Other

No. of researchers 12.006 10.444 600 2.718 7.120 6

No. of ICT researchers 890 817 346 35 436 -

IT - Software Development 615 611 313 - 298 -

Electrical engineering* 275 206 33 35 138 -

*Electrical engineering, communication technology, instrumentation, computer technology-hardware Source: Statistical Office of the Republic Serbia

Key messages on the table above:

12,006 – Number of researchers in Serbia, 2009

10,444 – Number of researchers in Serbia, according to FTE (Full time Equivalent) in 2009

The Serbian business sub-sector counts only 600 researchers. This indicates that the official statistics cover only state-owned companies.

In the total number of FTE researchers, in 2009, the business sector was involved with about 6% (600/10,444), Government sector with 26%, tertiary education with 68%.

The number of researchers employed in the R&D increased in 2009 by more than 4% compared to the previous year, and 13.5% more than in 2007.

In the total expenses for the R&D (€249 million) in 2009, the share of gross investments (investments in infrastructure) is 8.5% while 91.5% comprise the actual salaries for researchers, and a small amount for the actual cost of experiments.

37

F i gu r e 2 1 R&D i n OECD and non -OECD Coun t r i e s , 2 009

Source: OECD Science, Technology and Industry: Scoreboard 2009

The above diagram compares three components simultaneously: (1) gross domestic expenditure on R&D as a percentage of GDP; (2) Number of researchers, per thousand employment; (3) R&D volumes in Euros.

According to the level of investment in R&D (round 0.8% GDP-a) and R&D volume in 2009 (round €250 million) Serbia is positioned rather low. On the other hand, with round 12,000 researchers, which represents about 6.8‰ of total employees, Serbia is at the world average.

According to the Lisbon declaration, financial resources for R&D, for EU members and candidate countries, which apply for membership in EU, should reach 1% of GDP from national budget and 3% of GDP in total. In the Figure 21, which shows Gross domestic expenditure in R&D, is visible that investments in Serbia are among the lowest (round 0.8% of GDP) but surprisingly ahead of the three EU members: Poland, Greece and Slovakia.

USA

CHN

JPN

DEU

KOR

FRA

GBR

CAN

RUS

ITA

AUS

ESP

SWE

NLD

AUT

CHE

TUR

BEL

FIN

DNK

MEX

POL

ZAF

NOR

PRT

CZE

IRL

HUN

GRC

NZL

SVN

CHL

LUX SVK

ISL

SRB EST

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Res

earc

hers

, per

thou

sand

em

ploy

men

t

Gross domestic expenditures on R&D as a percentage of GDP

BRIICS North America EU27 Other OECD members

R&D Volumes in 2000 EUR - constant prices and PPP 1 Billion 10 Billion 100 Billion

37

36

C. RESEARCH AND DEVELOPMENT

This chapter provides the following information:

Current situation regarding R&D in Serbia, in general and ICT related

Government R&D policy

EU support dimension

Current Situation Regarding R&D in Serbia - in General and ICT Related

There are about 12,000 scientists in Serbia involved in research and development carried out in 68 registered scientific and research institutes and 93 faculties. Most of them are State funded as well as the largest research organizations from the business sector. To avoid misunderstandings about the business sector presence, it needs mentioning that the official statistics only cover market-oriented institutes that are State funded (e.g. IMP, IRITEL).

Tab l e 1 5 R e sea r che r s i n Se rb i a . Numbe r o f I CT Resea r che r s and FTE , i n 2 009

Indicator SRB Total

FTE (Full time Equivalent)

SRB FTE Business Government Tertiary

Education Other

No. of researchers 12.006 10.444 600 2.718 7.120 6

No. of ICT researchers 890 817 346 35 436 -

IT - Software Development 615 611 313 - 298 -

Electrical engineering* 275 206 33 35 138 -

*Electrical engineering, communication technology, instrumentation, computer technology-hardware Source: Statistical Office of the Republic Serbia

Key messages on the table above:

12,006 – Number of researchers in Serbia, 2009

10,444 – Number of researchers in Serbia, according to FTE (Full time Equivalent) in 2009

The Serbian business sub-sector counts only 600 researchers. This indicates that the official statistics cover only state-owned companies.

In the total number of FTE researchers, in 2009, the business sector was involved with about 6% (600/10,444), Government sector with 26%, tertiary education with 68%.

The number of researchers employed in the R&D increased in 2009 by more than 4% compared to the previous year, and 13.5% more than in 2007.

In the total expenses for the R&D (€249 million) in 2009, the share of gross investments (investments in infrastructure) is 8.5% while 91.5% comprise the actual salaries for researchers, and a small amount for the actual cost of experiments.

36 36

C. RESEARCH AND DEVELOPMENT

This chapter provides the following information:

Current situation regarding R&D in Serbia, in general and ICT related

Government R&D policy

EU support dimension

Current Situation Regarding R&D in Serbia - in General and ICT Related

There are about 12,000 scientists in Serbia involved in research and development carried out in 68 registered scientific and research institutes and 93 faculties. Most of them are State funded as well as the largest research organizations from the business sector. To avoid misunderstandings about the business sector presence, it needs mentioning that the official statistics only cover market-oriented institutes that are State funded (e.g. IMP, IRITEL).

Tab l e 1 5 R e sea r che r s i n Se rb i a . Numbe r o f I CT Resea r che r s and FTE , i n 2 009

Indicator SRB Total

FTE (Full time Equivalent)

SRB FTE Business Government Tertiary

Education Other

No. of researchers 12.006 10.444 600 2.718 7.120 6

No. of ICT researchers 890 817 346 35 436 -

IT - Software Development 615 611 313 - 298 -

Electrical engineering* 275 206 33 35 138 -

*Electrical engineering, communication technology, instrumentation, computer technology-hardware Source: Statistical Office of the Republic Serbia

Key messages on the table above:

12,006 – Number of researchers in Serbia, 2009

10,444 – Number of researchers in Serbia, according to FTE (Full time Equivalent) in 2009

The Serbian business sub-sector counts only 600 researchers. This indicates that the official statistics cover only state-owned companies.

In the total number of FTE researchers, in 2009, the business sector was involved with about 6% (600/10,444), Government sector with 26%, tertiary education with 68%.

The number of researchers employed in the R&D increased in 2009 by more than 4% compared to the previous year, and 13.5% more than in 2007.

In the total expenses for the R&D (€249 million) in 2009, the share of gross investments (investments in infrastructure) is 8.5% while 91.5% comprise the actual salaries for researchers, and a small amount for the actual cost of experiments.

37

F i gu r e 2 1 R&D i n OECD and non -OECD Coun t r i e s , 2 009

Source: OECD Science, Technology and Industry: Scoreboard 2009

The above diagram compares three components simultaneously: (1) gross domestic expenditure on R&D as a percentage of GDP; (2) Number of researchers, per thousand employment; (3) R&D volumes in Euros.

According to the level of investment in R&D (round 0.8% GDP-a) and R&D volume in 2009 (round €250 million) Serbia is positioned rather low. On the other hand, with round 12,000 researchers, which represents about 6.8‰ of total employees, Serbia is at the world average.

According to the Lisbon declaration, financial resources for R&D, for EU members and candidate countries, which apply for membership in EU, should reach 1% of GDP from national budget and 3% of GDP in total. In the Figure 21, which shows Gross domestic expenditure in R&D, is visible that investments in Serbia are among the lowest (round 0.8% of GDP) but surprisingly ahead of the three EU members: Poland, Greece and Slovakia.

USA

CHN

JPN

DEU

KOR

FRA

GBR

CAN

RUS

ITA

AUS

ESP

SWE

NLD

AUT

CHE

TUR

BEL

FIN

DNK

MEX

POL

ZAF

NOR

PRT

CZE

IRL

HUN

GRC

NZL

SVN

CHL

LUX SVK

ISL

SRB EST

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Res

earc

hers

, per

thou

sand

em

ploy

men

t

Gross domestic expenditures on R&D as a percentage of GDP

BRIICS North America EU27 Other OECD members

R&D Volumes in 2000 EUR - constant prices and PPP 1 Billion 10 Billion 100 Billion

37

38

F i gu r e 2 2 G ro s s Domes t i c E xpend i t u r e i n R&D ( a s a pe r c en t age o f GDP )

Source: OECD Science, Technology and Industry: Scoreboard 2009

Not all investments in Serbian R&D are comparable to the world-renowned universities or institutes whose annual budgets are above one billion Euros. The financing of Serbian science is facing the problem of the small amounts coming mainly from the one source and then split on a large number of projects (more than 1,000 of which 471 projects in the area of technological development)1

F i gu r e 2 3 D i s t r i bu t i on o f t he S c i e nce Budge t b y Depa r tmen t s , i n 2 009

(Source: MoSTD)

1 European Commission - Information Society and Media, Serbia - ICT RTD Technological Audit, Brussels, 2010

0.0% 1.0% 2.0% 3.0% 4.0% 5.0%

Israel (1)

Finland

Sweden

Japan

Korea

Denmark

Switzerland

Germany

United States

Austria

OECD Total (2)

Australia

France

Belgium

Canada

EU27

United Kingdom

Slovenia

Netherlands

Norway

Ireland

Portugal

Czech Republic

Estonia

Spain

Italy

Hungary

Turkey

Serbia

Poland

Greece

Slovak Republic

State owned (Vocational) , 2,282, 42%

State owned Univesity, 2,756,

50%

Private University, 445,

8%

State owned (Vocational) , 2,282, 42%

State owned Univesity, 2,756,

50%

Private University, 445,

8%

38 38

F i gu r e 2 2 G ro s s Domes t i c E xpend i t u r e i n R&D ( a s a pe r c en t age o f GDP )

Source: OECD Science, Technology and Industry: Scoreboard 2009

Not all investments in Serbian R&D are comparable to the world-renowned universities or institutes whose annual budgets are above one billion Euros. The financing of Serbian science is facing the problem of the small amounts coming mainly from the one source and then split on a large number of projects (more than 1,000 of which 471 projects in the area of technological development)1

F i gu r e 2 3 D i s t r i bu t i on o f t he S c i e nce Budge t b y Depa r tmen t s , i n 2 009

(Source: MoSTD)

1 European Commission - Information Society and Media, Serbia - ICT RTD Technological Audit, Brussels, 2010 39

The ratios shown in the Figure 23, where the basic research (50.2%), takes the largest share, are adverse to the majority of developed countries in the world, where the allocations for applied research activities make the major part of the budget. In addition, almost 90% of the resources for science projects are actually researchers’ salaries, with only small amounts allocated for the cost of experiments, and the rest of 10% represent investments in infrastructure.

F i gu r e 2 4 F i nanc i ng o f Te chno l og i c a l Deve l opmen t i n 2 008 a c co rd i ng t o S c i en t i f i c F i e l d s , [ € mi l l i on ]

Source MoSTD

In the area of technological development, apart from bioengineering and agro industry with €14.2 million allocated annually, no other field receives more than €5 million (Figure 24). Two ICT sectors: (1) electronics and telecommunications and (2) industrial software and informatics - together have a budget of €5.5 million!

Current Situation regarding R&D in Serbia - ICT Related

Government ICT R&D Policy The creation of a National ICT RTD policy framework started in 2005 and the relevant Government institutions were founded: National Council for Science and Technological Development (NC), Ministry of Telecommunication and Information Society (MoTIS), Republic Agency for Telecommunication (RATEL), while Ministry of Science and Technical Development (MoSTD) and National Information Technology and Internet Agency (NITIA) were transformed. However, ICT RTD progress is slow. The possible reasons might lie in frequent changes of the Government. In period 2005-2009, three Governments were formed, resulting in three different Ministers of Science.

However, the changes continue. The Government reconstruction in 2011 abolished, as a measure towards resolving the crisis, two Ministries (MoTIS and MoSTD) as well as agency NITIA. The authority (jurisdiction) of MoTIS has been transferred to the newly established “Digital Agenda” under the Ministry of Culture, Media and Information Society, while the Ministry of Education and Science took over the jurisdiction of MoSTD. These changes do not seem to be the best solution for ICT RDT, particularly because the focus of the Government during their extended mandate appears to be far away from ICT RTD.

39

38

F i gu r e 2 2 G ro s s Domes t i c E xpend i t u r e i n R&D ( a s a pe r c en t age o f GDP )

Source: OECD Science, Technology and Industry: Scoreboard 2009

Not all investments in Serbian R&D are comparable to the world-renowned universities or institutes whose annual budgets are above one billion Euros. The financing of Serbian science is facing the problem of the small amounts coming mainly from the one source and then split on a large number of projects (more than 1,000 of which 471 projects in the area of technological development)1

F i gu r e 2 3 D i s t r i bu t i on o f t he S c i e nce Budge t b y Depa r tmen t s , i n 2 009

(Source: MoSTD)

1 European Commission - Information Society and Media, Serbia - ICT RTD Technological Audit, Brussels, 2010

0.0% 1.0% 2.0% 3.0% 4.0% 5.0%

Israel (1)

Finland

Sweden

Japan

Korea

Denmark

Switzerland

Germany

United States

Austria

OECD Total (2)

Australia

France

Belgium

Canada

EU27

United Kingdom

Slovenia

Netherlands

Norway

Ireland

Portugal

Czech Republic

Estonia

Spain

Italy

Hungary

Turkey

Serbia

Poland

Greece

Slovak Republic

State owned (Vocational) , 2,282, 42%

State owned Univesity, 2,756,

50%

Private University, 445,

8%

State owned (Vocational) , 2,282, 42%

State owned Univesity, 2,756,

50%

Private University, 445,

8%

38 38

F i gu r e 2 2 G ro s s Domes t i c E xpend i t u r e i n R&D ( a s a pe r c en t age o f GDP )

Source: OECD Science, Technology and Industry: Scoreboard 2009

Not all investments in Serbian R&D are comparable to the world-renowned universities or institutes whose annual budgets are above one billion Euros. The financing of Serbian science is facing the problem of the small amounts coming mainly from the one source and then split on a large number of projects (more than 1,000 of which 471 projects in the area of technological development)1

F i gu r e 2 3 D i s t r i bu t i on o f t he S c i e nce Budge t b y Depa r tmen t s , i n 2 009

(Source: MoSTD)

1 European Commission - Information Society and Media, Serbia - ICT RTD Technological Audit, Brussels, 2010 39

The ratios shown in the Figure 23, where the basic research (50.2%), takes the largest share, are adverse to the majority of developed countries in the world, where the allocations for applied research activities make the major part of the budget. In addition, almost 90% of the resources for science projects are actually researchers’ salaries, with only small amounts allocated for the cost of experiments, and the rest of 10% represent investments in infrastructure.

F i gu r e 2 4 F i nanc i ng o f Te chno l og i c a l Deve l opmen t i n 2 008 a c co rd i ng t o S c i en t i f i c F i e l d s , [ € mi l l i on ]

Source MoSTD

In the area of technological development, apart from bioengineering and agro industry with €14.2 million allocated annually, no other field receives more than €5 million (Figure 24). Two ICT sectors: (1) electronics and telecommunications and (2) industrial software and informatics - together have a budget of €5.5 million!

Current Situation regarding R&D in Serbia - ICT Related

Government ICT R&D Policy The creation of a National ICT RTD policy framework started in 2005 and the relevant Government institutions were founded: National Council for Science and Technological Development (NC), Ministry of Telecommunication and Information Society (MoTIS), Republic Agency for Telecommunication (RATEL), while Ministry of Science and Technical Development (MoSTD) and National Information Technology and Internet Agency (NITIA) were transformed. However, ICT RTD progress is slow. The possible reasons might lie in frequent changes of the Government. In period 2005-2009, three Governments were formed, resulting in three different Ministers of Science.

However, the changes continue. The Government reconstruction in 2011 abolished, as a measure towards resolving the crisis, two Ministries (MoTIS and MoSTD) as well as agency NITIA. The authority (jurisdiction) of MoTIS has been transferred to the newly established “Digital Agenda” under the Ministry of Culture, Media and Information Society, while the Ministry of Education and Science took over the jurisdiction of MoSTD. These changes do not seem to be the best solution for ICT RDT, particularly because the focus of the Government during their extended mandate appears to be far away from ICT RTD.

39

40

The Government is playing an active role in strengthening Serbian ICT RTD capacities for the three main reasons: (1) RTD (and ICT RTD) polices are set at the national level; (2) majority of ICT RTD activities are funded by Government institutions; and (3) majority of relevant ICT RTD research institutions are state-owned.

The Government is the main relevant authority financing ICT RTD, and the Budget is the main financing source of ICT RTD in Serbia. From the Budget are also financed programs of general interest for Serbia.

The total budget for science in 2009 was about €150 million, and around 6% was allocated to both Electronics and telecommunications and Industrial software and informatics.

Several hundred ICT related science and research projects held at various Faculties indicate that scientific and research potential, as well as the results, exceeds the actual possibilities and interest of Serbian society to make full use of them. The result is an increasing lagging of the Serbian economy and Information Society development compared to the EU countries.

The economic situation regarding the entities from ICT RTD sector hinders the lack of financial resources. In addition, solutions competitive in both quality and price, neither business nor Governmental sector can afford for the same reasons – the lack of finances. However, institutions active in ICT RTD have achieved significant results and preserved a solid base of experts in spite of the “brain drain”.

The private sector in Serbia is only tangentially involved in ICT RTD and the role of ICT RTD business sector in Serbia is modest. There is a low or no connectivity with ICT RTD institutes. However, companies from private sector are business oriented and crave for applied solutions. Between these steps lies the currently hidden potential for RTD. The Government almost exclusively follows up and regulates the relationships inside ICT RTD area of state-owned entities and their financing.

Although the Serbian ICT RTD system is of an inadequate efficiency, this sector is alive and active, mainly due to the ingenious but isolated individuals. Number of activities seems to come from a single or small group of individuals, who invest their knowledge, expertise, authority and energy – with no or insufficient Government support.

Serbian ICT RTD Legal and Policy Framework The Serbian ICT RTD Legal and Policy Framework is in the early stages of development. All processes initiated in this field were set up for the first time in 2005. The regulatory vacuum has just begun to fill; the Strategy on Development of Science and Technological Research has just started to follow the basic laws in this area. However, there is still no visible activity on the horizon, which is why the action plans will be more than welcome.

The following adopted laws define ICT RTD legal environment: Law on Science and Research Activities, Law on Innovative Activity, Law on Telecommunications, Law on Digital Signature, Law on Digital Document, Law on e-Commerce, Law on Personal Data Protection, Law on Data Access, and Law on Intellectual Property. Draft version of the Law on Consumer Protection is currently being introduced to the public. Strategy for Information Society Development and the Strategy for Science and Technological Development (2010-2015) are the key policy documents for the continuation of ICT RTD development in Serbia.

The main document defining the ICT RTD operational framework in Serbia is The Action Plan for Implementation of the Strategy for Science and Technological Development in Serbia 2010-2015. Unfortunately, this Action Plan was supposed to be adopted before the end of the year (2009) but currently still does not exist. However, if Serbia wishes to get closer to the EU, the progress in RTD area has to be faster.

40 40

The Government is playing an active role in strengthening Serbian ICT RTD capacities for the three main reasons: (1) RTD (and ICT RTD) polices are set at the national level; (2) majority of ICT RTD activities are funded by Government institutions; and (3) majority of relevant ICT RTD research institutions are state-owned.

The Government is the main relevant authority financing ICT RTD, and the Budget is the main financing source of ICT RTD in Serbia. From the Budget are also financed programs of general interest for Serbia.

The total budget for science in 2009 was about €150 million, and around 6% was allocated to both Electronics and telecommunications and Industrial software and informatics.

Several hundred ICT related science and research projects held at various Faculties indicate that scientific and research potential, as well as the results, exceeds the actual possibilities and interest of Serbian society to make full use of them. The result is an increasing lagging of the Serbian economy and Information Society development compared to the EU countries.

The economic situation regarding the entities from ICT RTD sector hinders the lack of financial resources. In addition, solutions competitive in both quality and price, neither business nor Governmental sector can afford for the same reasons – the lack of finances. However, institutions active in ICT RTD have achieved significant results and preserved a solid base of experts in spite of the “brain drain”.

The private sector in Serbia is only tangentially involved in ICT RTD and the role of ICT RTD business sector in Serbia is modest. There is a low or no connectivity with ICT RTD institutes. However, companies from private sector are business oriented and crave for applied solutions. Between these steps lies the currently hidden potential for RTD. The Government almost exclusively follows up and regulates the relationships inside ICT RTD area of state-owned entities and their financing.

