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Czech Republic IT Profile and Business Opportunities Team Members Chris Kowalski Ed Terrana Rajani Sinha Gyan Prasad Chris Czar Agenda Characteristics of Czech Republic Geography History Demographics Politics Culture Characteristics of the IT Industry in the Czech Republic Economic characteristics as related to IT in the Czech Republic Economic and IT comparison between Czech Republic & Slovakia IT opportunities and Recommendation Characteristics – Geography Characteristics – Geography Characteristics – Geography Area: 78,866 sq km, roughly the size of South Carolina Landlocked – no ports Located astride some of oldest and most significant land routes in Europe Neighbors economically sound nations Germany and Austria, as well as emerging nations Poland and Slovakia Railways: 9,435 km; Roadways: 127,693 km (100% paved, 498 Highway); 114 Airports South Carolina has 103,072 km Roadways and 68 Airports What Does this mean? Czech Republic is highly accessible! Characteristics - History Communist Nation from 1948 until after the fall of the Berlin Wall Non-violent anti-communist coalition negotiated the governments resignation in 1989 1993 the “Velvet Divorce” separated Czech Republic and Slovakia into two nations In 2004 became a member of the European Union Czech Republic financial experts do not believe the nation is emerging, but already “emerged” Czech Republic has undergone recent and drastic changes! Characteristic - Demographics Population is 10,241,138 Labor Force 5.25 Million Growth rate is -.05% The median age: males is 37.2 years old females is 40.82 years old 90.4% of populous are of Czech ethnicity 59% claim no religious affiliation Catholic - 26.8% Literacy rate is very high at 99% 90.45% of populous has a secondary education (US – 88.35%) What does this mean? Czech Republic is educated but old! Characteristics - Politics Parliamentary Government Legal modifications have occurred to: bring Czech Republic in line with the obligations of the Organization on Security and Cooperation in Europe (OSCE) expunge Marxist-Leninist legal theory influences from former government regime The Czech Republic is working toward a stable, legitimate government Characteristics - Culture Culture is heavily influence by neighbors Prague 1-2 hours from Germany Also influenced by Western Europe Rapidly changing from Communist culture to Western culture. Characteristics - Culture Culture Model based on Hofstede: Environment – Constraint Time – Multi-focus, fixed, future and past Action – Doing and being Communication – High context, direct and indirect, instrumental, and formal Space – Private and public Power – Tend to be hierarchical Characteristics - Culture Culture Model based on Hofstede: Individualism – Collective and particularistic Competitiveness – Cooperative Structure – Mix of order and flexible Thinking – Tend to be inductive and deductive. Characteristics - Economic Unemployment Rate Real GDP Growth Rate 5 10 4 8 EU (15 countries) 1 Czech Republic % 2 6 EU (15 countries) 4 Czech Republic 0 2 -1 0 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 1998 1999 2000 2001 2002 2003 2004 -2 Year Year Inflation Comparision 12 10 Percent % 3 Czech 8 Finland 6 Germany 4 Netherlands 2 0 1998 1999 2000 2001 Year 2002 2003 2004 IT Industry in the Czech Republic Electricity Data 71.75 bill kWh produced, 55.33 bill kWh consumed Telephones 3.6 Million land lines Cellular Phones 9.7 Million cellular units Privatized industry (Eurotel, RadioMobil and Cesky Mobil) • All provide wireless internet access and improved SMS IT Industry in the Czech Republic, Cont. 86% Business Exchanges now digital Copper subscriber systems now being enhanced with Asymmetrical Digital Subscriber Line (ADSL) equipment 295,677 Internet Hosts 2.7 Million Internet Users Approximately 35% of population use internet Dial-up, ISDN, Lease Line, Wireless, Cable all used as access methods IT Industry in the Czech Republic, Cont. Personal Computers in Czech Republic 500,000 PCs in use 600,000 Networked PCs PCs in the home have the highest growth rates IT Industry in the Czech Republic, Cont. Government Initiatives Ministry of Information Technology was established in 2003 Program to connect all Czech schools to the Internet initiated in 2001 2003 – Launched National Computer Literacy Program targeting middle-age and older people outside large cities IT Industry in the Czech Republic, Cont. Prague establishing itself as a center for financial and IT services New Investors are attracted to Czech Republic due to: quality of the city's infrastructure the availability of modern office space good telecommunications improved services