Sunday, July 31, 2011

IT Development centers in Estonia

In 2012 the EU IT agency will open its office in Tallinn. This is a great achievement for the Estonian government and IT sector. Besides the EU IT agency Estonia currently hosts the following IT development centers:
- Skype
- Playtech - the biggest developer of online casinos is located in Tartu
- NATO Cooperative Cyber Defence Centre of Excellence

As always there are plusses and minuses to being a host country for something. The negative side that I have heard especially in the start-up community is that the development centers pull away potential IT enterpreneurs. "Why work in a risky start-up if you can get a good salary working for a development center?" is the argument one might hear. This negative side-effect was demonstrated in Lithuania where Barclay's Bank founded their IT sector and caused a significant salary increase in the IT sector.

Though the argument of pulling away good specialists is valid the positive effects are much, much bigger:
Firstly of course the economical effects through income and taxes.

Secondly it is important to note that such development centers hold an important educational role in the society. The know-how and know-who of people working in development centers is an important asset for the society. Afterall you will be a much better IT enterpreneur if you know business people in London and Silicon Valley and good developers in Russia, Belarus and India.

Thirdly every development center creates the effect the economists call the cluster effect. They create the possibility and need to build the overall infrastructure to support them and this in turn makes it easier for other development centers to locate here. By "infrastructure" for IT development centers I mean things like:
- Airlines flying here often.
- Possibility to educate the children for the specialists relocating here in English. In Estonia this is possible in the following schools.
- The overall knowledge of English and open-mindedness of the people.
- English in public office web-sites, tax-formulas etc.
- Educated workforce and vice versa - a reason for the students to choose IT education

So the benefits of having another development center located in Estonia are huge for the whole nation and the IT sector.

..and as a final side-note from a different area: We should move as much technology manufacturing industry back to Europe from China as possible as now the cluster effect is happening there not in Europe. Othervise we will lose the skills and infrastructure and marginalize. Fortunately the electronics manufacturing sector lead mainly by Ericsson and Elcoteq is also growing rapidly in Estonia.

2 comments:

  1. Märt, you forgot that Symantec has large software development centre in Tallinn.

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  2. Yes indeed there are a number of development centers in Estonia besides Skype and Playtech. Symantec, Ixonos, SEVEN networks to name a few that I know of. Any others?

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