Although the Serbian ICT RTD system is of an inadequate efficiency, this sector is alive and active, mainly due to the ingenious but isolated individuals. Number of activities seems to come from a single or small group of individuals, who invest their knowledge, expertise, authority and energy – with no or insufficient Government support.

Serbian ICT RTD Legal and Policy Framework The Serbian ICT RTD Legal and Policy Framework is in the early stages of development. All processes initiated in this field were set up for the first time in 2005. The regulatory vacuum has just begun to fill; the Strategy on Development of Science and Technological Research has just started to follow the basic laws in this area. However, there is still no visible activity on the horizon, which is why the action plans will be more than welcome.

The following adopted laws define ICT RTD legal environment: Law on Science and Research Activities, Law on Innovative Activity, Law on Telecommunications, Law on Digital Signature, Law on Digital Document, Law on e-Commerce, Law on Personal Data Protection, Law on Data Access, and Law on Intellectual Property. Draft version of the Law on Consumer Protection is currently being introduced to the public. Strategy for Information Society Development and the Strategy for Science and Technological Development (2010-2015) are the key policy documents for the continuation of ICT RTD development in Serbia.

The main document defining the ICT RTD operational framework in Serbia is The Action Plan for Implementation of the Strategy for Science and Technological Development in Serbia 2010-2015. Unfortunately, this Action Plan was supposed to be adopted before the end of the year (2009) but currently still does not exist. However, if Serbia wishes to get closer to the EU, the progress in RTD area has to be faster.

41

ICT RTD Infrastructure Analysis based on desk research shows that the current infrastructure for ICT RTD activities in Serbia is underdeveloped due to the low and irregular investments. It is inadequate – due to the short amortization period of this type of equipment, accompanied by a discontinuity in upgrades and renewal of equipment that only partially meets the real needs of Serbian science and research institutions.

Considering planned infrastructure for ICT RTD activities, the main Government plans relate to the Government project for investment in Serbian R&D infrastructure, SEE Light project, National Supercomputing and Data Storage Centre Project – Blue Danube. Certainly, the most important is the Serbian R&D infrastructure investment initiative.

The Government started the Project for investments in infrastructure, worth €400 million in March 2010, envisaged to last until the end of 2015. The Budget planed for ICT infrastructure is between €50 - 80 million.

The European Investment Bank (EIB) and the Serbian Government have signed as of 04/03/2010, in Belgrade, a €200 million loan for the Public Sector Research and Development (R&D) project. The project, with an estimated investment bill of €420 million, concerns a series of investments aimed at revitalizing the country’s public R&D activity. The investments include the upgrading of existing infrastructure, the creation of a center for promotion of science, the construction of accommodations for students and young scientists and creation of centers of excellence in priority research fields.

ICT RTD Centers of Excellence (CoE)

As a new institutional form - the Centre of Excellence (CoE), was established in Serbia in the middle of 2008, according to the Law on Research Activities and following the Rule Book and prepared by the National Council for Science and Technological Development. The appearance of CoE in Serbia is more than 5 years late in comparison to EU12 countries.

Since this type of entity in Serbia has just begun to develop, it will take a significant amount of time and money to achieve its full implementation in the following 3-5 years. For now, the existing CoE still do not receive recognition as the real leaders of RTD activities in Serbia, which should happen in the time to come.

CoE in this analysis covers ICT RTD organizations and research units with necessary critical mass of knowledge, resources and infrastructure, thus capable for achieving good research results.

The adopted criteria for identifying the potential CoEs is based primarily on the total number of ICT RTD researchers in a particular research unit (not the whole organization) combined with achieved success in FP7-ICT projects. Whenever it was possible (based on public available data or good estimation) the number of realized projects and number of published scientific works were taken into account. Besides this, consideration received the high expertise and/or market approval in ICT area by the relevant entities. Based on the above criteria, the selected entities were classified into three groups of potential CoEs: a) centers of competence, b) centers of potential for FP7-ICT and c) centers of best practice. One entity could not be classified in more than two categories.

(a) Centers of Competence represent entities with significant number of published scientific works and realized projects, and have a number of researchers with PhDs. In this group, the majority come from relevant state owned organizations (faculties’ departments and institutes).

(b) Centers of Potential for FP7-ICT form entities that have been successful in FP7-ICT Theme.

41

40

The Government is playing an active role in strengthening Serbian ICT RTD capacities for the three main reasons: (1) RTD (and ICT RTD) polices are set at the national level; (2) majority of ICT RTD activities are funded by Government institutions; and (3) majority of relevant ICT RTD research institutions are state-owned.

The Government is the main relevant authority financing ICT RTD, and the Budget is the main financing source of ICT RTD in Serbia. From the Budget are also financed programs of general interest for Serbia.

The total budget for science in 2009 was about €150 million, and around 6% was allocated to both Electronics and telecommunications and Industrial software and informatics.

Several hundred ICT related science and research projects held at various Faculties indicate that scientific and research potential, as well as the results, exceeds the actual possibilities and interest of Serbian society to make full use of them. The result is an increasing lagging of the Serbian economy and Information Society development compared to the EU countries.

The economic situation regarding the entities from ICT RTD sector hinders the lack of financial resources. In addition, solutions competitive in both quality and price, neither business nor Governmental sector can afford for the same reasons – the lack of finances. However, institutions active in ICT RTD have achieved significant results and preserved a solid base of experts in spite of the “brain drain”.

The private sector in Serbia is only tangentially involved in ICT RTD and the role of ICT RTD business sector in Serbia is modest. There is a low or no connectivity with ICT RTD institutes. However, companies from private sector are business oriented and crave for applied solutions. Between these steps lies the currently hidden potential for RTD. The Government almost exclusively follows up and regulates the relationships inside ICT RTD area of state-owned entities and their financing.

Although the Serbian ICT RTD system is of an inadequate efficiency, this sector is alive and active, mainly due to the ingenious but isolated individuals. Number of activities seems to come from a single or small group of individuals, who invest their knowledge, expertise, authority and energy – with no or insufficient Government support.

Serbian ICT RTD Legal and Policy Framework The Serbian ICT RTD Legal and Policy Framework is in the early stages of development. All processes initiated in this field were set up for the first time in 2005. The regulatory vacuum has just begun to fill; the Strategy on Development of Science and Technological Research has just started to follow the basic laws in this area. However, there is still no visible activity on the horizon, which is why the action plans will be more than welcome.

The following adopted laws define ICT RTD legal environment: Law on Science and Research Activities, Law on Innovative Activity, Law on Telecommunications, Law on Digital Signature, Law on Digital Document, Law on e-Commerce, Law on Personal Data Protection, Law on Data Access, and Law on Intellectual Property. Draft version of the Law on Consumer Protection is currently being introduced to the public. Strategy for Information Society Development and the Strategy for Science and Technological Development (2010-2015) are the key policy documents for the continuation of ICT RTD development in Serbia.

The main document defining the ICT RTD operational framework in Serbia is The Action Plan for Implementation of the Strategy for Science and Technological Development in Serbia 2010-2015. Unfortunately, this Action Plan was supposed to be adopted before the end of the year (2009) but currently still does not exist. However, if Serbia wishes to get closer to the EU, the progress in RTD area has to be faster.

40 40

The Government is playing an active role in strengthening Serbian ICT RTD capacities for the three main reasons: (1) RTD (and ICT RTD) polices are set at the national level; (2) majority of ICT RTD activities are funded by Government institutions; and (3) majority of relevant ICT RTD research institutions are state-owned.

The Government is the main relevant authority financing ICT RTD, and the Budget is the main financing source of ICT RTD in Serbia. From the Budget are also financed programs of general interest for Serbia.

The total budget for science in 2009 was about €150 million, and around 6% was allocated to both Electronics and telecommunications and Industrial software and informatics.

Several hundred ICT related science and research projects held at various Faculties indicate that scientific and research potential, as well as the results, exceeds the actual possibilities and interest of Serbian society to make full use of them. The result is an increasing lagging of the Serbian economy and Information Society development compared to the EU countries.

The economic situation regarding the entities from ICT RTD sector hinders the lack of financial resources. In addition, solutions competitive in both quality and price, neither business nor Governmental sector can afford for the same reasons – the lack of finances. However, institutions active in ICT RTD have achieved significant results and preserved a solid base of experts in spite of the “brain drain”.

The private sector in Serbia is only tangentially involved in ICT RTD and the role of ICT RTD business sector in Serbia is modest. There is a low or no connectivity with ICT RTD institutes. However, companies from private sector are business oriented and crave for applied solutions. Between these steps lies the currently hidden potential for RTD. The Government almost exclusively follows up and regulates the relationships inside ICT RTD area of state-owned entities and their financing.

Although the Serbian ICT RTD system is of an inadequate efficiency, this sector is alive and active, mainly due to the ingenious but isolated individuals. Number of activities seems to come from a single or small group of individuals, who invest their knowledge, expertise, authority and energy – with no or insufficient Government support.

Serbian ICT RTD Legal and Policy Framework The Serbian ICT RTD Legal and Policy Framework is in the early stages of development. All processes initiated in this field were set up for the first time in 2005. The regulatory vacuum has just begun to fill; the Strategy on Development of Science and Technological Research has just started to follow the basic laws in this area. However, there is still no visible activity on the horizon, which is why the action plans will be more than welcome.

The following adopted laws define ICT RTD legal environment: Law on Science and Research Activities, Law on Innovative Activity, Law on Telecommunications, Law on Digital Signature, Law on Digital Document, Law on e-Commerce, Law on Personal Data Protection, Law on Data Access, and Law on Intellectual Property. Draft version of the Law on Consumer Protection is currently being introduced to the public. Strategy for Information Society Development and the Strategy for Science and Technological Development (2010-2015) are the key policy documents for the continuation of ICT RTD development in Serbia.

The main document defining the ICT RTD operational framework in Serbia is The Action Plan for Implementation of the Strategy for Science and Technological Development in Serbia 2010-2015. Unfortunately, this Action Plan was supposed to be adopted before the end of the year (2009) but currently still does not exist. However, if Serbia wishes to get closer to the EU, the progress in RTD area has to be faster.

41

ICT RTD Infrastructure Analysis based on desk research shows that the current infrastructure for ICT RTD activities in Serbia is underdeveloped due to the low and irregular investments. It is inadequate – due to the short amortization period of this type of equipment, accompanied by a discontinuity in upgrades and renewal of equipment that only partially meets the real needs of Serbian science and research institutions.

Considering planned infrastructure for ICT RTD activities, the main Government plans relate to the Government project for investment in Serbian R&D infrastructure, SEE Light project, National Supercomputing and Data Storage Centre Project – Blue Danube. Certainly, the most important is the Serbian R&D infrastructure investment initiative.

The Government started the Project for investments in infrastructure, worth €400 million in March 2010, envisaged to last until the end of 2015. The Budget planed for ICT infrastructure is between €50 - 80 million.

The European Investment Bank (EIB) and the Serbian Government have signed as of 04/03/2010, in Belgrade, a €200 million loan for the Public Sector Research and Development (R&D) project. The project, with an estimated investment bill of €420 million, concerns a series of investments aimed at revitalizing the country’s public R&D activity. The investments include the upgrading of existing infrastructure, the creation of a center for promotion of science, the construction of accommodations for students and young scientists and creation of centers of excellence in priority research fields.

ICT RTD Centers of Excellence (CoE)

As a new institutional form - the Centre of Excellence (CoE), was established in Serbia in the middle of 2008, according to the Law on Research Activities and following the Rule Book and prepared by the National Council for Science and Technological Development. The appearance of CoE in Serbia is more than 5 years late in comparison to EU12 countries.

Since this type of entity in Serbia has just begun to develop, it will take a significant amount of time and money to achieve its full implementation in the following 3-5 years. For now, the existing CoE still do not receive recognition as the real leaders of RTD activities in Serbia, which should happen in the time to come.

CoE in this analysis covers ICT RTD organizations and research units with necessary critical mass of knowledge, resources and infrastructure, thus capable for achieving good research results.

The adopted criteria for identifying the potential CoEs is based primarily on the total number of ICT RTD researchers in a particular research unit (not the whole organization) combined with achieved success in FP7-ICT projects. Whenever it was possible (based on public available data or good estimation) the number of realized projects and number of published scientific works were taken into account. Besides this, consideration received the high expertise and/or market approval in ICT area by the relevant entities. Based on the above criteria, the selected entities were classified into three groups of potential CoEs: a) centers of competence, b) centers of potential for FP7-ICT and c) centers of best practice. One entity could not be classified in more than two categories.

(a) Centers of Competence represent entities with significant number of published scientific works and realized projects, and have a number of researchers with PhDs. In this group, the majority come from relevant state owned organizations (faculties’ departments and institutes).

(b) Centers of Potential for FP7-ICT form entities that have been successful in FP7-ICT Theme.

41

42

(c) Centers of Best Practice – comprise exclusively ICT companies (from business and industry sector) with good market reputation and strong reference lists and have been “recognized and well known by specific expert community” or “recommended by the person of authority (in a specific area)”.

72 organizations have been identified as potential CoE: 40 centers of competence, 9 centers of potential for FP7-ICT and 30 centers of best practice2.

The authors are aware that the presented list is not complete. There are ICT entities that have participated in FP7 projects, both successfully and unsuccessfully, in non-ICT areas not taken into account. In addition, there are ICT entities (research groups and individuals) inside organizations whose basic field of work does not exclusively fall under the ICT competence.

ICT RTD R&D Expertise

Although mapped to FP7 themes (objectives) expertise in the matrix below is a good illustration of ICT RTD expertise in particular areas.

Tab l e 1 6 Compe tence / Sha r e Ma t r i x o f Dec l a r ed E xpe r t i s e pe r Ob j e c t i v e s

High competence – low share: High competence – high share:

3.5 Photonic components and subsystems 3.1 Next generation Nanotechnology components (3.1-1)

and electronics integration (3.1-2) 5.3 Virtual physiological human 2.1 Cognitive Systems and Robotics 6.5 Novel ICT Solutions for Smart Electricity Distribution

Networks (Joint call between the ICT and Energy Themes)

3.4 Computing Systems 6.4 ICT for Environmental Services and Climate Change

Adaptation 7.2 Accessible and inclusive ICT 3.7 Networked embedded and control systems 6.3 ICT for the environmental management and energy

efficiency 7.3 ICT for Governance and Policy Modeling 1.2 Internet of Services, Software and Virtualization 1.3 Internet of Things and enterprise environments 4.3 Digital libraries and technology enhanced learning 4.4 Intelligent Information Management 3.3 Embedded Systems Design

Low competence – low share: Low competence – high share:

5.4 International Cooperation on Virtual Physiological Human

1.4 Trustworthy ICT 1.5 Networked Media & 3D Internet 3.6 Microsystems and Smart Miniaturized Systems 7.1 ICT & ageing

-

Source: EC-DG INFSO (FP7-ICT Theme Call 4 inclusive)

Key comments on the above Table:

All objectives in the upper right quadrant (High competence-High share) with the square frames are confirmed as expert (successful FP7 projects);

Besides confirmed, all other objectives in High competence-High share quadrant are declared as expert.

The objectives in upper left quadrant of CSM (High competence – Low share) offer a visible expert potential.

2 European Commission - Information Society and Media, Serbia - ICT RTD Technological Audit, Brussels, 2010

42 42

(c) Centers of Best Practice – comprise exclusively ICT companies (from business and industry sector) with good market reputation and strong reference lists and have been “recognized and well known by specific expert community” or “recommended by the person of authority (in a specific area)”.

72 organizations have been identified as potential CoE: 40 centers of competence, 9 centers of potential for FP7-ICT and 30 centers of best practice2.

The authors are aware that the presented list is not complete. There are ICT entities that have participated in FP7 projects, both successfully and unsuccessfully, in non-ICT areas not taken into account. In addition, there are ICT entities (research groups and individuals) inside organizations whose basic field of work does not exclusively fall under the ICT competence.

ICT RTD R&D Expertise

Although mapped to FP7 themes (objectives) expertise in the matrix below is a good illustration of ICT RTD expertise in particular areas.

Tab l e 1 6 Compe tence / Sha r e Ma t r i x o f Dec l a r ed E xpe r t i s e pe r Ob j e c t i v e s

High competence – low share: High competence – high share:

3.5 Photonic components and subsystems 3.1 Next generation Nanotechnology components (3.1-1)

and electronics integration (3.1-2) 5.3 Virtual physiological human 2.1 Cognitive Systems and Robotics 6.5 Novel ICT Solutions for Smart Electricity Distribution

Networks (Joint call between the ICT and Energy Themes)

3.4 Computing Systems 6.4 ICT for Environmental Services and Climate Change

Adaptation 7.2 Accessible and inclusive ICT 3.7 Networked embedded and control systems 6.3 ICT for the environmental management and energy

efficiency 7.3 ICT for Governance and Policy Modeling 1.2 Internet of Services, Software and Virtualization 1.3 Internet of Things and enterprise environments 4.3 Digital libraries and technology enhanced learning 4.4 Intelligent Information Management 3.3 Embedded Systems Design

Low competence – low share: Low competence – high share:

5.4 International Cooperation on Virtual Physiological Human

1.4 Trustworthy ICT 1.5 Networked Media & 3D Internet 3.6 Microsystems and Smart Miniaturized Systems 7.1 ICT & ageing

-

Source: EC-DG INFSO (FP7-ICT Theme Call 4 inclusive)

Key comments on the above Table:

All objectives in the upper right quadrant (High competence-High share) with the square frames are confirmed as expert (successful FP7 projects);

Besides confirmed, all other objectives in High competence-High share quadrant are declared as expert.

The objectives in upper left quadrant of CSM (High competence – Low share) offer a visible expert potential.

2 European Commission - Information Society and Media, Serbia - ICT RTD Technological Audit, Brussels, 2010 43

EU Support Dimension

The Seventh Framework Program (FP7) The Seventh Framework Program of the European Union spans in the period 2007 - 2013, with a budget of €50.5 billion. Based on the Memorandum of Understanding, signed by the Republic of Serbia regarding its Association to the EU Seventh Framework Program for Research and Technological Development as well as experimental activities, Serbia obtained the status of an Associated Country on June 13, 2007.

Based on the statistical data for the first two years of the program (by the end of January 2009), 628 researcher groups/partner organizations from Serbia participated in the preparation of 499 draft projects applied for. Of that number, 63 projects involving 79 research groups/organizations from Serbia were granted funding, achieving a success rate of 12.6%. The funds stipulated based on the total number of successful applications in the first two years of implementation of the Seventh Framework Program amount to €15.19 million.

The brief estimation on the level of financial EU FP7 support for Serbian ICT RTD has been created under the assumption that all Serbian participants in the all FP7 projects get the same part of contracted money. Based on this assumption, ICT RTD in Serbia will get 1/7 of total sum, or €2.17 million for two years. If other multidisciplinary cooperation (Joint Call) strongly connected to ICT are taken into consideration, the FP7 contribution to the Serbian ICT RTD sector will be about €2 million per year.

Participation in FP6-IST and FP7-ICT Theme

Tab l e 1 7 Suc c e s s and f a i l u r e r a t e s o f p r oposa l s i n F P6 - I ST and FP7 - ICT Theme .

EU Proposals Serbian Proposals

Ratio (%) of successful proposals

SERBIA -

Proposal share

Total Successful Total Successful EU SERBIA Successful Failure

FP6-IST Priority 8383 1123 125 16 13,4 12,8 1,4% 1,5%

FP7-ICTTheme 5586 840 77 12 15,0 15,6 1,4% 1,4%

Source: EC-DG INFSO (FP7-ICT Theme Call 4 inclusive)

In the FP7-ICT Theme, the EU countries achieved success rate of 15,0% (with 5586 submitted proposals, 840 approved),

Serbia accomplished higher pass rate of 15.6% (with 77 submitted and 12 approved proposals). In addition, this represents the growth of 2.8 percentage points compared to the Serbian success in FP6-IST Priority.

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42

(c) Centers of Best Practice – comprise exclusively ICT companies (from business and industry sector) with good market reputation and strong reference lists and have been “recognized and well known by specific expert community” or “recommended by the person of authority (in a specific area)”.

72 organizations have been identified as potential CoE: 40 centers of competence, 9 centers of potential for FP7-ICT and 30 centers of best practice2.

The authors are aware that the presented list is not complete. There are ICT entities that have participated in FP7 projects, both successfully and unsuccessfully, in non-ICT areas not taken into account. In addition, there are ICT entities (research groups and individuals) inside organizations whose basic field of work does not exclusively fall under the ICT competence.

