Thursday 24 April 2008

Romanian Trends

A few days ago I posted a summary about how our offshoring adventures have turned out so far and with said posting was a promise to put something up about the recent trends I've seen emerging in Romania.  Let's run through them in no particular order:


The most immediately visible trend on a monthly basis (and the one people usually ask about first) is how costs are changing.  In the year since we've been there we've seen costs creep up by approximately 14% overall.  The biggest increases have been in rents/leases, utilities, fuel and cost of credit (making existing borrowing more expensive).  Salaries have risen by about 7% and there is probably more adjustment to come as the cost of living has risen well in excess of this.  When you combine these factors with a volatile currency (RON) and a big supply of imported goods and services priced in Euros you've got a upward spiral going on.  Some of this might not line up with what you may read on the internet or in pre-investment reports.  Why might this be?  See the next point...

Public Information

In the UK it is easy to access fairly accurate information about market prices, salaries, accounting and employment laws - you get used to being able to make pretty informed decisions based on reliable data.  Not so in Romania - historical data and public records are notoriously difficult to get hold of, usually paper-based and tend to say what they recorder thought was best.  What you read in authoritative reports is usually a kind of average of what's been discovered - so it isn't that it's unreliable, it's just that it's as reliable as you're going to get.  Another thing to bear in mind is the discrepancy between cities is a lot more significant than in the west so national averages don't really carry much weight in real life.  This is supposed to be about trends and there isn't really a trend here - I guess I included it because there should be a trend toward making more accurate, relevant market information freely available.  People need confidence before investing and facts are a good source of that.


By now everyone must know what I think about Romanian engineers so let's skip that and talk about the market.  It's been an employers market here for a very long time but the balance of power is gradually shifting to employees.  Between the increased opportunities for working abroad EU membership has brought and the rapidly growing number of companies opening offices in Romania skilled Romanians have a lot more choice in work now than ever before.  This doesn't bother us much as we've got a very unique offering but it does mean having to work harder this year to attract the right talent and I only see this becoming more competitive.


Universities and technical colleges are very good at adapting their curriculum to match what the market demands from graduates, but maybe too good...  They need to strike a balance between the practical (preparing people for employment) and the academic (teaching those fundamental scientific principles and research/problem solving skills).  At the moment more and more education is based on equipping students with immediately usable skills but it seems to be at the expense of the basics like how logical operations work, communications protocols and how machines interpret instructions.  If this keeps going in the direction it's headed it will lead to graduates who can immediately put together a basic system using (for example) rails but will struggle to pick up the next thing, and the next and the next.


On the whole Romanians consider working for western companies desirable and are attracted to our values and management philosophy.  From what I have seen traditional Romanian management styles seem to revolve around clock watching and micromanagement - it's a very 'production line' philosophy.  I haven't come across a good management school/academy here and perhaps that's why?  The flipside of this is there is no shortage of people with good leadership potential and we're experiencing a surge of interest in moving into management roles - it seems like once the right culture has been established they are keen to take it on.  We're busy planning how we'll support transitioning people into these roles and if there are any significant lessons in it I'll be sure to post about it.

Bottom Line

In summary we’ve seen prices rise quite considerably in just over a year here and the currency has been quite volatile but where it could really all go wrong for Romania is that while prices have risen there has been no corresponding increase in quality of infrastructure or improvement in central services (i.e. how the government administers/supports businesses etc).  If these things are not carefully planned I think Romania could find itself in a situation where it prices itself out of the reach of that first wave of cost sensitive companies prepared to accept shortcomings in certain areas in order to access such great talent at low cost and at the same time not be providing the stable platform that the next wave of less cost sensitive global expansionists expect before they’ll come into a new economy.  Competition for skilled employees is certainly increasing but my feeling is we've got a few years worth of recruitment tactics yet before having to reassess growth strategies.

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