The IT Industry in Belarus: 2017 and Beyond THIS REPORT CONTAINS INFORMATION AS of 30 APRIL 2017 the IT INDUSTRY in BELARUS: 01 2017 and Beyond

The IT Industry in Belarus: 2017 and Beyond THIS REPORT CONTAINS INFORMATION AS OF 30 APRIL 2017 THE IT INDUSTRY IN BELARUS: 01 2017 and Beyond

CONTENTS

Foreword 02 Labor market 40 Partnerships with Summary 42 technological companies 89 Executive summary 04 Demographics and regional Certification 90 Brief information about distribution 42 Personnel 90 the Republic of Belarus 08 Age structure 44 English language skills 93 General information 10 Supply and demand on Business environment 93 Visa-free travel 10 the IT labor market 44 Raising finance 96 Population 10 Employee turnover 47 Sources 96 Transport and communications 10 Distribution by age and length of service 48 Development centers opened Doing Business 11 by international companies Salaries in the IT industry 50 Economy 11 in the Republic of Belarus 97 Total labor costs 55 Foreign investments 13 Labor resources by gender Recent landmark Foreign trade 13 in the IT industry 55 transactions and events 100 The IT industry’s role in Belarus 14 Proficiency in foreign languages 57 Sources 15 Belarus in international Sources 57 IT rankings 106 Information about the Global Outsourcing 100 106 Infrastructure 58 IT industry 16 Software 500 107 Summary 60 Summary 18 Everest Group MAP Matrix™ Office premises and other Employment in the ICT sector 19 for IT applications 108 utility expenses 61 Key ICT performance indicators 20 Sources 108 The ICT Development Index 61 Business of Hi-Tech Park residents 22 Internet access 62 Recent mentions of the Role of the Hi-Tech Park Mobile-cellular communications 63 Belarusian technology sector Administration 24 in the international media Commercial data centers 63 110 Foreign investments 24 Sources 64 Financial Times 110 Sources 25 Reuters 110 Doing Business 65 Education 26 The Wall Street Journal 110 Summary 66 Summary 28 Emerging Europe 110 State support and regulation Higher education system 29 of the IT industry 66 Methodology 111 STEM education 31 Overview of the legal and EY in the CIS 113 Leading institutions of higher regulatory environment 68 education 33 Investments in the Republic of Belarus 70 Key contacts in EY’s Affordability of education 35 Judicial system 72 Belarus office 114 Planning the number of students 35 Protection of intellectual property 73 Graduate placements 35 Cooperation between educational IT сompanies 76 institutions and technology Overview 78 companies 36 Business lines, types of service 79 IT company training centers 37 2020 HTP growth prospects 80 Achievements of Belarusian Customers 82 students in international competitions and olympiads 37 Sales geography 84 School education 39 Branches and representative offices 86 Sources 39 Map of sectoral industry competencies 86 Drivers of competitive performance 88 Development priorities 89 THE IT INDUSTRY IN BELARUS: 02 2017 and Beyond

FOREWORD Foreword 03

Pavel Laschenko, FCCA Country Managing Partner for Belarus

The digital transformation of all We have tried to bring together all the aspects of business is on manage- essential statistical and analytical ment’s agenda in companies every- information on the country and its where in the world. Today, three key business environment, and on the IT factors driving a company’s success industry and IT companies in Belarus, and future prospects are the ability to as well as to forecast key industry create and manage digital technology, figures for the future. access to technology talent, and the speed and cost of transformation. In In preparing this report, we analyzed the world of technology, where available statistics, conducted a large borders between countries tend to number of interviews with industry fade, it is essential to identify promis- experts, and surveyed numerous IT ing locations, find reliable partners, companies. and make well-considered invest- We trust that you will find the informa- ments. tion in this report useful. The IT industry in Belarus has grown If you have any questions or would like and developed substantially in the last to explore the Belarusian IT industry in decade. We are convinced that the greater depth, EY experts will be industry has great promise, and we happy to provide support and assis- are seeing ever increasing interest in tance. Belarusian IT companies from other countries and our clients.

We are pleased to present The IT industry in Belarus: 2017 and Beyond, a report prepared by EY experts to give you an idea of the country’s IT industry and its potential.

Enjoy the journey! THE IT INDUSTRY IN BELARUS: Executive summary 04 2017 and Beyond

EXECUTIVE SUMMARY

The Republic of Belarus is a country in tries. Over 90% of the market for communication), information security, Eastern Europe with a population of Belarusian IT companies is external establishment of data-processing around 9.5 million. The capital, Minsk, and involves exports, but the state centers, etc. As a result of the IT with a population of some 2 million, is retains a strong influence over the industry’s development, the range of the 11th largest city in Europe and industry in the form of local laws activities needs to be broadened to Belarus’s economic and educational regulating the business environment. meet the needs of companies develop- center, as well as its main technologi- ing their own products, whose form of cal cluster. In the IT products and services monetization may differ from that segment, these measures include the permitted at the present time (adver- The IT industry plays a key role in the Hi-Tech Park (HTP), a special regime tising revenues, for example). On the economy of Belarus. During the last for IT companies that was introduced whole, industry experts and compa- 10 years Belarus’s IT industry has in 2006 and applies throughout the nies have a high opinion of the Hi-Tech distinguished itself from other sectors country. Resident companies enjoy Park’s business climate — from the of the economy by steadily growing important government support: they point of view of taxes as well as other revenues, exports, workforce, and are exempted from most taxes, areas of cooperation with the state. other indicators. including value-added tax and income tax. Further, employees of the resident Hi-Tech Park residents may be The information and communication companies enjoy a 30% reduction in categorized as follows: technology (ICT) sector currently has personal income tax compared with a workforce of over 85,000, including other sectors of the economy. Due to • Companies specializing in IT some 34,000 in the IT products and the HTP, Belarus managed to build a services services segment. Another 30,000 IT mature export-oriented software • Companies specializing in develop- specialists are employed in sectors of development industry and became a ing and supporting their own the economy other than ICT according significant player on the IT services products (including startups) to our estimates. There are currently market in Europe in just 10 years. • Captive centers or R&D centers of no official statistics on the overall According to Gartner, Belarus is foreign technology companies number of ICT specialists in Belarus, among the nine most attractive but we conservatively estimate the locations for Outsourcing, Shared At the first stage of its development number at over 115,000. Service & Captives in the Europe, the Hi-Tech Park was established as a Middle East and Africa region. Today, Foreign demand for the products and regime for outsourced software Belarus Hi-Tech Park is a major IT services of companies in Belarus’s IT development and IT services based on cluster with over 30,000 software industry has seen strong growth in the offshore model. This line of engineers employed there. recent years. Exports of IT products business still prevails among residents. Five out of ten of the world’s largest and services increased by a factor of Under national law, Hi-Tech Park corporations, according to Forbes more than 30 in the period from 2005 residents can provide services rankings, are customers of the Hi-Tech through 2016, with the share of IT involving information-system analysis Park, and its residents supply software exports in the country’s total exports and software design and development products and IT services to 67 of goods and services rising from (IT consulting, audit, maintenance of countries globally. Six of the Park’s 0.16% to 3.25%. The IT industry has national information networks, residents have been selected as emerged as the second-largest database development, and implemen- 2017’s best outsourcing service contributor to the positive balance of tation and support of corporate providers — listed in the 2017 Global service exports (after the traditionally information systems). Since 2015, Outsourcing 100 — by the Internation- dominant transportation services). Hi-Tech Park residents have also been al Association of Outsourcing Profes- A positive external trade balance is involved in new R&D activities (micro-, sionals (IAOP). important for Belarus’s economy, and opto- and nanoelectronics, mechatron- a range of measures are being taken ics, telecommunications, radar to encourage export-oriented indus- ranging, radio navigation and wireless IT 05 B

BELARUS th million population countries’ citizens place out of 190 for share of services in 2017 allowed visa-free Belarus in the World in GDP, 2016 entry Bank Doing Business 2017

IT SETR USD b employed in ICT sector, share of ICT sector share of ICT sector foreign investment 2016 in GDP, 2016 in total employment, in ICT sector, 2015 2016

IT RDUTS AND SERIES USD b employed in IT products revenue from IT share of IT products and CAGR of IT products and services, products and services, services in ICT sector and services revenue, 2015 2015 revenue, 2015 2011-2015

UTER SERIES ERTS USD m USD Computer services computer services times increase CAGR of computer exports, 2016 exports per capita, in share of computer services exports, 2016 services in total exports, 2011-2016 2005-2016

HITEH AR Hi-Tech Park resident Hi-Tech Park residents’ share of Hi-Tech Park times growth in computer companies, headcount, residents’ exports services exports since 2017 2017 in computer services Hi-Tech Park’s creation, exports, 2016 2005-2016

HT RESIDENTS of Fortune 200 have are employed in the of HTP residents of HTP residents are worked with HTP EPAM Systems development are engaged in IT services under foreign or joint residents center in Belarus outsourcing ownership, 2017 THE IT INDUSTRY IN BELARUS: Executive summary 06 2017 and Beyond

EASURES STATE SURT R HT RESIDENTS INRASTRUTURE USD USD th million VAT, corporate withholding tax reduced personal income total payroll costs for rent for 1 sq. m. in out of 167 for Belarus internet user nodes of territory covered proﬁt tax and offshore on dividends, interest tax for employees an employee with A-class business in the ICT development by 3G/4G networks, duty and royalties (9% instead of 13%) USD 1,800 net monthly centers, 2016 index, 2015 2016 salary

EDUATIN INTERNATINAL RANINS st share of people with share of STEM students STEM graduates, Belarus in overall Software 500 companies with development HTP resident companies included in Global higher education in total in higher education 2016 Google Code Jam centers in Belarus, 2016 outsourcing 100, 2017 employment, 2014 system rankings, 2003-2016

LABR REASTS USD USD USD b thousand USD share of IT workforce average gross monthly median developer’s share of women in the expected annual EY estimate of HTP EY estimate of HTP EY estimate of HTP with higher education, salary of HTP residents’ gross monthly salary, Hi-Tech Park workforce, headcount growth rate residents’ revenue residents’ headcount residents’ average salary 2016 employees, 2016 2016 2016 for most HTP residents in 2020 in 2020 in 2020

Custom software was initially devel- Some major international companies graduates. Moreover, major IT compa- oped by companies to satisfy Belarus’s have already opened captive centers nies have their own training centers that domestic demand. The successful or global in-house centers in Belarus, prepare students to better meet development of the mobile and benefiting from the high qualifications, companies’ needs. gaming segments has provided a relatively low labor costs and preferen- major impetus for Belarusian develop- tial legal regime offered by the Hi-Tech Experts in the IT industry note that ers, and today there are many Park. The best known include the educational institutions need higher companies in Belarus successfully captive centers of IHS Markit, Playtika, budgets and more flexible educational developing their own products, such Netcracker, Viber, Yandex, Fitbit, processes in order to further prepare as Game Stream (Wargaming), Ciklum and SK Hynix. the IT specialists needed on the Apalon, Vizor, etc. Nowadays, mobile market. Overall, cooperation between applications developed by HTP The birth and dramatic growth of the state education system and residents are used by more than 1 Belarus’s IT industry has been made companies in the IT industry has billion people in over 150 countries of possible by the country’s system of ensured strong development of the IT the world. World of Tanks, a product STEM (Science, Technology, Engineer- industry for the last 15 years. by Wargaming, is one of the five most ing, and Mathematics) education. The average salary in the ICT sector is profitable MMO games with over 140 Technology-related education is higher than in other sectors of the million registered users. provided exclusively by state universities. There is broad access to higher economy. The average monthly salary There have been several high-profile education, as a result of which over 40% in Belarus as a whole in 2016 was deals with Belarus-based companies of students currently study for free. In about USD 400, while the average over the last four years, e.g. Viber, order to satisfy their own staffing needs, salary in the ICT sector was around Maps.me, MSQRD, and Juno. As a private companies in the IT industry USD 1,800. Due to its high level of rule, successful Belarusian startups work on a contractual basis with state compensation, the IT industry is able are taken over by foreign companies, educational institutions, arranging for to attract and retain a better qualified but carry on with their development certain disciplines and special courses to workforce than other sectors. The projects in Belarus. The startup be taught by company experts, estab- migration of qualified IT specialists MSQRD was a prime example of lishing branch departments in IT from other areas of the economy to IT success in 2016. It caught the companies, setting up labs in coopera- products and services is the second attention of the world’s largest social tion with educational institutions, and contributor, after the education network, Facebook, which later making employees available to teach system, to the quantitative growth of acquired it. Today, MSQRD’s technolo- cutting-edge IT disciplines. These IT companies. Higher salaries and tax gies are implemented in Facebook core activities, financed by IT companies as benefits have significantly reduced the products and used by billions of users. an investment in the education system, outflow of IT specialists to other substantially enhance the quality of countries (the brain drain). In fact, the 07

current trend is just the reverse: competitive advantages under the The success story of the Belarusian IT qualified specialists are being hired Hi-Tech Park regime and global growth industry and the Hi-Tech Park shows from other countries. One of the key of the IT products and services how favorable conditions and talent problems faced by companies on the segment, making it easy for Belarusian were brought together at the right labor market is the stiff competition companies to find new clients and time to launch a new high-demand for qualified specialists and their rising consumers abroad. Although growth sector in the country. Belarusian IT cost for companies. In the current rates in the industry are now slowing, companies are now creating their own conditions, we foresee further growth rapid development could continue if success stories, and many are gaining in the salaries of IT specialists over the the state makes the decisions needed worldwide recognition. next few years, but despite this to promote IT education and the IT growth, the cost of services provided industry. Draft laws that would offer We believe that the IT industry in by Belarusian IT companies remains additional benefits to IT companies are Belarus deserves greater attention quite competitive compared with other currently under discussion. If the from companies looking for technolo- companies in Eastern Europe. This is initiatives are approved, the IT gy partners or areas for investment. largely due to the low average level of industry is likely to follow an “acceler- In preparing this report, we have salaries in Belarus and the consider- ated development” scenario. If the brought together information needed able benefits that companies receive. current situation persists, we estimate to give a complete picture of the IT that Hi-Tech Park companies will have industry in Belarus, and we hope that In the near term, we expect to see a workforce of around 36-40 thousand readers will find it useful. continued growth in the performance by 2020, and resident companies of Hi-Tech Park residents, including should have revenues of between USD Thank you! revenues, headcount and average 1.3 billion and USD 1.4 billion. salaries. Key growth drivers include

Anatoliy Voroshilov, CISA Kiryl Domnitch, CISA, CISM Senior consultant Manager EY Minsk EY Minsk [email protected] [email protected] THE IT INDUSTRY IN BELARUS: Brief information about the 08 2017 and Beyond Republic of Belarus

BRIEF INFORMATION ABOUT THE REPUBLIC OF BELARUS 09

General information 10 Doing Business 11 The IT industry's role in Belarus 14 Visa-free travel 10 Economy 11 Sources 15 Population 10 Foreign investments 13 Transport and communications 10 Foreign trade 13 THE IT INDUSTRY IN BELARUS: Brief information about the 10 2017 and Beyond Republic of Belarus

General information Population of major cities in Belarus, ’000 The Republic of Belarus is a country in Vitebsk Eastern Europe bordered by Poland, Lithuania, Latvia, Russia and Ukraine. Belarus is the 20th most populous 369 country in Europe and 13th in terms of area.

The capital, Minsk, is the 11th largest Mogilev city in Europe and Belarus’s main Grodno Minsk technological cluster as well as its economic and educational center. The 378 country’s other major cities are the 366 1,960 administrative centers Gomel, Vitebsk, Mogilev, Grodno and Brest.

Belarusian and Russian are the official Gomel languages of Belarus. Russian is the most widely used for business Brest purposes. The most common foreign 521 languages are English and German. 340 Belarus is in the FET time zone (UTC+3).

Flight times from Minsk to other cities Visa-free travel City Flight time Belarus introduced five-day visa-free London 3 hours travel for citizens of 80 countries, including EU member states, on 12 Moscow 1 hour, 20 minutes February 2017. A full list of these countries is available on the official Paris 3 hours website of the Belarusian Ministry of Frankfurt 2 hours, 25 minutes Foreign Affairs (http://mfa.gov.by/ upload/17.01.11_list_states_eng.pdf). New York 12 or more hours (1 connection)

Foreign nationals entering Belarus at Sources: [1], [2] Minsk National Airport for a period of no more than five days do not need a visa. In all other cases, visitors to decline in population was largely rural, Transport and Belarus must obtain a visa. Entry visas and this trend continues, whereas the are issued by Belarus diplomatic urban population has steadily in- communications missions and consular offices in creased, with the population of Minsk foreign countries. As a rule, foreigners growing 17% in the last 20 years [4]. Belarus is served by a well-developed may also apply for a visa at the airport network of roads and railways that upon arrival (requires preliminary Adults and seniors are the predomi- connects the regions, and the cost of arrangements). nant age groups, as is typical for transportation remains moderate. The Europe, and this trend was strength- capital is in the center of the country, ened by a declining birth rate in the meaning that all major cities are 3-5 Population 1990s. hours away by public transport and 2-4 hours by private transport. Cell Belarus has a high level of literacy networks cover 98.2% of the country’s According to the most recent available (99.9%), and a relatively high percent- territory and 99.8% of its population. data (February 2017 [3]), Belarus has age of the population has higher Over 10 million subscribers have wired a population of 9.5 million. The education (29.4% in 2014). Education Internet access. population is largely urban (77.6% is popular and in high demand among [4]), with around 2 million people the population. living in Minsk and its satellite cities. The population declined over the 20 years from 1994 to 2013, taking an upward turn again in 2014. The 11

Doing Business Belarus GDP structure by type of economic activity

Belarus has demonstrated a steady Economic activity 2010 2016 Change, p. p. improvement in the World Bank Doing Production sector 44.3% 38% -6.3 Business rankings in recent years, now occupying 37th position in 2017, Services sector 43.5% 48.3% +4.8 compared with 50th in 2016 and 63rd Taxes and subsidies 12.2% 13.7% +1.5 in 2014. This shows the country’s understanding of the necessity to Sources: [7] — National accounts of the Republic of Belarus, Statistical Digest, 2017; reduce regulative and administrative [9] — Statistical review of Belarus in 2016 barriers.

Belarus achieved the highest result for considering the positions of Poland Belarus had a nominal GDP of USD the registering property indicator (5th (24th), Latvia (14th) and Lithuania 47.4 billion in 2016. According to the place). The greatest improvements (21st). IMF, Belarus holds 28th place in were recognized in obtaining electrici- Europe in terms of GDP (or 26th in ty (up 50 places) and resolving Belarus was subject to sanctions from terms of GDP PPP). GDP per capita is insolvency (up 26). These improve- the EU and other western countries, USD 4,991 — 37th among European ments were down to direct govern- which were lifted in February 2016. countries (36th in terms of PPP). ment action in the given areas. Since then, Belarus, as one of the EU Much of Belarus’s GDP is generated by Eastern Partnership countries, has large state-owned enterprises, which Belarus shows the worst results and been engaging actively in EU pro- are predominant in the economy. almost no improvement in getting grams aimed at SME support and credit (101st place) and paying taxes regional development. The service sector accounts for 48.3% (99th). These issues are often of GDP, having grown from 43.5% to mentioned when the Belarusian 48.3% between 2010 and 2016. The economy is considered. Economy main sources of GDP in the service sector are wholesale and retail trade In addition, Belarus ranked 30th in (22%), real estate (13%) and transpor- facilitating cross-border trade for the 4,367,000 people were employed in tation services (12%). second year in a row. This position is the Belarus economy in February comparable to that of its closest 2017. The nominal average monthly After a period of growth between former USSR neighbors Russia (40th salary in February 2017 was USD 2009 and 2014, Belarus’s GDP took a place) and Ukraine (80th), but it 377.76. [6] downturn in USD equivalent, losing highlights areas for improvement nearly 38% in the three years of

Belarus in Doing Business rankings DB 2016 Rank DB 2017 Rank

7 5 25 24 30 31 28 30 30 28 27 37 42 50 62 69 74

95 95 101 99 109

Overall Starting a Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving Business with Electricity Property Credit Minority Taxes across Contracts Insolvency Construc- Investors Borders tion Permits

Source: [5] — Ease of Doing Business in Belarus, 2017 THE IT INDUSTRY IN BELARUS: Brief information about the 12 2017 and Beyond Republic of Belarus

Structure of service sector GDP, 2016 10,216 to 19,885, largely due to GDP’s decline in dollar terms. daon nane Exchange rates in Belarus were very 8.9% volatile during 2009-2016.Economic 8.2% 7.4% oenen 10.5% performance has to be evaluated in terms of foreign currencies, since the local currency is subject to high eaae inflation (168% in 2000 and 59% in ea eae 7.5% 12.8% 2012), often triggered by devaluation of the national currency. The economy’s stability depends largely on the 5.3% oeona ee stability of exchange rates, which has a ano 11.9% direct effect on the population’s real income (due to inflation and reduced 5.0% e ee purchasing power of the national 22.5% currency), on state spending (due to the increased cost of servicing the oeae and ea external national debt) and on the economy as a whole (due to costlier Source: [9] — Statistical review of Belarus in 2016 imports, a substantial portion of which consists of energy resources).