ICT RTD R&D Expertise

Although mapped to FP7 themes (objectives) expertise in the matrix below is a good illustration of ICT RTD expertise in particular areas.

Tab l e 1 6 Compe tence / Sha r e Ma t r i x o f Dec l a r ed E xpe r t i s e pe r Ob j e c t i v e s

High competence – low share: High competence – high share:

3.5 Photonic components and subsystems 3.1 Next generation Nanotechnology components (3.1-1)

and electronics integration (3.1-2) 5.3 Virtual physiological human 2.1 Cognitive Systems and Robotics 6.5 Novel ICT Solutions for Smart Electricity Distribution

Networks (Joint call between the ICT and Energy Themes)

3.4 Computing Systems 6.4 ICT for Environmental Services and Climate Change

Adaptation 7.2 Accessible and inclusive ICT 3.7 Networked embedded and control systems 6.3 ICT for the environmental management and energy

efficiency 7.3 ICT for Governance and Policy Modeling 1.2 Internet of Services, Software and Virtualization 1.3 Internet of Things and enterprise environments 4.3 Digital libraries and technology enhanced learning 4.4 Intelligent Information Management 3.3 Embedded Systems Design

Low competence – low share: Low competence – high share:

5.4 International Cooperation on Virtual Physiological Human

1.4 Trustworthy ICT 1.5 Networked Media & 3D Internet 3.6 Microsystems and Smart Miniaturized Systems 7.1 ICT & ageing

-

Source: EC-DG INFSO (FP7-ICT Theme Call 4 inclusive)

Key comments on the above Table:

All objectives in the upper right quadrant (High competence-High share) with the square frames are confirmed as expert (successful FP7 projects);

Besides confirmed, all other objectives in High competence-High share quadrant are declared as expert.

The objectives in upper left quadrant of CSM (High competence – Low share) offer a visible expert potential.

2 European Commission - Information Society and Media, Serbia - ICT RTD Technological Audit, Brussels, 2010

42 42

(c) Centers of Best Practice – comprise exclusively ICT companies (from business and industry sector) with good market reputation and strong reference lists and have been “recognized and well known by specific expert community” or “recommended by the person of authority (in a specific area)”.

72 organizations have been identified as potential CoE: 40 centers of competence, 9 centers of potential for FP7-ICT and 30 centers of best practice2.

The authors are aware that the presented list is not complete. There are ICT entities that have participated in FP7 projects, both successfully and unsuccessfully, in non-ICT areas not taken into account. In addition, there are ICT entities (research groups and individuals) inside organizations whose basic field of work does not exclusively fall under the ICT competence.

ICT RTD R&D Expertise

Although mapped to FP7 themes (objectives) expertise in the matrix below is a good illustration of ICT RTD expertise in particular areas.

Tab l e 1 6 Compe tence / Sha r e Ma t r i x o f Dec l a r ed E xpe r t i s e pe r Ob j e c t i v e s

High competence – low share: High competence – high share:

3.5 Photonic components and subsystems 3.1 Next generation Nanotechnology components (3.1-1)

and electronics integration (3.1-2) 5.3 Virtual physiological human 2.1 Cognitive Systems and Robotics 6.5 Novel ICT Solutions for Smart Electricity Distribution

Networks (Joint call between the ICT and Energy Themes)

3.4 Computing Systems 6.4 ICT for Environmental Services and Climate Change

Adaptation 7.2 Accessible and inclusive ICT 3.7 Networked embedded and control systems 6.3 ICT for the environmental management and energy

efficiency 7.3 ICT for Governance and Policy Modeling 1.2 Internet of Services, Software and Virtualization 1.3 Internet of Things and enterprise environments 4.3 Digital libraries and technology enhanced learning 4.4 Intelligent Information Management 3.3 Embedded Systems Design

Low competence – low share: Low competence – high share:

5.4 International Cooperation on Virtual Physiological Human

1.4 Trustworthy ICT 1.5 Networked Media & 3D Internet 3.6 Microsystems and Smart Miniaturized Systems 7.1 ICT & ageing

-

Source: EC-DG INFSO (FP7-ICT Theme Call 4 inclusive)

Key comments on the above Table:

All objectives in the upper right quadrant (High competence-High share) with the square frames are confirmed as expert (successful FP7 projects);

Besides confirmed, all other objectives in High competence-High share quadrant are declared as expert.

The objectives in upper left quadrant of CSM (High competence – Low share) offer a visible expert potential.

2 European Commission - Information Society and Media, Serbia - ICT RTD Technological Audit, Brussels, 2010 43

EU Support Dimension

The Seventh Framework Program (FP7) The Seventh Framework Program of the European Union spans in the period 2007 - 2013, with a budget of €50.5 billion. Based on the Memorandum of Understanding, signed by the Republic of Serbia regarding its Association to the EU Seventh Framework Program for Research and Technological Development as well as experimental activities, Serbia obtained the status of an Associated Country on June 13, 2007.

Based on the statistical data for the first two years of the program (by the end of January 2009), 628 researcher groups/partner organizations from Serbia participated in the preparation of 499 draft projects applied for. Of that number, 63 projects involving 79 research groups/organizations from Serbia were granted funding, achieving a success rate of 12.6%. The funds stipulated based on the total number of successful applications in the first two years of implementation of the Seventh Framework Program amount to €15.19 million.

The brief estimation on the level of financial EU FP7 support for Serbian ICT RTD has been created under the assumption that all Serbian participants in the all FP7 projects get the same part of contracted money. Based on this assumption, ICT RTD in Serbia will get 1/7 of total sum, or €2.17 million for two years. If other multidisciplinary cooperation (Joint Call) strongly connected to ICT are taken into consideration, the FP7 contribution to the Serbian ICT RTD sector will be about €2 million per year.

Participation in FP6-IST and FP7-ICT Theme

Tab l e 1 7 Suc c e s s and f a i l u r e r a t e s o f p r oposa l s i n F P6 - I ST and FP7 - ICT Theme .

EU Proposals Serbian Proposals

Ratio (%) of successful proposals

SERBIA -

Proposal share

Total Successful Total Successful EU SERBIA Successful Failure

FP6-IST Priority 8383 1123 125 16 13,4 12,8 1,4% 1,5%

FP7-ICTTheme 5586 840 77 12 15,0 15,6 1,4% 1,4%

Source: EC-DG INFSO (FP7-ICT Theme Call 4 inclusive)

In the FP7-ICT Theme, the EU countries achieved success rate of 15,0% (with 5586 submitted proposals, 840 approved),

Serbia accomplished higher pass rate of 15.6% (with 77 submitted and 12 approved proposals). In addition, this represents the growth of 2.8 percentage points compared to the Serbian success in FP6-IST Priority.

43

44

F i gu r e 2 5 Suc ce s s Ra t e s o f A pp l i c an t s i n t he FP6 - I ST and FP7 - ICT f o r EU and Se rb i a

Source: EC-DG INFSO (FP7-ICT Theme Call 4 inclusive)

With 18 successful applicants in FP7-ICT Theme Serbia achieved 18.6 successful applicants per 100 (Serbian) applicants compared to 16.7 of EU countries. Serbian success rate (18.6%) is among the highest in the Europe.

The share of Serbian participations in total EU successful participations (applications) rose to 0.23% from 0.16% in FP6-IST Priority.

Despite detected growth, Serbia is still among the countries with the lowest number of participants.

Comparison of Serbian Applicants to EU27 and AC Figure 26 presents the Competence/Share Matrix of EU27 and AC applicants in FP7-ICT Theme. In this figure Serbia is positioned in the “high competence - low share” quadrant, with the highest competence in this quadrant. There is a visible contradiction between impressive successes of Serbian applicants (among the 38 most influential countries, Serbia is on the 8th place) and a small share in number of projects (among the 38 most influential countries, Serbia is 28th). This indicates either lack of critical mass of researchers or their modest interest in FP7-ICT participation.

17,916,7

14,4

18,6

0,16% 0,23%0

5

10

15

20

25

FP6-IST Priority FP7-ICT Theme0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

4,0%

4,5%

5,0%

Serbia - success applicants share in FP6 and FP7 Theme

Number succesfull per 100 applicants

EU SERBIA Serbia - success applicants share in FP6 and FP7 Theme

17.9 16.7

14.4

18.6

0.16% 0.23% 0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

0

5

10

15

20

25

FP6-IST Theme FP7-ICT Theme

Serbia - success applications share in FP6 and FP7 Theme

Number successfull per 100 aplicants

EU Serbia Serbia - success applications sharein FP6 and FP7 Theme

44 44

F i gu r e 2 5 Suc ce s s Ra t e s o f A pp l i c an t s i n t he FP6 - I ST and FP7 - ICT f o r EU and Se rb i a

Source: EC-DG INFSO (FP7-ICT Theme Call 4 inclusive)

With 18 successful applicants in FP7-ICT Theme Serbia achieved 18.6 successful applicants per 100 (Serbian) applicants compared to 16.7 of EU countries. Serbian success rate (18.6%) is among the highest in the Europe.

The share of Serbian participations in total EU successful participations (applications) rose to 0.23% from 0.16% in FP6-IST Priority.

Despite detected growth, Serbia is still among the countries with the lowest number of participants.

Comparison of Serbian Applicants to EU27 and AC Figure 26 presents the Competence/Share Matrix of EU27 and AC applicants in FP7-ICT Theme. In this figure Serbia is positioned in the “high competence - low share” quadrant, with the highest competence in this quadrant. There is a visible contradiction between impressive successes of Serbian applicants (among the 38 most influential countries, Serbia is on the 8th place) and a small share in number of projects (among the 38 most influential countries, Serbia is 28th). This indicates either lack of critical mass of researchers or their modest interest in FP7-ICT participation.

17,916,7

14,4

18,6

0,16% 0,23%0

5

10

15

20

25

FP6-IST Priority FP7-ICT Theme0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

4,0%

4,5%

5,0%

Serbia - success applicants share in FP6 and FP7 Theme

Number succesfull per 100 applicants

EU SERBIA Serbia - success applicants share in FP6 and FP7 Theme

45

F i gu r e 2 6 EU27 and AC app l i c an t s i n F P7 - ICT Theme – I nd i v i dua l Coun t r i e s Po s i t i on s

Source: EC-DG INFSO (FP7-ICT Theme Call 4 inclusive)

Explanation: The figure presents the Country Share Ratio (CSR) and individually Country Competence Ratio (CCR) for each of 40 countries (EU27 and AC).

CSR [%] = number of successful applicants per country / number of all successful applicants in FP7-ICT; CCR [%] = number of successful applicants per country / total number of applicants per country.

The emphasis is on the average value of Share (2.5%). This represents the borderline between the big and small shares. Similarly, for the Competence, the average competence of all countries, 16.7% separates more from the less successful countries.

GERMANY

FRANCE

ITALY

UNITED KINGDOM

GREECE

LUXEMBOURG

SPAIN

NETHERLANDSBELGIUM

SWEDEN

SWITZERLANDAUSTRIA

FINLAND

PORTUGAL

ISRAEL

IRELAND

POLAND

DENMARK

HUNGARYNORWAY

CZECH REPUBLIC

ROMANIA

SLOVENIA

CYPRUS

BULGARIA

TURKEY

SLOVAKIA

SERBIA

ESTONIA

CROATIA

MALTA

LITHUANIA

FYROM

LATVIAICELAND

MONTENEGRO

LIECHTENSTEIN

5,0

10,0

15,0

20,0

25,0

0,01 0,10 1,00 10,00 100,00

Share (CSR) [%]

Co

mp

eten

ce

(CC

R)

[%]

16,7%

2,5%

High Competence - High ShareHigh Competence - Low Share

Low Competence - High ShareLow Competence - High Share

Aver

age

Coun

try S

hare

2,5%

Average Competence16,7%

Statisticaly irelevant data*

*Extremly low share points to insuficientdata for full statisical analysis

GERMANY

FRANCE

ITALY UNITED KINGDOM

SPAIN

NETHERLANDS

GREECE

BELGIUM

SWEDEN

SWITZERLAND AUSTRIA

FINLAND

PORTUGAL

ISRAEL

IRELAND

POLAND

DENMARK

HUNGARY NORWAY

CZECH REPUBLIC

ROMANIA

SLOVENIA

CYPRUS

BULGARIA

TURKEY

LUXEMBOURG

SLOVAKIA

SERBIA

ESTONIA

CROATIA

MALTA

LITHUANIA

FYROM

LATVIA ICELAND

MONTENEGRO

LIECHTENSTEIN

5.0

10.0

15.0

20.0

25.0

0.01 0.10 1.00 10.00 100.00

Co

mp

eten

ce

(CC

R)

[%]

Share (CSR) [%]

16,7%

GERMANYGERMANY

FRANCENETHERLANDSNETHERLANDS

BELGIUM

SWEDENSWEDEN

SWITZERLANDAUSTRIA

FINLAND

High Competence - High Share

IRELANDIRELANDIRELANDIRELANDDENMARKDENMARK

SERBIA

High Competence - Low Share

ITALYUNITED KINGDOMUNITED KINGDOM

SPAIN

GREECE

Low Competence - High Share

PORTUGAL

ISRAELISRAEL

POLANDPOLANDHUNGARY

NORWAYNORWAY

CZECH REPUBLIC

ROMANIA

SLOVENIA

CYPRUS

BULGARIA

TURKEY

LUXEMBOURG

SLOVAKIA

ESTONIA

CROATIA

MALTA

LITHUANIATURKEYLITHUANIATURKEY

Low Competence - High Share

ESTONIAESTONIA

FYROM

LATVIAICELAND

MONTENEGRO

LIECHTENSTEIN

Statisticaly irelevant data*

*Extremly low share points to insuficient

data for full statisical analysis

Average Competence

Average Country Share

2,5%

16,7%

2,5%

45

44

F i gu r e 2 5 Suc ce s s Ra t e s o f A pp l i c an t s i n t he FP6 - I ST and FP7 - ICT f o r EU and Se rb i a

Source: EC-DG INFSO (FP7-ICT Theme Call 4 inclusive)

With 18 successful applicants in FP7-ICT Theme Serbia achieved 18.6 successful applicants per 100 (Serbian) applicants compared to 16.7 of EU countries. Serbian success rate (18.6%) is among the highest in the Europe.

The share of Serbian participations in total EU successful participations (applications) rose to 0.23% from 0.16% in FP6-IST Priority.

Despite detected growth, Serbia is still among the countries with the lowest number of participants.

Comparison of Serbian Applicants to EU27 and AC Figure 26 presents the Competence/Share Matrix of EU27 and AC applicants in FP7-ICT Theme. In this figure Serbia is positioned in the “high competence - low share” quadrant, with the highest competence in this quadrant. There is a visible contradiction between impressive successes of Serbian applicants (among the 38 most influential countries, Serbia is on the 8th place) and a small share in number of projects (among the 38 most influential countries, Serbia is 28th). This indicates either lack of critical mass of researchers or their modest interest in FP7-ICT participation.

17,916,7

14,4

18,6

0,16% 0,23%0

5

10

15

20

25

FP6-IST Priority FP7-ICT Theme0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

4,0%

4,5%

5,0%

Serbia - success applicants share in FP6 and FP7 Theme

Number succesfull per 100 applicants

EU SERBIA Serbia - success applicants share in FP6 and FP7 Theme

17.9 16.7

14.4

18.6

0.16% 0.23% 0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

0

5

10

15

20

25

FP6-IST Theme FP7-ICT Theme

Serbia - success applications share in FP6 and FP7 Theme

Number successfull per 100 aplicants

EU Serbia Serbia - success applications sharein FP6 and FP7 Theme

44 44

F i gu r e 2 5 Suc ce s s Ra t e s o f A pp l i c an t s i n t he FP6 - I ST and FP7 - ICT f o r EU and Se rb i a

Source: EC-DG INFSO (FP7-ICT Theme Call 4 inclusive)

With 18 successful applicants in FP7-ICT Theme Serbia achieved 18.6 successful applicants per 100 (Serbian) applicants compared to 16.7 of EU countries. Serbian success rate (18.6%) is among the highest in the Europe.

The share of Serbian participations in total EU successful participations (applications) rose to 0.23% from 0.16% in FP6-IST Priority.

Despite detected growth, Serbia is still among the countries with the lowest number of participants.

Comparison of Serbian Applicants to EU27 and AC Figure 26 presents the Competence/Share Matrix of EU27 and AC applicants in FP7-ICT Theme. In this figure Serbia is positioned in the “high competence - low share” quadrant, with the highest competence in this quadrant. There is a visible contradiction between impressive successes of Serbian applicants (among the 38 most influential countries, Serbia is on the 8th place) and a small share in number of projects (among the 38 most influential countries, Serbia is 28th). This indicates either lack of critical mass of researchers or their modest interest in FP7-ICT participation.

17,916,7

14,4

18,6

0,16% 0,23%0

5

10

15

20

25

FP6-IST Priority FP7-ICT Theme0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

4,0%

4,5%

5,0%

Serbia - success applicants share in FP6 and FP7 Theme

Number succesfull per 100 applicants

EU SERBIA Serbia - success applicants share in FP6 and FP7 Theme

45

F i gu r e 2 6 EU27 and AC app l i c an t s i n F P7 - ICT Theme – I nd i v i dua l Coun t r i e s Po s i t i on s

Source: EC-DG INFSO (FP7-ICT Theme Call 4 inclusive)

Explanation: The figure presents the Country Share Ratio (CSR) and individually Country Competence Ratio (CCR) for each of 40 countries (EU27 and AC).

CSR [%] = number of successful applicants per country / number of all successful applicants in FP7-ICT; CCR [%] = number of successful applicants per country / total number of applicants per country.

The emphasis is on the average value of Share (2.5%). This represents the borderline between the big and small shares. Similarly, for the Competence, the average competence of all countries, 16.7% separates more from the less successful countries.

