If you're a Bulgarian programmer, a Romanian network-systems engineer, or a Czech enterprise-software specialist, life is good. Salaries for information technology workers in Central Europe are rising by double digits annually as multinationals such as Hewlett-Packard, SAP, and Dell dive into the region, soaking up what was supposed to be a deep pool of math and science graduates willing to work for a third of what their Western European counterparts are paid.
As it turns out, the supply of qualified labor is proving surprisingly finite. And it's not just IT specialists, but also managers, accountants, engineers, and more. Call-center managers or IT directors in Poland can cost companies more than $100,000 a year including benefits, while even call center operators cost up to $23,000, staffing company Adecco says. So big companies are paying more and migrating to the hinterlands to find good, low-cost labor. Finnish mobile-phone maker Nokia, which already employs nearly 5,000 people in Hungary, announced on Mar. 26 it will build a new handset factory in Romania. And New Jersey-based EPAM Systems, which develops software for the likes of Microsoft and SAP, is scouting locations in Russia.
The problem is most acute for smaller companies that don't have the cachet and resources of the big multinationals. Many have already been priced out of the capitals. Hilscher, a fast-growing German maker of communications gear, chose to locate a new development center in Varna, a city on Bulgaria's Black Sea coast that is home to a technical school. "There's too much competition in Sofia," says Oleksandr Shcherbina, Hilscher's quality chief.
Local IT executives already know they need to compete on more than just price. "If you build your economic model only around low-cost labor, you have a three- or four-year window where you have an advantage," says Sasha Bezuhanova, head of Hewlett-Packard's operations in Bulgaria. HP, which plans to expand to more than 1,000 employees in Sofia by yearend, from 600 today, is subsidizing computer courses at local universities to ensure a steady flow of workers.
Employers in Central Europe not only compete with each other but with Western Europe. Romania's shortage of skilled labor has been aggravated by the estimated 2.5 million citizens--out of a population of 22.3 million--who have decamped for work abroad. But the globalizing labor market can help, too. Bulgarian Andrey Kalo spent nearly a dozen years at various jobs in San Francisco before HP lured him back to his native Sofia to help manage servers for big customers. The pay is a bit less, but the low cost of living means he can afford a better lifestyle. Says Kalo: "I'm quite happy to be back." By Jack Ewing, with Antonia Oprita in Bucharest