2014-16. In the same period, the average exchange rate against the US Exchange rates peaked in February national currency’s official annual dollar fell almost 49% from BYR 2016, followed by the current period

GDP and inflation in the Republic of Belarus Gross domestic product, Inflation, average current prices, USD billion consumer prices, %

90 180% 76.1 80 169% 73.1 160% 70 59.7 63.6 140% 55.2 54.6 60 47.4 120% 50 100% 40 30.2 80% 30 59% 60% 12.8 53% 20 40% 18% 18% 20% 10 10% 8% 14% 12% 0 0% 2000 2005 2010 2011 2012 2013 2014 2015 2016

Source: [8] — International Monetary Fund World Economic Outlook, 2016; [9] — Statistical review of Belarus in 2016

Gross external debt of the Republic of Belarus in Gross external debt (end of % of GDP absolute terms and relative to GDP the year), USD billion

34 33.8 39.6 40 60 28.4 69.6% 70%

50 57.9% 60% 51.6% 53.2% 54.4% 52.8% 38.3 50% 40 5.1 40% 30 18.3% 30% 20 17.0% 20%

10 2.1 10%

0 0% 2000 2005 2010 2011 2012 2013 2014 2015

Source: [10] — Statistical Yearbook of the Republic of Belarus, 2016 13

Foreign investments in the real economy by major investing countries, USD million

2005 2010 2011 2012 2013 2014 2015

Total 1,816.2 9,085.5 18,878.6 14,329.8 14,974.3 15,084.4 11,344.2

including:

Russian Federation 531.5 6,555.00 9,440.30 6,691.00 7,281.20 6,274.70 4,896.00

UK 83.2 280.2 4,391.70 3,617.80 3,202.10 2,809.00 2,339.30

The Netherlands 71.1 315.6 219.9 407.9 741 .1 1,962.10 1,220.20

Cyprus 50.3 316.3 1,238.70 923.4 1,059.50 930.9 806.7

Austria 178.4 912.3 955.2 576 501.9 526.1 353.4

China 1.3 71.4 125.1 127.6 146.7 300.1 341.7

Poland 19.7 27.9 85.6 128.2 179.8 157.7 194.8

Lithuania 10.7 49.5 114.4 173 178.5 233.5 168.9

Latvia 129.3 52.3 119.5 129.3 177. 3 193 101

Germany 149.4 70.9 176 185.2 163.4 379.7 98

Source: [10] — Statistical Yearbook of the Republic of Belarus, 2016 of stabilization. The refinancing rate of Council of Ministers and the National Foreign trade the National Bank of Belarus — the Agency for Investment and Privatiza- base rate used to calculate interest tion. rates — has returned to 14%, where it Belarus has trade relations with over was in the first half of 2011 before The Russian Federation accounts for 180 countries around the world. The being raised to 45% to contain the largest share of foreign invest- top 20 trading partners accounted for inflation. ments: 43.2% in 2015. At the same 90.4% of the country’s exports in 2016, time, foreign investments are highly including 46.2% to Russia. Belarus’s unstable and depend on political exports thus depend heavily not only decisions, periods of economic on the world market, but also on the Foreign investments instability and other countries’ economic situation in these partner reactions to such events. They are countries — a dependence compounded The Government of Belarus is imple- also affected by the economic by the structure of Belarus’s exports, menting a range of measures to situation in other countries such as which are traditionally dominated by attract foreign investments. In addition Russia. petroleum products made from Russian to ministries, institutions that are crude oil and by mineral fertilizers. active in this area include the Foreign Exports of goods have declined for the Investment Advisory Council under the last four years (2013-16) on all principal sales markets.

Export structure, USD million Exports to countries outside the CIS Russia Export to other CIS countries

25,000 22,367 21,044 20,000 18,211 16,309 16,838 14,509 15,181 15,000 14,188 13,054 11,988 14,973 12,584 11,125 11,648 10,819 10,552 10,398 10,000 8,879 9,954 6,719 7, 384 6,845 5,866 6,178 5,927 8,895 3,808 3,682 3,678 3,702 5,000 2,598 1,764 2,343

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: [11] — Foreign trade in goods and services of the Republic of Belarus, statistics of the National Bank of the Republic of Belarus THE IT INDUSTRY IN BELARUS: Brief information about the 14 2017 and Beyond Republic of Belarus

The IT industry’s In the current environment, a positive In this context, Belarus’s IT industry is external trade balance is important for taking on strategic importance. ICT role in Belarus Belarus’s economy, and a range of accounts for 10.5% of GDP in the measures are being taken to encour- service sector and 5.1% of total GDP Belarus’s IT industry is conspicuous age export-oriented industries that are (2016 [9]), with IT services making up among other sectors for its steadily less affected by restraints on tradition- 3.2% of total exports (2016 [12]). growing revenues, exports, workforce al areas of the economy (e.g. the cost and other indicators. Exports of IT of energy resources). services more than quadrupled in 2010-16.

IT industry indicators in 2010 and 2016 2016 2010

40% 36.2%

30% +8.2 +21.5 +4.4 20% +2.4 14.7% 17.0% +2.6 10.5% 10% 8.8% 6.1% 2.7% 5.1% 3.9% 1.3%

0 Share of ICT services Share of ICT services Share of ICT sector Share of ICT sector Share of ICT services net exports in total services exports in total services in the GDP of the in GDP exports in total net exports exports service sector exports

Source: [9] — Statistical review of Belarus in 2016; [13] — The National Bank of the Republic of Belarus. Balance of payments 15

The substantial exports of computer The IT industry’s weight is growing as industry’s competitiveness on external services contrast with a relatively low a component of all macroeconomic markets and growth potential. level of imports, making this industry indicators, and this demonstrates the Belarus’s second-largest contributor effectiveness of current incentives (after transportation services) to the (strong tax benefits) as well as the positive balance of service exports.

Net exports of certain types of Computer services Transportation services net exports services, USD million net exports

3,000

2,500 2,395 2,098 2,204 2,000 1 ,747 1,684 1,647 1,618 1,627 1,445 1,463 1,500 1,029 1,020 726 845 500 598 352 483 172 228 14 33 77 119 119 0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: [13] — The National Bank of the Republic of Belarus. Payment balance

SOURCES

[1] http://www.timeanddate.com/ [9] Statistical review of Belarus in 2016 — http://www.belstat.gov.by/ ofitsialnaya-statistika/publications/izdania/public_bulletin/ [2] http://www.airport.by/ index_7015/

[3] The socio-economic situation of the Republic of Belarus in Janu- [10] Statistical Yearbook of the Republic of Belarus, 2016 — http://www. ary-February 2017 — http://www.belstat.gov.by/ofitsialnaya-statisti belstat.gov.by/ofitsialnaya-statistika/publications/izdania/public_com ka/publications/izdania/public_bulletin/index_7176/ pilation/index_6316/

[4] Demographic Yearbook of the Republic of Belarus, 2016 — [11] Foreign trade in goods and services of the Republic of Belarus, http://www.belstat.gov.by/ofitsialnaya-statistika/publications/izdania/ statistics of the National Bank of the Republic of Belarus — public_compilation/index_5769/ http://www.nbrb.by/statistics/ForeignTrade/

[5] Doing Business Measuring Business Regulations, Ease of Doing [12] World Trade Organization statistics database, 2017 — http://stat.wto. Business in Belarus 2017 — http://www.doingbusiness.org/data/ org/StatisticalProgram/WSDBStatisticalPartner.aspx?Language=E exploreeconomies/belarus [13] The National Bank of the Republic of Belarus. Balance of payments. [6] Data on employees’ accrued average salary in February 2017. http:// http://www.nbrb.by/statistics/BalPay/ www.belstat.gov.by/ofitsialnaya-statistika/solialnaya-sfera/trud/ operativnaya-informatsiya_8/o-nachislennoi-srednei-zarabot- [14] Belarus in figures, 2016 —http://www.belstat.gov.by/ofitsial noi-plate-rabotnikov/o-nachislennoy-sredney-zarabotnoy-plate-rabot naya-statistika/publications/izdania/public_compilation/index_4920/ nikov-v-fevrale-2017-nbsp-g/ [15] Average official exchange rate of the Belarusian ruble in relation to [7] National accounts of the Republic of Belarus, Statistical Digest, foreign currencies — http://www.nbrb.by/statistics/Rates/AvgRate/ 2017 — http://www.belstat.gov.by/ofitsialnaya-statistika/publications/ izdania/public_compilation/index_7132/

[8] International Monetary Fund World Economic Outlook, 2016 — http://www.imf.org/external/pubs/ft/weo/2016/02/weodata/index.aspx THE IT INDUSTRY IN BELARUS: Information about the 16 2017 and Beyond IT industry

INFORMATION ABOUT THE IT INDUSTRY 17

Summary 18 Business of Hi-Tech Foreign investments 24 Park residents 22 Employment in the ICT sector 19 Sources 25 Role of the Hi-Tech Park Key ICT performance indicators 20 Administration 24 THE IT INDUSTRY IN BELARUS: Information about the 18 2017 and Beyond IT industry

Summary share in total exports of goods and significant player on the IT services services rose almost sixfold against a market in Europe over just 10 years. drop in total exports in 2012-16. Today, Belarus Hi-Tech Park is one of The ICT (information and communica- the largest IT clusters in Eastern tion technology) sector in Belarus The IT product and services segment Europe, with over 30,000 software does not yet account for a major share has been growing at a fast pace since engineers employed there. This of the national economy, with some 2006, when the Hi-Tech Park was favorable environment, as well as the 2.2% of total employment and 5.1% of established. The Hi-Tech Park provides availability of qualified IT specialists, GDP. However, it stands out among a special regime for IT companies that fosters the development of IT business other sectors for its high growth in was introduced in 2006 and applies in Belarus. revenue, exports, and foreign invest- throughout the country. Resident ment. companies enjoy important govern- ICT sector executives make up a ment support: they are exempted from quarter of the top 200 successful and ICT sector revenues reached almost most taxes, including value-added tax influential businesspersons in Belarus. USD 4 billion in 2016. IT products and and income tax, while the employees They engage in a wide range of services were the main driver of this of the resident companies enjoy activities: from online games to growth. In the context of a decline in personal income tax reduced by 30% banking and medical IT products. traditional economic sectors, a general compared with other sectors. Thanks recession and changes in the ruble to the HTP, Belarus managed to build Advances in information technology rate, exports of IT products and a mature export-oriented software attract foreign investors: total services from Belarus surged more development industry and became a investments in the ICT sector soared than sevenfold in 2009-16, and their by almost 290% to USD 1.47 billion by

The ICT sector’s share of the economy

Indicator 2011 2012 2013 2014 2015 2016

Number of companies in the ICT sector 3,569 3,958 4,227 4,477 4,536 3,962

Combined headcount of ICT sector companies 92,026 92,649 91,658 92,221 87,238 85,406

Share of ICT companies in the total number of companies, % 3.6 3.7 3.6 3.7 3.9 3.4

ICT’s share of total employment, % 3.0 3.1 3.1 3.2 2.2 2.2

Average headcount in ICT sector companies 26 23 22 21 19 22

Number of Share of ICT companies in ICT’s share of total Average headcount companies in the total number of employment, % 22 in ICT sector companies the ICT sector companies, %

21 19 22 23 22 26 4,477 4,536 4,227 3,958 3,962 3,569

3.6% 3.7% 3.6% 3.7% 3.9% 3.4%

3.0% 3.1% 3.1% 3.2% 2.2% 2.2%

2011 2012 2013 2014 2015 2016

Source: [1] — Information society in the Republic of Belarus, 2015 with updates received from the Belarusian Statistics Committee in May 2017 19

2014, from USD 505 million in 2011. that the sector has demonstrated over ICT companies’ activities in Belarus The US, the Netherlands, and Russia the last 10 years. span across various sectors of the were the main sources of foreign economy and include hardware investments. production, repair and maintenance; Employment software development; development IT products and services make up the of automated information systems; fastest growing and most promising in the ICT sector telecommunication services; training segment of the ICT sector in Belarus, in ICT; consulting and other ICT-related and we therefore made it the focus of The ICT (information and communica- services. our report. A large and regionally tion technology) sector in Belarus significant software technology and comprises about 4,000 entities that The ICT workforce is mostly employed engineering cluster has been set up in employ over 85,000. According to in IT products and services (37%) and Minsk, the capital, which also has a EY estimates, the total ICT workforce telecommunications (30%) (2014, competitive labor market. This helps in the Belarusian economy is about [1]). The headcount in IT products and technology companies to implement 115,000, including those directly services has been growing annually state-of-the-art technology projects involved in software production and since 2011, although the overall for customers from across the world. those performing IT functions in sector headcount remains almost entities in other sectors. IСT sector unchanged. That said, major effort is required companies account for 3.4% of the from IT companies, the government, Major IT companies, such as EPAM total number of business entities and and the education system to sustain Systems, Wargaming, IBA Group, and 2.2% of total employment in the the impressive growth performance Itransition, make up the core of the IT economy. products and services segment and

ICT headcount by segment

Segment 2011 2012 2013 2014 2015

Hardware production, installation and maintenance 32,323 30,649 ▼ 26,726 ▼ 25,925 ▼ 24,634▼

Hardware sale, lease and service 3,765 4,613 ▲ 5,144 ▲ 4,991 ▼ 2,790▼

Telecommunications services 32,367 30,302 ▼ 28,750 ▼ 27, 376 ▼ 25,406▼

IT products and services 23,571 27,085 ▲ 31,038 ▲ 33,929 ▲ 34,408▲

Growth in headcount in IT products and services +14.9% +14.6% +9.3% +1.4%

IT products and Telecommunications Hardware sale, lease Hardware production, services services and service installation and maintenance

100%

26% 29% 34% 37% 39%

75%

35% 33% 31% 30% 29% 50%

4% 5% 6% 5% 4%

25%

35% 33% 29% 28% 28%

0% 2011 2012 2013 2014 2015

Source: [1] — Information society in the Republic of Belarus, 2015 with updates received from the Belarusian Statistics Committee in May 2017 THE IT INDUSTRY IN BELARUS: Information about the 20 2017 and Beyond IT industry

Nominal accrued average monthly salary sation of staff helps the sector to in February 2017, USD attract and retain a qualified workforce. The rapid development of the Economy average 377.76 ICT sector and tax benefits it enjoys has substantially reduced the migra- Information technology tion of talent (the brain drain) from and information services 1,707.28 the sector, which is now seeing a Telecommunications 629.2 steady inflow of qualified migrants from neighboring countries instead. Sources: [2] — Data on the accrued average salary in February 2017

Key ICT performance indicators employ over 12,000. Hi-Tech Park large public-sector companies that residents have a total headcount of engage in the production of TV and over 30,000. radio equipment, semiconductors and The ICT sector is the fastest growing in integrated circuits, such as Integral the national economy in terms of both The telecommunications segment is with some 5,000 employees, as well investment inflows and exports. clearly dominated by Beltelecom, the as an array of small businesses that A major focus on exports is the largest government-owned telecom- produce various technology goods and sector’s hallmark. munications operator with 25,000 provide maintenance services. employees; other players include The ICT revenue structure is as mobile phone operators Velcom The hardware sale, lease and service follows: 41% — telecommunications (Telekom Austria Group), Life (Turkcell segment has no major players and companies, 25% — IT products and Group) and MTS (Mobile TeleSystems consists of many small wholesale and services, 22% — hardware production, Group). Apart from them, some small retail companies that sell technology installation and maintenance, and Internet providers operate in the goods and provide related services. 12% — hardware sale, lease and segment. service. Telecommunications services The average monthly salary in the ICT and IT products and services increased The hardware production, installation sector is the highest compared with their contribution to total revenue in and maintenance segment comprises other sectors. A high level of compen- 2011-15 from 38% to 41% and from 14% to 25%, respectively.

ICT revenue

Indicator 2011 2012 2013 2014 2015 2016

Revenue from products (works, services) by ICT entities, 4.26 4.41 5.49 5.01 4.20 3.94 USD billion

Growth rate, % - 3.5% 24.5% -8.7%* -16.2%* -6.1%*

Source: [1] — Information society in the Republic of Belarus, 2015 with updates received from Belarusian Statistics Committee in May 2017 *Decline is caused by devaluation of the national currency exchange rate to the USD, in national currency the average annual growth rate in 2013-2016 was 17%

ICT exports

ICT services exports, USD million Share of ICT services in total exports 1,158 1,005 904 750 3.89% 598 3.06% 396 458 316 2.09% 1.70% 1.27% 1.33% 1.15% 0.98%

2009 2010 2011 2012 2013 2014 2015 2016

Source: [4] — Statistical Bulletin: Balance of Payments, International Investment Position, and Gross External Debt of the Republic of Belarus, 2009-16 21

ICT revenue structure, USD million

Segment 2011 2012 2013 2014 2015

Hardware production, installation and maintenance 1,416.6 1 , 374.7 ▼ 1,360.0 ▼ 1,196.2 ▼ 937.03▼

Hardware sale, lease and service 614.8 810.6 ▲ 1,105.0 ▲ 622.9 ▼ 4 85.74 ▼

Telecommunications services 1,634.9 1,535.2 ▼ 2,021.8 ▲ 2,153.3 ▲ 1,704.9▼

IT products and services 592.5 686.5 ▲ 999.9 ▲ 1,036.0 ▲ 1,069.2▲

IT products and Telecommunications Hardware sale, lease Hardware production, services services and service installation and maintenance

100%

14% 16% 18% 21% 25%

75% 38% 35% 37% 43% 41%

50%

15% 18% 20% 12% 12% 25%

33% 31% 25% 24% 22%

0% 2011 2012 2013 2014 2015

Source: [1] — Information society in the Republic of Belarus, 2015 with updates received from the Belarusian Statistics Committee in May 2017

The share of ICT services in total threefold in 2009 but increased to 6.8 USD 956.8 million in 2016. Even if we service exports is growing, while the times by 2014. disregard the initial rapid growth share of ICT goods in total goods period, exports grew at a CAGR of exports has been fluctuating but has IT products and services is the fastest 28.4% during the last five years. In been broadly flat overall. The differ- growing segment in terms of revenue 2016, computer services accounted ence between the volume of services and exports. Exports of computer for 3.2% of total exports and for 14% and that of goods in the structure of services (WTO category) surged by a in total exports of services, and are exports is widening: it was less than factor of 36 over 12 years to reach constantly on the rise. Although

ICT exports indicators

Indicator 2009 2010 2011 2012 2013 2014 2015 2016

Exports of ICT goods, USD million 104.4 158.5 ▲ 176.4 ▲ 81.8 ▼ 148.4 ▲ 131.2 ▼ n/a* n/a*

Share of ICT goods in total exports 0.5 0.6 ▲ 0.4 ▼ 0.2 ▼ 0.4 ▲ 0.4 ▬ n/a* n/a* of goods, %

Exports of ICT services, USD million 316 396▲ 458 ▲ 598 ▲ 750 ▲ 904 ▲ 1,005 ▲ 1,158 ▲

Share of ICT services in total 9.0 8.8 ▼ 8.2 ▼ 9.4 ▲ 10.0 ▲ 11.5 ▲ 15.1 ▲ 17.0 ▲ exports of services, %

Sources: [1] — Information society in the Republic of Belarus, 2015 with updates received from the Belarusian Statistics Committee in May 2017; [4] — Statistical Bulletin: Balance of Payments, International Investment Position, and Gross External Debt of the Republic of Belarus, 2009-16 *There was no specific data available about exports of ICT goods as of April 2017. THE IT INDUSTRY IN BELARUS: Information about the 22 2017 and Beyond IT industry

Computer services exports, 2011-2016

Exports — computer Share of computer services Share of computer services in services, USD million in service exports total exports 957 818 14.0% 12.4% 691 555 408 8.8% 274 7.4% 6.5% 4.9%

3.20% 2.50% 1.20% 1.60% 0.60% 0.80%

2011 2012 2013 2014 2015 2016

Sources: [5] — World Trade Organization; [4] — Statistical Bulletin: Balance of Payments, International Investment Position, and Gross External Debt of the Republic of Belarus, 2016

government-owned entities dominate What makes the Hi-Tech Park unique Generally speaking, HTP residents are the Belarusian economy, all major is the winning combination of the most export oriented and competi- companies that provide IT products high-quality technical education, tive companies in the IT products and and services are private. highly-skilled IT professionals, and services segment of Belarus. government support for the IT industry. 15 companies with 2,506 employees became residents of the HTP in 2006. Business of Hi-Tech Employees of HTP residents make up Currently, HTP residents include 181 Park residents 28% of the total ICT workforce and 70% companies employing more than of those employed in the IT products 30,000. The HTP resident headcount The upsurge in the IT products and and services segment (2015). HTP has been going up steadily over the services segment is attributed to the residents contributed 28.9% to total last five years by approximately 3,000 establishment of the Hi-Tech Park ICT sector revenue in 2015 and 85.7% a year. to total exports of computer services. (HTP) in 2006. The Hi-Tech Park Even though domestic sales are on the Therefore, the bulk of computer provides a special regime for IT rise and domestic revenue has doubled services that Belarus exports is companies that was introduced in compared with 2012, reaching USD generated by HTP companies. 2006 and applies throughout the 83.8 million, the share of domestic country. Resident companies enjoy Key activities of the Hi-Tech Park sales in total revenue has been sliding, important government support: they residents include information and down to just 9.3% in 2016. are exempted from most taxes, communication technology, software including value-added tax and income IT companies and industry experts development and implementation. tax, and the employees of the resident highlight that the domestic market is a low priority in many companies’ companies enjoy personal income tax According to national legislation, HTP development strategy, and attribute reduced by 30% compared with other residents can provide services in this to the limited demand in Belarus sectors. Thanks to the HTP, Belarus information system analysis, software in absolute terms, as well as to the managed to build a mature export- design and development (IT consult- overall economic situation in the oriented software development ing, audit, networks maintenance, market. Most respondents we sur- industry and became a significant database development, and informa- veyed (51%) indicated that the size of player on the IT services market in tion systems implementation and the domestic market is the least Europe over just 10 years. Today, support). Since 2015, HTP residents important factor for the development Belarus Hi-Tech Park is one of the have also been involved in new R&D of IT companies, whereas more largest IT clusters in Eastern Europe activities (micro-, opto- and nanoelec- respondents believe that it has a with over 30,000 software engineers tronics, mechatronics, telecommunica- negative (38%) rather than positive employed there. This favorable tions, radar ranging, radio navigation (8%) impact on the industry’s develop- environment, as well as the availability and wireless communication), informa- ment. of qualified IT specialists, fosters the tion protection, and establishment of development of IT business in Belarus. data processing centers, etc. 23

HTP residents growth

Headcount Number of residents at 31 December

27, 342 24,037 18,038 20,995 14,492 9,421 11,766 164 7,259 137 148 6,202 118 134 4,537 94 106 2,506 80 61 38 15

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: [6] — Information provided by the Hi-Tech Park Administration

Share of exports in total revenue Exports, USD million Domestic revenue, USD million of HTP residents Share of exports in total revenue 22 Total revenue, USD million

773.1 904.4 667. 3

89.0% 91.5% 90.7% 84.9% 87.1% 84.8% 88.0% 84.3% 81.9% 77.3% 75.9%

527.7 372.9 254.5 196.8 121.6 144.7 28.2 66.9

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: [6] — Information provided by the Hi-Tech Park Administration

Importance of the domestic market for the development of HTP companies

Size of the domestic Impact Importance market

Negative Positive High Moderate Low

38% 8% 16% 33% 51%

Source: [7] — Results of EY’s survey among Hi-Tech Park residents THE IT INDUSTRY IN BELARUS: Information about the 24 2017 and Beyond IT industry

Geography of HTP companies’ Europe (excl. CIS) CIS exports, USD million North America Other regions

14.56 31.55 33.44 51.47 75.59 128.61 195.33 254.59 329.16 403.28 450 400 28.8 33.54 45.65 74.44 101.61 149.19 178.16 234.9 283.77 354.84 350 11.56 31.92 25.82 28.96 29.53 44.73 64.63 84.26 75.81 43.78 300 250 2.62 5.42 5.21 6.38 8.49 8.97 8.53 11.5 16.89 18.72 200 150 100 50 0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: [6] — Information provided by the Hi-Tech Park Administration