GERMANY

FRANCE

ITALY

UNITED KINGDOM

GREECE

LUXEMBOURG

SPAIN

NETHERLANDSBELGIUM

SWEDEN

SWITZERLANDAUSTRIA

FINLAND

PORTUGAL

ISRAEL

IRELAND

POLAND

DENMARK

HUNGARYNORWAY

CZECH REPUBLIC

ROMANIA

SLOVENIA

CYPRUS

BULGARIA

TURKEY

SLOVAKIA

SERBIA

ESTONIA

CROATIA

MALTA

LITHUANIA

FYROM

LATVIAICELAND

MONTENEGRO

LIECHTENSTEIN

5,0

10,0

15,0

20,0

25,0

0,01 0,10 1,00 10,00 100,00

Share (CSR) [%]

Co

mp

eten

ce

(CC

R)

[%]

16,7%

2,5%

High Competence - High ShareHigh Competence - Low Share

Low Competence - High ShareLow Competence - High Share

Aver

age

Coun

try S

hare

2,5%

Average Competence16,7%

Statisticaly irelevant data*

*Extremly low share points to insuficientdata for full statisical analysis

GERMANY

FRANCE

ITALY UNITED KINGDOM

SPAIN

NETHERLANDS

GREECE

BELGIUM

SWEDEN

SWITZERLAND AUSTRIA

FINLAND

PORTUGAL

ISRAEL

IRELAND

POLAND

DENMARK

HUNGARY NORWAY

CZECH REPUBLIC

ROMANIA

SLOVENIA

CYPRUS

BULGARIA

TURKEY

LUXEMBOURG

SLOVAKIA

SERBIA

ESTONIA

CROATIA

MALTA

LITHUANIA

FYROM

LATVIA ICELAND

MONTENEGRO

LIECHTENSTEIN

5.0

10.0

15.0

20.0

25.0

0.01 0.10 1.00 10.00 100.00

Co

mp

eten

ce

(CC

R)

[%]

Share (CSR) [%]

16,7%

GERMANYGERMANY

FRANCENETHERLANDSNETHERLANDS

BELGIUM

SWEDENSWEDEN

SWITZERLANDAUSTRIA

FINLAND

High Competence - High Share

IRELANDIRELANDIRELANDIRELANDDENMARKDENMARK

SERBIA

High Competence - Low Share

ITALYUNITED KINGDOMUNITED KINGDOM

SPAIN

GREECE

Low Competence - High Share

PORTUGAL

ISRAELISRAEL

POLANDPOLANDHUNGARY

NORWAYNORWAY

CZECH REPUBLIC

ROMANIA

SLOVENIA

CYPRUS

BULGARIA

TURKEY

LUXEMBOURG

SLOVAKIA

ESTONIA

CROATIA

MALTA

LITHUANIATURKEYLITHUANIATURKEY

Low Competence - High Share

ESTONIAESTONIA

FYROM

LATVIAICELAND

MONTENEGRO

LIECHTENSTEIN

Statisticaly irelevant data*

*Extremly low share points to insuficient

data for full statisical analysis

Average Competence

Average Country Share

2,5%

16,7%

2,5%

45

46

OUTSOURCING – Opportunities and Barriers for Serbian IT Companies on International Markets For accomplishment of the SWOT analysis “Outsourcing – Opportunities and Barriers for Serbian IT Companies on International Markets”, the following five major aspects in the identification and analysis of the opportunities and barriers were considered:

(a) Serbian IT Outsourcing Sector – opportunities and barriers in approaching international markets

(b) IT Sector – general status (including all sub-sectors)

(c) ICT RTD sector - general status of research-technological development (including high education, institutes, business and industry sub-sectors)

(d) ICT Higher Education - general status

(e) ICT environment - to enable the ICT sector treatment as one of the priorities the Government has to create a stimulating environment for ICT development

Each aspect is examined through a SWOT analysis lens, i.e. by examining related strengths, weaknesses, opportunities and threats. The final table shows the following:

Tab l e 1 8 SWOT Ana l y s i s Summary

Strengths Weaknesses

A IT Sector in Outsourcing Young and emerging sector with active, innovative

behavior Good command of English language within the sector

Solid knowledge of other languages as well Strong capacity to adjust to new conditions and

market demands

B IT Sector General Status Above average price / quality ratio of Serbian ICT

services Despite the economic, social and institutional crisis

and a difficult transition process, the Serbian ICT sector has survived, which proves entrepreneurial strength and vitality

C ICT RTD Sector A solid number of preserved Serbian experts Solid market orientation of ICT related institutes

D ICT Higher Education ICT related education system (after Bologna reforms) Growing interest of young people for ICT studies and

solid geographical distribution (availability)

A IT Sector in Outsourcing Low level of specialization inside ICT companies Lack of references and experience in getting (big)

contracts Insufficient experience in search for international

partners

B IT Sector General Status Lack of cooperation among companies as well as other

stakeholders Insufficient knowledge and skills on international

market penetration – low level of internationalization Missing a public national database related to the ICT

sector

C ICT RTD Sector Insufficient interest of academic researchers to

participate in international projects Low level of national funds for ICT RTD Lack of official Centers of Excellence

D ICT Higher Education Weak cooperation between industry and education

46 46

OUTSOURCING – Opportunities and Barriers for Serbian IT Companies on International Markets For accomplishment of the SWOT analysis “Outsourcing – Opportunities and Barriers for Serbian IT Companies on International Markets”, the following five major aspects in the identification and analysis of the opportunities and barriers were considered:

(a) Serbian IT Outsourcing Sector – opportunities and barriers in approaching international markets

(b) IT Sector – general status (including all sub-sectors)

(c) ICT RTD sector - general status of research-technological development (including high education, institutes, business and industry sub-sectors)

(d) ICT Higher Education - general status

(e) ICT environment - to enable the ICT sector treatment as one of the priorities the Government has to create a stimulating environment for ICT development

Each aspect is examined through a SWOT analysis lens, i.e. by examining related strengths, weaknesses, opportunities and threats. The final table shows the following:

Tab l e 1 8 SWOT Ana l y s i s Summary

Strengths Weaknesses

A IT Sector in Outsourcing Young and emerging sector with active, innovative

behavior Good command of English language within the sector

Solid knowledge of other languages as well Strong capacity to adjust to new conditions and

market demands

B IT Sector General Status Above average price / quality ratio of Serbian ICT

services Despite the economic, social and institutional crisis

and a difficult transition process, the Serbian ICT sector has survived, which proves entrepreneurial strength and vitality

C ICT RTD Sector A solid number of preserved Serbian experts Solid market orientation of ICT related institutes

D ICT Higher Education ICT related education system (after Bologna reforms) Growing interest of young people for ICT studies and

solid geographical distribution (availability)

A IT Sector in Outsourcing Low level of specialization inside ICT companies Lack of references and experience in getting (big)

contracts Insufficient experience in search for international

partners

B IT Sector General Status Lack of cooperation among companies as well as other

stakeholders Insufficient knowledge and skills on international

market penetration – low level of internationalization Missing a public national database related to the ICT

sector

C ICT RTD Sector Insufficient interest of academic researchers to

participate in international projects Low level of national funds for ICT RTD Lack of official Centers of Excellence

D ICT Higher Education Weak cooperation between industry and education

47

Tab l e 1 9 SWOT Ana l y s i s Summary - Con t i nued

Opportunities Threats

A IT Sector in Outsourcing Potential for increasing outsourcing significantly Geographical proximity to the European market opens

outsourcing potentials Using experts from Diaspora for entering foreign

markets Nearshoring - targeting the regional market and

Central and Eastern Europe Use capacity of leading Serbian entities Strengthening cooperation and networking between

local and international IT entities. The Serbian Government’s plans for the development

of the IT sector and is setting up a range of technology parks in Belgrade, Niš, Novi Sad and Indija, the last to be the largest technology park in the region

Transfer of knowledge and experience from successful ones

Outsourcing promotions, regional conferences, events and support actions

Strategic shift from focus on outsourcing toward development and providing solutions, including in cooperation with foreign partners

B IT Sector General Status Low penetration of IT/ICT within Serbian business

sector makes a good market potential in future Work on building the critical mass of ICT experts Exploit the hidden potential of the SME IT sector

C ICT RTD Sector Rising compatibility with international ICT RTD sector Exploit the hidden potential of the ICT business sector Solid expertise in particular FP7-ICT areas Positive attitude towards FP7-ICT

D ICT Higher Education Harmonization of Serbian education system with

economy (market) needs

E ICT Environment EU integration of Serbia will have a positive impact on

the ICT sector ICT is recognized as one of the key sectors by the

Government, line ministries and international development organizations

Ambitious plans expressed in strategy papers in the ICT RTD field

ICT infrastructure improvement - new ICT RTD Infrastructure investment initiative (€50-80 million out of €400 million)

Serbia as a natural gathering and coordination regional center for the West Balkan countries

A IT Sector in Outsourcing Brain drain of ICT professionals Insufficient inflow of new programmers and other ICT

graduates Weak cooperation on ICT projects

B IT Sector General Status Insufficient ICT demand Great inflow of foreign IT companies might seriously

hamper the existing IT labor market

C ICT RTD Sector With few exceptions, obsolete existing infrastructure Serbia as a latecomer to the international ICT RTD

scene (2001)

D ICT Higher Education Lack of problem solving skills and entrepreneurial

spirit, excessive theoretical knowledge and inadequate general and specific technical skills

E ICT Environment Financial crisis and other instabilities at targeted

international and domestic markets Still present political instability in the country/region Uncertain sources of funding Mistrust to the promises of the policy makers Stereotyped image of Serbia Weak communication of the ICT sector with the policy

creators Insufficient Government support for ICT development

(weak political will, expertise and financial resources)

47

46

OUTSOURCING – Opportunities and Barriers for Serbian IT Companies on International Markets For accomplishment of the SWOT analysis “Outsourcing – Opportunities and Barriers for Serbian IT Companies on International Markets”, the following five major aspects in the identification and analysis of the opportunities and barriers were considered:

(a) Serbian IT Outsourcing Sector – opportunities and barriers in approaching international markets

(b) IT Sector – general status (including all sub-sectors)

(c) ICT RTD sector - general status of research-technological development (including high education, institutes, business and industry sub-sectors)

(d) ICT Higher Education - general status

(e) ICT environment - to enable the ICT sector treatment as one of the priorities the Government has to create a stimulating environment for ICT development

Each aspect is examined through a SWOT analysis lens, i.e. by examining related strengths, weaknesses, opportunities and threats. The final table shows the following:

Tab l e 1 8 SWOT Ana l y s i s Summary

Strengths Weaknesses

A IT Sector in Outsourcing Young and emerging sector with active, innovative

behavior Good command of English language within the sector

Solid knowledge of other languages as well Strong capacity to adjust to new conditions and

market demands

B IT Sector General Status Above average price / quality ratio of Serbian ICT

services Despite the economic, social and institutional crisis

and a difficult transition process, the Serbian ICT sector has survived, which proves entrepreneurial strength and vitality

C ICT RTD Sector A solid number of preserved Serbian experts Solid market orientation of ICT related institutes

D ICT Higher Education ICT related education system (after Bologna reforms) Growing interest of young people for ICT studies and

solid geographical distribution (availability)

A IT Sector in Outsourcing Low level of specialization inside ICT companies Lack of references and experience in getting (big)

contracts Insufficient experience in search for international

partners

B IT Sector General Status Lack of cooperation among companies as well as other

stakeholders Insufficient knowledge and skills on international

market penetration – low level of internationalization Missing a public national database related to the ICT

sector

C ICT RTD Sector Insufficient interest of academic researchers to

participate in international projects Low level of national funds for ICT RTD Lack of official Centers of Excellence

D ICT Higher Education Weak cooperation between industry and education

46 46

OUTSOURCING – Opportunities and Barriers for Serbian IT Companies on International Markets For accomplishment of the SWOT analysis “Outsourcing – Opportunities and Barriers for Serbian IT Companies on International Markets”, the following five major aspects in the identification and analysis of the opportunities and barriers were considered:

(a) Serbian IT Outsourcing Sector – opportunities and barriers in approaching international markets

(b) IT Sector – general status (including all sub-sectors)

(c) ICT RTD sector - general status of research-technological development (including high education, institutes, business and industry sub-sectors)

(d) ICT Higher Education - general status

(e) ICT environment - to enable the ICT sector treatment as one of the priorities the Government has to create a stimulating environment for ICT development

Each aspect is examined through a SWOT analysis lens, i.e. by examining related strengths, weaknesses, opportunities and threats. The final table shows the following:

Tab l e 1 8 SWOT Ana l y s i s Summary

Strengths Weaknesses

A IT Sector in Outsourcing Young and emerging sector with active, innovative

behavior Good command of English language within the sector

Solid knowledge of other languages as well Strong capacity to adjust to new conditions and

market demands

B IT Sector General Status Above average price / quality ratio of Serbian ICT

services Despite the economic, social and institutional crisis

and a difficult transition process, the Serbian ICT sector has survived, which proves entrepreneurial strength and vitality

C ICT RTD Sector A solid number of preserved Serbian experts Solid market orientation of ICT related institutes

D ICT Higher Education ICT related education system (after Bologna reforms) Growing interest of young people for ICT studies and

solid geographical distribution (availability)

A IT Sector in Outsourcing Low level of specialization inside ICT companies Lack of references and experience in getting (big)

contracts Insufficient experience in search for international

partners

B IT Sector General Status Lack of cooperation among companies as well as other

stakeholders Insufficient knowledge and skills on international

market penetration – low level of internationalization Missing a public national database related to the ICT

sector

C ICT RTD Sector Insufficient interest of academic researchers to

participate in international projects Low level of national funds for ICT RTD Lack of official Centers of Excellence

D ICT Higher Education Weak cooperation between industry and education

47

Tab l e 1 9 SWOT Ana l y s i s Summary - Con t i nued

Opportunities Threats

A IT Sector in Outsourcing Potential for increasing outsourcing significantly Geographical proximity to the European market opens

outsourcing potentials Using experts from Diaspora for entering foreign

markets Nearshoring - targeting the regional market and

Central and Eastern Europe Use capacity of leading Serbian entities Strengthening cooperation and networking between

local and international IT entities. The Serbian Government’s plans for the development

of the IT sector and is setting up a range of technology parks in Belgrade, Niš, Novi Sad and Indija, the last to be the largest technology park in the region

Transfer of knowledge and experience from successful ones

Outsourcing promotions, regional conferences, events and support actions

Strategic shift from focus on outsourcing toward development and providing solutions, including in cooperation with foreign partners

B IT Sector General Status Low penetration of IT/ICT within Serbian business

sector makes a good market potential in future Work on building the critical mass of ICT experts Exploit the hidden potential of the SME IT sector

C ICT RTD Sector Rising compatibility with international ICT RTD sector Exploit the hidden potential of the ICT business sector Solid expertise in particular FP7-ICT areas Positive attitude towards FP7-ICT

D ICT Higher Education Harmonization of Serbian education system with

economy (market) needs

E ICT Environment EU integration of Serbia will have a positive impact on

the ICT sector ICT is recognized as one of the key sectors by the

Government, line ministries and international development organizations

Ambitious plans expressed in strategy papers in the ICT RTD field

ICT infrastructure improvement - new ICT RTD Infrastructure investment initiative (€50-80 million out of €400 million)

Serbia as a natural gathering and coordination regional center for the West Balkan countries

A IT Sector in Outsourcing Brain drain of ICT professionals Insufficient inflow of new programmers and other ICT

graduates Weak cooperation on ICT projects

B IT Sector General Status Insufficient ICT demand Great inflow of foreign IT companies might seriously

hamper the existing IT labor market

C ICT RTD Sector With few exceptions, obsolete existing infrastructure Serbia as a latecomer to the international ICT RTD

scene (2001)

D ICT Higher Education Lack of problem solving skills and entrepreneurial

spirit, excessive theoretical knowledge and inadequate general and specific technical skills

E ICT Environment Financial crisis and other instabilities at targeted

international and domestic markets Still present political instability in the country/region Uncertain sources of funding Mistrust to the promises of the policy makers Stereotyped image of Serbia Weak communication of the ICT sector with the policy

creators Insufficient Government support for ICT development

(weak political will, expertise and financial resources)

47

48

CURRENT SITUATION, TRENDS AND POTENTIALS The identification and evaluation of potentials of Serbian IT companies (with the specific focus on outsourcing, software and IT services developers and providers) has necessarily to be built on the description of the current situation in Serbia, the identification and analysis of global IT trends and the potentials arising from these trends for Serbian companies.

Current Situation and Trends of the Serbian IT Market

On the global market, IT companies from Serbia (SMEs and large ones alike) are engaged in the outsourcing of writing program codes, testing software and designing websites, but also in providing solutions for the embedded industry. The main markets for outsourced industry are Germany, USA and the Netherlands. There is a trend among outsourcing companies, which attempt to create their own products hoping that they might have a high export value on the foreign markets. However, so far, only a few companies have been successful in this regard.

F i gu r e 2 7 E xpo r t o f Compu te r and I n f o rma t i o n S e r v i c e s , 2 007 -2010 and F o r e c a s t 2011 [€

mi l l i on ]

62,0

96,2 100,7

126,8

166,0

0,0

20,0

40,0

60,0

80,0

100,0

120,0

140,0

160,0

180,0

2007 2008 2009 2010 2011

Source: NBS

However, exports in ICT are lower than expected, and “if Serbia is to become a respectable off-shoring destination for software development, the ratio of services export to GDP in ICT sector has to be much higher” (ibid, p.13).

There is no unique pattern as to how Serbian companies enter foreign markets. A few common approaches are worth elaborating further. However, it is not possible to provide an accurate assessment as to which of the presented models has had the most successful results. The models are as follows:

- Getting the job through contacts created at international fairs. Usually companies manage to get small contracts at first, thereafter developing trust and contracts that are more serious

- Getting the job through Serbian IT experts working abroad

- Getting the job through B2B events organized by the Government, clusters and associations or international development agencies - all of which recognize ICT as a sector with high export potential

62.0

96.2 100.7

126.8

166.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

2007 2008 2009 2010 2011

48 48

CURRENT SITUATION, TRENDS AND POTENTIALS The identification and evaluation of potentials of Serbian IT companies (with the specific focus on outsourcing, software and IT services developers and providers) has necessarily to be built on the description of the current situation in Serbia, the identification and analysis of global IT trends and the potentials arising from these trends for Serbian companies.

Current Situation and Trends of the Serbian IT Market

On the global market, IT companies from Serbia (SMEs and large ones alike) are engaged in the outsourcing of writing program codes, testing software and designing websites, but also in providing solutions for the embedded industry. The main markets for outsourced industry are Germany, USA and the Netherlands. There is a trend among outsourcing companies, which attempt to create their own products hoping that they might have a high export value on the foreign markets. However, so far, only a few companies have been successful in this regard.

F i gu r e 2 7 E xpo r t o f Compu te r and I n f o rma t i o n S e r v i c e s , 2 007 -2010 and F o r e c a s t 2011 [€

mi l l i on ]

62,0

96,2 100,7

126,8

166,0

0,0

20,0

40,0

60,0

80,0

100,0

120,0

140,0

160,0

180,0

2007 2008 2009 2010 2011

Source: NBS

However, exports in ICT are lower than expected, and “if Serbia is to become a respectable off-shoring destination for software development, the ratio of services export to GDP in ICT sector has to be much higher” (ibid, p.13).

There is no unique pattern as to how Serbian companies enter foreign markets. A few common approaches are worth elaborating further. However, it is not possible to provide an accurate assessment as to which of the presented models has had the most successful results. The models are as follows:

- Getting the job through contacts created at international fairs. Usually companies manage to get small contracts at first, thereafter developing trust and contracts that are more serious

- Getting the job through Serbian IT experts working abroad

- Getting the job through B2B events organized by the Government, clusters and associations or international development agencies - all of which recognize ICT as a sector with high export potential

49

In a number of cases, Serbian companies have obtained international contracts based on their personal acquaintances overseas.

One of the most difficult issues of assessing the Serbian IT industry is the question of how much of sector/industry specific knowledge is available that can be translated and “packed” into different software (applications). Success stories of taking advantage of this knowledge include the already mentioned companies (DMS, Execom, Typhoon etc.), that developed a business model based on their core competence, a unique expertise and experience in a certain (technical) field, and used their software only as a “wrap-up” and means to deliver and market this knowledge. For developing such a business model, the (implementing) programmers are important but not essential. The knowledge, once developed and brought to a specific use, is not hard to “translate” into software.

It is very important to emphasize the lack of market intelligence on international markets among Serbian ICT companies. Serbian companies do not have a specific knowledge as to what could be the potential markets for their goods and services and how to access those markets.

The market competition is tough, very often non-transparent, with unclear rules of the game. It is very difficult for small IT companies to compete on the domestic market. Public procurement procedures are set up in a way to favor international and large local companies with strong references and significant lobby capacity. Small and medium sized companies have difficulties in developing good references thus their chances to get jobs are slimmer. In order to win a contract, local companies create consortia and joint applications for tenders, presenting quite a recent phenomenon; a few years ago, such cooperation between local companies would have been impossible to imagine.

The inflow of FDI in Serbia has twofold effects on developing market opportunities in Serbia. While at the beginning foreign companies came to in Serbia with already developed IT solutions, lately the trend of engaging local IT companies for developing IT solutions seems to have increased. This trend is especially visible in the banking sector.

It appears that the issue of introduction and certification of norms and standards is currently of low significance to the software companies as will be explained in more detail in the Potentials section.

Evaluation of Selected (market) Potentials for Serbian Software Companies

Potentials - Specialization Being in a service industry, IT companies would benefit from specialization, either in a particular area (vertical specialization) or in a particular function (horizontal specialization). Service-providing firms that are more specialized have greater control in setting up their own prices for the services they offer. The more specialized the product, either horizontally or vertically, the fewer the number of actors that will be able to provide it, increasing service providers’ scope to set their own billing rates. To increase the impact of having more control over prices, firms with particular expertise and specialization in the area will probably also produce higher quality services (OECD 2009, p.157).

In the IT sector, software developers in particular are sensitive to specialization, since they need in-depth knowledge of the processes and dynamics specific of each industry. The importance of sector specialization to the software services segment also relates to a positive spill over with respect to economic growth and productivity. This is true not only of the overall economy, but also on the level of individual firms.

The specific significance of the free-lance market needs further examination in this context. This group provides on one hand an unknown number of readily available skills and expertise; on the other hand, it represents a large group of persons without a sound economic basis or a chance of permanent employment, with all other difficulties coming with this status.

49

48

CURRENT SITUATION, TRENDS AND POTENTIALS The identification and evaluation of potentials of Serbian IT companies (with the specific focus on outsourcing, software and IT services developers and providers) has necessarily to be built on the description of the current situation in Serbia, the identification and analysis of global IT trends and the potentials arising from these trends for Serbian companies.