SAP, Intel, DHL, ExxonMobil and Siemens all have Czech Republic Operations Top Tier Czech Tech Firms include Auto-Cont on Line, ICZ, LogicaCMG, PVT Economic Characteristics as related to IT GDP $107 Billion Unemployment rate is 8.5% Work week mandated at a minimum of 40 hours a week Double Digit growth in IT Industry IT market value is $760 Million $26 Million in IT services in 2003 Economic Characteristics as related to IT 4 Modes of Software Development in CR Localization – software imported from other countries and translated in Czech Customized – software created from scratch for Czech users Offshoring – developing software domestically to be sold to other countries Development – developing software for domestic market as well as translating to other languages for foreign market Economic Characteristics as related to IT Czech Software Engineers Lower salaried that Western European Counter parts (60% of salary) • $18,000/year for programmer in Prague with 2-3 years experience • Smaller cities, salary is 15-20% lower Tend to be very skilled Targeted for software development by foreign companies 50,000 Czech university students are enrolled in software engineering course • 33% of degrees are technical in nature (US – 18%) • Czech Technical Institute compares favorably to MIT Slovak Republic Member of European Union Czech Republic is also a member of EU Population is 5.4 Million 10.2 Million in the Czech Republic Originally behind economic growth of other Eastern European nations Has since caught up economically Very High Unemployment rate 15% Czech Republic is 8.5% Slovak Republic GDP is $41.1 Billion with 5.5% growth rate GDP $107 Billion in Czech Republic Services make up 53.6% of GDP 58.8% in Czech Republic Hi Tech Exports Made up 3.7% of exports in 2004 Down from 4.1% in 2003 Slovak Republic Hi level of phone usage Fixed Line/Mobile Phones combined at .925 phones per person • Czech Republic is over 1 per person Internet usage is 53% 35% of Czech Republic 89,592 Internet Hosts 295,677 in Czech Republic PC’s owned is 15% Czech Republic is 27% (2001 est.) IT Opportunities/Recommendations Call Center servicing Europe and/or USA and Canada Call center for Germany is likely the best possibility due to labor cost differences 35% of Czech Republic speak German, higher proficiency than English Advanced telecommunications SAP European Call Center serves as model IT Opportunities/Recommendations Tourist IT Services Tourism is increasing in Prague http://www.mikesbiketours.com/index_munich.html “Mike’s Bike Tours” has leveraged IT to market itself Relocation Assistance for Americans Prague becoming biggest European Relocation destination for Americans Assistance would include Czech language instruction, social and business cultural instruction as well as helping emigrés to set-up their basic needs IT Opportunities/Recommendations Outsource engineering and/or computer science projects Leverage IT in order to have a satellite center that tackles engineering and computer science projects for a company High number of graduates with technical degree 8.5% unemployment approximates to 1,400 unemployed high tech graduates each year Opportunity for Czech’s to work in their own country and not be forced to emigrate IT Opportunities/Recommendations Advantages to establishing in Czech Republic No foreign investment restrictions High “Knowledge Pipeline” Skilled and disciplined workforce Expansive telecommunications network IT is a national priority Various domestic tools to facilitate investment Stable, democratically elected government IT Opportunities/Recommendations Advantages, continued Lower labor costs when compared to other European nations Czech Czech Czech Opportunities/Recommendations Disadvantages Labor costs are rising with admittance into the EU • Real wage growth is 4% (US 1.2%) Unemployed work force is primarily unskilled Only 4.38% of 530,297 unemployed workers have a university degree Czech Republic government’s weak enforcement of Intellectual Property Laws Czech Republic added to U.S. government’s Special 301 priority watch list that identifies nations that have failed to establish fair and effective legal protections outlined under international obligations for intellectual property rights Summary While labor costs are still low, and IT skills are high, the Czech Republic represents an excellent opportunity for IT investors. Call centers, software development, and IT services are a few possible investment areas. However, as the Czech Republic continues to thrive economically and remains an attractive destination for other investors and immigrants, the odds of a successful venture will continue to decrease in the near future.