Software products that HTP residents The HTP Administration is active in investments in ICT were constantly on developed in 2016 were supplied to implementing national strategy and the rise in 2011-2014, reaching more customers in 67 countries worldwide, state policy affecting the development than USD 1.4 billion in 2015 (the with 49.1% and 43.2% of exports going and export of information technolo- latest data available), up by a factor of to Western Europe and the USA, gies. Measures to promote HTP 2.9 from 2011. As a result, in 2015 respectively. The share of CIS countries residents on external markets include the ICT sector absorbed 12.96% of in total exports has shrunk from 10.7% an annual roadshow, “Discover IT total foreign investments, compared to 5.3% amid a 43% drop in exports to Belarus” as well as business forums with just 2.7% in 2011. Russia in 2016 [4]. Notably, most ICT held abroad and contacts with foreign sector players operate through their own media. The telecommunications services companies or representative offices in segment dominates the structure of other countries, and therefore, exports For foreign clients and IT companies foreign investments in terms of both statistics may not be fully representative seeking to do business in Belarus, HTP share (88%) and growth (by a factor of their customer geography. Administration specialists provide of 3.86 from 2011). By comparison, information, consultations and investments in IT products and organizational assistance, advise on services increased by a factor of 2.5 available forms of state support and over the same period and accounted Role of the Hi-Tech Park identify HTP residents interested in for 8% of total investments in 2014. Administration collaboration. This broad difference arises because the telecommunications segment is The HTP Administration plays an The Hi-Tech Park Administration (HTP capital intensive and foreign invest- important role in promoting close Administration), a state Institution ments in Belarusian companies are collaboration between the IT industry established in accordance with Decree ultimately classified as investments in and the system of higher education, No. 12 of the President of the Republic fixed assets.Alternatively, investments taking measures to increase the of Belarus of 22 September 2005 “On in IT products and services are usually number and quality of specialists for the Hi-Tech Park,” directly manages linked to a transfer of ownership rights the IT industry. It also conducts a the Hi-Tech Park. and take place outside Belarus, as large-scale career guidance program most IT companies carry out these The HTP Administration is subordinate to popularize technical education in transactions via their foreign entities. to the President of the Republic of the schools and to encourage students Belarus and reports to the Council of in general secondary schools to pursue Foreign direct investments in HTP Ministers. It’s a legal entity at the higher education in engineering, IT companies were consistently on an national level and a nonprofit state and other technology-related disci- upward trend, reaching institution. plines. USD 169.2 million in 2016. They account for a relatively small share in The HTP Administration’s activities total foreign investments in the sector involve creating conditions favorable Foreign because most HTP residents use their for HTP residents, promoting domestic own profit to drive organic growth and foreign investments in information investments rather than seek external investment. technologies and creating a modern In addition, companies often become infrastructure. The HTP Administra- The ICT sector in Belarus is less HTP residents after they receive tion also protects the interests of exposed to regular economic shocks investment and when they already Hi-Tech Park residents and represents than other sectors, which for this have an established business model. their interests in relations with reason see unstable inflows of foreign national government agencies. investments. Unlike them, foreign 25

ICT’s share in total foreign Foreign investments in ICT, ICT’s share in total foreign investments USD million investments

1,799.50 1,469.90

11.9% 13.0% 720.2 505 452.9 4.8% 2.7% 3.2%

2011 2012 2013 2014 2015

Sources: [6] — Information provided by the Hi-Tech Park Administration; [1] — Information society in the Republic of Belarus, 2015 with updates received from the Belarusian Statistics Committee in May 2017; [3] — Statistical Yearbook of the Republic of Belarus, 2016

Foreign investments in ICT, USD million

Segment 2011 2012 2013 2014

Hardware production, installment and maintenance 22.4 26.7 ▲ 25.5 ▼ 22.5 ▼

Hardware sale, lease and service 14.3 33.1 ▲ 41.2 ▲ 49.2 ▲

Telecommunications services 407.7 303.6 ▼ 547. 3 ▲ 1,578.1 ▲

IT products and services 60.7 89.6 ▲ 106.2 ▲ 149.7 ▲

Source: [1] — Information Society in the Republic of Belarus, 2015 with updates received from the Belarusian Statistics Committee in May 2017

Foreign investments Foreign investments Foreign investments in other Share of foreign investments in IT companies in HTP resident IT products and services in HTP resident companies companies, USD million companies, USD million in total investments in IT products and services

180 87.4% 160 80.2% 80.3% 80.3% 140 120 100 80 60 40 20 0 2011 2012 2013 2014 2015 2016

*As of April 2017 there was no data concerning the total amount of foreign investments in IT products and services for 2015-2016 Source: [6] — Information provided by the Hi-Tech Park Administration

SOURCES

[1] Information society in the Republic of Belarus, 2015 with updates [3] Statistical Yearbook of the Republic of Belarus, 2016 - received from the Belarusian Statistics Committee in May 2017 http://www.belstat.gov.by/ofitsialnaya-statistika/publications/izdania/ http://www.belstat.gov.by/en/ofitsialnaya-statistika/publications/ public_compilation/index_6316/ statistical-publications-data-books-bulletins/public_compilation/ index_4922/ [4] Statistical Bulletin, 2009-16 https://www.nbrb.by/engl/publications/ bulletin/Bulletin_2015_4e.pdf [2] Belstat data on average salaries in February 2017 - http://www.belstat.gov.by/ofitsialnaya-statistika/solialnaya- [5] World Trade Organization 2017. http://stat.wto.org/StatisticalPro sfera/trud/operativnaya-informatsiya_8/o-nachislennoi- gram/WSDBStatisticalPartner.aspx?Language=E srednei-zarabotnoi-plate-rabotnikov/o-nachislennoy-sredney-zarabot noy-plate-rabotnikov-v-fevrale-2017-nbsp-g/ [6] Information provided by the Hi-Tech Park Administration

[7] Results of EY’s survey among Hi-Tech Park residents THE IT INDUSTRY IN BELARUS: Education 26 2017 and Beyond

EDUCATION 27

Summary 28 Planning the number IT company training centers 37 of students 35 Higher education system 29 Achievements of Belarusian Graduate placements 35 students in international STEM education 31 competitions and olympiads 37 Cooperation between Leading institutions educational institutions School education 39 of higher education 33 and technology companies 36 Sources 39 Affordability of education 35 THE IT INDUSTRY IN BELARUS: Education 28 2017 and Beyond

Summary Percentage of the workforce with higher education

Indicator 2005 2010 2014 Thanks to the conditions and opportu- nities offered by the country’s Percentage of the workforce with higher education 22.8% 25.4% ▲ 29.4% ▲ educational system, higher education is popular and in high demand in Sources: [1] — Statistical compilation Education in the Republic of Belarus 2013; Belarus. People with higher education [2] — Statistical compilation Education in the Republic of Belarus 2015 accounted for 29.4% of the workforce in 2014, up from 22.8% in 2005. Tertiary education enrollment index according the World Bank There is broad access to higher education, which is free for over 40% Rank Country Name 2014 of students. 1 SPAIN 89.07% The demand for and affordability of higher education in Belarus can be 2 BELARUS 88.86% judged from the World Bank’s Enroll- ment Index (the number of those who 3 FINLAND 88.67% receive tertiary education over the total number of people graduated 4 UNITED STATES 86.66% from school), in which Belarus placed second among 139 countries (2014). 5 CHILE 86.63% Quantity and quality are both key considerations in an analysis of the 6 SLOVENIA 82.93% system of higher education: the number of people entering the IT 7 UKRAINE 82.31% industry and their knowledge and skills. 8 DENMARK 81.52%

9 NEW ZEALAND 80.88% Quantity 10 AUSTRIA 80.00% Belarus had 313,000 university students in 2016, with as many as Source: [4] — World Bank Data. gross enrolment ratio. tertiary. both sexes 75,000, or 24%, specialized in STEM (Science, Technology, Engineering and Quality departments in IT companies, setting Mathematics) disciplines [3], including up labs in cooperation with education- some 70 IT specializations, which are STEM education is provided almost al institutions and making employees the most in demand among IT entirely by state educational institu- available to teach cutting-edge IT companies [5]. These are the people tions, and the percentage of private disciplines. These activities, financed who will develop the IT industry of the institutions is insignificant. As of today, by IT companies as an investment in future. Belarus has not yet completed the the education system, substantially process of joining the European Higher enhance the quality of graduates. If current trends persist, quantitative Education Area. The quality of the growth driven by higher education can education system depends to a large Moreover, major IT companies have be forecast based on the following degree on the approaches taken in the their own training centers that prepare assumptions: state education system and education- students to better meet companies’ needs. 1. The number of students enrolling in al institutions in developing and implementing up-to-date programs of educational institutions will change Belarus has a unique graduate in proportion to the change in the study, creating the necessary conditions (labs, access to technology) and placement system for state-funded birthrate 17-18 years before the students (around half of all gradu- enrollment preparing academic staff. Experts in the IT industry note a need for higher ates). Those graduates are required to 2. The percentage of those enrolling in budgets and more flexible educational conclude a two-year contract with the institutions of higher education has processes in order to prepare the IT company to which they are assigned. stabilized and will remain constant specialists needed on the market. IT companies make active use of this mechanism to recruit graduates. 3. Given the current trend, the In order to satisfy their own staffing percentage of university graduates Overall, cooperation between the state specializing in STEM disciplines will needs, private companies in the IT industry work on a contractual basis education system and companies in increase, reaching 22% by 2025 the IT industry has ensured strong (now at 20%) with state educational institutions, arranging for certain disciplines and development of the industry for the special courses to be taught by last 15 years. company experts, establishing branch 29

Education system growth forecast (based on existing trends)

Indicator 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Total births 17 years prior 92,645 92,975 93,691 91,720 88,743 88,512 88,943 90,508 96,721 103,626 107,876 to enrollment year

Total births 18 years prior 89,586 92,645 92,975 93,691 91,720 88,743 88,512 88,943 90,508 96,721 103,626 to enrollment year

Number of students enrolled 63,100 62,700 64,161 63,729 62,029 60,926 60,995 61,681 64,354 68,863 72,697 in institutions of higher education

Number 78,000 74,600 78,400 66,050 63,250 62,900 63,430 63,945 62,879 61,477 60,960 of graduates

Number of 15,700 15,100 16,002 13,849 13,142 13,280 13,533 13,760 13,607 13,473 13,459 STEM graduates

Number of STEM graduates n/a n/a 6,698 3,942 4,263 4,74 4 4,685 4,767 4,711 4,665 4,660 in the most sought-after specializations

Number of graduates in other specializations Number of graduates Forecast number of STEM graduates

Number of STEM graduates Forecast number Forecast number of STEM graduates in the of graduates most sought-after specializations

90,000

80,000 78,000 74,600 70,000 62,900 60,000 60,960

50,000

40,000

30,000

20,000 16,002 13,280 13,459 10,000 6,698 4,74 4 4,660 0

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Source: EY analysis

Higher education system and 11,800 master’s students in situation in the 1990s and early 2016, or an average of 330 students 2000s (a sharp decline in the birth- per 10,000 population. rate). In 2002 the birthrate began to The higher education system in the grow again, and the number of Republic of Belarus includes 51 The number of students grew between graduates should thus resume a educational institutions with a total 2005 and 2010, but took a downturn positive trend in 2024. enrollment of 313,200 undergraduate in 2011 due to the demographic THE IT INDUSTRY IN BELARUS: Education 30 2017 and Beyond

Statistical data on institutions of higher education

Indicator 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Number of institutions of higher 55 55 53 53 53 55 55 54 54 54 52 51 education

Number of students, ’000 383.0 396.9 413.7 420.7 430.4 442.9 445.6 428.4 395.3 362.9 336.4 313.2

Students per 10,000 population 398 414 433 442 453 467 471 453 417 383 354 330

Number of students enrolled in institutions of higher education, 90.5 86.6 95.4 91.5 97.8 100.5 96.0 88.1 68.7 63.4 63.1 62.7 ’000

Number of specialists graduated from institutions of higher 53.6 61.4 66.9 68.8 74.0 73.3 75.8 84.6 82.7 81.1 78.0 74. 6 education, ’000

Number of specialists employed in the economy per 10,000 122 137 148 149 159 156 162 183 181 178 173 166 population

Number of master’s students, 2.0 2.4 3.3 4.0 4.3 4.8 5.0 6.1 7.6 8.9 10.2 11.8 ’000

Number of students enrolled in institutions Number of specialists graduated from Number of students, ’000 of higher education, ’000 institutions of higher education, ’000

200

180 445.6 420.7 430.4 442.9 428.4 160 396.9 413.7 395.3 383 362.9 140 336.4 313.2 120

100

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Sources: [1] — Statistical compilation Education in the Republic of Belarus 2013; [2] — Statistical compilation Education in the Republic of Belarus 2015; [3] — Statistical bulletin Education in the Republic of Belarus 2016-2017

The greatest number of educational • Belarusian National Technical Educational institutions owned and institutions (28), including the oldest University managed by the state (the Ministry of and most in demand among compa- Education) are completely dominant in nies in the IT industry, are located in Regional demand is satisfied by terms of the number of students, the the capital city of Minsk: educational institutions in other major quality of education and prestige cities — the regional centers Brest, (popularity). As a rule, private • Belarusian State University Vitebsk, Gomel, Grodno and Mogilev — institutions concentrate on the human- • Belarusian State University of but Gomel and Grodno are the most ities and do not have specializations in Informatics and Radio Electronics noted for technical disciplines. demand among IT companies. 31

Higher education system trends and forecast 2010-2025

Share of students enrolled in institutions of Birth-rate in the birth year of students enrolled in higher education institutions of higher education

Number of students enrolled in institutions of Number of specialists graduated from institutions of higher education, ’000 higher education, ’000

140,000 Influence of “demographic decline” 1996-2005 120,000 200% Effect of “double graduation” of students

100,000 150% 80,000 Forecast number of specialists graduated from 78,400 institutions of higher education

60,000 82% 84% 83% 62,900 60,960 100% 70% 68% 69% 68%

40,000 Forecast share of students enrolled in institutions 50% of higher education 20,000

0 0%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Source: EY analysis

A strong state presence in higher Belarus is currently in the process of STEM education education is typical for countries of joining the European Higher Education the CIS, and this affects the rules that Area and must substantially restruc- Belarusian educational institutions ture its system of higher education to STEM education in the Republic of follow in terms of: meet European standards. A road map Belarus comprises two groups of has been developed for this purpose, disciplines: natural sciences and • Planning the number of places by and the reforms mapped out are technology/engineering. In specialization prerequisites for inclusion in the 2016/2017 a total of 75,300 students, or 24% of the student popula- • Affordability of education European Higher Education Area. The process is going forward, but it is still tion, were specializing in these • Graduate placement too early to say when Belarus will disciplines. • Designing academic programs actually be included. [7]

Number of students enrolled in universities specializing in natural sciences and technology

Number of students specializing in technology and engineering Share of students specializing in technology and engineering

Number of students specializing in natural sciences Share of students specializing in natural sciences

90,000 19.5% 80,000 19.7% 20.2% 70,000 60,000 18.7% 18.9% 19.4% 19.7% 50,000 40,000 30,000 3.0% 3.1% 3.2% 3.4% 3.5% 3.7% 3.8% 20,000 10,000 0

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

As with the total number of students situation. Meanwhile, the share of Technical education has grown in and graduates, there was a positive students receiving STEM education popularity as demand has increased on trend from 2005 through 2010, has grown steadily over the last 11 the labor market — largely due to the followed by a decline lasting until years (from 20.5% in 2005/2006 to development of the IT industry in 2016 due to the demographic 24% in 2016/2017). Belarus. Job placement statistics show

Most popular universities in terms of graduate employment in the Hi-Tech Park in 2016

Belarusian State University of Informatics and Radioelectronics 35.4% Belarusian State University 28.3% Yanka Kupala State University of Grodno 5.9% Belarusian National Technical University 5.3% Francisk Skorina Gomel State University 3.9% Belarus State Economic University 3.8% Academy of Public Administration under the Aegis of the President of the Republic of Belarus 2.3% Sukhoi Gomel State Technical University 2.1% Belarusian-Russian University 1.9% Minsk State Linguistic University 1.9% Brest State Technical University 1.8% Polotsk State University 1.6% Other educational institutions 5.8%

Most popular specializations in terms of graduate employment in the Hi-Tech Park in 2016

Software engineering 14.0% Information systems and technologies (by area) 8.4% Applied mathematics (by area) 7.1% Automated data processing systems 7.0% Computer science 6.2% Computing devices, systems and networks 5.0% Information resource management 4.7% Mathematics (by area) 4.4% Computer science and programming technologies 3.7% Artificial intelligence 3.5% Other technological specializations 36.0%

Most popular faculties in terms of graduate employment in the Hi-Tech Park in 2016

Faculty of Computer Systems and Networks, BSUIR 14.7% Faculty of Applied Mathematics and Computer Science, BSU 14.6% Faculty of Information Technologies and Management, BSUIR 8.7% Faculty of Engineering and Economics, BSUIR 5.1% Faculty of Mechanics and Mathematics, BSU 5.1% Faculty of Mathematics and Computer Science, YKSUG 4.9% Faculty of Radiophysics and Computer Technology, BSU 3.1% Faculty of Mathematics, GSU 2.7% Faculty of Information Technologies and Robotics, BSTU 2.6% Faculty of Innovation Training of the Management Institute, Academy of Public Administration 2.2% Other faculties 36.3%

Source: [9] — Information provided by the Hi-Tech Park Administration 33

that graduates of Belarusian State Distribution of students University of Informatics and Radio specializing in key Electronics and Belarusian State IT disciplines in 2016 Polotsk 1% University are the most sought-after. by region 2% Vitebsk Together, these two leading universities 126 supply most of the junior specialists 338 needed by companies in the IT industry.

To meet the industry’s current needs, educational institutions update their 3% Mogilev programs and introduce new specializations, such as information systems 76% 395 and technologies (in the game 5% Grodno Minsk industry), programmable mobile 715 systems, geo-information systems, 11,563 manufacturing based on 3D technologies, and information security software for mobile systems. Educa- tional institutions throughout the Gomel 10% country are also introducing popular IT specializations such as software 3% Brest 1,575 engineering, applied computer science, etc. into their curriculum. 491

Now that there is stable demand for graduates specializing in technological disciplines, admission scores and Source: [5] — Directory for those applying competition among applicants have for an IT specialty, HTP, 2016 risen substantially, making these specializations, especially in leading universities, among the most popular and sought-after in the country. Leading institutions Belarusian State University IT specialists are trained throughout of Informatics and Radio the country, though institutions in of higher education Minsk still play the main role (especial- Electronics, Faculty of Computer Systems and Networks ly Belarusian State University and The most prominent institutions Belarusian State University of Infor- preparing IT specialists are Belarusian The Faculty of Computer Systems and matics and Radio Electronics). Other State University and Belarusian State Networks is one of Belarus’s leading institutions that didn’t train IT University of Informatics and Radio sources of IT specialists. The faculty specialists just 15 years ago are now Electronics, which account for the has 7 departments, 4 of which grant introducing new specializations to majority of students specializing in IT degrees in computers, computer satisfy the demand among applicants disciplines (about 55%). science, software engineering and and on the labor market. Major IT electronic computing devices. The companies have started opening The faculties whose IT specialists are faculty also has branch departments offices in other cities in order to most in demand among Hi-Tech Park of computers, computer science and employ graduates throughout the residents are the Faculty of Computer software engineering at EPAM Republic of Belarus. Systems and Networks and the Faculty Systems. The faculty has 13 research of Information Technologies and laboratories, set up in cooperation A key problem noted by many industry Management at Belarusian State with leading IT companies that are experts in connection with the quality University of Informatics and Radio Hi-Tech Park residents and Belarusian of higher technical education is the Electronics, the Faculty of Applied banking institutions, as well as 5 disproportion in salaries between Mathematics and Computer Science at academic and education centers. academic staff and IT specialists, Belarusian State University, and the The faculty also has a professional leading to an outflow of experts from Faculty of Information Technologies development center (business the educational system into the and Robotics at Belarusian National incubator), formed in cooperation workforce. Technical University. with System Technologies company, and a parallel computing laboratory [10]. The faculty employs over 220 academic staff, including 16 professors (doctors of sciences) and 94 assistant professors (candidates of sciences) [5]. THE IT INDUSTRY IN BELARUS: Education 34 2017 and Beyond

Belarusian State University of Belarusian State University, Belarusian National Technical Informatics and Radio Faculty of Applied Mathematics University, Faculty of Electronics, Faculty of and Computer Science Information Technologies and Information Technologies and Robotics Management The Faculty of Applied Mathematics was founded in 1970. Graduates are The Faculty of Information Technolo- The Faculty of Information Technolo- qualified to engage in research, gies and Robotics was founded in gies and Management was founded in analysis, organization and manage- 1983 as the Faculty of Robots and 1964 as the Faculty of Automation ment in their areas of specialization, Robotic Systems. The faculty is and Computing Technology. The and today make up the core human expanding its program for students faculty has 6 departments, 5 of which resources of many leading IT compa- specializing in information technolo- grant degrees: smart information tech- nies in the country. The faculty has gies and robotics to meet today’s nologies, automated systems informa- cooperation agreements with over 100 needs. The faculty has 6 departments, tion technologies, management Hi-Tech Park residents. The faculty has 4 of which grant degrees: computers systems, theory of electrical engineer- 11 departments, including further and automated systems software, ing, and computational methods and mathematics, computational mathe- automated design systems,electrical programs. The faculty has 4 branch matics, discrete mathematics and drives. and automation of industrial departments at industrial enterprises algorithmics, management information installations and technological in Belarus as well as 6 research and systems, computer technologies and complexes. A key focus is the develop- development laboratories, 3 of which systems, mathematical modeling and ment of information technologies in were set up in cooperation with data analysis, etc. The faculty has 6 areas such as education, science and leading Hi-Tech Park residents. The branches at Hi-Tech Park companies manufacturing. Research is carried out faculty is a partner of leading foreign and the National Academy of Sciences by the industrial automation research technology vendors such as IBM, of the Republic of Belarus. There is and innovation laboratory (magnetic Siemens, Philips, Intel and Motorola also an IT competence center devoted diagnostics and processing sector). [11]. The faculty employs over 110 to the study of products of well-known The faculty also has a computer academic staff, including 20 profes- international vendors such as SAP, center, including a computer graphics sors (doctors of sciences) and over 35 Oracle, Microsoft and Cisco, and the and publishing systems laboratory assistant professors (candidates of Yandex Data Analysis School has also (education support sector). The sciences). [5] been set up. The faculty employs over faculty employs some 150 academic 180 teachers, including over 30 staff, including 7 doctors of sciences professors (doctors of sciences) and and 67 candidates of sciences [12]. over 100 assistant professors (candidates of sciences).