Current Situation and Trends of the Serbian IT Market

On the global market, IT companies from Serbia (SMEs and large ones alike) are engaged in the outsourcing of writing program codes, testing software and designing websites, but also in providing solutions for the embedded industry. The main markets for outsourced industry are Germany, USA and the Netherlands. There is a trend among outsourcing companies, which attempt to create their own products hoping that they might have a high export value on the foreign markets. However, so far, only a few companies have been successful in this regard.

F i gu r e 2 7 E xpo r t o f Compu te r and I n f o rma t i o n S e r v i c e s , 2 007 -2010 and F o r e c a s t 2011 [€

mi l l i on ]

62,0

96,2 100,7

126,8

166,0

0,0

20,0

40,0

60,0

80,0

100,0

120,0

140,0

160,0

180,0

2007 2008 2009 2010 2011

Source: NBS

However, exports in ICT are lower than expected, and “if Serbia is to become a respectable off-shoring destination for software development, the ratio of services export to GDP in ICT sector has to be much higher” (ibid, p.13).

There is no unique pattern as to how Serbian companies enter foreign markets. A few common approaches are worth elaborating further. However, it is not possible to provide an accurate assessment as to which of the presented models has had the most successful results. The models are as follows:

- Getting the job through contacts created at international fairs. Usually companies manage to get small contracts at first, thereafter developing trust and contracts that are more serious

- Getting the job through Serbian IT experts working abroad

- Getting the job through B2B events organized by the Government, clusters and associations or international development agencies - all of which recognize ICT as a sector with high export potential

62.0

96.2 100.7

126.8

166.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

2007 2008 2009 2010 2011

48 48

CURRENT SITUATION, TRENDS AND POTENTIALS The identification and evaluation of potentials of Serbian IT companies (with the specific focus on outsourcing, software and IT services developers and providers) has necessarily to be built on the description of the current situation in Serbia, the identification and analysis of global IT trends and the potentials arising from these trends for Serbian companies.

Current Situation and Trends of the Serbian IT Market

On the global market, IT companies from Serbia (SMEs and large ones alike) are engaged in the outsourcing of writing program codes, testing software and designing websites, but also in providing solutions for the embedded industry. The main markets for outsourced industry are Germany, USA and the Netherlands. There is a trend among outsourcing companies, which attempt to create their own products hoping that they might have a high export value on the foreign markets. However, so far, only a few companies have been successful in this regard.

F i gu r e 2 7 E xpo r t o f Compu te r and I n f o rma t i o n S e r v i c e s , 2 007 -2010 and F o r e c a s t 2011 [€

mi l l i on ]

62,0

96,2 100,7

126,8

166,0

0,0

20,0

40,0

60,0

80,0

100,0

120,0

140,0

160,0

180,0

2007 2008 2009 2010 2011

Source: NBS

However, exports in ICT are lower than expected, and “if Serbia is to become a respectable off-shoring destination for software development, the ratio of services export to GDP in ICT sector has to be much higher” (ibid, p.13).

There is no unique pattern as to how Serbian companies enter foreign markets. A few common approaches are worth elaborating further. However, it is not possible to provide an accurate assessment as to which of the presented models has had the most successful results. The models are as follows:

- Getting the job through contacts created at international fairs. Usually companies manage to get small contracts at first, thereafter developing trust and contracts that are more serious

- Getting the job through Serbian IT experts working abroad

- Getting the job through B2B events organized by the Government, clusters and associations or international development agencies - all of which recognize ICT as a sector with high export potential

49

In a number of cases, Serbian companies have obtained international contracts based on their personal acquaintances overseas.

One of the most difficult issues of assessing the Serbian IT industry is the question of how much of sector/industry specific knowledge is available that can be translated and “packed” into different software (applications). Success stories of taking advantage of this knowledge include the already mentioned companies (DMS, Execom, Typhoon etc.), that developed a business model based on their core competence, a unique expertise and experience in a certain (technical) field, and used their software only as a “wrap-up” and means to deliver and market this knowledge. For developing such a business model, the (implementing) programmers are important but not essential. The knowledge, once developed and brought to a specific use, is not hard to “translate” into software.

It is very important to emphasize the lack of market intelligence on international markets among Serbian ICT companies. Serbian companies do not have a specific knowledge as to what could be the potential markets for their goods and services and how to access those markets.

The market competition is tough, very often non-transparent, with unclear rules of the game. It is very difficult for small IT companies to compete on the domestic market. Public procurement procedures are set up in a way to favor international and large local companies with strong references and significant lobby capacity. Small and medium sized companies have difficulties in developing good references thus their chances to get jobs are slimmer. In order to win a contract, local companies create consortia and joint applications for tenders, presenting quite a recent phenomenon; a few years ago, such cooperation between local companies would have been impossible to imagine.

The inflow of FDI in Serbia has twofold effects on developing market opportunities in Serbia. While at the beginning foreign companies came to in Serbia with already developed IT solutions, lately the trend of engaging local IT companies for developing IT solutions seems to have increased. This trend is especially visible in the banking sector.

It appears that the issue of introduction and certification of norms and standards is currently of low significance to the software companies as will be explained in more detail in the Potentials section.

Evaluation of Selected (market) Potentials for Serbian Software Companies

Potentials - Specialization Being in a service industry, IT companies would benefit from specialization, either in a particular area (vertical specialization) or in a particular function (horizontal specialization). Service-providing firms that are more specialized have greater control in setting up their own prices for the services they offer. The more specialized the product, either horizontally or vertically, the fewer the number of actors that will be able to provide it, increasing service providers’ scope to set their own billing rates. To increase the impact of having more control over prices, firms with particular expertise and specialization in the area will probably also produce higher quality services (OECD 2009, p.157).

In the IT sector, software developers in particular are sensitive to specialization, since they need in-depth knowledge of the processes and dynamics specific of each industry. The importance of sector specialization to the software services segment also relates to a positive spill over with respect to economic growth and productivity. This is true not only of the overall economy, but also on the level of individual firms.

The specific significance of the free-lance market needs further examination in this context. This group provides on one hand an unknown number of readily available skills and expertise; on the other hand, it represents a large group of persons without a sound economic basis or a chance of permanent employment, with all other difficulties coming with this status.

49

50

This understanding can then serve as the starting point for different potentials aiming in different directions and dimensions (local, regional and international):

As the basis for the development of a company product as illustrated with the mentioned success stories of e.g. DMS - The software application in this context was built directly on the core competence based on excellent knowledge and understanding of an industry, its technology and processes.

As the basis for industry or sector focused initiatives by clusters and companies alike - When it comes to other sectors in Serbia, such as agriculture, apparel/textile, automotive etc. - their specific needs and demands referring to ICT products and services appear as a clear picture that is often missing or blurred on the IT companies´ side. Nevertheless, the awareness of managers and decision-makers in these industries related to how ICT can support their (business) processes has to increase significantly.

Potential - Outsourcing For most of the Serbian IT companies (for micro and SMEs almost exclusively) outsourcing contracts are a simple and often sole “survival” strategy. Some of the reasons are explained in greater detail in the chapters and sections above, including company size, access to capital to develop own products in the short and medium term, low demand of local companies in other sectors, degree of specialization etc.

One can assume that in the timeframe of the coming ten years, taking an improved access to capital and IT professionals into account, outsourcing in the medium term remains one of the core pillars of services sold to local and foreign clients alike. Depending on how fast the ICT sector matures in Serbia and the region, this market will become more and more split between companies which engage in (especially software development) outsourcing as a core or sole competence (specialized outsourcers), and those ones which only occasionally work on outsourcing contracts.

Considering global and German market trends the (offshore outsourcing) potentials for Serbian companies become easily visible. In exploiting them, Serbia can build on several factors including the preference of European companies for nearshoring to Eastern and South-eastern Europe due to distance and cultural issues, positive cost-benefit-ratio of relatively cheap but skilled labor (in combination with the lack of experts in some markets like Germany), strong language skill available and increasing wages in some markets like India. The trend towards smaller and shorter projects (less “mega deals”) helps Serbian SMEs additionally. The strong position and growth predictions can be seen in the following chart where Serbia is listed as a mature market with great market volumes.

F i gu r e 2 8 I n t r o - Eu ropean O f f s ho r i n g Ma r ke t G row th P a t t e r n

50 50

This understanding can then serve as the starting point for different potentials aiming in different directions and dimensions (local, regional and international):

As the basis for the development of a company product as illustrated with the mentioned success stories of e.g. DMS - The software application in this context was built directly on the core competence based on excellent knowledge and understanding of an industry, its technology and processes.

As the basis for industry or sector focused initiatives by clusters and companies alike - When it comes to other sectors in Serbia, such as agriculture, apparel/textile, automotive etc. - their specific needs and demands referring to ICT products and services appear as a clear picture that is often missing or blurred on the IT companies´ side. Nevertheless, the awareness of managers and decision-makers in these industries related to how ICT can support their (business) processes has to increase significantly.

Potential - Outsourcing For most of the Serbian IT companies (for micro and SMEs almost exclusively) outsourcing contracts are a simple and often sole “survival” strategy. Some of the reasons are explained in greater detail in the chapters and sections above, including company size, access to capital to develop own products in the short and medium term, low demand of local companies in other sectors, degree of specialization etc.

One can assume that in the timeframe of the coming ten years, taking an improved access to capital and IT professionals into account, outsourcing in the medium term remains one of the core pillars of services sold to local and foreign clients alike. Depending on how fast the ICT sector matures in Serbia and the region, this market will become more and more split between companies which engage in (especially software development) outsourcing as a core or sole competence (specialized outsourcers), and those ones which only occasionally work on outsourcing contracts.

Considering global and German market trends the (offshore outsourcing) potentials for Serbian companies become easily visible. In exploiting them, Serbia can build on several factors including the preference of European companies for nearshoring to Eastern and South-eastern Europe due to distance and cultural issues, positive cost-benefit-ratio of relatively cheap but skilled labor (in combination with the lack of experts in some markets like Germany), strong language skill available and increasing wages in some markets like India. The trend towards smaller and shorter projects (less “mega deals”) helps Serbian SMEs additionally. The strong position and growth predictions can be seen in the following chart where Serbia is listed as a mature market with great market volumes.

F i gu r e 2 8 I n t r o - Eu ropean O f f s ho r i n g Ma r ke t G row th P a t t e r n

51

Source: GOPA

Potentials - Standardization From the perspective of the year 2010, so far there has been no significant interest for certification or standardization as stated by many actors in the stakeholder interviews. The Serbian software industry has therefore engaged in obtaining CMMI certifications yet only on a very limited scale. Over the last few years, GTZ/WBF has been engaged in providing support to Serbian companies in introduction of the necessary standards. More recently, EBRD’s Business Advisory Services (BAS) Programme47 in Serbia and SIEPA have been active in providing financial support to Serbian SMEs introducing the necessary standards.

Looking at the standardization issue from an outsourcing perspective, quality management and standards/methodologies like CMMI, ISO 9001, ISO 27001, Six Sigma, ITIL etc. can be assumed as growing significantly in importance as foreign partners´ and clients´ demand is likely to increase as elaborated earlier (keywords: progressing “industrialization” of IT services and “standardization of technologies and processes”). The Serbian ICT clusters recognized this need by including trainings on quality and standardization matters in their activity portfolio for the coming years.

The question of establishing an independent organization (agency, laboratory etc.) for certification of the Serbian origin of an IT product was therefore suggested as one possible topic in this context. This could be accomplished through a sector-specific agency with a web-based platform where companies could register, login and upload source-code in order to receive 'Serbian SW' certification.

Summing up the anticipated increase in demand coming from outsourcing clients and the mentioned example of an organization for software evaluation, are merely highlighting the assumed growing demand for quality infrastructure institutions, mechanisms and processes in the coming years.

Potentials - IT Usage Local market remains to be one of the core potentials for Serbian IT companies. Serbian economy is still under transition, with outdated production lines that need replacement with new technologies. IT solutions are also necessary for increasing efficiency in management. For instance, only 67.50% of Serbian companies that have an Internet connection have their own company website and only 11.50% of companies use Enterprise Resource Planning (ERP), mostly large companies (43.1%). Use of Customer Relationship Management (CRM) systems among Serbian companies is even weaker, only 8.5%. These figures clearly indicate low penetration of IT into Serbian companies.

IT companies in Serbia should invest more time in getting specific knowledge about the economy in Serbia, and by that positioning themselves for future opportunities. Furthermore, IT companies should help the technologically outdated Serbian industry with solutions that might increase productivity, innovation and competitiveness on the international and domestic markets.

51

- India- Pakistan- Sri Lanka

Tier 1: UK

Tier 2: D, AT, CH

Tier 3: France

Tier 4: Southern Europe

- Hungary- Czech Republic- Bulgaria- Romania- Sebia

- Tunisia- Marocco- Algeria- Lebanono

Market Maturiy

Off

sho

rin

Vo

lum

e

- Croatia- ?- ?

50

This understanding can then serve as the starting point for different potentials aiming in different directions and dimensions (local, regional and international):

As the basis for the development of a company product as illustrated with the mentioned success stories of e.g. DMS - The software application in this context was built directly on the core competence based on excellent knowledge and understanding of an industry, its technology and processes.

As the basis for industry or sector focused initiatives by clusters and companies alike - When it comes to other sectors in Serbia, such as agriculture, apparel/textile, automotive etc. - their specific needs and demands referring to ICT products and services appear as a clear picture that is often missing or blurred on the IT companies´ side. Nevertheless, the awareness of managers and decision-makers in these industries related to how ICT can support their (business) processes has to increase significantly.

Potential - Outsourcing For most of the Serbian IT companies (for micro and SMEs almost exclusively) outsourcing contracts are a simple and often sole “survival” strategy. Some of the reasons are explained in greater detail in the chapters and sections above, including company size, access to capital to develop own products in the short and medium term, low demand of local companies in other sectors, degree of specialization etc.

One can assume that in the timeframe of the coming ten years, taking an improved access to capital and IT professionals into account, outsourcing in the medium term remains one of the core pillars of services sold to local and foreign clients alike. Depending on how fast the ICT sector matures in Serbia and the region, this market will become more and more split between companies which engage in (especially software development) outsourcing as a core or sole competence (specialized outsourcers), and those ones which only occasionally work on outsourcing contracts.

Considering global and German market trends the (offshore outsourcing) potentials for Serbian companies become easily visible. In exploiting them, Serbia can build on several factors including the preference of European companies for nearshoring to Eastern and South-eastern Europe due to distance and cultural issues, positive cost-benefit-ratio of relatively cheap but skilled labor (in combination with the lack of experts in some markets like Germany), strong language skill available and increasing wages in some markets like India. The trend towards smaller and shorter projects (less “mega deals”) helps Serbian SMEs additionally. The strong position and growth predictions can be seen in the following chart where Serbia is listed as a mature market with great market volumes.

F i gu r e 2 8 I n t r o - Eu ropean O f f s ho r i n g Ma r ke t G row th P a t t e r n

50 50

This understanding can then serve as the starting point for different potentials aiming in different directions and dimensions (local, regional and international):

As the basis for the development of a company product as illustrated with the mentioned success stories of e.g. DMS - The software application in this context was built directly on the core competence based on excellent knowledge and understanding of an industry, its technology and processes.

As the basis for industry or sector focused initiatives by clusters and companies alike - When it comes to other sectors in Serbia, such as agriculture, apparel/textile, automotive etc. - their specific needs and demands referring to ICT products and services appear as a clear picture that is often missing or blurred on the IT companies´ side. Nevertheless, the awareness of managers and decision-makers in these industries related to how ICT can support their (business) processes has to increase significantly.

Potential - Outsourcing For most of the Serbian IT companies (for micro and SMEs almost exclusively) outsourcing contracts are a simple and often sole “survival” strategy. Some of the reasons are explained in greater detail in the chapters and sections above, including company size, access to capital to develop own products in the short and medium term, low demand of local companies in other sectors, degree of specialization etc.

One can assume that in the timeframe of the coming ten years, taking an improved access to capital and IT professionals into account, outsourcing in the medium term remains one of the core pillars of services sold to local and foreign clients alike. Depending on how fast the ICT sector matures in Serbia and the region, this market will become more and more split between companies which engage in (especially software development) outsourcing as a core or sole competence (specialized outsourcers), and those ones which only occasionally work on outsourcing contracts.

Considering global and German market trends the (offshore outsourcing) potentials for Serbian companies become easily visible. In exploiting them, Serbia can build on several factors including the preference of European companies for nearshoring to Eastern and South-eastern Europe due to distance and cultural issues, positive cost-benefit-ratio of relatively cheap but skilled labor (in combination with the lack of experts in some markets like Germany), strong language skill available and increasing wages in some markets like India. The trend towards smaller and shorter projects (less “mega deals”) helps Serbian SMEs additionally. The strong position and growth predictions can be seen in the following chart where Serbia is listed as a mature market with great market volumes.

F i gu r e 2 8 I n t r o - Eu ropean O f f s ho r i n g Ma r ke t G row th P a t t e r n

51

Source: GOPA

Potentials - Standardization From the perspective of the year 2010, so far there has been no significant interest for certification or standardization as stated by many actors in the stakeholder interviews. The Serbian software industry has therefore engaged in obtaining CMMI certifications yet only on a very limited scale. Over the last few years, GTZ/WBF has been engaged in providing support to Serbian companies in introduction of the necessary standards. More recently, EBRD’s Business Advisory Services (BAS) Programme47 in Serbia and SIEPA have been active in providing financial support to Serbian SMEs introducing the necessary standards.

Looking at the standardization issue from an outsourcing perspective, quality management and standards/methodologies like CMMI, ISO 9001, ISO 27001, Six Sigma, ITIL etc. can be assumed as growing significantly in importance as foreign partners´ and clients´ demand is likely to increase as elaborated earlier (keywords: progressing “industrialization” of IT services and “standardization of technologies and processes”). The Serbian ICT clusters recognized this need by including trainings on quality and standardization matters in their activity portfolio for the coming years.

The question of establishing an independent organization (agency, laboratory etc.) for certification of the Serbian origin of an IT product was therefore suggested as one possible topic in this context. This could be accomplished through a sector-specific agency with a web-based platform where companies could register, login and upload source-code in order to receive 'Serbian SW' certification.

Summing up the anticipated increase in demand coming from outsourcing clients and the mentioned example of an organization for software evaluation, are merely highlighting the assumed growing demand for quality infrastructure institutions, mechanisms and processes in the coming years.

Potentials - IT Usage Local market remains to be one of the core potentials for Serbian IT companies. Serbian economy is still under transition, with outdated production lines that need replacement with new technologies. IT solutions are also necessary for increasing efficiency in management. For instance, only 67.50% of Serbian companies that have an Internet connection have their own company website and only 11.50% of companies use Enterprise Resource Planning (ERP), mostly large companies (43.1%). Use of Customer Relationship Management (CRM) systems among Serbian companies is even weaker, only 8.5%. These figures clearly indicate low penetration of IT into Serbian companies.

IT companies in Serbia should invest more time in getting specific knowledge about the economy in Serbia, and by that positioning themselves for future opportunities. Furthermore, IT companies should help the technologically outdated Serbian industry with solutions that might increase productivity, innovation and competitiveness on the international and domestic markets.

51

52

APPENDIX Terminology

ICT Products

According to the OECD definition, broad level categories of ICT products include: (1) Computers and peripheral equipment (2) Communication equipment (3) Consumer electronic equipment (4) Miscellaneous ICT components and goods (5) Manufacturing services for ICT equipment (6) Business and productivity software and licensing services (7) Information technology consultancy and services (8) Telecommunications services (9) Leasing or rental services for ICT equipment (10) Other ICT services

IT Market Structure

IT market typically falls into three categories: IT hardware, software and IT services.

ICT Market Value

IT market value (expressed in Euros) is defined by an end-user (household and business) spending on IT hardware, IT services and packaged software.

Telecommunication Market Value (expressed in Euros) is defined by an end-user (household and

business) spending on telecom equipment and telecom services. This includes Internet market.

ICT Investment

ICT investment is only a subset of ICT products (since it reflects only expenditure on ICT products that satisfy the rules on investment of the basic system of national accounts or SNA). Expenditure on rental of office machinery (which is part of the ICT sector) will normally not be considered as an investment. In practice, ICT investment falls into three components: IT equipment, communications equipment and software. These components represent the subset of ICT products that can usually be capitalized.

Revenue

In business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries, such as the United Kingdom, revenue is referred to as turnover.

Added Value = Price that the product/service is sold at - cost of producing the product

Added Value can also be defined as the difference between a particular product's final selling price and the direct and indirect input used in making that particular product.

