Excerpt from the publication "Why Poland?", 2016, prepared by the Polish Information and Foreign Investment Agency (PAIiIZ), financed by the Ministry of Economic Development of the Republic of Poland
Why is it worth to invest in this sector in Poland? On the one hand, it is worth due to the rapidly developing market and the increase of domestic demand. On the other hand, however, the presence of such global companies as Microsoft, HP, Google, Oracle, IBM or SAP confirm the increase of Poland’s significance not only as a place of selling products and services.
The reason for Poland’s success as the more and more valuable destination for IT services centre is most of all the availability of employees. Our unique and the most valuable resource - people - is still available, and Polish experts provide services for foreign clients more and more often.
According to PMR estimates, the revenue of the information technology sector (consisting of three components - hardware, software and IT services) in Poland for the year 2015 amounted to 30.7 billion PLN. The vast majority of this amount comes from sales of computer equipment. However, it is IT services (through booming outsourcing) and software distribution that shows pronounced growth. IT services’ share of the industry is expected to grow from what is currently 39% to 45% in 2019, whereas the share of computer hardware sales is expected to drop from 43% to 36% respectively.
Taking the Computerworld TOP200 ranking into account, the cumulative revenue of the largest IT companies in Poland for the last year was 63 billion PLN. This difference is due to the inclusion of companies dealing in electronics, subcontractors and shared services centres which operate in Poland.
In 2015 the Polish software and IT services market remained the second (after the Russian) IT market in Central and Eastern Europe. According to Euromoney, the IT services sector is expected to grow at 8.2 % p.a. between 2015 and 2019 while the software sector is expected to grow at 7.4% p.a. The computer hardware sector is expected to grow at a much lower rate than the overall IT market, 3.2% p.a. between 2015 and 2019 and therefore its share is expected to drop significantly.
Certainly, a strong advantage of the domestic market is human capital. Although labour costs in Poland (depending on location) are between 20% and 50% lower than in Western Europe, the main distinguishing factor is the highest quality of services provided by Polish specialists. The skills and talent of young IT specialists can be proven by the results of international competitions, including: the Imagine Cup, Facebook Hacker Cup, Google Code Jam or the Central European Programming Contest (CEPC). The forecasts are positive since technical universities are increasingly popular among high school graduates. In 2015 more than 76,000 people studied IT programs. The average number of candidates per place at universities of technology equals 4, whereas it equals 3.5 at standard universities and universities of economics. Academic institutions are strengthening their cooperation with businesses which results in tailor made internships, attractive curriculums in line with market expectations and the opportunity to a start career during studies.
Investors interested in expanding their business in Poland may have a dilemma when deciding on the final location of their project. Foreign companies tend to be focused on major academic centres, but a vast number of projects are carried out in other large (over 300,000 inhabitants) urban centres.
A good example is the company Sii which provides IT services. The enterprise perfectly illustrates Polish growth potential and confirms the existence of many interesting locations. The company was founded in France in 1979 and established its first foreign subsidiary in 2006 in Warsaw. Currently, the Polish branch employs more than 1,200 professionals in the capital city, Gdańsk, Kraków, Wrocław, Poznań and Łódź. The list of other global companies in the IT area with more than one branch in Poland includes: Google, Oracle, IBM, Tieto and Accenture.
Undoubtedly, the growth in this sector has been supported by readily available investment incentives. Businesses implementing new projects or expanding their activities can rely on various forms of regional aid. Support instruments include non-repayable grants, from the state budget and those co-financed with EU funds. There is exemption from income tax in Special Economic Zones and various local tax exemptions. It is also worth mentioning the offer from the National Centre for Research and Development, which is focused on supporting the most innovative and breakthrough projects, as well as CIT relief for the acquisition of new technology, allowing a deduction from taxable income of expenditure incurred on the purchase of innovative software (not older than 5 years).
In the forthcoming years Polish IT sector will be driven by such factors as: public sector spending, small and medium enterprises’ (SMEs) reliance on modern technologies and the development of IT services outsourcing.
Financial aid based on the EU Multiannual Financial Framework 2014 - 2020 is a potential source for the further development of accessibility and information infrastructure quality. One of the State Programme on Integrated Informatization’s priorities is the process of public administration modernization aimed at creating broadly accessible and citizen-friendly offices. Poland, one of the European leaders in terms of the implementation of structural funds, has already absorbed nearly 90% of the allocation for 2007 - 2013. The measurable effect of implementation (according to the Ministry of Regional Development, dated July 2013) are 5,394 e-services and 41,197 kilometres of broadband digital network. A combination of EU financial assistance (total allocation of Cohesion Policy 2014 - 2020 for Poland - 82.5 billion EUR) and public administration’s determined approach should result in significant demand for hardware, software and IT services.
Small and medium enterprises also signal a growing demand for software, hardware and IT services. This is mainly due to the importance of pursuing competitive advantages and on the other hand the threat of hostile takeovers. Increasing demand for complex solutions like ERP (enterprise resource planning) is another interesting trend among SMEs.
The outsourcing of IT services, as well as the whole sector of modern business services, is one of the most dynamically developing sectors of the Polish economy. This is mainly thanks to companies with foreign capital, current employment is about 45,000 with a growth perspective within the next two years of up to 70 000 employees (according to TechNavio). One of the sources of this estimated growth is the aim of financial-banking, telecommunications, and the energy and processing industry to optimise activity and operational costs.
Additionally, pre-existing trends will positively affect the market: the significant increase of private as well as public sector participation in cloud computing, successive growth in the number of broadband internet users, the ongoing necessity to be up-to-date with modern IT solutions and the market requirement to reduce delays (in particular in public and privatized establishments).