Number of students by form of payment for education, ‘000

Fee-based State-funded Fee-based, as a percentage State-funded, as of the total a percentage of the total

560 70%

480 60%

149.6 150.3 400 147.6 50% 142.9 138.7 320 40% 134 130.6 295.2 293.3 280.9 240 30% 252.4 224.2 202.4 160 182.7 20%

80 10%

0 0% 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

Source: [3] — Statistical bulletin Education in the Republic of Belarus 2016-2017 35

Affordability of education the Ministry of Education receives from faculties believe that most students organizations seeking to hire graduates. will find employment despite twice as This system, however, requires a long many students graduating this year The dominant role of state-funded planning horizon (4 years, previously compared with the usual number. higher education means that educa- 5), as a result of which private compa- Subsequently, the graduation trend is tion is very affordable: 41.7% of nies — especially small ones — are rarely expected to remain positive. students receive full state funding, and involved in such planning. 58.3% receive partial funding (a partial state subsidy, with the rest paid The state determines the number of Plan for graduates with key by the students themselves). students that will receive funding. An IT specializations educational institution may redistribute The cost of education in technical state funds among specializations, on 2017 2018 2019 2020 disciplines averages USD 1,300 per condition that a minimum number of year (4-year course of study). The full specialists graduate in all specializations 6,698 3,942 4,263 4,74 4 cost of education for foreign students for which companies have submitted is substantially higher. Source: [9] — Information provided by the Hi-Tech applications. Educational institutions, Park Administration based on their own resources (class- Students have the chance to reduce room area, number of teacher hours), their fees or switch to state funding on may then admit an additional number of the basis of their academic and other Graduate placements students who will make a partial achievements. In addition, commercial payment. The need for specializations is banks in Belarus provide educational taken into account, allowing educational The practice of compulsory graduate loans to be repaid after education is institutions to meet the demand of placement applies to all state-funded completed. There is also a legally applicants. Although there is a consider- students. Each such graduate receives established “family capital” initiative ably higher demand on the market for the legal status of “young specialist”. under which a family receives USD graduates specializing in software devel- All graduates who receive a 10,000 from the state for each child opment than for graduates in many state-funded education are placed on beginning with the third. This amount other technical areas, universities tend the basis of applications from compa- is indexed and may be used to pay for to be conservative and in no hurry to nies. They conclude two-year con- the child’s education when he or she increase IT admissions at the expense tracts and cannot resign or be reaches the age of 18. of other areas, even though they have dismissed during that period except in the ability to do this. cases stipulated by law. This guarantees that state-funded students get Planning the number In the next four years, almost 20,000 their first employment and encourages students are expected to graduate students to interact with companies on of students with specializations in high demand their own to ensure that applications among IT companies. The large are submitted. As a result, practically The dominance of state educational number of graduates in 2017 has to all students have a job waiting when institutions allows state agencies to do with the transition in Belarus from they complete their education. This manage the number of students in a 5-year to a 4-year course of universi- practice is not mandatory for students accordance with economic plans and ty study as part of the process of who make partial payment, but they forecasts. The state plans the number harmonization with European stan- may also obtain “young specialist” of graduates, based on applications that dards. The deans of the key IT status if they so desire.

Annual cost of higher education in key technical disciplines for Belarusian and foreign students, 2016

Educational institution Faculty For For Belarusian foreign students students

1 Belarusian State University of Informatics Faculty of Computer Systems and Networks USD 1,334 — and Radio Electronics

2 Belarusian State University Faculty of Applied Mathematics and Computer Science USD 1,157 USD 3,350

3 Belarusian State University of Informatics Faculty of Information Technologies USD 1,227 USD 5,000 and Radio Electronics and Management

4 Belarusian State University of Informatics Faculty of Engineering and Economics USD 1,227 — and Radio Electronics

5 Belarusian State University Faculty of Mechanics and Mathematics USD 1,101 USD 2,850

Average, top 5 technical faculties USD 1,209 USD 3,733

Sources: [13] — BSUIR information portal; [14] — Order of the rector of BSU; [15] — Information portal of the Ministry of Education of the Republic of Belarus THE IT INDUSTRY IN BELARUS: Education 36 2017 and Beyond

Approximately 47% of graduates hired The form of cooperation that is most Belarusian educational institutions by IT companies received placements. widespread and affordable for work not only with domestic IT This practice is popular with both grad- companies makes use of employees of companies, but also with international uates, who are guaranteed a job, and technology companies to teach technology vendors. For example, they companies, which know that these specific subjects, special courses or work with SAP as part of the SAP specialists will not soon leave for other labs (practical training involving the University Alliances Program as well as companies and are thus willing to use of specific technologies). under a tripartite memorandum on invest in them. cooperation (Belarusian State Joint laboratories are a more ad- University of Informatics and Radio vanced form of cooperation, involving Electronics, SAP CIS, and Itransition). Cooperation between a certain level of investment on the The Regional Academic Competence part of companies. These are class- Center, formed in December 2010 educational rooms equipped by a company for (the first in Belarus), offers training institutions and work with products and technologies courses and awards its own certifi- technology companies that it actively uses and develops. As cates as well as TERP10 professional of today, technology companies have certification. set up 52 joint laboratories in 15 An important aspect of technical educational institutions. Universities work with IBM as part of education is student access to new the IBM Academic Initiative Program, technologies and systems. Such Another form of cooperation involves and a memorandum of understanding access improves the quality of the opening of a so-called “branch has been signed (IBM Eastern Europe/ education and thus helps both department” in an IT company. In this Asia). The IBM Technology Academic universities and companies by case, some of the department’s Competence Center was established on reducing the cost of additional training classes are held directly on the 21 April 2011. Students who complete and allowing talented students to be companies’ premises, allowing training courses at the center receive identified and recruited even before students to obtain practical IT experi- IBM certificates as part of the IBM their graduation. For this reason, the ence. As of today, 24 branch depart- Academic Qualification Program. In law allows companies in the IT industry ments of 8 educational institutions 2012 Belarusian State University of to enter into cooperation agreements have been opened in 11 Hi-Tech Park Informatics and Radio Electronics with educational institutions. companies. received an IBM Faculty Award.

Cooperation between the Faculty of Computer Systems and Networks, Belarusian State University of Informatics and Radio Electronics, with big-name international IT companies

Company Year Form cooperation of cooperation began

SAP 2009 Participation in the SAP University Alliances Program. Tripartite memorandum on cooperation (Belarusian State University of Informatics and Radio Electronics, SAP CIS, and Itransition). The Regional Academic Competence Center was formed.

CISCO Systems 2009 The Cisco Web Academy was set up.

National 2010 Cooperation agreement with National Instruments Rus. The officially authorized National Instruments Instruments Technology Center was formed.

IBM 2010 Participation in the IBM Academic Initiative Program. Memorandum of understanding (IBM Eastern Europe/Asia). The IBM Technologies Academic Competence Center was formed.

NVidia 2012 Agreement with the Moscow branch. The CUDA Training Center was set up (reorganized as the GPU Education Center in 2016). The center’s status is confirmed on an annual basis.

EMC2 2013 Participation in the EMC Academic Partnership Program.

EPAM 2004 Cooperation Agreement. Joint laboratories. Training in Java, testing technologies and Linux systems Systems programming. The company branch of the Faculty of Computer Systems and Networks offers 300-400 class hours of training annually.

Yandex 2013 Cooperation Agreement. An annual interface development school.

Microsoft 2008 Participation in the Microsoft Dream Spark Program (Microsoft Imaging).

Oracle 2013 Participation in the Oracle Academy Program.

Apple 2014 Participation in the iOS Developer University Program.

Source: [16] — Information provided by the faculty Dean’s office 37

IT company Number of persons who took courses at IT company training centers in 2016 training centers Center Area Trained Hired % hired of total Training centers of major IT compa- trained nies — an important new element of the Itransition Training Center Software development 568 105 18.5% IT education system — train new specialists for the IT industry and Itransition Training Center QA 840 140 16.7% provide retraining and advanced training for those already employed in EPAM Systems Training Center QA 583 412 70.7% the industry. In 2016, 4,394 people EPAM Systems Training Center Software development 617 324 52.5% took training at Itransition, EPAM Systems and Hi-Tech Park training EPAM Systems Training Center Other areas 157 70 44.6% centers, and 1,391 were subsequently hired by IT companies. This number Source: [17] — Information provided by the training centers of Itransition, EPAM Systems includes university students in IT disciplines who took training before entering the workforce as well as those Belarusian students have taken part in • IMC (International Mathematics with no prior training. competitions such as ACM ICPC, Competition for University Stu- Google Code Jam, Google Hash Code, dents): team firsts in 2003 and IBA’s IT and Business Administration TopCoder Open and IEEEXtreme. In 2005; 77 students have taken part Institute focuses on specialized courses 2004, the Belarusian State University in the olympiad since 2001, and all for the retraining and advanced training team took third place and won a gold of them have won individual prizes: of IT specialists. In 2016, 325 people medal in the International Collegiate 40 gold medals (including 5 grand took authorized courses as part of Programming Contest (ACM ICPC). prizes), 27 silver and 10 bronze partnership programs with technology From 2004 through 2016, a total of • ITYM (International Tournament of companies (Microsoft, Cisco, Oracle, SAP, over 40 students achieved strong IBM, and 1C). In addition, 381 people Young Mathematicians): in 2016 results, 29 of them taking prizes in Belarus was represented by 2 teams, took the institute’s custom-designed individual or team competitions courses in various IT-related areas. both of which took prizes (gold and (highlighted in yellow). silver medals); in the 8 years that With the participation of HTP residents, Belarusian university and school the tournament has been held, the Educational Center of the Hi-Tech students also excel in international Belarusian students have won 9 Park was established to provide math competitions and conferences awards re-education for adults who want to such as IMC, EUCYS, ICYS and ITYM. start a career in the IT industry, as well The following achievements may be as training for employees of IT compa- singled out: nies willing to improve their knowledge and skills. 1,629 people received training there in 2016, with 340 of Gennady Korotkevich takes gold in the prestigious international competition them getting jobs in HTP companies. Topcoder Open in the USA iTeen Academy for kids aged 6-15 years old also operates within the Educational Center.

Achievements of Belaru- sian students in international competitions and olympiads

Belarusian university and school students are active in international competitions and olympiads in STEM subjects.

Gennady Korotkevich, an internationally recognized programming prodigy, has won six consecutive gold medals in the International Olympiad in Informatics (IOI), first place in the 2014, 2015 and 2016 Google Code Jam and first place in the 2014 and 2015 Facebook Hacker Cup. Source: [19] — History of ITMO University THE IT INDUSTRY IN BELARUS: Education 38 2017 and Beyond

ACM ICPC Google ACM ICPC Google Bronze medal Code Jam 13th place Code 12th place 2 cat. prize 8th place Jam Absolute 3 cat. prize 13th place first place ACM ICPC Google Silver medal Code Jam 5th place Google Semifinalist IEEEXtreme Bronze medal 12th place Hash First place Code Absolute first place ACM KPI-OPEN ICPC ACM ICPC First degree Gold medal diploma Third place 14th place

2004 2006 2008 2010 2012 2014 2016

ACM ICPC ACM 17th place ACM ACM ICPC ICPC ICPC Silver medal 26th place 27th place 8th place Top Coder Open ACM IEEEXtreme ACM Finalist ICPC ICPC (2nd of 46 Third place finalists) 34th place 15th place

Google Google TopCoder Challenge-24, Code Code Jam Open Deadline-24 Jam Second place Finalist (2nd Finalist (Among Semifinalist of 24 finalists) 20 finalist teams) 39

School education Google Code Jam ranking, 2003-2016

Country Number Number Number Computer science is a prerequisite for of first-place of sec- of third-place the upper six grades in the Belarusian showings ond-place showings school curriculum. The approved showings course of study includes the funda- mentals of information technologies BELARUS 4 1 0 and algorithmization, as well as basic technology skills (graphic and text CHINA 2 3 1 editors, web design, computer animation, and the development RUSSIA 2 1 6 environment). POLAND 2 0 1 The popularity and prospects of higher technical education can be judged JAPAN 1 1 1 based on the demand for technical specializations among school stu- Source: [18] — Google Code Jam results by years dents. All applicants to institutions of higher education take the same state exams. The number of graduates who what to concentrate on when prepar- educational program was launched to take the maths and physics exams (the ing for exams, what areas to specialize teach Scratch programming skills to subjects required for admission to in, etc. children in the second grade on a STEM disciplines) is thus an indication voluntary basis. Another course is of the level of interest in IT-related An IT Academy was established at the designed for students of the fifth-sixth education and employment. In 2016 Hi-Tech Park Educational Center for grades dedicated to game develop- one in four school graduates chose to children from 6 to 15 years of age ment using Scratch. In Scratch take both maths and physics exams. (iTeen Academy). Courses are offered programming, code is replaced with on programming, robotics, game graphic units. This allows program- The Hi-Tech Park Administration creation, web technologies and design. ming to be studied at the level of actively engages with school students The center’s students have won prizes program functioning, which helps to to promote IT education. Since 2010 in both national and international develop both logical and algorithmic the first week in September has been olympiads and competitions. thinking in children. The project is Knowledge Week, when representa- designed to teach children to under- tives of Hi-Tech Park residents meet In 2016, at the initiative of Hi-Tech stand and create computer programs with school students all over the Park residents and in cooperation with and to use computers to solve a country to tell them about work in the the Hi-Tech Park Administration and variety of problems. IT field, make recommendations on the Ministry of Education, a joint

SOURCES

[1] Statistical compilation Education in the [6] Results of EY’s survey among Hi-Tech [13] BSUIR Information portal — https://www. Republic of Belarus 2013 http://www. Park residents bsuir.by/ru/oplata-obucheniya belstat.gov.by/ofitsialnaya-statistika/ publications/izdania/public_compilation/ [7] Report Implementation of road map [14] Order of the rector of BSU — http://www. index_487/ requirements in the draft Education Code bsu.by/Cache/pdf/751133.pdf — http://bolognaby.org/images/ [2] Statistical compilation Education in the uploads/2017/03/BIBC_Roadmap_ [15] Information portal of the Ministry of Republic of Belarus 2015 http://www. Code_of_Education_2017.pdf Education of the Republic of Belarus — belstat.gov.by/ofitsialnaya-statistika/ http://edu.gov.by/page-22931 publications/izdania/public_compilation/ [8] Education and Youth Policy State index_682/ Program for 2016-2020 — [16] Information provided by BSUIR FCSN http://www.government.by/upload/docs/ Dean’s office [3] Statistical bulletin Education in the file2b2ba5ad88b5b0eb.PDF Republic of Belarus 2016-2017 http:// [17] Information provided by the training www.belstat.gov.by/ofitsialnaya-statisti- [9] Information provided by the Hi-Tech Park centers of Itransition, EPAM Systems ka/publications/izdania/public_bulletin/ Administration index_6835/ [18] Google Code Jam results by years — [10] Interview with Alexander https://en.wikipedia.org/wiki/Google_ [4] World Bank Data, gross enrolment ratio, Martinkevich by information portal tut.by Code_Jam tertiary, both sexes — — http://42.tut.by/415519 http://data.worldbank.org/indicator/ [19] History of ITMO University — SE.TER.ENRR?end=2014&start= [11] Official Information Portal FITU BSUIR http://en.ifmo.ru/en/history/History.htm 1970&view=chart — https://www.bsuir.by/ru/fitu

[5] Reference book for those obtaining IT [12] Official information portal of FITR BNTU education, HTP, 2016 — http://www.bntu.by/fitr/item/fitr.html THE IT INDUSTRY IN BELARUS: Labor market 40 2017 and Beyond

LABOR MARKET 41

Summary 42 Employee turnover 47 Labor resources by gender in the IT industry 55 Demographics and regional Distribution by age distribution 42 and lenth of service 48 Proficiency in foreign languages 57 Age structure 44 Salaries in the IT industry 50 Sources 57 Supply and demand Total labor costs 55 on the IT labor market 44 THE IT INDUSTRY IN BELARUS: Labor market 42 2017 and Beyond

Summary affects the cost of IT services and The overall tax burden and labor costs companies’ potential to compete in are relatively high in Belarus; however, foreign markets. Hi-Tech Park residents are entitled to The labor market is a cornerstone of payroll tax benefits that are among the IT industry, having an impact on all The IT industry labor market features the most advantageous in the region. sector activities. The Belarusian IT an average salary level that is much This gives Hi-Tech Park residents a industry is notable for a high percent- higher than in all other sectors of the significant competitive edge over age of employees with higher educa- economy and is constantly rising for companies from other countries in the tion (some 76%) [1]. Its young both experienced staff and beginners. region. workforce is another characteristic of As of March 2017, the average salary the sector — 57% of Hi-Tech Park in the IT industry was almost five In terms of gender structure, Belarus employees are under 30 years of age times the average national salary. This has more women than men; however, [2]. The IT career path usually starts huge gap in the level of labor compen- men prevail in the working-age before the age of 25 [1]. sation is one of the reasons why the IT population. Women make up 7.6% of products and services segment draws total Hi-Tech Park headcount, which is The information and communication talent from other sectors. The majority consistent with the gender ratio in the technology (ICT) sector currently has of best qualified IT staff work in the IT IT industry globally. Female talent a workforce of over 85,000, including products and services segment. The IT holds untapped potential that the IT some 34,000 in the IT products and industry has a reputation for providing industry can draw on to further drive services segment, with more than secure and well-paid jobs that are its growth and development. 30,000 working for HTP resident immune to economy-wide fluctuations companies. Another 30,000 IT in both the labor market and the specialists are employed in sectors of regional economy. the economy other than ICT according Demographics and to our estimates. There are currently The median net monthly salary is regional distribution no official statistics on the overall USD 1,500 for developers, USD 2,000 number of ICT specialists in Belarus, for project managers, and USD 700 Belarus has a population of 9.5 mil- but we conservatively estimate the for system administrators. For lion, with 4.37 million engaged in the number at over 115,000. technology staff, the salary level economy. Belarus is a highly urbanized largely depends on work experience: High urbanization of the workforce is country: 7.4 million or 77.6% of its those with at least 5 years of experi- total population and 3.6 million or a key feature of the labor market in ence are paid more than USD 2,000, Belarus, where more than 80% of 81.1% of its working population live in and those with 7 years of experience cities [4]. working people live in cities. This are paid more than USD 3,000. The trend is even more prominent in the IT salary level also depends on technolo- Official unemployment statistics are industry: over 95% of IT company gy expertise, with the highest salaries based on the number of people employees are based in three cities — paid to specialists who work with C++ officially registered as unemployed, Minsk, Gomel and Grodno — which are (USD 1,949 on average), Objective C / and thus may not adequately report also major centers of higher educa- Swift (USD 1,969 on average) and the actual number of jobless people, tion. Minsk is an important technology Python (USD 2,002 on average). yet they show changes in the national cluster in Eastern Europe: it has a unemployment rate. The unemploy- large number of IT companies, The rapid growth in the IT industry ment rate was the lowest in 2012-14 competitive employers, highly company headcount (19% per year at 0.5%, but then picked up to 1% due qualified IT staff, and an effective between 2010 and 2016 [2]) to the deteriorating economy. system of education that satisfies the strengthens competition for experi- demand of companies for graduates. enced IT workers, because the world In 2015, the combined headcount in market potential and growth opportu- the ICT sector was 85,000, or less Although the labor market is largely nities that companies see surpass than 2% of the working population, concentrated in Minsk, IT companies their ability to recruit and train with some 34,000 in the IT products often set up their offices in regional qualified staff. Yet, most companies and services segment, and over cities to gain access to IT resources note that the need for IT graduates is 24,000, or 28%, employed by Hi-Tech who work there for companies from not difficult to meet. In previous years, Park residents [3]. Apart from that, other sectors. The knock-on effect of some major IT companies were able to around 30,000 IT specialists work in this trend is that engineering educa- increase their local headcount by other sectors of the economy. tion is developing at the regional 1,000 and more every year. level. Drawing on regional resources The ICT sector and HTP workforce is is a factor that will help the IT Industry experts point to improve- constantly expanding, consistent with industry to grow its workforce and ments in education quality and IT company development plans. develop. self-learning, and particularly, much According to the EY Survey 2017, 88% better English language skills. Just of companies indicated that they are The level of labor compensation five years ago, IT developers with planning to boost their headcount in prevailing on the market is responsible reasonable English language skills the next 2-3 years, and 52% intend to for the sector’s high attractiveness were difficult to find, whereas now the expand it by more than 25% [5]. and ability to draw and retain talent; majority of highly qualified IT staff can on the other hand, the cost of labor speak good English. 43

How do you expect your company headcount to change by 2019?

>50% 14%

Increase 25-50% 38%

15-25% 24%

+ 5-15% 12% No notable ±5% change 8% - 5-15% 2%

15-25% 0%

Decrease 25-50% 0%

>50% 2%

Source: [5] Results of EY’s survey among Hi-Tech Park residents

The majority of the population live in The majority of Belarusian IT compa- However, regional universities have six large cities that are administrative nies were founded in Minsk. Historical- recently started to enroll more centers of the Belarusian regions. All ly, Minsk has always been the center of students for training in IT jobs and of them have educational institutions higher education and the main introduce new IT specializations, that train STEM specialists. migration destination in the country supplying fresh talent to the sector in for people seeking education or the regions. The companies responding to our employment. Regional development is questionnaire have indicated that one of the potential growth paths for Companies believe that the state of more than 95% of their employees are the IT industry. Initially, IT companies the IT industry labor market in based in three cities: Minsk (89%), set up offices in regional cities to Belarusian regional cities and regions Gomel (6%) and Grodno (2%). attract IT talent who work there for is an important factor whose impact other sectors into the IT industry. on the industry has so far been fairly negative.