Net Assets

Net assets, sometimes referred to as net worth, is the shareholders' equity = assets minus liabilities.

For a company, total assets minus total liabilities. Net worth is an important determinant of the value of a company, considering it is composed primarily of all the money invested since its inception, as well as the retained earnings for the duration of its operation. Net worth determines creditworthiness because it gives a snapshot of the company's investment history, also called owner's equity, shareholders' equity, or net assets.

52 52

APPENDIX Terminology

ICT Products

According to the OECD definition, broad level categories of ICT products include: (1) Computers and peripheral equipment (2) Communication equipment (3) Consumer electronic equipment (4) Miscellaneous ICT components and goods (5) Manufacturing services for ICT equipment (6) Business and productivity software and licensing services (7) Information technology consultancy and services (8) Telecommunications services (9) Leasing or rental services for ICT equipment (10) Other ICT services

IT Market Structure

IT market typically falls into three categories: IT hardware, software and IT services.

ICT Market Value

IT market value (expressed in Euros) is defined by an end-user (household and business) spending on IT hardware, IT services and packaged software.

Telecommunication Market Value (expressed in Euros) is defined by an end-user (household and

business) spending on telecom equipment and telecom services. This includes Internet market.

ICT Investment

ICT investment is only a subset of ICT products (since it reflects only expenditure on ICT products that satisfy the rules on investment of the basic system of national accounts or SNA). Expenditure on rental of office machinery (which is part of the ICT sector) will normally not be considered as an investment. In practice, ICT investment falls into three components: IT equipment, communications equipment and software. These components represent the subset of ICT products that can usually be capitalized.

Revenue

In business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries, such as the United Kingdom, revenue is referred to as turnover.

Added Value = Price that the product/service is sold at - cost of producing the product

Added Value can also be defined as the difference between a particular product's final selling price and the direct and indirect input used in making that particular product.

Net Assets

Net assets, sometimes referred to as net worth, is the shareholders' equity = assets minus liabilities.

For a company, total assets minus total liabilities. Net worth is an important determinant of the value of a company, considering it is composed primarily of all the money invested since its inception, as well as the retained earnings for the duration of its operation. Net worth determines creditworthiness because it gives a snapshot of the company's investment history, also called owner's equity, shareholders' equity, or net assets.

53

Assets

Any item of economic value owned by corporation (or an individual), especially that which could be converted to cash. Examples are cash, securities, accounts receivable, inventory, office equipment, real estate, a car, and other property.

ICT Sector The ICT sector is defined according to the OECD (WPIIS) definition, first released in 1998 and revised slightly in 2002. It was revised again in 2007 (ISIC Rev. 4).

Tab l e 2 0 OECD ICT s e c to r de f i n i t i on

ICT manufacturing industries IT industry

IT Converged industry

2610 Manufacture of electronic components and boards Y 2620 Manufacture of computers and peripheral equipment PC Hardware 2630 Manufacture of communication equipment Y 2640 Manufacture of consumer electronics Y 2680 Manufacture of magnetic and optical media Y

ICT service industries 4651 Wholesale of computers, computer peripheral equipment and software

IT Channels - Wholesale and retail

4652 Wholesale of electronic and telecommunications equipment and parts Y

5820 Software publishing Software 61 Telecommunications Y 62 Computer programming, consultancy and related activities IT services

Software

631 Data processing, hosting and related activities; Web portals Y 951 Repair of computers and communication equipment IT services

IT Industry

The four constituent sub-sectors i.e. set of companies focused on: PC hardware, Software, IT Services and IT Channels/Distribution. The starting point for the structural analysis is the official NACE registration of ICT companies, given in the table above.

IT Company Size

The enterprise size categorization due to the number of their employees, size-class according to EUROSTAT Standard is following: (a) Micro Company – up to 9 employees; (b) Small Company – 10-49 employees; (c) Medium sized Company – 50-249; (d) Large company - 250 and more employees;

Outsourcing

Use of the term outsourcing is inconsistent, but usually assumes contracting out of a business function - commonly one previously performed in-house - to an external provider. In this sense, two organizations may enter into a contractual agreement involving an exchange of services and payments.

Outsourcing – Offshoring

Offshoring involves shifting work to a foreign, distant organization in order to reduce production costs.

53

52

APPENDIX Terminology

ICT Products

According to the OECD definition, broad level categories of ICT products include: (1) Computers and peripheral equipment (2) Communication equipment (3) Consumer electronic equipment (4) Miscellaneous ICT components and goods (5) Manufacturing services for ICT equipment (6) Business and productivity software and licensing services (7) Information technology consultancy and services (8) Telecommunications services (9) Leasing or rental services for ICT equipment (10) Other ICT services

IT Market Structure

IT market typically falls into three categories: IT hardware, software and IT services.

ICT Market Value

IT market value (expressed in Euros) is defined by an end-user (household and business) spending on IT hardware, IT services and packaged software.

Telecommunication Market Value (expressed in Euros) is defined by an end-user (household and

business) spending on telecom equipment and telecom services. This includes Internet market.

ICT Investment

ICT investment is only a subset of ICT products (since it reflects only expenditure on ICT products that satisfy the rules on investment of the basic system of national accounts or SNA). Expenditure on rental of office machinery (which is part of the ICT sector) will normally not be considered as an investment. In practice, ICT investment falls into three components: IT equipment, communications equipment and software. These components represent the subset of ICT products that can usually be capitalized.

Revenue

In business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries, such as the United Kingdom, revenue is referred to as turnover.

Added Value = Price that the product/service is sold at - cost of producing the product

Added Value can also be defined as the difference between a particular product's final selling price and the direct and indirect input used in making that particular product.

Net Assets

Net assets, sometimes referred to as net worth, is the shareholders' equity = assets minus liabilities.

For a company, total assets minus total liabilities. Net worth is an important determinant of the value of a company, considering it is composed primarily of all the money invested since its inception, as well as the retained earnings for the duration of its operation. Net worth determines creditworthiness because it gives a snapshot of the company's investment history, also called owner's equity, shareholders' equity, or net assets.

52 52

APPENDIX Terminology

ICT Products

According to the OECD definition, broad level categories of ICT products include: (1) Computers and peripheral equipment (2) Communication equipment (3) Consumer electronic equipment (4) Miscellaneous ICT components and goods (5) Manufacturing services for ICT equipment (6) Business and productivity software and licensing services (7) Information technology consultancy and services (8) Telecommunications services (9) Leasing or rental services for ICT equipment (10) Other ICT services

IT Market Structure

IT market typically falls into three categories: IT hardware, software and IT services.

ICT Market Value

IT market value (expressed in Euros) is defined by an end-user (household and business) spending on IT hardware, IT services and packaged software.

Telecommunication Market Value (expressed in Euros) is defined by an end-user (household and

business) spending on telecom equipment and telecom services. This includes Internet market.

ICT Investment

ICT investment is only a subset of ICT products (since it reflects only expenditure on ICT products that satisfy the rules on investment of the basic system of national accounts or SNA). Expenditure on rental of office machinery (which is part of the ICT sector) will normally not be considered as an investment. In practice, ICT investment falls into three components: IT equipment, communications equipment and software. These components represent the subset of ICT products that can usually be capitalized.

Revenue

In business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries, such as the United Kingdom, revenue is referred to as turnover.

Added Value = Price that the product/service is sold at - cost of producing the product

Added Value can also be defined as the difference between a particular product's final selling price and the direct and indirect input used in making that particular product.

Net Assets

Net assets, sometimes referred to as net worth, is the shareholders' equity = assets minus liabilities.

For a company, total assets minus total liabilities. Net worth is an important determinant of the value of a company, considering it is composed primarily of all the money invested since its inception, as well as the retained earnings for the duration of its operation. Net worth determines creditworthiness because it gives a snapshot of the company's investment history, also called owner's equity, shareholders' equity, or net assets.

53

Assets

Any item of economic value owned by corporation (or an individual), especially that which could be converted to cash. Examples are cash, securities, accounts receivable, inventory, office equipment, real estate, a car, and other property.

ICT Sector The ICT sector is defined according to the OECD (WPIIS) definition, first released in 1998 and revised slightly in 2002. It was revised again in 2007 (ISIC Rev. 4).

Tab l e 2 0 OECD ICT s e c to r de f i n i t i on

ICT manufacturing industries IT industry

IT Converged industry

2610 Manufacture of electronic components and boards Y 2620 Manufacture of computers and peripheral equipment PC Hardware 2630 Manufacture of communication equipment Y 2640 Manufacture of consumer electronics Y 2680 Manufacture of magnetic and optical media Y

ICT service industries 4651 Wholesale of computers, computer peripheral equipment and software

IT Channels - Wholesale and retail

4652 Wholesale of electronic and telecommunications equipment and parts Y

5820 Software publishing Software 61 Telecommunications Y 62 Computer programming, consultancy and related activities IT services

Software

631 Data processing, hosting and related activities; Web portals Y 951 Repair of computers and communication equipment IT services

IT Industry

The four constituent sub-sectors i.e. set of companies focused on: PC hardware, Software, IT Services and IT Channels/Distribution. The starting point for the structural analysis is the official NACE registration of ICT companies, given in the table above.

IT Company Size

The enterprise size categorization due to the number of their employees, size-class according to EUROSTAT Standard is following: (a) Micro Company – up to 9 employees; (b) Small Company – 10-49 employees; (c) Medium sized Company – 50-249; (d) Large company - 250 and more employees;

Outsourcing

Use of the term outsourcing is inconsistent, but usually assumes contracting out of a business function - commonly one previously performed in-house - to an external provider. In this sense, two organizations may enter into a contractual agreement involving an exchange of services and payments.

Outsourcing – Offshoring

Offshoring involves shifting work to a foreign, distant organization in order to reduce production costs.

53

54

Outsourcing - Nearshoring

Nearshoring is a derivative of the business term offshoring. Nearshoring is "the transfer of business or IT processes to companies in a nearby country, often sharing a border with your own country", where both parties expect to benefit from one or more of the following dimensions of proximity: geographic, temporal (time zone), cultural, linguistic, economic, political, or historical linkages. The outsourced service work may be a business process or software development.

Business Sector

A business (also known as enterprise or firm) is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, most of them privately owned and administered to earn profit to increase the wealth of their owners.

Non-financial industry

It represents an industry that does not deal with financial or investment-related goods or services.

ICT education

OAS: Tertiary-type A education Programs (ISCED 5A) are largely theory-based and are designed to provide sufficient qualifications for entry to advanced research programs and professions with high skill requirements, such as medicine, dentistry or architecture. Tertiary-type A programs have a minimum cumulative theoretical duration (at tertiary level) of three years’ full-time equivalent, although they typically last four or more years. Not only universities offer these programs exclusively. Conversely, not all university programs fulfill the criteria to be classified as tertiary-type A. Tertiary-type A programs include second degree programs like the American Master.

OSS: Tertiary-type B education Programs (ISCED 5B) are typically shorter than those of tertiary-type A and focus on practical, technical or occupational skills for direct entry into the labor market, although some theoretical foundations may be covered in the respective programs. They have a minimum duration of two years full-time equivalent at the tertiary level.

Advanced Research Qualifications represent tertiary programs that lead directly to the award of an advanced research qualification, e.g. Ph.D. The theoretical duration of these programs is three years full-time in most countries (for a cumulative total of at least seven years full-time at the tertiary level), although the actual enrolment time is typically longer. The programs are devoted to advanced study and original research.

54 54

Outsourcing - Nearshoring

Nearshoring is a derivative of the business term offshoring. Nearshoring is "the transfer of business or IT processes to companies in a nearby country, often sharing a border with your own country", where both parties expect to benefit from one or more of the following dimensions of proximity: geographic, temporal (time zone), cultural, linguistic, economic, political, or historical linkages. The outsourced service work may be a business process or software development.

Business Sector

A business (also known as enterprise or firm) is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, most of them privately owned and administered to earn profit to increase the wealth of their owners.

Non-financial industry

It represents an industry that does not deal with financial or investment-related goods or services.

ICT education

OAS: Tertiary-type A education Programs (ISCED 5A) are largely theory-based and are designed to provide sufficient qualifications for entry to advanced research programs and professions with high skill requirements, such as medicine, dentistry or architecture. Tertiary-type A programs have a minimum cumulative theoretical duration (at tertiary level) of three years’ full-time equivalent, although they typically last four or more years. Not only universities offer these programs exclusively. Conversely, not all university programs fulfill the criteria to be classified as tertiary-type A. Tertiary-type A programs include second degree programs like the American Master.

OSS: Tertiary-type B education Programs (ISCED 5B) are typically shorter than those of tertiary-type A and focus on practical, technical or occupational skills for direct entry into the labor market, although some theoretical foundations may be covered in the respective programs. They have a minimum duration of two years full-time equivalent at the tertiary level.

Advanced Research Qualifications represent tertiary programs that lead directly to the award of an advanced research qualification, e.g. Ph.D. The theoretical duration of these programs is three years full-time in most countries (for a cumulative total of at least seven years full-time at the tertiary level), although the actual enrolment time is typically longer. The programs are devoted to advanced study and original research.

55

Abbreviations

ACCESS Assistance to Competitiveness and Compatibility with the EU of Serbian SME

AC Associated Countries, i.e. Serbia, Switzerland, Israel, Norway, Iceland, Croatia, Macedonia, Montenegro, Liechtenstein, Albania, Turkey

CAGR Compound annual growth rate CCR Compound Competence Ratio CCS Current Competence Share CIP Competitiveness and Innovation Programme CMMI Capability Maturity Model Integration CoE Centres of Excellence CRM Customer Relationship Management DAS Diplomske akademske studije (Graduate Academic studies - Masters) DED Deutscher Entwicklungsdienst (DED) gGmbH DS Doktorske studije (PhD studies) EEN Enterprise Europe Network EIB European Investment Bank ERP Enterprise Resource Planning ETF Elektrotehnicki Fakultet (School of Electrical Engineering) EU 27 member states of European Union (EU27) EU10 10 new members states wich joined the EU in 2004 EU15 15 members states wich joined the EU before 2004 FDI Foreign Direct Investments FIT Faculty of Information Technology FON Faculty of Organisational Sciences FP6, FP7 Framework Programme 6, Framework Programme 7

FTE Full Time Employed Researchers GCI Global Competitiveness Index GDP Gross Domestic Product GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH GTZ Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH ICT Information and Communication Technologies ICT-PSP ICT Policy Support Programme (under CIP Programme)

ICT-RTD Information and Communications Technology Research and Technology Development

IDI ICT Development Index IMP Institute Mihajlo Pupin IPA Instrument for Pre-Accession IS Information Society IT Information Technologies JISA Jugoslovenski Informaticki Savez (Union of ICT Societies in Serbia) MDCS Microsoft Development Center in Serbia MoSTD Ministry of Science and Technology Development of the Republic of Serbia MoTIS Ministry of Telecommunications and Information Society of the Republic of Serbia NACE Statistical classification of economic activities in the European Community NARD National Agency for Regional Development NIP National Investment Plan NITIA National Information Technology and Internet Agency OECD Organisation of Economic Co-operation and Development R&D Research and Development RATEL Republic Agency for Electronic Communication RNIDS Serbian National Register of Internet Domain Names RTD Research and Technology Development SANU (or SASA) Serbian Academy of Science and Art SAS Specijalističke akademske studije (Specialistic Academic studies) SBRA (or APR) Serbian Business Registers Agency SCoC Serbian Chamber of Commerce SECEP Support to Enterprise Competitiveness and Export Promotion -EU IPA Project

55

54

Outsourcing - Nearshoring

Nearshoring is a derivative of the business term offshoring. Nearshoring is "the transfer of business or IT processes to companies in a nearby country, often sharing a border with your own country", where both parties expect to benefit from one or more of the following dimensions of proximity: geographic, temporal (time zone), cultural, linguistic, economic, political, or historical linkages. The outsourced service work may be a business process or software development.

Business Sector

A business (also known as enterprise or firm) is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, most of them privately owned and administered to earn profit to increase the wealth of their owners.

Non-financial industry

It represents an industry that does not deal with financial or investment-related goods or services.

ICT education

OAS: Tertiary-type A education Programs (ISCED 5A) are largely theory-based and are designed to provide sufficient qualifications for entry to advanced research programs and professions with high skill requirements, such as medicine, dentistry or architecture. Tertiary-type A programs have a minimum cumulative theoretical duration (at tertiary level) of three years’ full-time equivalent, although they typically last four or more years. Not only universities offer these programs exclusively. Conversely, not all university programs fulfill the criteria to be classified as tertiary-type A. Tertiary-type A programs include second degree programs like the American Master.

OSS: Tertiary-type B education Programs (ISCED 5B) are typically shorter than those of tertiary-type A and focus on practical, technical or occupational skills for direct entry into the labor market, although some theoretical foundations may be covered in the respective programs. They have a minimum duration of two years full-time equivalent at the tertiary level.

Advanced Research Qualifications represent tertiary programs that lead directly to the award of an advanced research qualification, e.g. Ph.D. The theoretical duration of these programs is three years full-time in most countries (for a cumulative total of at least seven years full-time at the tertiary level), although the actual enrolment time is typically longer. The programs are devoted to advanced study and original research.

54 54

Outsourcing - Nearshoring

Nearshoring is a derivative of the business term offshoring. Nearshoring is "the transfer of business or IT processes to companies in a nearby country, often sharing a border with your own country", where both parties expect to benefit from one or more of the following dimensions of proximity: geographic, temporal (time zone), cultural, linguistic, economic, political, or historical linkages. The outsourced service work may be a business process or software development.

Business Sector

A business (also known as enterprise or firm) is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, most of them privately owned and administered to earn profit to increase the wealth of their owners.

Non-financial industry

It represents an industry that does not deal with financial or investment-related goods or services.

ICT education

OAS: Tertiary-type A education Programs (ISCED 5A) are largely theory-based and are designed to provide sufficient qualifications for entry to advanced research programs and professions with high skill requirements, such as medicine, dentistry or architecture. Tertiary-type A programs have a minimum cumulative theoretical duration (at tertiary level) of three years’ full-time equivalent, although they typically last four or more years. Not only universities offer these programs exclusively. Conversely, not all university programs fulfill the criteria to be classified as tertiary-type A. Tertiary-type A programs include second degree programs like the American Master.

OSS: Tertiary-type B education Programs (ISCED 5B) are typically shorter than those of tertiary-type A and focus on practical, technical or occupational skills for direct entry into the labor market, although some theoretical foundations may be covered in the respective programs. They have a minimum duration of two years full-time equivalent at the tertiary level.

Advanced Research Qualifications represent tertiary programs that lead directly to the award of an advanced research qualification, e.g. Ph.D. The theoretical duration of these programs is three years full-time in most countries (for a cumulative total of at least seven years full-time at the tertiary level), although the actual enrolment time is typically longer. The programs are devoted to advanced study and original research.

