Bloomberg News

Fivefold Pay Surge Since 2006 Reveals Romania Tech Boom

May 08, 2014

President Traian Basescu

In trying to "convince the hackers to come to the good side," President Traian Basescu proposed the European Union Council last December to set up in Bucharest the European Agency for Cyber Crime to coordinate the fight against future cyber attacks. Photographer: Sean Gallup/Getty Images

George Mihaiu has boosted his salary fivefold since 2006 and he’s still getting two job offers a day.

Mihaiu, 31, rode a wave of software investment streaming into Romania to increase his after-tax pay to about 2,000 euros ($2,790) a month, five times the country’s average. In the past 10 years, at least 50 technology companies, including International Business Machines Corp. (IBM:US), Microsoft Corp. (MSFT:US), Oracle Corp. (ORCL:US) and Intel Corp. (INTC:US), have set up offices in Romania, making it one of Europe’s biggest technology-worker hubs.

With more than 64,000 certified IT specialists, Romania is the European Union leader in technology workers per capita and sixth in the world, according to Gartner Inc. (IT:US), a research company in Stamford, Connecticut. Romania’s strengths are its multilingual, educated labor force and its low costs for IT services, Gartner said in a Nov. 6 report.

“Many companies are completely moving their development here,” said Mihaiu, a software developer who chose to work for a smaller company that produces software for U.S. firms because of schedule flexibility. “I personally want to have a balance.” Some friends in Romania earn 4,000 euros a month working 14 to 15 hours a day, he said.

The rise in technology jobs in the EU’s second-poorest member isn’t just on the legal side. The country is struggling to contain a rising number of cybercrime networks even with the help of the U.S. Secret Service, which has a special office in Bucharest.

Converting Hackers

Romania accounted for about 1 percent of the world’s cyber-attack traffic during the fourth quarter of 2013, putting it in ninth place in the world after leaders China, the U.S, Canada and Indonesia, according to a report by Cambridge, Massachusetts-based Akamai Technologies Inc. (AKAM:US), which helps speed Internet-data delivery. A global study coordinated by Verizon Communications Inc. (VZ:US) placed Romania second after China in terms of cyber-attacks and data breaches in 2012.

President Traian Basescu said he was trying to “convince the hackers to come to the good side” when he asked the European Union Council in December 2013 to make Bucharest the location for a planned European agency to fight cybercrime. No decision has yet been made.

Three Romanian hackers last year received sentences ranging from 21 months to 15 years in U.S. federal prison after pleading guilty to hacking-related charges, admitting they hit more than 800 U.S. stores, about 250 of which were Subway sandwich shops.

Exit Strategy

With an education system oriented toward mathematics and foreign languages from primary school through university, Romania is looking to take advantage of an accelerating Europe-wide technology labor shortage.

The continent is facing 500,000 vacancies by 2015, up from the current 300,000, according to Danny Gooris, senior regional manager in Brussels at Oracle Academy, an Oracle unit that provides computer-science curricula and software to schools.

That may offer an exit strategy for the country, where the rusting ruins of factories still dot the landscape as reminders of the forced industrialization during communism, which ended 24 years ago. In cities including Bucharest, Cluj-Napoca and Iasi, steel-and-glass towers have risen in the past decade to house the programmers.

In Oracle’s offices in northern Bucharest, the software maker’s biggest operations and development center in Europe, Romanian employees speak 27 languages, said Sorin Mindrutescu, chief executive officer of the unit.

‘New Ways’

“It’s their innovative spirit that makes Romanians great at this job,” he said from his office in a modern building. “A Romanian immediately thinks of new ways to work around a brick wall when the only textbook solution would be to smash his head against it to break it.”

Romania also is attracting technology entrepreneurs seeking to use the country as a hub for European expansion. Among them is William Sterns, 36, who raised $185,000 from his family and friends in New York to set up a business in Bucharest to develop mobile-coupon and mobile-payment systems.

“Part of why we wanted to do it in Romania is because it’s very cheap to get a business off the ground,” Sterns, a professional photographer and the president of Mobuy Solutions, said in Bucharest. “The costs are much less than in other parts of Western Europe and the IT talent is plentiful.”

Sterns’s company now employs 12 people and partners with the local units of Vodafone Group Plc (VOD), Adidas AG (ADS) and Mol Nyrt. to sell his applications. He expects to reach profitability in about eight months, he said.

Jobs Outlook

The country’s outlook for job growth for this quarter outpaces peers in the region including Poland, the Czech Republic, Hungary and Slovakia, according to an index from Milwaukee-based staffing firm Manpowergroup Inc. Romania’s jobless rate of 7.2 percent is the eighth-lowest among the EU’S 29 members and its economy was the bloc’s fastest-growing in the fourth quarter of last year, at 5.4 percent from a year earlier.

Software developers in Romania earn more than their counterparts in Poland but less than those in the Czech Republic and Russia, according to figures from Seattle-based Payscale Inc., which provides online employee compensation data.

Romanian wages rose 5.5 percent in March from a year earlier when adjusted for inflation, the statistics office said today. That’s the fastest pace in almost a year, data compiled by Bloomberg show.

About 12,000 Romanians work for the biggest 25 technology companies in the country and Oracle is the largest employer, according to Finance Ministry data.

Corporate Benefits

Companies settling in Romania also can benefit from government aid -- about 77 million euros have gone to nine technology companies, including Microsoft and IBM, in the past two years to match private investment. More than 3,600 jobs are being created as a result, the government says.

Deutsche Bank AG (DBK) alone plans to hire 500 software engineers by 2016 in its new technology center in Bucharest, according to Mihai Andrei Ionescu, the bank’s local office manager. The facility was officially inaugurated today.

“The choice of Deutsche Bank to open a technology center in Bucharest reflects the recognition of the significant talent resources available in the country,” Marian Popa, the center’s manager, told the Bucharest-based newspaper Capital.

Another driver for the technology industry is the tax exemption for programmers, who don’t pay the 16 percent flat tax on their income that workers in other industries do.

Moldova Opportunities

“If that incentive were eliminated, my company would definitely move to Moldova or Albania,” said Cristi Lupu, a 33-year-old senior developer from Brasov whose company specializes in building and maintaining websites.

Many Romanian programmers still leave the country for better-paying jobs in Western Europe or the U.S. Paul Atzberg, a 31-year game developer, is moving to Barcelona. He chose it over another offer from the U.K. because of the location.

“I’ve been programming since high school and I’m very specialized in what I do so I’m not going to Spain to steal anyone’s job,” said Atzberg. He was referring to the Romanians who moved to Spain to work, mostly in agriculture or construction, after Romania joined the EU in 2007.

Continued emigration of the skilled workforce, along with rising costs, may reduce Romania’s attractiveness, Gartner analysts Ian Marriott and Gianluca Tramacere said in the report.

For people such as Mihaiu, with a family to keep them in the country, the rising number of job offers and bumper salaries make Romania an attractive home.

“I was driven to programing by circumstance, not by a special calling,” said Mihaiu, who asked to have his employers’ name withheld because of all his job offers. “I wasn’t too much of an athlete, I wasn’t attracted by economics or law and my eyesight wasn’t good enough to make me a pilot. So, I chose computer science and it paid off.”

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net; Irina Savu in Bucharest at isavu@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net; James M. Gomez at jagomez@bloomberg.net Anne Swardson, Scott Rose


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