Distribution of population, ‘000

Minsk 1,960 Gomel 521 Mogilev 378 Vitebsk 369 Grodno 366 Brest 340 Other urban population 3,436 Rural population 2,128

Source: [6] — Demographic Year Book of the Republic of Belarus, 2016

Distribution of HTP residents’ employees among cities

Minsk 89.2% Gomel 5.7% Grodno 1.9% Brest 1.1% Vitebsk 0.9% Mogilev 0.9% Other 0.3%

Source: [5] Results of EY’s survey among Hi-Tech Park residents THE IT INDUSTRY IN BELARUS: Labor market 44 2017 and Beyond

Assessment of factor impact

State of the IT labor Impact Importance market in Belarusian regional cities and regions Negative Positive High Moderate Low

21% 15% 37% 46% 17%

Source: [5] Results of EY’s survey among Hi-Tech Park residents

International migration has no countries include a large number of IT survey by Stack Overflow covering material effect on the total workforce companies offering competitive 56,000 developers, the Belarusian IT in the country. In 2015, 28,000 employment conditions and interest- industry employs fewer people over arrivals and 10,000 departures were ing technology assignments, a stable 30 years old but more people aged registered, resulting in a net change of situation in the country, as well as an between 25 and 29. This is due to the less than 0.5% of the total workforce. affordable cost of living and conve- fact that the IT workforce is mostly Migration of IT talent from Belarus has nient infrastructure. replenished with university graduates dropped considerably over the last 10 who gain a new job in the sector after years. completing two years of mandatory Age structure post-graduation employment (refer to On the contrary, IT companies point to the “Education” section for details). a new trend — inbound migration to Belarus from other countries, mostly The Belarusian IT industry has a young Russia and Ukraine. Factors that workforce. When compared with the attract IT talent from neighboring findings of the global IT workforce

IT industry age structure

Globally Belarus, HTP

<20 7.1% 18-24 20.6% 20-24 23.6% 25-29 36.2% 25-29 28.4% 30-31 11.0% 30-34 18.1% 32-39 19.8% 35-39 10.1% 40-49 7.0% 40-49 8.9% 50-54 2.0% 50-59 3.0% 55-59 1.8% ≥60 0.8% ≥60 1.6%

Sources: [7] — Stack Overflow Survey Results 2016 Sources: [2] — Information provided by the Hi-Tech Park Administration

Supply and demand on Competition for qualified IT profes- the website — the second-highest sionals is strengthening because the among all occupational areas. Demand the IT labor market need for IT industry workers is growing on the IT labor market continues to faster than the total workforce. In Q1 rise, reaching a four-year peak. Supply and demand on the labor 2017, demand for IT skills surged by market was analyzed using data on 26% year-on-year and by 5% from Q4 vacancies and candidates’ resumes 2016. On average, there were 2,124 posted at jobs.tut.by, the top job vacant IT jobs available in this period, search website in Belarus. or 14% of total vacancies posted on 45

Vacancies by occupational area

Sales 30.0% IT, Telecommunications 14.0% Manufacturing 9.9% Marketing, Advertising, PR 9.4% Transport, Logistics 8.3% Accounting, Management Accounting, Finance 7.5% Blue-collar staff 7. 3% Construction, Real Estate 6.8% Career starters, students 6.0% Tourism, HoReCa 5.7% Administration 5.5% Banking, Investment, Leasing 5.2% Automotive 3.5% Health Care, Pharmaceuticals 3.0%

Source: [8] — Labor market in IT: jobs and resumes, competition, salaries Note: only occupational areas with more than 3% of vacancies are displayed; vacancies can relate to several occupational areas

Over 33,000 people looking for a job number of job seekers was down 0.7% est among all occupational areas. This in IT/Telecommunications have in Q1 2017 from the previous quarter. means that IT job seekers remain registered on the website over the last On average, there were 7,595 active active in the labor market. five years, with 17,000 registered resumes daily during this period, or during the last 12 months. The 4.9% of total resumes — seventh-high-

Resumes by occupational area

Career starters, students 23.2% Sales 16.6% Transport, Logistics 6.8% Accounting, Management Accounting, Finance 6.5% Manufacturing 6.2% Administration 5.7% IT, Telecommunications 4.9% Construction, Real Estate 4.3% Marketing, Advertising, PR 4.1% Blue-collar staff 4.1% Tourism, HoReCa 2.2% Security 1.9% Arts, Entertainment, Mass Media 1.8% Senior management 1.6% HR, Training 1.4% Lawyers 1.4% Banking, Investment, Leasing 1.4% Automotive 1.3% Science, Education 1.1% Gyms, Fitness, Beauty services 1.1%

Source: [8] — Labor market in IT: jobs and resumes, competition, salaries Note: only occupational areas with more than 1% of resumes are displayed

In 1Q 2017, competition for IT jobs industry do not correlate with those in economy. In particular, those seeking a decreased to the lowest level over the other sectors of the economy, job in the sector need special training last two years: 3.6 resumes per meaning that the IT industry has to acquire skills in a limited range of IT vacancy. Changes in the number of specific characteristics making it specializations. vacancies and job seekers in the IT largely independent of the rest of the THE IT INDUSTRY IN BELARUS: Labor market 46 2017 and Beyond

Labor market competition: active resumes per vacancy IT Entire labor market

16 14.9 14.6 14.3 13.1 11 10.5 10.3 9.4

4.5 4.5 4.4 4.5 4.3 3.8 3.7 3.8 3.6

Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017

Source: [8] — Labor market in IT: jobs and resumes, competition, salaries

Assessment of factor impact

Factor Impact Importance

Qualification level of Negative Positive business analysts High Moderate Low

17% 19% 66% 31% 3%

Qualification level Negative Positive of sales professionals High Moderate Low

33% 19% 74% 20% 6%

Qualification level of Negative Positive engineers and other High Moderate Low technology staff

12% 31% 78% 19% 3%

Qualification level of Negative Positive project managers High Moderate Low

21% 26% 76% 21% 3%

Source: [5] — Results of the EY’s survey among Hi-Tech Park residents 47

Vacancies by required certain skills or have just started doing dev.by. In 2016, 1,542 employees work experience so. For example, Belarusian State took part in the survey. EY neither University of Informatics and Radio- collected nor verified the data. electronics started training game designers only in 2015, [9] with Although industry experts state that 3% strategic support from Wargaming, their companies have low employee Melesta Games and the HTP Adminis- turnover of 10-15% a year, the survey showed that 24% changed their job Over 6 years tration. However, no courses in universities are yet in place specifically during the last 12 months. The survey for the IT industry in project manage- also found that the average continu- ment, management, marketing or ous employment period — when an 14% business administration in Belarus. employee has worked for one employ- None er without a break — is two years or The number of experienced IT less. This is attributed to high competi- specialists currently available on the tion for experienced IT experts on the labor market has a significant negative labor market. Usually, an IT specialist impact on the industry, while the with proper qualification will easily 29% 3-6 years number of young IT specialists find an attractive job offer on the currently available has a positive market, with the main reasons for 1-3 years impact. changing job being a chance to take part in an interesting technology 54% The shortage of IT experts with a high project or acquire new skills, rather qualification level is proved by the fact than a better salary or working that most vacancies require relevant conditions. work experience: 54.4% from 1 to 3 years and 28.9% from 3 to 6 years. According to the dev.by survey Source: [8] — Labor market in IT: jobs and resumes, competition, salaries Only 14% of total vacancies are findings, only 1-8% of the respondents suitable for graduates or newcomers were made redundant in 2009-16. lacking relevant experience. This means that employees switched to another employer on their own The number and qualification of accord rather than because they were available experienced IT specialists dismissed by their current employer. are, in the opinion of IT companies, Employee turnover Most of those who were made the most significant labor market redundant in 2009-16 managed to factors that affect the IT industry in The data to which EY refers through- find a new job due to the large market Belarus. Many respondents point out out this section comes from the annual capacity. that educational institutions in Belarus voluntary survey of IT industry either do not provide training in employees carried out by the website

Assessment of factor impact

Impact Importance

Number of experienced Negative Positive IT specialists currently High Moderate Low available on the labor market

43% 21% 84% 16% 0%

Number of young IT Negative Positive specialists currently High Moderate Low available on the labor market

17% 37% 46% 45% 9%

Source: [5] — Results of EY’s survey among Hi-Tech Park residents THE IT INDUSTRY IN BELARUS: Labor market 48 2017 and Beyond

Number of employers depending on length of service, 2016

Up to 1 year 1-2 3-5 6-7 Over 7 years

35% 30% 25% 20% 15% 10% 5% 0%

1 employer 2 employers 3 employers 4 employers 5 employers 6-7 employers more than 8 employers

Source: [1] — dev.by IT labor market survey data

Change of employer over the last 12 months

No, I am still with the same employer and No, I am still with the same employer but Yes, it was my own decision involved in a project not involved in a project (on the bench)

Yes, I was made redundant but found a new job Yes, I was made redundant and I am still out of work

70% 2% 24% 3% 1% 2016

71% 3% 21% 4% 1% 2015

69% 3% 24% 3% 1% 2014

70% 2% 23% 2% 1% 2013

71% 2% 24% 2% 1% 2012

77% 2% 20% 1% 0% 2011

71% 3% 20% 5% 1% 2010

76% 9% 7% 4% 4% 2009

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Source: [1] — dev.by IT labor market survey data

Employees themselves consider the IT Distribution by age and higher education, whereas the labor market to be stable in terms of average figure for the economy is 30% job security: 73% are confident that length of service of the working population or even less they will keep their job. than that. According to the dev.by survey, about 12% of individuals employed in the IT The IT industry is among the most industry are students. A key feature of attractive for local employment and the sector workforce is its large continues to draw talent from other percentage of university graduates: sectors. The workforce analysis by age some 76% of respondents [1] have and length of service suggests the 49

Assessment of current job security by IT industry employees by education, 2016 employees, 2016

I’m fine and Secondary sure of keeping 73% education my job 12% I’m fine so far but not so sure 23% of the future Higher 76% education I have concerns about losing my 4% Students 12% job and not being able to find a new one

Source: [1] — dev.by IT labor market survey data Source: [1] — dev.by IT labor market survey data conclusion that many employees have 32% reported less than 7 years of than 3 years of IT-related work switched to the IT industry after they work experience, meaning that they experience. In total, at least 17% of the graduated from university and worked worked in other sectors before respondents have switched to the IT in other sectors of the economy. switching to IT. Similarly, 19.2% of the industry after gaining work experience Among the respondents aged over 30, respondents aged 26-30 have less in other sectors.

Respondents by work experience and age, 2016

Up to 1 year 1-2 3-5 6-7 Over 7 years

45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

<21 21-25 26-30 31-35 36-41 >41

Source: [1] — dev.by IT labor market survey data

Respondents by age of starting IT companies have close ties with ation employment and took a job in an IT career, 2016 universities, and their involvement in the IT industry once they gained an the teaching process helps them to opportunity. Only 10% started their attract talented students while they career in IT after 28. are still at university. The obvious 10% conclusion regarding the age of people The percentage of experienced IT 28 and starting a career in IT is that the experts is constantly on the rise. Back older 14% sector mainly attracts young talent. in 2009, 51% of the survey respon- 25-27 According to the survey [1], 49% of dents had work experience of more the respondents got their first job in than 3 years, whereas in 2016, their 21 and 49% share increased to 72%, and the share younger the IT sector before they were 21, while still a student, and 27% em- of respondents with more than 7 years of experience picked up to 28% from 22-24 barked on an IT career at the age of 17%. This suggests that IT profession- 27% 22-24, that is, after graduation. Some people (14%) joined the IT community als tend to stay in the sector rather at the age of 25-27. This age group than switch out of it or even look for a mostly comprises those who complet- job abroad. ed two years of mandatory post-gradu- Source: [1] — dev.by IT labor market survey data THE IT INDUSTRY IN BELARUS: Labor market 50 2017 and Beyond

Respondents by work experience, 2009 and 2016 2009 2016

40% 38% 35% 32% 30% 28% 25% 22% 20% 17% 17% 15% 11% 11% 12% 12% 10% 5% 0%

Up to 1 year 1-2 3-5 6-7 Over 7 years

Source: [1] — dev.by IT labor market survey data

Salaries in managers — had the highest average among survey respondents. The salary in the IT industry. The salaries salaries of technology specialists the IT industry of developers, systems administrators depend on their experience and and analysts show the greatest technology-related skills. According to a Hi-Tech Park statistical differences between the upper and report [2], salaries in the IT industry lower quartiles, with the most experi- The most popular programming are substantially higher than the enced and qualified technology languages are Javascript (57% of national average, and employees of specialists receiving salaries far above those surveyed), SQL (52%), Java Hi-Tech Park residents received an the average. (48%), .NET/C# (38%) and Python average salary that was 16% above the (18%). This distribution is in line with average for the IT industry as a whole Software development and related world trends: the three most popular in 2016. activities are key, representing the languages — Javascript, SQL and core of the industry, and developers Java — are the same. Employees in senior positions — (including team leads, tech leads and tech leads, team leads and project project managers) were singled out

Average monthly salaries in Belarus, the IT industry and the Hi-Tech Park, USD, 2016

Republic of Belarus ICT sector High-Tech Park

2,500

2,012 2,000 1,875 1,927 1,784 1,674 1,687 1,606 1,600 1,500

1,000 620 621 500 406 408

2013 2014 2015 2016

Source: [2] Information provided by the Hi-Tech Park Administration 51

Monthly salaries by position, USD, 2016

Position Lower 25% Median Upper 25%

System administrator 488 700 1,825

Test engineer (QA) 500 900 1,575

Sales or marketing staff 500 1,000 1,300

Usability designer/specialist 575 1,100 1,600

Analyst 700 1,100 2,000

HR manager/recruiter 735 1,200 1,470

Developer (programmer, software engineer) 811 1,500 2,245

Project manager 1,075 2,000 2,738

Team lead or tech lead 2,000 2,800 3,500

Other 700 1,200 2,650

Lower 25% Median Upper 25%

Team lead or tech lead

Project manager

Developer (programmer, software engineer)

HR manager/recruiter

Analyst

Usability designer/specialist

Sales or marketing staff

Test engineer (QA)

Systems administrator

Other

Source: [1] — dev.by IT labor market survey data 0 500 1,000 1,500 2,000 2,500 3,000 3,500

Distribution by main programming language, 2016

Globally Belarus, dev.by

JavaScript 61.9% JavaScript 57%

SQL 50.8% SQL 52%

Java 39.3% Java 48%

C# 33.8% .NET/C# 38%

Python 31.7% Python 18%

PHP 27.9% PHP 17%

C++ 22.1% C++ 12%

C 18.9% NoSQL Databases 8%

TypeScript 9.4% Ruby 7%

Ruby 9.0% Objective-C 6%

Swift 6.4% C 5%

Objective-C 6.4% Swift 5%

Source: [7] — Stack Overflow Survey Results 2016 Source: [1] — dev.by IT labor market survey data THE IT INDUSTRY IN BELARUS: Labor market 52 2017 and Beyond

Preference of main programming language and work experience, 2016

Language up to 1 year 1-2 years 3-5 years 6-7 years over 7 years

Java 12.5% 13.9% 33.9% 11.9% 27.8%

.NET/C# 9.3% 10.7% 34.0% 16.3% 29.8%

JavaScript 17.0% 19.9% 34.0% 12.1% 17.0%

PHP 5.7% 10.3% 36.8% 8.0% 39.1%

C++ 3.4% 10.3% 27.6% 12.1% 46.6%

Python 4.3% 17.0% 29.8% 10.6% 38.3%

SQL 2.2% 11.1% 20.0% 11.1% 55.6%

Ruby 8.3% 27.8% 36.1% 0.0% 27.8%

Objective-C/Swift 7.5% 30.0% 35.0% 17.5% 10.0%

Other 2.6% 15.4% 35.9% 15.4% 30.8%

Up to 1 year 1-2 3-5 6-7 Over 7 years

100% 10.0% 17.0% 27.8% 29.8% 27.8% 30.8% 80% 39.1% 38.3% 17.5% 12.1% 46.6% 55.6%

16.2% 15.4% 60% 11.9% 10.6% 34.0% 8.0% 36.1% 35.0% 12.1% 40% 33.9% 11.1% 34.0% 35.9% 36.9% 27.6% 29.8% 19.9% 20.0% 27.8% 30.0% 20% 13.9% 10.7% 10.3% 10.3% 17.0% 11.1% 15.4% 12.5% 9.3% 17.0% 5.7% 3.4% 4.3% 2.2% 8.3% 7.5% 2.6% 0%

Java .NET/C# JavaScript PHP C++ Python SQL Ruby Objective-C/ Other Swift

Source: [1] — dev.by IT labor market survey data

Monthly salary depending on work experience and programming language, USD, 2016

Language up to 1 year 1-2 years 3-5 years 6-7 years over 7 years average median

Java 423 855 1 ,745 2,399 2,870 1,846 1,700

.NET/C# 505 939 1,610 2,209 2,761 1,876 1,900

JavaScript 465 798 1,564 2,388 2,862 1,545 1,250

PHP 340 1,372 1,631 2,836 2,188 1,845 1,600

C++ 585 808 1,257 1,864 2,735 1,949 1,700

Python 550 890 1,900 2,130 2,702 2,002 1,900

SQL 500 1,100 1,387 2,005 2,292 1,907 1,800

Ruby 470 1,128 1,981 n/a 3,228 1,928 1,600

Objective-C/Swift 700 1,288 2,050 3,271 2,400 1,969 1,700

Other 700 778 1,896 2,178 3,008 2,079 2,000

Source: [1] — dev.by IT labor market survey data 53

Experienced developers are unevenly and PHP, are associated with lower It is important to note that a good distributed in terms of programming salaries for employees with less number of highly-paid developers are languages. Java and Javascript, experience, but comparatively high in the group earning above USD followed by .NET/C#, are preferred salaries for employees with over five 3,000, and their maximum salaries among junior specialists. This is years of experience. may be several times the most because these languages are the most common values. This explains the high popular in general and also because In addition to programming language, average salary of USD 3,844 — well they form part of the university salary depends on an employee’s work above the median of USD 3,500. programming curriculum. These experience. The main groups are languages, as well as Ruby and distinguished on the basis of experi- Most IT companies review salaries on Objective-C, are preferred by employ- ence. Salaries of up to USD 500 are a regular basis. Only 5% of dev.by ees with up to five years of experience. generally those of students with respondents have seen a decrease in Among developers with over five years experience of up to 1 or 2 years. Most salary, while 54% have seen an of experience, C++ and SQL are developers at the junior-to-middle increase. Substantial growth in salary preferred. level receive salaries from USD 500 to (more than 20%) was typical for USD 2,000. Specialists with experi- specialists with little work experience, An analysis of salary figures by ence of more than 7 years are as well as for those with long experi- programming language and work beginning to account for a significant ence in IT. experience reveals that the average part of the group, with salaries over salary associated with Objective-C/ USD 2,000. The USD 2,000-3,000 Swift is higher than for other languag- group is the salary level at which most es. Languages popular with young senior developers stop. specialists, such as Java, Javascript

Distribution by salary and work experience, 2016

Salary. USD Experience Overall

up to 1-2 3-5 6-7 over 1 year years years years 7 years

0-499 6.5% 2.7% 1.8% 0.5% 0.9% 12.3%

500-999 4.3% 7.7% 5.5% 0.8% 2.0% 20.3%

1,000-1,499 0.5% 4.6% 8.9% 1.2% 2.1% 17. 3%

1,500-1,999 0.0% 0.8% 7. 3% 2.6% 3.2% 13.8%

2,000-3,000 0.0% 0.4% 7.1% 4.4% 9.6% 21.5%

over 3,000 0.0% 0.3% 1.6% 2.3% 10.6% 14.8%

Up to 1 year 1-2 3-5 6-7 Over 7 years

25%

20%

15%

10%

0-499 500-999 1,000-1,499 1,500-1,999 2,000-3,000 over 3,000

Source: [1] — dev.by IT labor market survey data THE IT INDUSTRY IN BELARUS: Labor market 54 2017 and Beyond

Change in salary depending on work experience, 2016

Up to 1 year 1-2 3-5 6-7 Over 7 years

100% 15% 33% 9% 37% 34% 75% 41%

11% 5% 38% 17% 50% 14% 21% 28% 33% 32% 26% 29% 25% 13% 9% 5% 15% 12% 4% 8% 11% 0%

No change Increase of more Increase of less Reduction of less Reduction of more than 20% than 20% than 20% than 20%

Source: [1] — dev.by IT labor market survey data

In addition to actual salary, the full employees’ satisfaction with their salary of around USD 1,000, those picture requires an analysis of salaries to identify salaries that satisfy with from 3 to 5 years of experience employees’ salary expectations, which 25%, 50% and 75% of employees in want at least USD 1,500, those with have a significant impact on the cost each length-of-service group. Salary more than 6 years want over USD of labor for projects, as well as on the expectations are generally consistent 2,000, and those with more than 7 movement of employees between with employees’ experience and actual years want at least USD 3,000. companies. Expectations were salaries. Employees with up to 2 years analyzed using information on of experience are satisfied with a

Salary expectations depending on work experience, USD, 2016 25% 50% 75%

4,000 3,500 3,500 3,000 3,000 2,800 2,500 2,100 2,250 2,000 2,000 600 1,200 1,500 1,600 1,700 450 900 1,000 1,100 500 300 650 0

Up to 1 year 1-2 3-5 6-7 Over 7 years

Source: [1] — dev.by IT labor market survey data

Importance and expectations regarding the cost of labor among IT companies

Expectations Importance

Labor Will improve Will stay the same Will change for the worse High Moderate Low costs

10% 34% 56% 82% 18% 0%

Source: [5] — Results of EY’s survey among Hi-Tech Park residents 55

In the opinion of IT companies, the account all related taxes and contri- However, Belarus and Russia have cost of labor is one of the key determi- butions paid by the employer. To this introduced measures of government nants of the Belarusian IT industry’s end, a comparative analysis was support to stimulate the IT industry. prospects for development. 56% of made of the hypothetical expenses on Under these regimes, Belarusian companies expect further growth in an employee earning USD 2,000 Hi-Tech Park residents have the lowest the salaries of IT specialists, and this gross per month in Belarus and expenses (USD 233), and their may have an adverse effect on prices neighboring countries. employees pay the lowest taxes (USD and thus on the competitiveness of 200). The measures of government Belarusian IT products and services. The below table shows that an support provided to Hi-Tech Park employer’s tax expenses are highest residents thus substantially enhance in Belarus (USD 727) and lowest in an employer’s competitiveness in Total labor costs Ukraine (USD 349). As for the terms of sales and on the labor expenses of employees, the highest market. taxes and deductions from salary In analyzing salaries, it is important were in Latvia (USD 622) and the to understand an employee’s real lowest in the Russian Federation (USD income and expenses, taking into 260).