55

Abbreviations

ACCESS Assistance to Competitiveness and Compatibility with the EU of Serbian SME

AC Associated Countries, i.e. Serbia, Switzerland, Israel, Norway, Iceland, Croatia, Macedonia, Montenegro, Liechtenstein, Albania, Turkey

CAGR Compound annual growth rate CCR Compound Competence Ratio CCS Current Competence Share CIP Competitiveness and Innovation Programme CMMI Capability Maturity Model Integration CoE Centres of Excellence CRM Customer Relationship Management DAS Diplomske akademske studije (Graduate Academic studies - Masters) DED Deutscher Entwicklungsdienst (DED) gGmbH DS Doktorske studije (PhD studies) EEN Enterprise Europe Network EIB European Investment Bank ERP Enterprise Resource Planning ETF Elektrotehnicki Fakultet (School of Electrical Engineering) EU 27 member states of European Union (EU27) EU10 10 new members states wich joined the EU in 2004 EU15 15 members states wich joined the EU before 2004 FDI Foreign Direct Investments FIT Faculty of Information Technology FON Faculty of Organisational Sciences FP6, FP7 Framework Programme 6, Framework Programme 7

FTE Full Time Employed Researchers GCI Global Competitiveness Index GDP Gross Domestic Product GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH GTZ Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH ICT Information and Communication Technologies ICT-PSP ICT Policy Support Programme (under CIP Programme)

ICT-RTD Information and Communications Technology Research and Technology Development

IDI ICT Development Index IMP Institute Mihajlo Pupin IPA Instrument for Pre-Accession IS Information Society IT Information Technologies JISA Jugoslovenski Informaticki Savez (Union of ICT Societies in Serbia) MDCS Microsoft Development Center in Serbia MoSTD Ministry of Science and Technology Development of the Republic of Serbia MoTIS Ministry of Telecommunications and Information Society of the Republic of Serbia NACE Statistical classification of economic activities in the European Community NARD National Agency for Regional Development NIP National Investment Plan NITIA National Information Technology and Internet Agency OECD Organisation of Economic Co-operation and Development R&D Research and Development RATEL Republic Agency for Electronic Communication RNIDS Serbian National Register of Internet Domain Names RTD Research and Technology Development SANU (or SASA) Serbian Academy of Science and Art SAS Specijalističke akademske studije (Specialistic Academic studies) SBRA (or APR) Serbian Business Registers Agency SCoC Serbian Chamber of Commerce SECEP Support to Enterprise Competitiveness and Export Promotion -EU IPA Project

55

56

SEE South East Europe SIEPA Serbia Investment and Employment Promotion Agency SITO Serbian IT Observer SME Small and Medium-sized Enterprises SORS (or RZS) Statistical Office of the Republic of Serbia SSS Specijalističke strukovne studije (Specialistic Vocational studies) SWOT S-Strengths, W-Weaknesses, O-Opportunities, T-Threats ToR Terms of Reference UNDP United Nation Development Programme VOICT Vojvodina ICT Cluster VoIP Voice over Internet Protocol WEF World Economic Forum ОSS Osnovne strukovne studije (Basic Vocational studies) ОАS Osnovne akademske studije (Bachelor Academic studies)

56 56

SEE South East Europe SIEPA Serbia Investment and Employment Promotion Agency SITO Serbian IT Observer SME Small and Medium-sized Enterprises SORS (or RZS) Statistical Office of the Republic of Serbia SSS Specijalističke strukovne studije (Specialistic Vocational studies) SWOT S-Strengths, W-Weaknesses, O-Opportunities, T-Threats ToR Terms of Reference UNDP United Nation Development Programme VOICT Vojvodina ICT Cluster VoIP Voice over Internet Protocol WEF World Economic Forum ОSS Osnovne strukovne studije (Basic Vocational studies) ОАS Osnovne akademske studije (Bachelor Academic studies)

57

References and Key ICT Publications

[1] Bednarik, A. (2010), Serbia ICT - Technology, Creativity and Smart Solutions, SIEPA, Berlin

[2] Commission for Accreditation and Quality Assurance, Guide for students, Belgrade, 2011

[3] Djukic, Dj (2009), ICT Serbia, JISA Presentation at the 4th Meeting of the South East Europe nvestment Committee, April 2009

[4] European Commiission - Information Society and Media, Serbia - ICT RTD Technological Audit, Bruxelles, 2010

[5] FREN (2007), Understanding Belgrade Services Sector, Foundations for the Advancement of Economics, Beograd

[6] GTZ/WBF (2009), ICT Directory of Serbia 2009, GTZ WBF, Beograd

[7] http://www.eib.org/projects/pipeline/2009/20090283.htm - Public Sector Research and Development

[8] Ivanovic, M, Budimac, Z and Dudan Z (2007), LifeLong Learning for Small and Medium Companies in Serbia, Paper Presented a the Informatics Education Europe II Conference IEEII 2007, Thessaloniki

[9] Ivkovic, M and Pantelic, J (2008), ICT in Serbia 2008, PPT, Information Society of Serbia, Ohrid

[10] JRC (2010) ICT and Regional Economic Dynamic: A Literature Review, JRC Scientific and Technical Reports, Spain

[11] MINECO (2010), IT trziste u Srbiji 2009-2010 (in Serbian), Blog article published at PC Press, available at http://www.pcpress.info/tag/mineco, last accessed: September 19, 2010

[12] NBS, Odeljenje statistike platnog bilansa, "Bilans usluga, januar - decembar 2009-2010/1", Beograd, 2011

[13] NITIA (2009a), Analiza stanja IKT infrastrukture u opstinama i gradovima Srbije, Republicki zavod za Informatiku i Internet (NITIA), Beograd

[14] NITIA (2009b), Handbook for ICT in Local Self-Government Units, Republicki zavod za Informatiku i Internet (NITIA), Beograd

[15] NITIA (2009c),Preporuke za izradu web prezentacija lokalne samouprave, Republicki zavod za Informatiku i Internet (NITIA), Beograd

[16] NITIA (2009d), Stanje razvoja eUprave u Republici Srbiji za 2008, Republicki zavod za Informatiku iInternet (NITIA), Beograd

[17] NITIA (2010), Stanje razvoja eUprave u Republici Srbiji za 2009, Republicki zavod za Informatiku i Internet (NITIA), Beograd

[18] OECD (2009), Guide to Measure the Information Society, Organisation of Economic Co-operation and Development, Paris

[19] OECD (2009), Sector Specific Sources of Competitiveness in the Western Balkans, Organisation of Economic Co-operation and Development, Paris

[20] OECD (2009), Working Party on Indicators for the Information Society, Bruxelles, 2009

[21] Radovic, N (?), Serbia in FP7 ICT, PPT of the Ministry of Telecommunications and Information Society, Beograd

57

56

SEE South East Europe SIEPA Serbia Investment and Employment Promotion Agency SITO Serbian IT Observer SME Small and Medium-sized Enterprises SORS (or RZS) Statistical Office of the Republic of Serbia SSS Specijalističke strukovne studije (Specialistic Vocational studies) SWOT S-Strengths, W-Weaknesses, O-Opportunities, T-Threats ToR Terms of Reference UNDP United Nation Development Programme VOICT Vojvodina ICT Cluster VoIP Voice over Internet Protocol WEF World Economic Forum ОSS Osnovne strukovne studije (Basic Vocational studies) ОАS Osnovne akademske studije (Bachelor Academic studies)

56 56

SEE South East Europe SIEPA Serbia Investment and Employment Promotion Agency SITO Serbian IT Observer SME Small and Medium-sized Enterprises SORS (or RZS) Statistical Office of the Republic of Serbia SSS Specijalističke strukovne studije (Specialistic Vocational studies) SWOT S-Strengths, W-Weaknesses, O-Opportunities, T-Threats ToR Terms of Reference UNDP United Nation Development Programme VOICT Vojvodina ICT Cluster VoIP Voice over Internet Protocol WEF World Economic Forum ОSS Osnovne strukovne studije (Basic Vocational studies) ОАS Osnovne akademske studije (Bachelor Academic studies)

57

References and Key ICT Publications

[1] Bednarik, A. (2010), Serbia ICT - Technology, Creativity and Smart Solutions, SIEPA, Berlin

[2] Commission for Accreditation and Quality Assurance, Guide for students, Belgrade, 2011

[3] Djukic, Dj (2009), ICT Serbia, JISA Presentation at the 4th Meeting of the South East Europe nvestment Committee, April 2009

[4] European Commiission - Information Society and Media, Serbia - ICT RTD Technological Audit, Bruxelles, 2010

[5] FREN (2007), Understanding Belgrade Services Sector, Foundations for the Advancement of Economics, Beograd

[6] GTZ/WBF (2009), ICT Directory of Serbia 2009, GTZ WBF, Beograd

[7] http://www.eib.org/projects/pipeline/2009/20090283.htm - Public Sector Research and Development

[8] Ivanovic, M, Budimac, Z and Dudan Z (2007), LifeLong Learning for Small and Medium Companies in Serbia, Paper Presented a the Informatics Education Europe II Conference IEEII 2007, Thessaloniki

[9] Ivkovic, M and Pantelic, J (2008), ICT in Serbia 2008, PPT, Information Society of Serbia, Ohrid

[10] JRC (2010) ICT and Regional Economic Dynamic: A Literature Review, JRC Scientific and Technical Reports, Spain

[11] MINECO (2010), IT trziste u Srbiji 2009-2010 (in Serbian), Blog article published at PC Press, available at http://www.pcpress.info/tag/mineco, last accessed: September 19, 2010

[12] NBS, Odeljenje statistike platnog bilansa, "Bilans usluga, januar - decembar 2009-2010/1", Beograd, 2011

[13] NITIA (2009a), Analiza stanja IKT infrastrukture u opstinama i gradovima Srbije, Republicki zavod za Informatiku i Internet (NITIA), Beograd

[14] NITIA (2009b), Handbook for ICT in Local Self-Government Units, Republicki zavod za Informatiku i Internet (NITIA), Beograd

[15] NITIA (2009c),Preporuke za izradu web prezentacija lokalne samouprave, Republicki zavod za Informatiku i Internet (NITIA), Beograd

[16] NITIA (2009d), Stanje razvoja eUprave u Republici Srbiji za 2008, Republicki zavod za Informatiku iInternet (NITIA), Beograd

[17] NITIA (2010), Stanje razvoja eUprave u Republici Srbiji za 2009, Republicki zavod za Informatiku i Internet (NITIA), Beograd

[18] OECD (2009), Guide to Measure the Information Society, Organisation of Economic Co-operation and Development, Paris

[19] OECD (2009), Sector Specific Sources of Competitiveness in the Western Balkans, Organisation of Economic Co-operation and Development, Paris

[20] OECD (2009), Working Party on Indicators for the Information Society, Bruxelles, 2009

[21] Radovic, N (?), Serbia in FP7 ICT, PPT of the Ministry of Telecommunications and Information Society, Beograd

57

58

[22] RATEL (2007), An Overview of Telecom Market in the Republic of Serbia in 2006, Republicka Agencija za Telekomunikacije (RATEL), Beograd

[23] RATEL (2008), An Overview of Telecom Market in the Republic of Serbia in 2007, Republicka Agencija za Telekomunikacije (RATEL), Beograd

[24] RATEL (2009), An Overview of Telecom Market in the Republic of Serbia in 2008, Republicka Agencija za Telekomunikacije (RATEL), Beograd

[25] RATEL (2010), An Overview of Telecom Market in the Republic of Serbia in 2009, Republicka Agencija za Telekomunikacije (RATEL), Beograd

[26] RATEL (2011), An Overview of Telecom Market in the Republic of Serbia in 2010, Republicka Agencija za Telekomunikacije (RATEL), Beograd

[27] Republički zavod za statistiku, AC10 - Saopštenje broj 363 "Novoupisani studenti u 2010/2011", Beograd, 27.12.2010

[28] Republički zavod za statistiku, Bilten 532, "Naučnoistraživačke i istraživačko-razvojne organizacije, 2009", Beograd, 2010

[29] RSZ (2006), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2005, Beograd: Republicki zavod za statistiku Srbije

[30] RSZ (2007), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2006, Beograd: Republicki zavod za statistiku Srbije

[31] RSZ (2008), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2007, Beograd: Republicki zavod za statistiku Srbije

[32] RSZ (2009), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2008, Beograd: Republicki zavod za statistiku Srbije

[33] RSZ (2010), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2009, Beograd: Republicki zavod za statistiku Srbije

[34] RSZ (2011), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2010, Beograd: Republicki zavod za statistiku Srbije

[35] Savic Z. (2004), ICT for Development Serbia Assessment and Project Report, Seamus Mulconry Accenture

[36] SCORE (2007), ICT Country Report Serbia, score-project.eu, Beograd

[37] SECEP (2010), Quantitative Clustering:Mapping of Statistical Clusters, Support to Enterprise Competitiveness and Export Promotion in the Republic of Serbia, Beograd

[38] SIEPA (2009), Smart Solution ICT Serbia, Serbia Investment and Export Promotion Agency, Belgrade

[39] SITO (2011), Quarterly Tracker: IT Equipment Delivery through Distribution Channel, Belgrade, 2011

[40] SITO (2011), Serbian Companies as IT Users 2010-2011, Belgrade, 2011

[41] SITO (2011), Serbian IT Industry 2010 and 2011 Forecast, Belgrade, 2011

[42] SITO (2011), The scope and structure of Serbian IT market, Belgrade, 2011

[43] SKGO (2009), Najbolje IKT prakse gradova i opstina u Srbiji, Stalna konferencija gradova i opstina,USAID i Universitet u Nisu Elektronski Fakultet, Beograd

58 58

[22] RATEL (2007), An Overview of Telecom Market in the Republic of Serbia in 2006, Republicka Agencija za Telekomunikacije (RATEL), Beograd

[23] RATEL (2008), An Overview of Telecom Market in the Republic of Serbia in 2007, Republicka Agencija za Telekomunikacije (RATEL), Beograd

[24] RATEL (2009), An Overview of Telecom Market in the Republic of Serbia in 2008, Republicka Agencija za Telekomunikacije (RATEL), Beograd

[25] RATEL (2010), An Overview of Telecom Market in the Republic of Serbia in 2009, Republicka Agencija za Telekomunikacije (RATEL), Beograd

[26] RATEL (2011), An Overview of Telecom Market in the Republic of Serbia in 2010, Republicka Agencija za Telekomunikacije (RATEL), Beograd

[27] Republički zavod za statistiku, AC10 - Saopštenje broj 363 "Novoupisani studenti u 2010/2011", Beograd, 27.12.2010

[28] Republički zavod za statistiku, Bilten 532, "Naučnoistraživačke i istraživačko-razvojne organizacije, 2009", Beograd, 2010

[29] RSZ (2006), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2005, Beograd: Republicki zavod za statistiku Srbije

[30] RSZ (2007), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2006, Beograd: Republicki zavod za statistiku Srbije

[31] RSZ (2008), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2007, Beograd: Republicki zavod za statistiku Srbije

[32] RSZ (2009), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2008, Beograd: Republicki zavod za statistiku Srbije

[33] RSZ (2010), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2009, Beograd: Republicki zavod za statistiku Srbije

[34] RSZ (2011), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2010, Beograd: Republicki zavod za statistiku Srbije

[35] Savic Z. (2004), ICT for Development Serbia Assessment and Project Report, Seamus Mulconry Accenture

[36] SCORE (2007), ICT Country Report Serbia, score-project.eu, Beograd

[37] SECEP (2010), Quantitative Clustering:Mapping of Statistical Clusters, Support to Enterprise Competitiveness and Export Promotion in the Republic of Serbia, Beograd

[38] SIEPA (2009), Smart Solution ICT Serbia, Serbia Investment and Export Promotion Agency, Belgrade

[39] SITO (2011), Quarterly Tracker: IT Equipment Delivery through Distribution Channel, Belgrade, 2011

[40] SITO (2011), Serbian Companies as IT Users 2010-2011, Belgrade, 2011

[41] SITO (2011), Serbian IT Industry 2010 and 2011 Forecast, Belgrade, 2011

[42] SITO (2011), The scope and structure of Serbian IT market, Belgrade, 2011

[43] SKGO (2009), Najbolje IKT prakse gradova i opstina u Srbiji, Stalna konferencija gradova i opstina,USAID i Universitet u Nisu Elektronski Fakultet, Beograd

59

[44] Stability Pact (2002), eSEEurope Agenda for the Development of the Information Society, Stability Pact for South Eastern Europe, Ljubljana

[45] Stability Pact (2005), eSEE Agenda +, Stability Pact for South Eastern Europe, Thessaloniki

Strategy Documents:

[46] Strategija razvoja informacionog drustva u Republici Srbiji do 2020.g.

[47] Strategija naucno tehnoloskog razvoja Srbije 2010-2015

[48] Strategija razvoja konkurentnih i inovativnih malih i srednjih preduzeca za period od 2008 do 2013.g.

[49] Strategija za razvoj telekomunikacija u Republici Srbiji do 2010.g.

[50] UNDP (2010), eGovernance and ICT Usage Report for South East Europe, United Nations Development Programme, Sarajevo

[51] UPIS (2009) IKT u nastavi skola u Srbiji, Pregled stanja, perspektive razvoja, Udruzenje Profesora Informatike Srbije, Beograd

[52] USAID (2007), Status of Information & Communications Technology in Serbia, US Agency for International Development, Belgrade

[52] USAID (2008), Skills Gap Analysis in the IT, Film Production, Apparel and Education Sectors of the Serbian Economy, US Agency for International Development, Belgrade

[53] WBC (2010), WBC Regional Model of University-Enterprise Cooperation, University of Kragujevac, Kragujevac

[54] World Bank (2009), SERBIA: Doing more with less, The World Bank, Belgrade

[55] World Economic Forum, The Global Competitiveness Report 2010-2011, Geneva, Switzerland 2010

[56] World Economic Forum, The Global Information Technology Report 2010-2011, Geneva, Switzerland 2011

[57] Zitnik, B. (2009), IT Markets in SEE Countries in 2008 and Crisis Impact 2009-2010, 7th SEEITA –2nd SEE ICT Forum Board Meeting and 6th MASIT Open Days Conference, 18-20 November, Ohrid

59

58

[22] RATEL (2007), An Overview of Telecom Market in the Republic of Serbia in 2006, Republicka Agencija za Telekomunikacije (RATEL), Beograd

[23] RATEL (2008), An Overview of Telecom Market in the Republic of Serbia in 2007, Republicka Agencija za Telekomunikacije (RATEL), Beograd

[24] RATEL (2009), An Overview of Telecom Market in the Republic of Serbia in 2008, Republicka Agencija za Telekomunikacije (RATEL), Beograd

[25] RATEL (2010), An Overview of Telecom Market in the Republic of Serbia in 2009, Republicka Agencija za Telekomunikacije (RATEL), Beograd

[26] RATEL (2011), An Overview of Telecom Market in the Republic of Serbia in 2010, Republicka Agencija za Telekomunikacije (RATEL), Beograd

[27] Republički zavod za statistiku, AC10 - Saopštenje broj 363 "Novoupisani studenti u 2010/2011", Beograd, 27.12.2010

[28] Republički zavod za statistiku, Bilten 532, "Naučnoistraživačke i istraživačko-razvojne organizacije, 2009", Beograd, 2010

[29] RSZ (2006), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2005, Beograd: Republicki zavod za statistiku Srbije

[30] RSZ (2007), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2006, Beograd: Republicki zavod za statistiku Srbije

[31] RSZ (2008), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2007, Beograd: Republicki zavod za statistiku Srbije

[32] RSZ (2009), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2008, Beograd: Republicki zavod za statistiku Srbije

[33] RSZ (2010), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2009, Beograd: Republicki zavod za statistiku Srbije

[34] RSZ (2011), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2010, Beograd: Republicki zavod za statistiku Srbije

[35] Savic Z. (2004), ICT for Development Serbia Assessment and Project Report, Seamus Mulconry Accenture

[36] SCORE (2007), ICT Country Report Serbia, score-project.eu, Beograd

[37] SECEP (2010), Quantitative Clustering:Mapping of Statistical Clusters, Support to Enterprise Competitiveness and Export Promotion in the Republic of Serbia, Beograd

[38] SIEPA (2009), Smart Solution ICT Serbia, Serbia Investment and Export Promotion Agency, Belgrade

[39] SITO (2011), Quarterly Tracker: IT Equipment Delivery through Distribution Channel, Belgrade, 2011

[40] SITO (2011), Serbian Companies as IT Users 2010-2011, Belgrade, 2011

[41] SITO (2011), Serbian IT Industry 2010 and 2011 Forecast, Belgrade, 2011

[42] SITO (2011), The scope and structure of Serbian IT market, Belgrade, 2011

[43] SKGO (2009), Najbolje IKT prakse gradova i opstina u Srbiji, Stalna konferencija gradova i opstina,USAID i Universitet u Nisu Elektronski Fakultet, Beograd

58 58

[22] RATEL (2007), An Overview of Telecom Market in the Republic of Serbia in 2006, Republicka Agencija za Telekomunikacije (RATEL), Beograd

[23] RATEL (2008), An Overview of Telecom Market in the Republic of Serbia in 2007, Republicka Agencija za Telekomunikacije (RATEL), Beograd

[24] RATEL (2009), An Overview of Telecom Market in the Republic of Serbia in 2008, Republicka Agencija za Telekomunikacije (RATEL), Beograd

[25] RATEL (2010), An Overview of Telecom Market in the Republic of Serbia in 2009, Republicka Agencija za Telekomunikacije (RATEL), Beograd

[26] RATEL (2011), An Overview of Telecom Market in the Republic of Serbia in 2010, Republicka Agencija za Telekomunikacije (RATEL), Beograd

[27] Republički zavod za statistiku, AC10 - Saopštenje broj 363 "Novoupisani studenti u 2010/2011", Beograd, 27.12.2010

[28] Republički zavod za statistiku, Bilten 532, "Naučnoistraživačke i istraživačko-razvojne organizacije, 2009", Beograd, 2010

[29] RSZ (2006), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2005, Beograd: Republicki zavod za statistiku Srbije

[30] RSZ (2007), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2006, Beograd: Republicki zavod za statistiku Srbije

[31] RSZ (2008), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2007, Beograd: Republicki zavod za statistiku Srbije

[32] RSZ (2009), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2008, Beograd: Republicki zavod za statistiku Srbije

[33] RSZ (2010), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2009, Beograd: Republicki zavod za statistiku Srbije

[34] RSZ (2011), Upotreba informaciono-komunikacionih tehnologija u Republici Srbiji, 2010, Beograd: Republicki zavod za statistiku Srbije

[35] Savic Z. (2004), ICT for Development Serbia Assessment and Project Report, Seamus Mulconry Accenture

[36] SCORE (2007), ICT Country Report Serbia, score-project.eu, Beograd

[37] SECEP (2010), Quantitative Clustering:Mapping of Statistical Clusters, Support to Enterprise Competitiveness and Export Promotion in the Republic of Serbia, Beograd

[38] SIEPA (2009), Smart Solution ICT Serbia, Serbia Investment and Export Promotion Agency, Belgrade

[39] SITO (2011), Quarterly Tracker: IT Equipment Delivery through Distribution Channel, Belgrade, 2011

[40] SITO (2011), Serbian Companies as IT Users 2010-2011, Belgrade, 2011

[41] SITO (2011), Serbian IT Industry 2010 and 2011 Forecast, Belgrade, 2011

[42] SITO (2011), The scope and structure of Serbian IT market, Belgrade, 2011

[43] SKGO (2009), Najbolje IKT prakse gradova i opstina u Srbiji, Stalna konferencija gradova i opstina,USAID i Universitet u Nisu Elektronski Fakultet, Beograd

59

[44] Stability Pact (2002), eSEEurope Agenda for the Development of the Information Society, Stability Pact for South Eastern Europe, Ljubljana

[45] Stability Pact (2005), eSEE Agenda +, Stability Pact for South Eastern Europe, Thessaloniki

Strategy Documents:

[46] Strategija razvoja informacionog drustva u Republici Srbiji do 2020.g.

