A while ago I went to a conference in which, among other things, high profiles in the know discussed about the Romanian software development industry. Everybody was keen to mention that outsourcing assignments, or positioning as the low cost provider, will ultimately lead to industry's failure. Even the State's officials, whenever they have the chance, mention that IT and software in particular are the most promising/important industries for the Romanian business future. But is it like this, and, more importantly, do they put the money where their mouth is?

As a start, keep in mind that last year India had $3.8 bn in exports and China had $2.8bn with a very strong increase from 400 mil in 2000. [link] I mentioned those because most of the Romanian IT pros claim superiority to Chinese or Indians - which, to some extent, may prove right given the cheap skills, proximity and cultural similarities proposition.

In 2004 there were 5-6000 Romanian software companies and the industry totalled about 400 mil with about 75%-80% coming from foreign contracts. Please note that this is not an accurate figure, I've heard many figures thrown in and claiming to be THE ones; however, given the muddy and cumbersome fiscal/taxes policies in Romania it is quite hard to come up with a number close to reality. But 400 mil is a good enough figure and we will probably have a half a billion gotten at sometimes in the next years.

Now, what is the most important asset in this business? People, and not only that, but skilled and experienced ones. Romania has roughly 21 mil people - hardly a figure to compare when talking about China or India. BUT, in this low-figure context a fact that signals an emergency state in the Romanian local landscape is that every year the Romanian professionals are keen to leave the country for looking for better opportunities - last year 15.000 young uni graduates went out for better opportunities. And that comes in the context of reversed trends in India for example. How did the Indians reverse the trend? They simply created a proper business environment that gave a close to market valuation to the local talents - why would anybody leave abroad considering a foreign proposition if he/she were to make a decent living at home?

As such Romania lacks a proper business environment which directly leads to the lack of better emerging personal opportunities which comes from the low motivation - that's the number one reason when people decide to leave. This is the result encompassing things such as no career perspectives, not so attractive financial incentives, lack of a professional business environment and projects that are boring or not intelectually stimulating.

So, putting all of the above and the figures together we're not doing quite well, in spite of the the present advantages mentioned: the skills & costs combo, cultural similarities and proximity. Currently we are facing a skills shortage every year, and this will naturally lead to a considerably increased costs side - which will affect the outsourcing interest. That's fine by me - the problem is that the alternative to this in the big picture is not very encouraging, in spite of everybody acknowledging it. Of course there are isolated cases of Romanian ventures that switched their business model, but they're too few to consider it as a trend.

This is the situation like - it's quite bad i think. What is the Romanian attitude, especially when you see that most of your young and skilled people are leaving the country? Their typical answer is: there's nothing we can do, or so what, we can live without them anyways. That's in between the elections, because every four years all the officials are rushing to make pompous promises that all the Romanians are sick of by now. The reality check is very clear and the old farts from most of the leading layers of the Romanian administration are more preoccupied with their personal present than with what it will come. And this leads to a deteriorated business environment, exactly the value proposition India and lately China are putting on the table - in  the software environment, of course.