Net income of employees and total labour costs in Belarus and neighbouring countries, USD, 2017

Employee’s net Taxes paid by Taxes paid by income the employee the employer

Republic of Belarus, Hi-Tech Park 1,800 200 233

Russian Federation, tax benefits 1,740 260 280

Ukraine 1,610 390 349

Poland 1,411 589 412

Latvia 1,378 622 472

Russian Federation 1,740 260 604

Lithuania 1,520 480 624

Republic of Belarus 1,720 280 727

Republic of Belarus, High-Tech Park 1,800 200 233

Russian Federation, tax benefits 1,740 260 280

Ukraine 1,610 390 349

Poland 1,411 589 412

Latvia 1,378 622 472

Russian Federation 1,740 260 604

Lithuania 1,520 480 624

Republic of Belarus 1,720 280 727

Source: EY analysis 2,000

Labor resources by Number of men and women gender in the IT industry in the working-age population, 2016

Indicator Men in the Women in the The proportion of men to women in 18-60 age group 18-55 age group Belarus is approximately even up to the age of 50. In age groups over 50, men Number 2,850,523 2,605,572 are a significantly smaller proportion of Share 52% 48% the population. Given a retirement age of 60 for men and 55 for women, the Source: [6] — Demographic Year Book of the Republic of Belarus, 2016 working-age population has a majority of men. The retirement age is now being gradually increased to 63 for men and 58 for women. THE IT INDUSTRY IN BELARUS: Labor market 56 2017 and Beyond

The IT industry in Belarus is marked by Percentage of women developers according a comparatively high percentage of to the Stack Overflow study, globally, 2016 women in the workforce: 18.7% based on the findings of dev.by [1]. Accord- ing to official Hi-Tech Park statistics, 92.8% women account for a much smaller Men share of park employees: 7.6%. This is Women 5.8% because Hi-Tech Park residents specialize in software development, an Other 0.4% area that employs substantially more Prefer not to Disclose 1.0% men at the present time.

Even though women occupy a higher percentage of non-technology Source: [7] — Stack Overflow Survey Results 2016 positions (HR, marketing/sales), data on the IT industry in Belarus also shows a greater percentage of women developers (5.8%) and team leads/ project managers (7.6%) than in the Positions by gender in the Belarusian Stack Overflow findings for 2016 and IT industry, 2016 2017. Women also account for a significant share of QA specialists (36%) and business analysts (42%). HR manager/recruiter 96% The profession least in demand among women (consistent with the Stack Technical writer/copywriter 67% Overflow findings for 2016 and 2017) is that of systems administrator/ Sales or marketing staff 55% dev-ops engineer, representing only 4% of surveyed IT specialists in Analyst 42% Belarus. Test engineer (QA) 36% There is a disparity between the levels of salary for men and women. The Usability designer/specialist 35% greatest relative difference in median salary, 26.6%, applies to employees Project manager 17% with a length of service of 3-5 years, and the overall disparity increases for Developer (programmer, software engineer) 10% more experienced employees. Stack Overflow findings show a similar trend. Team lead or tech lead 10% This is largely because men are more often employed as technology Systems administrator 4% specialists in the Belarusian IT industry, and their salaries increase Other 28% % of women with experience, substantially exceed- ing the salaries of employees with the same length of service in support positions. Source: [1] — dev.by IT labor market survey data

Increased involvement of women in the IT industry, especially in technology-related specializations, may become a key driver of quantitative and qualitative growth in the IT industry. 57

Upper and lower quartile salary depending on work experience Men Women for men and women, USD, 2016

4,000

3,000

2,000

1,000

Up to 1 year 1-2 3-5 6-7 Over 7 years

Source: EY analysis; [1] — dev.by IT labor market survey data

Proficiency for their employees. Industry experts Although English is the language most have noted improvements in the in demand, other languages are also in foreign languages quality of education and self-study, needed. There are companies, for including higher proficiency in English. example, that provide services in the Since the majority of Hi-Tech Park Just five years ago, it was hard to find German language — up to and includ- residents concentrate on exports of IT developers with any proficiency in ing remote user-support services. services, they place a high importance English, whereas now the majority of on employees’ proficiency in foreign highly-qualified technology specialists An analysis of the level of English languages — English in particular, since can speak English. among job applicants shows that, of the US is their primary market. These the 17,000 IT/telecom applicants companies give serious attention to listed on the website jobs.tut.by, 36% English and invest in language training define their English skills as sufficient for interviewing.

SOURCES

[1] Website dev.by IT in Belarus https://dev.by/ [6] Demographic Year Book of the Republic of Belarus, 2016 - http://www.belstat.gov.by/ofitsialnaya-statistika/solialnaya-sfera/ [2] Information provided by the Hi-Tech Park Administration demografiya_2/metodologiya-otvetstvennye-za-informatsionnoe- s_2/index_5770/ [3] Information society in the Republic of Belarus, 2015 with updates received from the Belarusian Statistics Committee in May 2017 [7] Stack Overflow Survey Results 2016 - http://www.belstat.gov.by/en/ofitsialnaya-statistika/publications/ http://stackoverflow.com/insights/survey/2016 statistical-publications-data-books-bulletins/public_compilation/ index_4922/ [8] Labor market in IT: jobs and resumes, competition, salaries - https://jobs.tut.by/article/20311 [4] Work and employment, 2016 - http://www.belstat.gov.by/ofitsialnaya-statistika/publications/izdania/ [9] Belarusian portal tut.by: Game design will be taught in BSUIR. public_compilation/index_6396/ Partners — Wargaming and Melesta Games https://42.tut.by/454848 [5] Results of EY’s survey among Hi-Tech Park residents, 2017 THE IT INDUSTRY IN BELARUS: InfrastructureInfrastructure 58 2017 and Beyond

INFRA STRUCTURE 59

Summary 60 Internet access 62 Office premises Mobile-cellular communications 63 and other utility expenses 61 Commercial data centers 63 The ICT Development Index 61 Sources 64 THE IT INDUSTRY IN BELARUS: Infrastructure 60 2017 and Beyond

Summary Belarus has well-organized transporta- companies can benefit from setting up tion services between its capital and an office (e.g., a captive center) in other cities, and a well-developed Belarus. Belarus has well-developed infrastruc- network of roads and railways, while ture for running a business. Transport, the cost of transportation remains IT companies are generally positive telecommunications, office premises, moderate. The capital is in the center about the current level of overheads and utilities, etc. meet high quality of the country, meaning that all major of running a business in Belarus. Most standards and are relatively cheap, cities are 3-5 hours away by public IT companies (84%) consider low making overheads and infrastructure transport or 2-4 hours by private overheads, including office premises, costs less burdensome for businesses. transport. services and other costs, among the The average national monthly salary most significant factors impacting of just USD 378 (February 2017) According to Mercer’s 2016 Cost of sector development. Another import- affects the prices for many goods and Living Survey, Minsk is one of the 10 ant factor is the state of IT infrastruc- services in the country. least expensive cities among 209 ture and communication channels. surveyed and has the lowest cost of Almost half (47%) of respondents living in Europe [1]. Minsk’s position in believe that this factor has a positive this ranking suggests that foreign impact on their development.

10 most and least expensive cities to live in

Top 10 Bottom 10

# City Country # City Country

1 Hong Kong Hong Kong 200 Lusaka Zambia

2 Luanda Angola 201 Gaborone Botswana

3 Zurich Switzerland 201 Karachi Pakistan

4 Singapore Singapore 203 Tunis Tunisia

5 Tokyo Japan 204 Minsk Belarus

6 Kinshasa Democratic Republic of the Congo 205 Johannesburg South Africa

7 Shanghai China 206 Blantyre Malawi

8 Geneva Switzerland 207 Bishkek Kyrgyzstan

9 N'Djamena Chad 208 Cape Town South Africa

10 Beijing China 209 Windhoek Namibia

Source: [1] — Mercer 2016 Cost Of Living Rankings

Assessment of factor impact

Factor Impact Importance

Level of overheads Negative Positive (office premises, High Moderate Low services, equipment) borne by the company

28% 19% 30% 54% 16%

Current state of the Negative Positive IT infrastructure and High Moderate Low communication channels

6% 47% 68% 29% 3%

Source: [2] Results of EY’s survey among Hi-Tech Park residents 61

Office premises and mean that the quality of office space The development of startups and small has declined. Some business centers companies is supported by the other utility expenses apply variable lease rates depending favorable environment that business on the leased area. For large deals, incubators create for them. The latter Minsk currently has over 100 business owners of business centers may often support small and medium-sized centers with total office space of some agree to special terms different from businesses, in particular, by providing 900,000 sq. m [3]. With many new those reported in statistics. office space at lower lease rates. office premises being built (on average, some 100,000 sq. m a year Despite an ample supply of vacant In addition to lease payments, becoming available in 2013-16) and office space in Minsk (just over company overheads are impacted by the economy being sluggish, lease 55,000 sq. m in 60 business centers the cost of utilities. The Belarus rates have plunged in 2017, leveling as of 1 February 2017), there is government does not provide IT out at USD 15-25 per sq. m, USD 10- somewhat of a shortage in the companies with any utilities subsidies, 15 per sq. m, and USD 6-8 per sq. m segment of large (over 1,500 sq. m) however, utility costs are generally for Class A, Class B, and Class C and high-quality premises, making the moderate. business centers, respectively. search for a suitable office difficult for However, a lower lease rate does not major companies [3].

Vacant office space, Average cost of utilities for legal entities, USD, May 2017 ‘000 sq. m, 1 February 2017 Utility type Unit of Cost, measure USD Class A 2 Electricity* 1 kWh 0.15 Class B+ 26.5 Drinking water 1 m3 0.86 Class B 16.5 Wastewater disposal 1 m3 0.43 Class C 12.3 Source: [4] — Electricity tariffs for legal entities; [5] — Water supply and wastewater disposal tariffs for legal entities Source: [3] — Tvoya Stolitsa real estate agency * The cost of 1 kWh for other non-industrial customers.

The ICT calculated in order to follow local ICT Belarus substantially improved its IDI development over time in comparison performance between 2010 and Development Index with other economies, monitor and 2015, mainly due to improvements in compare ICT performance within and the ICT access sub-index (up from The overall development level of across developed and emerging 6.16 in 2010 to 7.68 in 2015) and information and communication economies, and evaluate ICT develop- the ICT use sub-index (from 2.46 in technologies (ICT) in Belarus can be ment potential. The ICT Development 2010 to 5.40 in 2015), moving up assessed by comparing it with that of Index is based on 11 ICT indicators, from 50th place to 36th in the ranking other countries using the ICT Develop- grouped into three clusters: access, of 167 economies. ment Index (IDI) published by the UN use and skills, which are given International Telecommunication different weights in the computation of Union since 2009. The index is the overall IDI.

ICT Access (40%) ICT Use (40%) ICT Skills (20%)

• Fixed-telephone subscriptions / • Percentage of individuals using the • Adult literacy rate 100 inhabitants Internet (% of the population aged 15 and older who can read and write simple • Mobile-cellular telephone subscrip- • Fixed (wired)-broadband(wired) broadband subscriptions statements with understanding and tions / 100 inhabitants per 100 inhabitants do simple arithmetic calculations)

• International Internet bandwidth • Wireless broadband subscriptions per • Gross enrollment ratio secondary (bits/s) per user 100 inhabitants (including satellite, level terrestrial fixed, and active mobile with • Percentage of households with a minimum download of 256 Kbit/s) • Gross enrollment ratio tertiary level a computer

• Percentage of households with Internet access THE IT INDUSTRY IN BELARUS: Infrastructure 62 2017 and Beyond

ICT Development Index, 2015 (rank change from IDI 2010)

Economy IDI ICT Access ICT Use ICT Skills

Rank Index Rank Index Rank Index Rank Index

Korea (Rep.) 1 ▬ 8.93 9 ▲ 9.00 4 ▼ 8.42 2 ▬ 9.82

Denmark 2 ▲ 8.88 13 ▼ 8.72 1 ▲ 8.83 12 ▲ 9.29

Iceland 3 ▬ 8.86 2 ▬ 9.37 8 ▲ 8.11 10 ▲ 9.35

United Kingdom 4 ▲ 8.75 4 ▲ 9.24 3 ▲ 8.42 44 ▼ 8.42

Sweden 5 ▼ 8.67 10 ▼ 8.90 6 ▼ 8.32 24 ▼ 8.91

United States 15 ▲ 8.19 31 ▼ 7.82 11 ▲ 7.86 5 ▬ 9.57

Estonia 20 ▲ 8.05 28 ▼ 7.86 14 ▲ 7.66 15 ▲ 9.22

Israel 35 ▼ 7.19 25 ▼ 7.98 42 ▼ 5.57 26 ▲ 8.86

Belarus 36 ▲ 7.18 38 ▲ 7.68 47 ▲ 5.4 4 ▲ 9.75

Latvia 37 ▼ 7.16 49 ▼ 7.23 32 ▼ 6.29 30 ▼ 8.76

Lithuania 40 ▼ 7.08 54 ▼ 7.04 34 ▲ 6.1 17 ▼ 9.13

Poland 44 ▼ 6.91 51 ▼ 7.15 41 ▼ 5.62 20 ▲ 9.02

Russian Federation 45 ▲ 6.91 48 ▲ 7.24 44 ▲ 5.52 19 ▼ 9.04

Ukraine 79 ▼ 5.23 72 ▲ 6.27 109 ▼ 2.17 14 ▲ 9.25

[6] — International Telecommunications Union, Measuring the Information Society Report 2015

Internet access is easier for telecommunications capability almost doubled between companies to ensure good access to 2010 and 2015 (10.3 million versus data networks and make improve- 5.4 million), while the bandwidth of Access to the Internet is vital for IT ments to service quality and scope on Internet access channels increased by companies to operate. Since the an ongoing basis. Subscribers to data 12 times (from 67 Gbit/s to 803). territory of Belarus is not very large, it networks that have Internet access

Data network indicators

Total subscriptions to all types Including with Internet access Bandwidth of Internet access of data transmission, ’000 capability, ’000 channels, Gbit/s

803 12,000 783

10,000

8,000 480 6,000 350

4,000 200

2,000 67 3 7 23

0 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: [7] — Statistical Yearbook of the Republic of Belarus, 2016 63

The data and network infrastructure is Mobile-cellular covers 98.2% of the territory of undergoing continuous improvements Belarus and 99.8% of its population, and upgrading, resulting in much communications with 74.5% [8] of its territory covered better quality of communications and by 3G or 4G networks. 4G networks a higher speed of data transmission Mobile-cellular services are provided in are available in all major cities. for subscribers throughout the Belarus by three private telecommuni- country. cation operators. The cellular network

Key indicators of mobile-cellular penetration

Indicator 2013 2014 2015 2016

Total mobile-cellular subscriptions, 11,114.4 11,401.9 11,448.3 11,439.9 ’000

Population covered by mobile-cellular 99.9 99.8 99.9 99.8 services, %

Territory covered by mobile-cellular services, % 98.4 97.6 98.1 98.2

Mobile-cellular subscriptions per 1,174 1,203 1,205 1,204 1,000 inhabitants

Source: [9] — Statistical Book: Belarus by Numbers, 2017

Commercial data centers All commercial data centers are June 2016 saw the launch of con- located in Minsk or the Minsk region, struction of the country’s first TIER III except the server facilities of Beltele- data center — the Republican Data Several companies currently provide com, the government-owned telecom- Center. The first module consisting of data center services on a commercial munications provider, which are 156 racks began operation in Decem- basis. Their service offering includes located in administrative centers of ber 2016. The data center is planned hosting, colocation, VPS, SaaS, PaaS, Belarusian regions and provide only to host information systems of and IaaS. colocation services. government bodies, as well as provide services on a commercial basis.

Please describe the location of your organization’s IT infrastructure

In Belarus Abroad

Our own equipment 71% (or data center) 14%

Use of partners’ data 8% centers (on non-market terms) 13%

Use of cloud 11% infrastructure 35%

Leased data center space 25% on a commercial basis 20%

Source: [2] Results of EY’s survey among Hi-Tech Park residents THE IT INDUSTRY IN BELARUS: Infrastructure 64 2017 and Beyond

Over 70% of the surveyed IT compa- Currently, only 11% of companies use public cloud services is the most nies use their own server premises cloud infrastructure from local popular solution (31% of respondents). located in Belarus. Apart from that, providers and 25% lease space with The second most popular solution companies build their IT infrastructure Belarusian commercial data centers; (24%) is the use of a self-managed using cloud infrastructure from foreign however, with new commercial data private cloud running on third-party providers (35% of respondents) or centers beginning operation, more infrastructure. Only 7% of survey colocation (25% in Belarusian data companies are likely to locate their participants use their own private centers and 20% in data centers infrastructure in Belarus. cloud managed by themselves. Some abroad). IT companies in Belarus use a combi- Many IT companies already use cloud nation of solutions to build their services for their business. The use of infrastructure.

What cloud computing technologies do you use to build your infrastructure?

Public cloud 31%

Self-managed private cloud running on third-party infrastructure 24%

Virtual private cloud 14%

Externally managed private cloud 12%

Self-managed private cloud 7%

Source: [2] Results of EY’s survey among Hi-Tech Park residents

SOURCES

[1] Mercer 2016 Cost Of Living Rankings - [6] International Telecommunications Union, Measuring the Information https://www.imercer.com/content/2016-cost-of-living-infographic. Society Report 2015 http://www.itu.int/en/ITU-D/Statistics/Pages/ aspx publications/mis2015.aspx

[2] Results of EY’s survey among Hi-Tech Park residents [7] Statistical Yearbook of the Republic of Belarus, 2016 - http://www.belstat.gov.by/ofitsialnaya-statistika/publications/izdania/ [3] Tvoya Stolitsa real estate agency - public_compilation/index_6316/ http://www.t-s.by/info/news/analitika-i-konsalting/87976/ http://www.t-s.by/info/news/analitika-i-konsalting/89141/ [8] OpenSignal, “Global State of Mobile Networks (August 2016)” - https://opensignal.com/reports/2016/08/global-state-of-the-mobile- [4] Electricity tariffs for legal entities, GPO Belenergo, network/ http://www.energo.by/e-services/es-u-ta.htm [9] Statistical Book: Belarus by Numbers, 2017 - [5] Water supply and wastewater disposal tariffs for legal entities, UP http://www.belstat.gov.by/ofitsialnaya-statistika/publications/izdania/ Minskvodokanal, http://minskvodokanal.by/companies/tariffs/ public_compilation/index_7187/ 65

DOING BUSINESS

Summary 66 Investments in the Republic of Belarus 70 State support and regulation of the IT industry 66 Judicial system 72 Overview of the legal Protection of intellectual and regulatory environment 68 property 73 THE IT INDUSTRY IN BELARUS: Doing Business 66 2017 and Beyond

Summary State support The Hi-Tech Park Administration oversees the Hi-Tech Park regime; sends and regulation materials to the Hi-Tech Park Superviso- The IT industry in Belarus is regulated of the IT industry ry Board as required for decisions on at the state level by the President of registering applicants as park residents, Belarus and various state agencies. A unified state IT policy is established canceling residency status and register- The decision that laid the foundation by the President of the Republic of ing business projects involving new and for support of the IT business was the Belarus, who has broad powers to use high technologies; enters into agree- Decree “On the Hi-Tech Park,” which a variety of instruments to regulate ments with park residents concerning established a system of preferences for and promote the development of the the terms of their participation and park residents. These preferences, IT industry. One example is Presiden- monitors compliance with these terms; involving corporate tax exemptions or a tial Decree No. 12 of 22 September and analyzes residents’ activities and substantial reduction in tax rates, do 2005 “On the Hi-Tech Park,” which the results of their activities to ensure much to promote the development of IT created a special system of preferenc- that they are permitted types of companies. es for IT companies that are park activity, etc. residents. Belarus has no separate In addition, Belarus has a simplified tax state body that acts as a central The State Science and Technology system for other companies in the IT regulator of the IT industry. Committee of the Republic of Belarus industry that do business and meet regulates the development of science, certain criteria. The simplified tax The regulation of specific issues in technology and innovation and the system offers rates substantially lower IT-related areas is the responsibility of protection of intellectual property rights than in the general system. various state bodies, including: and is responsible for the development of innovation infrastructure, for the Belarus has created favorable condi- • the Ministry of Communications introduction of support mechanisms for tions for investments, and investments and Informatization of the Republic innovators, for the establishment and may be made in various ways. Belaru- of Belarus development of production facilities sian law guarantees that investors can • the Operational and Analytical based on new and high technologies freely transfer profits and other Center under the Aegis of the and for the attraction and use of investment-related funds. President of the Republic of Belarus advanced, high-efficiency foreign technologies, etc. Although there is currently no basis in • the Hi-Tech Park Administration law for venture financing in Belarus, • the State Science and Technology the practice exists. Committee of the Republic of State support of IT companies Belarus The Republic of Belarus, along with Measures of state support under the Armenia, the Russian Federation, the The Ministry of Communications and Hi-Tech Park regime Republic of Kazakhstan and the Kyrgyz Informatization of the Republic of Republic, is a member of the Eurasian Belarus develops and implements The Hi-Tech Park regime is a special Economic Union (EEU), which has a concepts and programs for the legal regime that provides various unified customs territory. The EEU has development of telecommunications as benefits and preferences for developing unified customs regulations and a well as state informatization programs, software, information and communica- unified list of customs duty rates licenses telecommunication activities tion technologies and other new and applicable to goods imported into the (e.g. data transmission, IP telephony high technologies in Belarus (see table). customs territory of the EEU from third and cellular mobile telecommunication countries. Under the preferential services), registers websites in the The preferential regime may be used by regimes of doing business, customs national segment of the Internet, and legal entities and individual entrepre- payments and VAT benefits may be adopts technical regulations concern- neurs that are registered as Hi-Tech provided to Belarus companies for ing informatization, information and Park residents and are engaged in imports of certain goods. communication technologies and activities permitted for park residents. telecommunications, etc. The current system of preferences has The judicial system consists of the been approved in law until 25 Decem- Constitutional Court of Belarus and The Operational and Analytical ber 2020, and residents and industry courts of general jurisdiction. Domestic Center under the Aegis of the experts expect the tax benefits to be and foreign legal entities may appeal to President of the Republic of Belarus extended for another ten years. courts of general jurisdiction to defend licenses activities involving technical their lawful rights and interests. and cryptographic information The most important benefits are an Organizations outside the judicial security, verifies state expert examina- exemption from corporate profit tax and system have also been created to tions of technical and cryptographic a reduction in the base used to calculate resolve disputes: permanent arbitration means of information security, and contributions on compulsory state courts as well as ad hoc arbitration determines the procedure for register- social security insurance of employees. courts formed by agreement of the ing domain names with the national Further, the business owners enjoy 5% parties to a specific dispute. domain extension as well as the dividend withholding tax and exemption procedure for restricting access to from offshore duty. At the same time, Computer programs in Belarus are information resources posted in the residents must make quarterly pay- automatically protected by copyright as Internet, etc. ments of 1% of their revenues to the soon as they are created. Hi-Tech Park Administration. 67

Measures of state support under the Hi-Tech Park regime

Standard tax regime Hi-Tech Park resident

Corporate profit tax 18% Exemption

VAT on sales of goods, work, services and 20% Exemption property rights in the Republic of Belarus

Withholding tax on dividends, royalties and 12% on dividends 5% on dividends interest paid to foreign organizations* 10% on interest 5% on interest

15% on royalties 5% on royalties

* A more favorable regime may be envisaged by double tax treaties

Rent for state-owned real estate Determined using the base rate For rented real estate in the Hi-Tech Park, the base rate is reduced by 50%