[47] Strategija naucno tehnoloskog razvoja Srbije 2010-2015

[48] Strategija razvoja konkurentnih i inovativnih malih i srednjih preduzeca za period od 2008 do 2013.g.

[49] Strategija za razvoj telekomunikacija u Republici Srbiji do 2010.g.

[50] UNDP (2010), eGovernance and ICT Usage Report for South East Europe, United Nations Development Programme, Sarajevo

[51] UPIS (2009) IKT u nastavi skola u Srbiji, Pregled stanja, perspektive razvoja, Udruzenje Profesora Informatike Srbije, Beograd

[52] USAID (2007), Status of Information & Communications Technology in Serbia, US Agency for International Development, Belgrade

[52] USAID (2008), Skills Gap Analysis in the IT, Film Production, Apparel and Education Sectors of the Serbian Economy, US Agency for International Development, Belgrade

[53] WBC (2010), WBC Regional Model of University-Enterprise Cooperation, University of Kragujevac, Kragujevac

[54] World Bank (2009), SERBIA: Doing more with less, The World Bank, Belgrade

[55] World Economic Forum, The Global Competitiveness Report 2010-2011, Geneva, Switzerland 2010

[56] World Economic Forum, The Global Information Technology Report 2010-2011, Geneva, Switzerland 2011

[57] Zitnik, B. (2009), IT Markets in SEE Countries in 2008 and Crisis Impact 2009-2010, 7th SEEITA –2nd SEE ICT Forum Board Meeting and 6th MASIT Open Days Conference, 18-20 November, Ohrid

59

60

List of Tables

Table 1 ICT Sector Definition ....................................................................................................................4 Table 2 Discrepancies between Qualitative and Quantitative GCI Indicators selection ..........................6 Table 3 The Key Parameters for the Serbian IT Market Forecast, in Q4-2011 .........................................6 Table 4 Serbian IT Market Value in 2010 and Trends for 2011-2012 [€ million]. ....................................9 Table 5 IT service in Serbia. Market Value in 2010 and Forecast 2011-2012 [€ million]. ..................... 11 Table 6 Serbian IT Market Value and Structure, 2010 and Potentials 2011-2015 [€ million] ............... 16 Table 7 Total Number of Internet Operators in Serbia ......................................................................... 19 Table 8 OECD ICT Sector Definition ....................................................................................................... 20 Table 9 Number of IT companies in Serbia, 2010 according to the IT Sub-sector and Company size .. 21 Table 10 Workforce in IT industry in Serbia, according to the IT Sub-sector and Company Size ............ 22 Table 11 Revenue in Serbian IT Industry [€ million], according to the Sub-sector and Company Size ... 23 Table 12 Added Value in Serbian IT Industry [€ million], 2010. .............................................................. 24 Table 13 Net Assets of Serbian IT Industry [€ million], 2010. .................................................................. 25 Table 14 Tertiary-type A and type B Education Programmes in Serbia .................................................. 32 Table 15 Researchers in Serbia. Number of ICT Researchers and FTE, in 2009 ...................................... 36 Table 16 Competence/Share Matrix of Declared Expertise per Objectives ............................................ 42 Table 17 Success and failure rates of proposals in FP6-IST and FP7-ICT Theme. .................................... 43 Table 18 SWOT Analysis Summary .......................................................................................................... 46 Table 19 SWOT Analysis Summary - Continued ...................................................................................... 47 Table 20 OECD ICT sector definition ........................................................................................................ 53

List of Figures Figure 1 Serbian IT Market and Growth Rates for 2008-2012. (%) ......................................................... 10 Figure 2 Serbian IT Market Structure in 2010. Revenue and Profit ....................................................... 10 Figure 3 Structure of IT Service in Serbia and Compound Annual Growth Rate (5 year period) ........... 11 Figure 4 Products in Serbian Software Industry ..................................................................................... 12 Figure 5 IT Spending and Investments in Serbia ..................................................................................... 13 Figure 6 IT Investment according to Economic Strength (GDP). ............................................................ 14 Figure 7 Revenue and Investments by Telecommunication Services, in 2010 ....................................... 17 Figure 8 ICT Development Index, IDI Structure ...................................................................................... 18 Figure 9 Incomes Earned from Internet (in millions of RSD) .................................................................. 19 Figure 10 Structure of IT Companies in Serbia,2010 ............................................................................ 21 Figure 11 Share of IT Industry Sub-sector (%) in Total Number of Employees in ICT Industry ............ 22 Figure 12 Structure of IT Industry Sub-sector (%) in Revenues ............................................................ 23 Figure 13 Share of the Value Added (%) in Revenues of ICT Industry Sub-sectors .............................. 25 Figure 14 Structure of IT Industry Sub-sector (%) in Net Assets .......................................................... 25 Figure 15 Digital Divide. Households with Internet Connection, by Monthly Incomes Level .............. 27 Figure 16 ICT, % of Employees in all Reported Accusations (sample 1122 employees) ...................... 31 Figure 17 Number of Students (vocational and academic) with ICT Titles, in 2009 ............................ 31 Figure 18 Capacity of New Enrollees according to ICT Studying Programs, in 2011/2012 .................. 32 Figure 19 Number of New ICT Enrollees according to Cities, in 2011/2012 ........................................ 33 Figure 20 Number of New ICT Enrollees according to Faculties’ Founders, in 2011/2012 .................. 34 Figure 21 R&D in OECD and non-OECD Countries, 2009 ...................................................................... 37 Figure 22 Gross Domestic Expenditure in R&D (as a percentage of GDP) ........................................... 38

60

60

List of Tables

Table 1 ICT Sector Definition ....................................................................................................................4 Table 2 Discrepancies between Qualitative and Quantitative GCI Indicators selection ..........................6 Table 3 The Key Parameters for the Serbian IT Market Forecast, in Q4-2011 .........................................6 Table 4 Serbian IT Market Value in 2010 and Trends for 2011-2012 [€ million]. ....................................9 Table 5 IT service in Serbia. Market Value in 2010 and Forecast 2011-2012 [€ million]. ..................... 11 Table 6 Serbian IT Market Value and Structure, 2010 and Potentials 2011-2015 [€ million] ............... 16 Table 7 Total Number of Internet Operators in Serbia ......................................................................... 19 Table 8 OECD ICT Sector Definition ....................................................................................................... 20 Table 9 Number of IT companies in Serbia, 2010 according to the IT Sub-sector and Company size .. 21 Table 10 Workforce in IT industry in Serbia, according to the IT Sub-sector and Company Size ............ 22 Table 11 Revenue in Serbian IT Industry [€ million], according to the Sub-sector and Company Size ... 23 Table 12 Added Value in Serbian IT Industry [€ million], 2010. .............................................................. 24 Table 13 Net Assets of Serbian IT Industry [€ million], 2010. .................................................................. 25 Table 14 Tertiary-type A and type B Education Programmes in Serbia .................................................. 32 Table 15 Researchers in Serbia. Number of ICT Researchers and FTE, in 2009 ...................................... 36 Table 16 Competence/Share Matrix of Declared Expertise per Objectives ............................................ 42 Table 17 Success and failure rates of proposals in FP6-IST and FP7-ICT Theme. .................................... 43 Table 18 SWOT Analysis Summary .......................................................................................................... 46 Table 19 SWOT Analysis Summary - Continued ...................................................................................... 47 Table 20 OECD ICT sector definition ........................................................................................................ 53

List of Figures Figure 1 Serbian IT Market and Growth Rates for 2008-2012. (%) ......................................................... 10 Figure 2 Serbian IT Market Structure in 2010. Revenue and Profit ....................................................... 10 Figure 3 Structure of IT Service in Serbia and Compound Annual Growth Rate (5 year period) ........... 11 Figure 4 Products in Serbian Software Industry ..................................................................................... 12 Figure 5 IT Spending and Investments in Serbia ..................................................................................... 13 Figure 6 IT Investment according to Economic Strength (GDP). ............................................................ 14 Figure 7 Revenue and Investments by Telecommunication Services, in 2010 ....................................... 17 Figure 8 ICT Development Index, IDI Structure ...................................................................................... 18 Figure 9 Incomes Earned from Internet (in millions of RSD) .................................................................. 19 Figure 10 Structure of IT Companies in Serbia,2010 ............................................................................ 21 Figure 11 Share of IT Industry Sub-sector (%) in Total Number of Employees in ICT Industry ............ 22 Figure 12 Structure of IT Industry Sub-sector (%) in Revenues ............................................................ 23 Figure 13 Share of the Value Added (%) in Revenues of ICT Industry Sub-sectors .............................. 25 Figure 14 Structure of IT Industry Sub-sector (%) in Net Assets .......................................................... 25 Figure 15 Digital Divide. Households with Internet Connection, by Monthly Incomes Level .............. 27 Figure 16 ICT, % of Employees in all Reported Accusations (sample 1122 employees) ...................... 31 Figure 17 Number of Students (vocational and academic) with ICT Titles, in 2009 ............................ 31 Figure 18 Capacity of New Enrollees according to ICT Studying Programs, in 2011/2012 .................. 32 Figure 19 Number of New ICT Enrollees according to Cities, in 2011/2012 ........................................ 33 Figure 20 Number of New ICT Enrollees according to Faculties’ Founders, in 2011/2012 .................. 34 Figure 21 R&D in OECD and non-OECD Countries, 2009 ...................................................................... 37 Figure 22 Gross Domestic Expenditure in R&D (as a percentage of GDP) ........................................... 38

60

60

List of Tables

Table 1 ICT Sector Definition ....................................................................................................................4 Table 2 Discrepancies between Qualitative and Quantitative GCI Indicators selection ..........................6 Table 3 The Key Parameters for the Serbian IT Market Forecast, in Q4-2011 .........................................6 Table 4 Serbian IT Market Value in 2010 and Trends for 2011-2012 [€ million]. ....................................9 Table 5 IT service in Serbia. Market Value in 2010 and Forecast 2011-2012 [€ million]. ..................... 11 Table 6 Serbian IT Market Value and Structure, 2010 and Potentials 2011-2015 [€ million] ............... 16 Table 7 Total Number of Internet Operators in Serbia ......................................................................... 19 Table 8 OECD ICT Sector Definition ....................................................................................................... 20 Table 9 Number of IT companies in Serbia, 2010 according to the IT Sub-sector and Company size .. 21 Table 10 Workforce in IT industry in Serbia, according to the IT Sub-sector and Company Size ............ 22 Table 11 Revenue in Serbian IT Industry [€ million], according to the Sub-sector and Company Size ... 23 Table 12 Added Value in Serbian IT Industry [€ million], 2010. .............................................................. 24 Table 13 Net Assets of Serbian IT Industry [€ million], 2010. .................................................................. 25 Table 14 Tertiary-type A and type B Education Programmes in Serbia .................................................. 32 Table 15 Researchers in Serbia. Number of ICT Researchers and FTE, in 2009 ...................................... 36 Table 16 Competence/Share Matrix of Declared Expertise per Objectives ............................................ 42 Table 17 Success and failure rates of proposals in FP6-IST and FP7-ICT Theme. .................................... 43 Table 18 SWOT Analysis Summary .......................................................................................................... 46 Table 19 SWOT Analysis Summary - Continued ...................................................................................... 47 Table 20 OECD ICT sector definition ........................................................................................................ 53

List of Figures Figure 1 Serbian IT Market and Growth Rates for 2008-2012. (%) ......................................................... 10 Figure 2 Serbian IT Market Structure in 2010. Revenue and Profit ....................................................... 10 Figure 3 Structure of IT Service in Serbia and Compound Annual Growth Rate (5 year period) ........... 11 Figure 4 Products in Serbian Software Industry ..................................................................................... 12 Figure 5 IT Spending and Investments in Serbia ..................................................................................... 13 Figure 6 IT Investment according to Economic Strength (GDP). ............................................................ 14 Figure 7 Revenue and Investments by Telecommunication Services, in 2010 ....................................... 17 Figure 8 ICT Development Index, IDI Structure ...................................................................................... 18 Figure 9 Incomes Earned from Internet (in millions of RSD) .................................................................. 19 Figure 10 Structure of IT Companies in Serbia,2010 ............................................................................ 21 Figure 11 Share of IT Industry Sub-sector (%) in Total Number of Employees in ICT Industry ............ 22 Figure 12 Structure of IT Industry Sub-sector (%) in Revenues ............................................................ 23 Figure 13 Share of the Value Added (%) in Revenues of ICT Industry Sub-sectors .............................. 25 Figure 14 Structure of IT Industry Sub-sector (%) in Net Assets .......................................................... 25 Figure 15 Digital Divide. Households with Internet Connection, by Monthly Incomes Level .............. 27 Figure 16 ICT, % of Employees in all Reported Accusations (sample 1122 employees) ...................... 31 Figure 17 Number of Students (vocational and academic) with ICT Titles, in 2009 ............................ 31 Figure 18 Capacity of New Enrollees according to ICT Studying Programs, in 2011/2012 .................. 32 Figure 19 Number of New ICT Enrollees according to Cities, in 2011/2012 ........................................ 33 Figure 20 Number of New ICT Enrollees according to Faculties’ Founders, in 2011/2012 .................. 34 Figure 21 R&D in OECD and non-OECD Countries, 2009 ...................................................................... 37 Figure 22 Gross Domestic Expenditure in R&D (as a percentage of GDP) ........................................... 38

61

Figure 23 Distribution of the Science Budget by Departments, in 2009 .............................................. 38 Figure 24 Financing of Technological Development in 2008 according to Scientific Fields, [€ million] 39 Figure 25 Success Rates of Applicants in the FP6-IST and FP7-ICT for EU and Serbia .......................... 44 Figure 26 EU27 and AC applicants in FP7-ICT Theme – Individual Countries Positions ....................... 45 Figure 27 Export of Computer and Information Services, 2007-2010 and Forecast 2011 [€ million].. 48 Figure 28 Intro-European Offshoring Market Growth Pattern ............................................................ 50

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60

List of Tables

Table 1 ICT Sector Definition ....................................................................................................................4 Table 2 Discrepancies between Qualitative and Quantitative GCI Indicators selection ..........................6 Table 3 The Key Parameters for the Serbian IT Market Forecast, in Q4-2011 .........................................6 Table 4 Serbian IT Market Value in 2010 and Trends for 2011-2012 [€ million]. ....................................9 Table 5 IT service in Serbia. Market Value in 2010 and Forecast 2011-2012 [€ million]. ..................... 11 Table 6 Serbian IT Market Value and Structure, 2010 and Potentials 2011-2015 [€ million] ............... 16 Table 7 Total Number of Internet Operators in Serbia ......................................................................... 19 Table 8 OECD ICT Sector Definition ....................................................................................................... 20 Table 9 Number of IT companies in Serbia, 2010 according to the IT Sub-sector and Company size .. 21 Table 10 Workforce in IT industry in Serbia, according to the IT Sub-sector and Company Size ............ 22 Table 11 Revenue in Serbian IT Industry [€ million], according to the Sub-sector and Company Size ... 23 Table 12 Added Value in Serbian IT Industry [€ million], 2010. .............................................................. 24 Table 13 Net Assets of Serbian IT Industry [€ million], 2010. .................................................................. 25 Table 14 Tertiary-type A and type B Education Programmes in Serbia .................................................. 32 Table 15 Researchers in Serbia. Number of ICT Researchers and FTE, in 2009 ...................................... 36 Table 16 Competence/Share Matrix of Declared Expertise per Objectives ............................................ 42 Table 17 Success and failure rates of proposals in FP6-IST and FP7-ICT Theme. .................................... 43 Table 18 SWOT Analysis Summary .......................................................................................................... 46 Table 19 SWOT Analysis Summary - Continued ...................................................................................... 47 Table 20 OECD ICT sector definition ........................................................................................................ 53

List of Figures Figure 1 Serbian IT Market and Growth Rates for 2008-2012. (%) ......................................................... 10 Figure 2 Serbian IT Market Structure in 2010. Revenue and Profit ....................................................... 10 Figure 3 Structure of IT Service in Serbia and Compound Annual Growth Rate (5 year period) ........... 11 Figure 4 Products in Serbian Software Industry ..................................................................................... 12 Figure 5 IT Spending and Investments in Serbia ..................................................................................... 13 Figure 6 IT Investment according to Economic Strength (GDP). ............................................................ 14 Figure 7 Revenue and Investments by Telecommunication Services, in 2010 ....................................... 17 Figure 8 ICT Development Index, IDI Structure ...................................................................................... 18 Figure 9 Incomes Earned from Internet (in millions of RSD) .................................................................. 19 Figure 10 Structure of IT Companies in Serbia,2010 ............................................................................ 21 Figure 11 Share of IT Industry Sub-sector (%) in Total Number of Employees in ICT Industry ............ 22 Figure 12 Structure of IT Industry Sub-sector (%) in Revenues ............................................................ 23 Figure 13 Share of the Value Added (%) in Revenues of ICT Industry Sub-sectors .............................. 25 Figure 14 Structure of IT Industry Sub-sector (%) in Net Assets .......................................................... 25 Figure 15 Digital Divide. Households with Internet Connection, by Monthly Incomes Level .............. 27 Figure 16 ICT, % of Employees in all Reported Accusations (sample 1122 employees) ...................... 31 Figure 17 Number of Students (vocational and academic) with ICT Titles, in 2009 ............................ 31 Figure 18 Capacity of New Enrollees according to ICT Studying Programs, in 2011/2012 .................. 32 Figure 19 Number of New ICT Enrollees according to Cities, in 2011/2012 ........................................ 33 Figure 20 Number of New ICT Enrollees according to Faculties’ Founders, in 2011/2012 .................. 34 Figure 21 R&D in OECD and non-OECD Countries, 2009 ...................................................................... 37 Figure 22 Gross Domestic Expenditure in R&D (as a percentage of GDP) ........................................... 38

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Figure 23 Distribution of the Science Budget by Departments, in 2009 .............................................. 38 Figure 24 Financing of Technological Development in 2008 according to Scientific Fields, [€ million] 39 Figure 25 Success Rates of Applicants in the FP6-IST and FP7-ICT for EU and Serbia .......................... 44 Figure 26 EU27 and AC applicants in FP7-ICT Theme – Individual Countries Positions ....................... 45 Figure 27 Export of Computer and Information Services, 2007-2010 and Forecast 2011 [€ million].. 48 Figure 28 Intro-European Offshoring Market Growth Pattern ............................................................ 50

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ICT-Serbia.indd 2 09.12.11 12:56

ISBN 978-86-87737-50-1