Real estate tax 1% of the real estate’s value Properties in the Hi-Tech Park are exempted

Offshore duty when dividends are paid to 15% Exemption founders/participants registered in an offshore zone

Personal income tax for employees 13% 9%

Compulsory state social insurance 35%, excluding the part of an employee’s income in 35%, excluding the part of an employee’s contributions of employees excess of five times the country’s average salary income in excess of the country’s average salary, by agreement with the employee

Mandatory sale of foreign currency 20% of hard-currency revenues Exemption

Benefits for Infopark members Investment agreement with the also provided, e.g. exemption from Republic of Belarus customs duties and VAT on imports of The members of Belarus’s Infopark equipment (as well as components and Science and Technology Association — An investment agreement is a special spare parts for such equipment) to be legal entities whose core activity is the type of contract concluded to provide used exclusively in Belarus for the development of information technolo- additional state support for invest- purposes of an investment project. gies, including software — are exempt- ment projects. Investment agreements ed from VAT on proceeds from sales of are concluded between a foreign or Investment agreements concluded by information technologies and services national investor and the Republic of decision of the Council of Ministers of involved in the development of such Belarus as represented by the Council the Republic of Belarus with the technologies. of Ministers of the Republic of Belarus permission of the President of Belarus or a republican government body. may provide additional incentives and benefits, even if these are not express- Other preferential regimes Investment agreements may be ly envisaged by law. Such incentives concluded only for projects in Belarus are provided individually on a case-by- In addition to the Hi-Tech Park regime, in areas (or industries) that have case basis. Belarus has a number of other priority investment status. Such areas 1 preferential regimes, including: are determined by the Council of Statistics show that around a half of Ministers of the Republic of Belarus all investment agreements are • Investment agreements with the and include, among others, telecom- terminated or fall behind schedule. If Republic of Belarus munications, computer programming, an investment agreement is terminated because the investor fails to meet • Business activities in medium-sized consulting on computer technologies, its contractual obligations, the and small towns and rural areas data processing, hosting services and related activities, etc. investor must pay compensation for • Free economic zones the benefits and/or preferences • The Great Stone China-Belarus During the term of an investment received as well as a penalty stipulated Industrial Park agreement, the investor is entitled by in the agreement. law to a number of benefits and preferences, most of them designed to Current information on these regimes create preferential conditions for and the preferences and benefits they construction. As a result, it has offer may be found in Doing Business become common in Belarus to in Belarus, a guide prepared by EY 1 Data of the National Agency for Investments conclude investment agreements for experts. and Privatization of the Republic of Belarus: http://www.investinbelarus.by/press/news/ construction and greenfield projects. f2e15a9a0e36f6ea.html Benefits of a more general nature are THE IT INDUSTRY IN BELARUS: Doing Business 68 2017 and Beyond

Overview of the legal and Overview of the tax system from VAT on sales of goods, work, services and property rights in Belarus regulatory environment IT companies doing business in (see table). Belarus may use either the general tax General business matters of rele- system that applies by default to all The simplified tax system may be used vance for IT companies organizations and involves payment of if a company has no more than 100 Any IT company doing business in corporate profit tax or the simplified employees and annual revenues of no Belarus must comply with the general tax system. more than BYN 1.5 million (approxi- requirements of the business laws of mately USD 800,000 in equivalent). Under the general tax system, a Belarus. The simplified system may not, company pays 18% corporate profit however, be used by Hi-Tech Park Current information on the key legal tax on the difference between its residents or by a commercial organiza- and tax aspects of business in Belarus revenues and costs, while under the tion when over 25% of its shares may be found in Doing Business in simplified system, instead of corporate (participatory interest) are owned by a Belarus, a guide prepared by EY profit tax, it pays tax on its revenues single organization or jointly owned by experts. at a rate of either 5% or 3%. When a several organizations. company pays 5% it is also exempt

Overview of the tax system

Key taxes and their standard rates General tax system Simplified tax system

Corporate profit tax/Tax under the simplified Corporate profit tax: 18% Tax under the simplified tax system: 5% (no tax system VAT paid) or 3% (VAT paid)

VAT on sales of goods, work, services and VAT: 20% VAT: 20% if the 3% rate is used property rights in the Republic of Belarus* VAT is not paid if the 5% rate is used

* The Republic of Belarus is not regarded as the place of sale, and VAT does not apply when property rights to intellectual property are sold to foreign customers.

VAT on goods imported into the Republic of VAT: 20% Belarus

Real estate tax 1% of the real estate’s value Real estate that does not exceed 1,000 square meters in area is tax-exempt. Otherwise, 1% of the real estate’s value.

Withholding tax on certain types of income 10% on interest paid to foreign organizations** 12% on dividends

15% on royalties

15% on other income in a list prescribed by law

** Lower rates or an exemption from withholding tax may apply under double tax treaties with the Republic of Belarus.

Personal income tax 13%

Compulsory state social insurance contribu- 35% tions of employees***

*** The monthly base used to calculate these contributions is limited to five times the average monthly salary in the country. 34% is paid by the employer, and 1% is withheld from the employee’s salary. 69

As a rule, tax returns are filed and Primary accounting document Time limits for cross- taxes paid on a month basis: returns border transactions are to be filed no later than the 20th Accounting law requires that a of the month following the reporting primary accounting document The law sets binding time limits for quarter, and tax is to be paid no later confirm each business transaction the completion of cross-border than the 22nd of the month following performed, including cross-border transactions: the reporting quarter. transactions. Such primary accounting documents must indicate: the docu- • in the case of imports, a transaction Tax audits are generally performed in ment’s title and date; the name (full must be completed within 60 accordance with a plan, and their name) of the parties to the transac- calendar days after prepayment is frequency depends on a company’s tion; the content and basis of the made, i.e. goods (protected risk group. Companies with a high transaction; its value in physical and information, exclusive rights to the level of risk may be audited once a money terms or in money terms; and results of intellectual activity) must year. Companies must not, however, the positions, full names and signa- be received or work or services be audited for a period of two years tures of the persons responsible for performed after their registration. No period of the transaction’s completion and/or • in the case of exports, a transaction limitation applies to tax collection in proper documentation. must be completed — i.e. money Belarus, so the tax authorities may from exports must be received — collect unpaid taxes and late payment As a rule, a primary accounting within 90 calendar days (120 interest regardless of how much time document should be prepared and calendar days in the case of has passed since the due date. signed by both parties: the client and commission agreements) after the the provider. A unilateral procedure is shipment of goods (protected possible if such a procedure is information, exclusive rights to the Foreign trade envisaged in a public agreement results of intellectual activity) or between the provider and the client. A the performance of work or In working with foreign clients and public agreement is concluded by a services customers, Belarusian IT companies commercial organization and estab- must observe a number of special lishes such organization’s obligations, Withholding tax upon legal requirements that may in including to perform work (services) import transactions practice create certain complications. that, by the nature of its activities, it must perform for any who request In the case of import transactions, them and on the same terms. Written form of an agreement withholding tax may be charged in Belarus on certain income of a An agreement with a nonresident must be Mandatory sale of foreign nonresident. Such income includes in written form; otherwise the foreign trade currency revenues royalties for the use of proprietary transaction will be invalid. Written form is observed when a single document is rights or the right to use proprietary Belarus IT companies (except for rights to copyrighted works (including prepared and signed by the parties or when Hi-Tech Park residents) are required to a written offer to enter into an agreement software) as well as licensing fees, sell 20% of their foreign currency is sent and accepted by means of implica- income from intermediary and tive (actual) actions to fulfill the terms of revenues from cross-border transac- advertising services, data processing the agreement (payment, performance of tions on the domestic currency services and web hosting, and income work or services, etc.). market. from web portals involving websites that use search engines to create and Settlement terms in an agreement maintain extensive databases of Internet addresses and content An agreement with a nonresident must formatted for easy searching, etc. indicate the terms of settlement, i.e. payment before or after the other party performs its obligations. THE IT INDUSTRY IN BELARUS: Doing Business 70 2017 and Beyond

Belarus IT companies are a source of Investments in the Investment law in Belarus does not such income and are considered as tax apply to the provision of loans or the agents and thus they are obliged to Republic of Belarus acquisition of securities other than calculate, withhold and pay 15% shares. withholding tax. Double tax treaties Under the laws of Belarus, invest- between the Republic of Belarus and ments are any assets or other subjects Many legal mechanisms that are foreign states (70 such agreements of civil rights that an investor owns or widely used in international practice have been signed as of today) may possesses on another legal basis allow- for mergers and acquisitions are not envisage benefits in the form of a ing it to dispose of them and that such envisaged by the laws of Belarus. For reduced rate of withholding tax or investor invests within the Republic of that reason, when sales of shares exemption from such tax. To qualify Belarus for the purpose of earning a (participatory interests) in Belarusian for these benefits, a company must profit (revenue) and/or achieving companies involve a foreign investor, provide the Belarusian tax authorities another significant result or for the transaction is often structured in a with a tax residency certificate issued purposes unrelated to personal, family, foreign jurisdiction under foreign law by foreign tax authorities. In practice, household or other such uses. (e.g. English law), which is more however, such a certificate may be flexible and adaptable than the laws of difficult to obtain from a non-resident. In the Republic of Belarus, investments Belarus. Foreign law allows a contract may be made in the following ways: for the sale of shares (participatory interests) to involve legal mechanisms Cross-border specifics of Belarus IT • creation of a commercial organiza- familiar to foreign investors, such as companies tion representations and warranties, In practice, it isn’t possible for a • acquisition and creation, including indemnities, escrow, etc., so that the company to meet these requirements construction, of immovable agreements between the parties can of Belarus law when working with property be enforced to their fullest legal extent. foreign game and app stores (Goo- • acquisition of intellectual property gle Play, App Store), social networks rights Many legal constructions typical of (Facebook) and advertising services • acquisition of equity, participatory foreign corporate law are not envis- (Google AdSense). Belarus IT compa- interests in authorized capital or aged in Belarus law and thus, for all nies that want to offer products to a shares in the assets of commercial practical purposes, cannot be used in broad range of consumers or other- organizations, including increases Belarus. Only in 2016, for example, wise commercialize their products in the authorized capital of such did the law explicitly permit agree- must work with foreign organizations organizations ments to be concluded between indirectly via intermediaries registered shareholders (participants) of a in foreign jurisdictions so that they can • concession-based projects company to regulate corporate conclude agreements in written form, • other means not prohibited by the relations, although not all company regularly prepare and sign primary laws of Belarus shareholders (participants) may be accounting documents, stay within the parties to such an agreement at the time limits for cross-border transac- Belarusian law guarantees that an same time, and the terms must be tions, etc. investor’s profits (revenue) and other consistent with the binding laws of lawfully obtained funds related to Belarus. In principle, Belarus law prohibits the investments in Belarus can be freely activities of so-called payment agents, transferred outside the Republic of In world practice, by comparison, who receive payment for goods (work, Belarus. This right may be exercised instruments such as option agree- services) sold by third parties. Such after payment of taxes, levies (duties) ments, put and call options, drag- activities may be carried out only by and other mandatory payments along and tag-along rights and banks, non-bank credit and financial stipulated by the laws of Belarus. convertible loans are commonly used institutions and certain state organiza- to give shareholders (participants) tions. Depending on the situation, convenient and rapid means of getting however, there are legal mechanisms into and out of companies and for reducing such risks. alienating shares (participatory interests). There are sometimes ways of dealing with such issues under the laws of Belarus, but by means of quasi-instruments that are not evident or transparent for investors. 71

It should be noted that Belarusian law Venture organizations qualify for an Depending on how goods are to be makes no provision for convertible exemption from corporate profit tax used in Belarus, a specific customs loans that would allow a loan provided on dividends from an innovation procedure must be applied, and this to a Belarus company to be converted organization and interest on money determines the conditions of customs into the company’s shares (participa- provided to finance venture projects, clearance. Goods released for domes- tory interest). Moreover, in some cases provided that the innovation organiza- tic consumption — the most common (e.g. an interest-free loan from a tion’s proceeds from sales of high-tech customs procedure — are regarded as foreign company), the permission of goods (work, services) or property being in free circulation in the customs authorized state agencies may be rights to intellectual property, calculat- territory of the EEU following payment required in order to provide/obtain a ed as a cumulative total from the of customs duty, VAT and customs loan. beginning of the year, make up at least clearance fees. 50% of its total revenue. Importation of goods by Nevertheless, there are currently no Venture financing Hi-Tech Park residents private venture organizations regis- Belarus law contains only isolated tered in Belarus. The Belarus Innova- Belarusian IT companies that are provisions concerning venture financ- tion Fund performs the functions of a residents of the Hi-Tech Park qualify ing, and as a result the concept of specialized state venture organization for an exemption from VAT and venture activity is not envisaged by law. in financing venture projects. customs duties on equipment and related components and/or spare In practice, high-risk innovation At the same time, a venture project is parts imported into Belarus. Decree projects that promise high returns in understood in law as an innovation No. 392 of the President of the the future are financed by companies project financed by a venture organi- Republic of Belarus of 30 August in the same way that other projects zation, which in turn is understood as 2012 “On Certain Tax Issues Affecting are financed: debt (bank and other a commercial organization whose Hi-Tech Park Residents” approved a loans) and equity financing (purchase activities consist of financing innova- list of equipment to which this of shares/ participatory interests) and tion. To obtain the status of a venture exemption applies. The list includes other means not prohibited by law. organization, a commercial organiza- portable and other computers, their tion must be registered as an innova- central processing units, data storage tion infrastructure organization. Such devices, etc. an organization is registered by the Importation of equipment State Science and Technology Commit- to the Republic of Belarus A conclusion by the Hi-Tech Park tee after it proposes a business project Administration on the purpose of with a duration of at least three years General provisions on goods imported by a resident serves and the project’s significance has been importation of equipment as the basis for an exemption. For evaluated. such a conclusion to be issued, the The Republic of Belarus, along with resident must document the need to The law mentions special-purpose Armenia, the Russian Federation, the import such goods as well as provide loans and the purchase of shares Republic of Kazakhstan and the Kyrgyz commercial and other documents. (participatory interests) as means of Republic, is a member of the Eurasian financing venture projects. Funds may Economic Union (EEU), which has a During the two years after their be provided without any pledge, unified customs territory. The EEU has release, imported goods to which this guarantee or other means of securing unified customs regulations and a exemption is applied may be used by obligations. No single venture project unified list of customs duty rates Hi-Tech Park residents for purposes may receive financing in excess of 50% applicable to goods imported into the other than those allowed for residents of the book value of the venture customs territory of the EEU from or transferred to legal entities or organization’s assets. A venture third countries. individuals for ownership, possession, organization may place its assets, use and/or disposal via civil transac- including funds, in asset management. Most goods imported into Belarus tions only if import duties and VAT are from outside the EEU are subject to paid to the customs authorities. import duties and VAT. Duty rates range from 0% to 80% of the customs value of goods. The basic 20% rate of VAT is charged on the sum of customs value and customs duty. THE IT INDUSTRY IN BELARUS: Doing Business 72 2017 and Beyond

Importation of goods under When such exemptions are used, Legal entities may appeal directly to an investment agreement restrictions on the use and/or disposal courts of general jurisdiction to defend of the imported goods apply until the their lawful rights and interests. Belarusian IT companies that conclude end of the investment project, but for Foreign legal entities have the same investment agreements with the no more than five years after such procedural rights and obligations as Republic of Belarus qualify for an goods are placed under the appropriate Belarusian legal entities. exemption from customs duties and customs procedure. If goods are used VAT on imported equipment and for purposes other than those designat- Disputes between business entities related components and spare parts to ed, import duties and VAT are paid may be heard by economic courts of be used only in Belarus under an (collected) in accordance with the law. the regions and the City of Minsk as investment project. well as the Supreme Court of the Republic of Belarus, but it is the The basis for such an exemption is a Supreme Court that is the court of first conclusion issued by the state body or Judicial system instance in cases involving exclusive executive committee that concluded rights to intellectual property. the investment agreement on behalf of the Republic of Belarus, confirming Court system that the imported goods are to be Belarus’s judicial system consists of Arbitration courts used exclusively under an investment the Constitutional Court of the project. Republic of Belarus and courts of In the Republic of Belarus, organiza- general jurisdiction. Courts of general tions outside the judicial system have jurisdiction include: also been created to resolve disputes: permanent arbitration courts as well • the Supreme Court of the Republic as ad hoc arbitration courts formed by of Belarus agreement of the parties to resolve a specific dispute. • regional (Minsk municipal) courts • district (Minsk) economic courts The best-known permanent arbitration court is the International Arbitration • district (municipal) courts Court of the Belarus Chamber of Commerce and Industry.

The Republic of Belarus has been a party to the UN Convention on Recognition and Enforcement of Foreign Arbitral Awards (10 June COURT SYSTEM 1958) since 1961. Under the Conven- tion, signatory countries are obligated to recognize and enforce foreign arbitration decisions on their territory. As of today, the Convention has over 150 signatory countries. COURTS CONSTITUTIONAL OF GENERAL Unlike the decisions of arbitration COURT courts, foreign court decisions are JURISDICTION recognized and enforced only if the Republic of Belarus has entered into an agreement to that effect with the state that seeks recognition and enforcement or on the basis of reciprocity.

SUPREME COURT Thus, if a court decision is to be enforced in a foreign state, it is recommended that the case be heard in an arbitration court, as its decisions will be recognized and enforced in most countries of the world. Regional District Regional (Minsk (municipal) (Minsk) municipal) courts economic courts courts 73

Commercial litigation Writ proceedings The courts typically recognize only written documents personally signed In writ proceedings, the court issues a by the parties and stamped in ink. In Mandatory claim procedure writ without summoning the parties or for settling disputes view of the high volume of information a court hearing. As a result, the sent via the Internet and posted in the Effective 31 January 2011, a claim- claimant may obtain satisfaction global network, the possibility of using ant, before filing suit in court, must within 20 business days. electronic information as written evidence is an important issue. Despite present a claim (a written proposal to The courts may issue writs only for the increased flow of electronic settle the dispute voluntarily) to the specific types of claims: claims for documents, however, documents sent potential respondent, unless otherwise money or property or levying of via the Internet are frequently not stipulated by contract. execution on the debtor’s property, recognized as evidence by the courts. The form and content of such a claim where such claims are incontestable must meet the requirements of the (based on documents verifying the debtor’s liabilities) or acknowledged laws of Belarus. The claim must be Protection of accompanied by copies of documents (uncontested) by the debtor, but have not possessed by the recipient, or not been satisfied, or claims for up to intellectual property excerpts therefrom, substantiating 100 times the base unit. and verifying the claim. To initiate writ proceedings, the Software copyright Within one month of receiving such a claimant files a petition giving the claim, unless otherwise stipulated by information prescribed by law and Software is protected by copyright in contract, the recipient must notify the attaches the appropriate documents. Belarus. A computer program is claimant in writing of the results of the automatically protected by copyright claim’s consideration. In practice, if no Extra-judicial alternative as soon as it is created, and no answer is received within this time, to writ proceedings formalities are required. there is nothing to prevent the Unless proved otherwise, the author of claimant from filing suit in court and In 2016, to optimize the workload of a computer program is the person using the claim as evidence that the the courts, legal entities were given indicated as such on the original recipient acknowledges (does not the ability to collect debts on an program or a copy. As additional proof contest) the claim for the purpose of incontestable basis without going to of copyright, a computer program may the writ proceedings. court. be registered at the author’s initiative This is done on the basis of a notary’s with the National Center of Intellectual Litigation writ of execution, which the claimant Property. The purpose of registration must request from the notary in is to provide the applicant (author or Economic courts of Belarusian regions writing. rights holder) with independent and the City of Minsk hear cases verification of his/her assertion that involving commercial disputes arising The main basis for obtaining such a he/she has created a computer out of civil, land, financial and other writ of execution for claims arising out program and holds the exclusive rights legal relations, cases arising out of of agreements is the debtor’s written to the program. administrative and other public law acknowledgment of the debt. Docu- relations, cases involving the determi- ments that can be used to verify such Copyright includes property rights nation of legally significant facts acknowledgment include the debtor’s (the right to use a program in any (juridical facts), and other cases response to a claim, acknowledging manner or form, the right to royalties) envisaged by law. the obligation to pay, an accepted and personal non-property rights demand for payment, a settlement (rights of attribution and name). Such suits must be filed in writing with reconciliation report signed by the Personal non-property rights are a court that hears commercial cases claimant and the debtor, etc. protected in perpetuity, while property and must be signed by the claimant or rights are protected during the life of the claimant’s representative. Evidence in support of claims the author and for 50 years thereafter. As a general rule, a case must be heard by the court of first instance The law requires a claimant filing suit within two months of its being listed in court to include evidence support- for trial. If we include the preliminary ing the claim. court hearing and the period until a Written evidence is of prime impor- decision enters into force, it takes at tance: documents signed by persons least three months for a claimant to authorized by the parties to an obtain satisfaction. agreement and verifying that an agreement has been concluded, work or services provided or rights assigned. THE IT INDUSTRY IN BELARUS: Doing Business 74 2017 and Beyond

The law provides cases of free use of Under an agreement assigning Under an agreement assigning software. E.g., a person in lawful exclusive rights, the author alienates exclusive rights, the legal entity that possession of a copy of a computer his/her exclusive rights to an already is the rights holder alienates its program may: created computer program in full and exclusive rights to a computer for the entire period covered by program in full and for the entire • make a copy of the program to be copyright. The author’s personal period covered by copyright. The archived or to replace a legally non-property rights are not trans- conclusion of an agreement assigning acquired copy ferred, and the terms of an agreement exclusive rights does not entail the • adjust the program, without transferring or limiting such rights are termination of licensing agreements changing the source code, for use invalid. previously concluded in respect of the on the user’s computer program. A copyright agreement is a licensing • modify the program if it was agreement concluded directly with the Under a licensing agreement, the provided with an open source code developer of an already created rights holder (licensor) permits the and/or if such person was autho- computer program. Only an individual user (licensee) to use a computer rized to modify it developer may be the licensor under program in ways directly stipulated by • record and store the program in such an agreement. If an agreement’s the agreement. computer memory territorial scope is not specified, its scope is limited to the Republic of A licensing agreement for a computer Belarus. If the duration of an agree- program may be concluded by means of an adhesion contract the terms of Contractual relations with ment is not specified, it may be terminated by the developer three which are set forth on the acquired developers years after its conclusion. copy of the program or the copy’s packaging or included with the copy. In practice, software developers often Under an agreement on the creation The licensee consents to enter into create software to a client’s specifica- and use of an item protected by such an agreement by starting to use tions. How relations are legally copyright, the author undertakes to the computer program. structured in such cases depends on create a computer program in the whether the developers are individuals future and to grant the right to use it Note that the laws of Belarus do not or legal entities. to a customer who is not the author’s allow rights to use intellectual proper- employer. Such agreements may be ty to be provided without compensa- concluded only with individuals and tion in relations between commercial Contractual relations with must not contain the following terms organizations. A licensing agreement authors (individual developers) (which would be invalid): that does not envisage compensation for rights to use a computer program An individual developer (author) may • terms transferring or limiting the will be invalid. conclude the following types of author’s personal non-property agreement: rights As already mentioned, an agreement on the creation and use of an item • employment agreements • terms limiting the author’s ability to protected by copyright may be create works of a specific kind or in concluded only with an individual • agreements assigning exclusive a specific area in the future rights developer. Neither the laws of Belarus • terms requiring the author to grant nor judicial practice give any direct • copyright agreements the customer exclusive rights to indication as to what sort of agree- • agreements on the creation and use any computer programs that the ment should be used when a software of items protected by copyright author will create in the future developer is a legal entity. In this situation, a mixed agreement should An employment agreement between be used. an employer and an employee Contractual relations with regulates the employee’s (author’s) developers that are legal entities creation of a computer program as a piece of work made to order upon the The following agreements may be employer’s instruction or as part of used to formalize contractual relations the employee’s obligations under the with software developers that are legal employment agreement. In this case, entities: exclusive rights to a computer program created by the employee pass • agreements assigning exclusive to the employer, unless the employ- rights ment contract stipulates otherwise. If • licensing agreements the employer does not begin using the program within five years and does • mixed agreements not assign exclusive rights to the program, the exclusive rights pass back to the author, unless the employment contract stipulates otherwise. 75

Contractual relations with authors (individual developers)

Type of agreement Extent of rights Terms/conclusion procedure Term Special provisions

Employment Exclusive rights to Concluded between an employer If the employer does not begin using agreement a computer and an employee; regulates the the program within five years and program created employee’s (author’s) creation of does not assign exclusive rights to the by the employee a computer program as a piece of program, the exclusive rights pass pass to the work made to order upon the back to the author, unless the employer, unless employer’s instruction or as part employment contract stipulates the employment of the employee’s obligations otherwise contract stipulates under the employment agreement otherwise

Agreements Full exclusive The entire The conclusion of an agreement does assigning rights to a period covered not entail the termination of licensing exclusive rights computer by copyright agreements previously concluded in program respect of the program

Copyright Stipulated in the A licensing agreement concluded Stipulated in the Only an individual developer may be agreement agreement directly with the developer of an agreement, If an the licensor under such an agree- already created computer agreement’s ment. program duration is not specified, it may If an agreement’s territorial scope is be terminated not specified, its scope is limited to by the develop- the Republic of Belarus er three years after its conclusion

Agreements on Right to use a The author undertakes to create a Stipulated in the Such agreements may be concluded the creation and program computer program in the future agreement only with individuals and must not use of items and to grant the right to use it to contain the following terms (which protected by a customer who is not the would be invalid): copyright author’s employer • terms transferring or limiting the author’s personal non-property rights • terms limiting the author’s ability to create works of a specific kind or in a specific area in the future • terms requiring the author to grant the customer exclusive rights to any computer programs that the author will create in the future

Contractual relations with developers that are legal entities

Type of agreement Extent of rights Terms/conclusion procedure Term Special provisions

Agreement Full exclusive The entire The conclusion of an agreement does assigning rights to a period covered not entail the termination of licensing exclusive rights computer by copyright agreements previously concluded in program respect of the program

Licensing Use of a computer A licensing agreement for a The laws of Belarus do not allow agreement program in ways computer program may be rights to use intellectual property to directly stipulated concluded by means of an be provided without compensation in in the agreement adhesion contract the terms of relations between commercial which are set forth on the organizations. A licensing agreement acquired copy of the program or that does not envisage compensation the copy’s packaging or included for rights to use a computer program with the copy. The licensee will be invalid consents to enter into such an agreement by starting to use the computer program

Mixed agreement In cases when the software developer is a legal entity THE IT INDUSTRY IN BELARUS: IT сompanies 76 2017 and Beyond

IT СOMPANIES 77

Overview 78 Branches and Certification 90 representative offices 86 Business lines, Personnel 90 types of service 79 Map of sectoral English language skills 93 industry competencies 86 2020 HTP growth Business environment 93 prospects 80 Drivers of competitive performance 88 Raising finance 96 Customers 82 Development priorities 89 Sources 96 Sales geography 84 Partnerships with technological companies 89 THE IT INDUSTRY IN BELARUS: IT сompanies 78 2017 and Beyond

Overview Originally, it was planned that the products, such as Apalon, Vizor, main activities of the newly estab- Targetprocess, etc. lished HTP would include outsourced According to our estimates, more than development and the provision of IT Belarus still lacks a legal framework 115,000 ICT specialists work in the services based on the offshore for venture financing, so startups Belarusian IT and other sectors. Of model — and these remain prevalent. either receive support from their those, more than 34,000 specialists Major residents such as EPAM founders or seek finance outside the work in IT products and services, with Systems, IBA, Itransition, ISsoft, country. There have been several over 30,000 employed by Hi-Tech Park iTechArt, Exadel, SaM Solutions, significant M&A deals with Belar- residents, responsible for over 85% of ScienceSoft, etc. established their us-based startups over the last four computer services exports from the presence here with those aims in view years, e.g. Viber, Maps.me, MSQRD, Republic of Belarus. The IT industry’s and still pursue them. They offer a and Juno. Successful Belarusian rapid growth over the last ten years wide range of services, from providing startups are usually taken over by has been driven by the availability of individual developers or quality foreign companies but carry on with talent, state support measures and an assurance engineers to assigning a their development projects in Belarus, export-oriented strategy. whole team of hundreds of experts to thus becoming their captive centers. develop complex digital solutions. This section of the report provides The Republic of Belarus is becoming a Most companies are registered and are detailed information on HTP residents, popular destination for major interna- growing in Belarus, but have many since they are the most prominent tional companies to open captive representative offices on the key examples of the Belarusian IT industry. centers or global in-house centers markets: USA, EU, UK, etc. EPAM Our analysis was based on statistical (GIC). Some of them are already Systems is a perfect example: in 1993, information provided by the HTP benefiting from the strong skills and the company started developing Administration and EY’s questionnaire relatively low labor costs, as well as customized software in Belarus and surveying 42 of the 165 companies from the favorable operating regime currently employs more than 20,000 existing at that moment, covering 70% offered by the Hi-Tech Park. The best people in 25 countries, including more of total employment by HTP residents. known captive centers include than 8,000 in Belarus. Playtika, IHS Markit, Netcracker, Viber, Hi-Tech Park residents are classified as Yandex, Fitbit, Ciklum and SK Hynix. follows: Customized software was initially developed by companies established Among the HTP residents, the most to satisfy internal demand in Belarus, • Companies specializing in providing common are small companies with up such as IBA, SoftClub, System Technol- IT services to 100 employees, accounting for ogies, and BelHard. The upswing in the • Companies specializing in develop- 72.8% of the total businesses. At the mobile and gaming segments, e.g. ing and supporting proprietary same time, more than 50% of all HTP Game Stream (Wargaming), Viaden products (including startups) staff are employed in major companies Media, etc., gave Belarusian develop- whose headcount exceeds 500. • Captive centers or representative ers a strong impetus and, as of now, offices of foreign IT companies there are many Belarusian companies successfully developing proprietary

Breakdown of HTP companies by headcount, 2016

Headcount <10 11-50 51-100 101-500 501-1,000 >1,000

Number of companies 6.2% 40.1% 26.5% 23.5% 1.2% 2.5%

Total headcount 0.3% 7.2% 11.7% 29.7% 4.6% 46.5%

Source: [1] — Information provided by the Hi-Tech Park Administration

This demonstrates two major develop- More than half of the surveyed • Companies residing in Belarus and ment trends at the HTP: on the one companies (59%) are headquartered operating through their representa- hand, the sector is growing due to the in Belarus, while the other 41% have tive offices located abroad emergence of multiple small businesses only a development center. • Companies residing outside Belarus that are able to develop and promote There are several types of HTP but whose development center is unique solutions, products and services, located in Belarus and quickly and easily adapt to market residents, classified according to the requirements. On the other hand, the structure of their operations: • Companies established or pur- sector relies on core companies that chased to operate as development • Companies residing in and operat- train specialists, cooperate with centers ing from Belarus universities, annually increase staffing levels, and create an international image for the Belarusian IT industry. 79

In all cases except the first, which is strated by the share of salary in the • Higher competition for qualified IT typical of small business, companies companies’ revenue. professionals due to the explosive neither sign contracts nor sell services growth of the IT industry or products to foreign clients from the Salary is the most significant expense item. In 2016, its share exceeded 73% • The emergence of multiple develop- territory of Belarus, but use their ers whose earnings exceed those of foreign representative offices for these of revenue, demonstrating steady growth driven by the annual average service companies and who are purposes. Therefore, there is no ready to offer a higher salary purpose in analyzing the profit or growth of salaries across the sector. financial performance of Belarusian The salary growth results from residents, since they do not reflect the the following: economic reality. This is best demon-

HTP residents revenue and salary

Year 2009 2010 2011 2012 2013 2014 2015 2016

Revenue, USD million 144.7 196.8 254.5 372.9 527.7 667. 3 773.1 904.4

Headcount 7,259 9,421 11,766 14,492 18,038 20,995 24,037 27, 342

Average monthly salary, USD 1,073 1,183 1,633 1,431 1,674 1,875 1,927 2,012

Total salary, USD million 93.5 133.7 230.6 248.9 362.3 472.3 555.8 660.1

Salary as a percentage of revenue 65% 68% 91% 67% 69% 71% 72% 73%

HTP revenue Total salary Salary as a percentage of revenue 73% 72% 1,000 904.4 71% 900 91% 773.1 660.1 800 667. 3 69% 700 68% 65% 67% 555.8 600 527.7 472.3 500 372.9 362.3 400 254.5 230.6 248.9 300 196.8 144.7 133.7 200 93.5 100

0 2009 2010 2011 2012 2013 2014 2015 2016

Source: [1] — Information provided by the Hi-Tech Park Administration

Business lines, the government when planning IT Many sector experts emphasize the support initiatives. However, business significance of promoting and support- types of service is steadily moving from basic models ing those companies that develop and of IT services outsourcing to more market proprietary products, and More than half of the respondents mature and complicated forms. expect that this will be reflected in (69%) noted that IT services outsourc- Therefore, 67% of companies are new legislative initiatives in the IT ing is their prevailing business line. In engaged in the development of industry. particular, the service model is the customized technical solutions, 52% most common across the HTP, develop customized products, and 43% because software development was develop customized industry solutions. the key activity taken into account by THE IT INDUSTRY IN BELARUS: IT сompanies 80 2017 and Beyond

Business lines of HTP residents

Outsourcing of services 69%

Development of customized technology solutions 67%

Development of customized products 52% Development and support of products for internal needs (development center) 48% Development and support of proprietary products for enterprises 43% Development of customized industry solutions 43% Development and support of mass market products 40% Integration and implementation of software (based on external platforms and products) 38% Outsourcing of personnel (dedicated teams) 38%

Advisory services 33% Provision of IT services for internal needs of the Parent (captive center, shared service center) 26% Development and support of hardware and software products 24% Sale of software licenses 21% R&D, scientific research 19% Outsourcing of information security services 12% Game development 12% Development of information security products 10% Educational services 7% Outsourcing of business processes 7% Customized hardware development 7% Integration and implementation of IT infrastructure (data center, computing machinery, networks) 5%

Source: [2] — Results of EY’s survey among Hi-Tech Park residents

Service-based companies are now impact on the IT segment in Belarus. tive advantages offered by the special starting to develop and support their Later, the rapid growth of the mobile HTP regime and the global growth of own products. According to the survey games market was a key factor behind the IT products and services segment, results, 48% of respondents stated the popularity of game development which helps Belarusian companies to that they develop products and as a whole, particularly in small easily find new clients abroad. provide related support services for companies, resulting in the emergence internal needs, 43% develop propri- of companies such as Melsoft, Vizor The number of HTP employees is etary products for enterprises, and Games, Playtika, etc. growing from year to year and, despite 40% develop products for the mass a relative slowdown, their number has market. doubled over the last five years. According to industry experts, most We should separately mention the role 2020 HTP growth prospects HTP residents demonstrate organic and the progress of the game develop- growth of 15%-20%. ment segment in the Republic of Belar- In the near term, we expect to see an us. The oldest companies in this improvement in HTP residents’ According to the survey, almost half of segment include Game Stream performance, including revenues, the surveyed IT companies expect (Wargaming) and Viaden Media. The headcount, and average salaries. headcount to increase by 25%-50% by success of Wargaming had a strong Major growth factors include competi- 2019. 81

HTP residents headcount Headcount

30,000 27, 342 24,037

25,000 20,995 20,000 18,038

14,492 15,000 11,766 9,421 10,000 7,259 6,202 4,537 5,000 2,506

0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: [1] — Information provided by the Hi-Tech Park Administration

How do you expect your company headcount to change by 2019?

>50% 14%

Increase 25-50% 38%

15-25% 24%

+ 5-15% 12% No notable ±5% change 8% - 5-15% 2%

15-25% 0%

Decrease 25-50% 0%

>50% 2%

Source: [2] — Results of EY’s survey among Hi-Tech Park residents

HTP development forecast up to 2020

Year 2017 2018 2019 2020

HTP revenue, USD million 1,063 1,206 1,335 1,445 Accelerated development Headcount 30,896 34,295 37, 382 39,998

HTP revenue, USD million 1,029 1,136 1,226 1,288 Normal development Headcount 30,076 32,633 34,764 36,260

Average monthly salary, USD 2,117 2,219 2,322 2,424

Source: EY analysis THE IT INDUSTRY IN BELARUS: IT сompanies 82 2017 and Beyond

Total revenue of HTP residents, as Therefore, we suggest two possible Many of the world’s biggest companies shown above, depends primarily on development scenarios for the HTP up have already had dealings with the headcount and salary. Since 2010, to 2020. Belarusian IT sector. According to our salaries have demonstrated an average survey, more than 30% of the Fortune annual growth rate of 9.3%. The Currently, there are draft laws under Global 200 companies have worked constant growth in salary is expected consideration that seek to extend the with HTP residents. The most trending to persist in the coming years. special legal regime for the HTP, customers are Facebook, Microsoft, providing for additional government Northrop Grumman, PepsiCo, Whirl- The forecast of HTP headcount is support measures to develop the pool, 3M, Amazon.com, Cisco Sys- based on business and educational product model and help HTP residents tems, HP, Oracle, Xerox, Disney, Intel, expectations (see the Education expand the scope of their business. If Apple and IBM, which have worked section for our forecast of graduates). the initiatives are approved, the IT with several companies from Belarus. Considering the headcount growth industry is likely to see faster growth slowdown and decreasing number of following the “accelerated develop- In most cases, HTP residents provide graduates, and provided that current ment” scenario. services to banks and the financial trends persist, we can suggest two market (55% of respondents), tele- possible scenarios of HTP headcount communication companies (50%) and evolution: Customers technological companies (48%). On the one hand, these sectors are • “Normal development” — If no technologically sophisticated and are additional state support initiatives The Belarusian IT industry is oriented expected to be among the key clients, are taken, the growth will slow and towards the B2B market, targeting but, on the other hand, low penetra- current conditions will persist other sectors rather than technologi- tion in other sectors may indicate a cal companies. At the dawn of the IT • “Accelerated development” — If lack of industry expertise and an industry, in the early 2000s, most measures to maintain growth, the incomplete service offering. Belarusian companies worked to necessary governmental decisions orders from other technological for IT education and the IT sector companies. However, the emergence are taken, and assuming further of in-house expertise helped compa- promotion of the IT industry nies to find their own clients and markets.

Most sought types of customer for HTP residents

Other sector companies 77%

Other IT or technology companies 69%

Startups 31%

Individuals 16%

Government bodies 14%

Source: [2] — Results of EY’s survey among Hi-Tech Park residents 83

Distribution of customers by sector

Banks and financial markets 55% Telecommunication companies 50% Technological companies 48% Automotive companies 48% Education 45% Logistic companies 43% Media and entertainment 43% Health care 43% Insurance 40% Industrial commodities 38% Retail and wholesale companies 36% Consumer products 36% Services and products for individuals 33% Transport companies 31% Professional service providers 29% Energy and utility companies 29% Biomedical sector 29% State and public organizations 29% Real estate and construction, hotels and health resorts 26% Oil and gas 21% Mineral and metals 17% Chemicals and petrochemicals 17% Airlines 5% Aerospace and defense 5%

Source: [2] — Results of EY’s survey among Hi-Tech Park residents

Due to the fact that most Belarusian IT risks. Most respondents (63%) seek appealing for those few companies companies run small and medium small projects (10-30 team members) whose staff exceed 500 employees. businesses (fewer than 500 employ- while larger projects (more than 50 Similarly, Belarusian IT companies are ees), strong dependence on individual team members) are less common, targeting medium businesses with major clients and projects exposes which can be explained by the 250 - 1,000 employees. their operations to certain business headcount gap — big projects are

Most sought project team size for HTP residents

1-5 65% 5-10 84% 10-30 79% 30-50 62% 50-100 43% 100-250 24% 250-500 20% 500 and above 16%

Source: [2] — Results of EY’s survey among Hi-Tech Park residents THE IT INDUSTRY IN BELARUS: IT сompanies 84 2017 and Beyond

Most sought client company size (headcount) for HTP residents

Up to 15 employees 35%

From 15 to 50 employees 56%

From 50 to 250 employees 72%

From 250 to 1,000 employees 86%

From 1,000 to 5,000 employees 76%

From 5,000 to 10,000 employees 60%

From 10,000 to 50,000 employees 54%

Over 50,000 employees 50%

Source: [2] — Results of EY’s survey among Hi-Tech Park residents

Sales geography USD 353.7 million, or 43% of the total, phy depends on regional penetration while exports to Western Europe are and arrangements usually made distributed among a number of through the country closest to the Despite bigger export volumes to countries, with the largest being the customer. We should also note recent Western Europe (49%), the USA is the UK and Germany. The Russian growth in exports to the EU, from 25% most popular HTP export destination: Federation ranks fourth, with about 5% in 2007 to 49% in 2016. in 2016, exports to the USA totaled of total exports. The exports geogra-

Sales markets: geographic structure and trends

Europe, excl. CIS North America CIS Other regions

100% 4.56% 5.29% 4.72% 3.95% 3.95% 2.71% 1.91% 1.96% 2.39% 2.28%

17.96% 13.72% 13.49% 14.47% 14.40% 10.74% 5.34% 20.09% 23.45% 31.16% 75%

45.00% 40.14% 40.22% 43.24% 46.17% 47.21% 39.89% 50.05% 32.75% 41.46% 50%

49.14% 25% 43.73% 43.50% 46.65% 35.12% 38.80% 25.30% 30.80% 30.37% 31.92%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: [1] — Information provided by the Hi-Tech Park Administration 85

Sales by country, USD million

Country 2016 Share, % Country 2016 Share, %

USA 353.7 43.1 FINLAND 10.1 1.2

UK 63.9 7.8 CZECH REPUBLIC 9.1 1.1

GERMANY 41.4 5.0 ISRAEL 7.6 0.9

RUSSIA 41.3 5.0 SOUTH KOREA 6.6 0.8

IRELAND 25.4 3.1 LATVIA 6.0 0.7

NETHERLANDS 17.1 2.1 SWEDEN 5.2 0.6

LUXEMBOURG 12.6 1.5 AUSTRIA 4.0 0.5

SWITZERLAND 11.5 1.4

USA 43%

UK 8%

Germany 5%

Russia 5%

Ireland 3%

Other 36%

0% 10% 20% 30% 40% 50%

Source: [1] — Information provided by the Hi-Tech Park Administration

Most respondents (51%) have revenue has been sliding, down to just IT development prospects are associ- indicated that the size of the domestic 9.3% in 2016. Therefore, the domestic ated with North America and the EU, market is the least important factor market’s impact on the sector perfor- which is to be expected, since these for IT companies. Even though mance was assessed as negative regions serve as major markets for domestic sales are on the rise and (38%). A larger domestic market Belarusian IT companies and their domestic revenue doubled compared would contribute to the growth and economic growth significantly affects with 2012, reaching USD 83.8 million, development of the Belarusian IT trends in the Belarusian IT industry. the share of domestic sales in total industry.

Importance of the domestic market for HTP residents’ performance

Size of the domestic Impact Importance market

Negative Positive High Moderate Low

38% 8% 16% 33% 51%

Source: [2] — Results of EY’s survey among Hi-Tech Park residents THE IT INDUSTRY IN BELARUS: IT сompanies 86 2017 and Beyond

Effect of market changes on the development prospects of the Belarusian IT industry

Importance

Changes in the regional Changes in the regional Changes in the regional economy — economy — CIS economy — EU North America

Low Low

High Moderate Low High Moderate High Moderate

40% 34% 26% 67% 30% 3% 78% 22% 0%

Source: [2] — Results of EY’s survey among Hi-Tech Park residents

Branches and there. The UK, Germany and Russia Federation. Many industry experts are popular destinations for establish- believe that moving beyond the representative offices ing representative offices. The intent domestic market results from high to be closer to the key markets is competition for qualified IT profession- The geography of representative logical both in terms of sales and als and from the need to diversify the offices mirrors the main sales and contracting performance, as well as in network to reduce risks. export trends. HTP companies are terms of understanding the local legal best represented in the USA — 24% of framework. The majority of Belarusian companies respondents have their main offices are located in the capital (89.2%) and located in the USA, 7% have develop- The most popular destinations for regional centers. Only seven offices of ment centers, 19% have representative development centers are Belarus’s the respondents are located in smaller offices, 2% have partner companies neighbors — 14% of respondents have towns, with a 0.2% share of total and 12% have commercial agents development centers in Ukraine, 10% employment. in Poland, and 7% in the Russian

Geography of HTP representative offices Offices and staff in the Republic of Belarus Main office Development center Representative office Partner company Commercial agent

USA Minsk 16,915 Russia Gomel 1,075 Germany Grodno UK 368 Ukraine Brest 218 Canada Vitebsk 176 Poland Mogilev 172 Czech Republic Others Cyprus 46 Israel Other countries Source: [2] — Results of EY’s survey Source: [2] — Results of EY’s survey among Hi-Tech Park residents among Hi-Tech Park residents

Map of sectoral expertise being primarily focused on (e.g. mobile and web design), as well these segments. We should also note as specialized products such as industry competencies analytical systems, development financial management, analytics and support systems, project management payment systems. We have compiled a map of Belarusian systems, e-commerce and CRM IT competencies based on analysis of systems. We should also mention technological the sectors and solutions. companies and related development The most prominent sector is banking competencies, e.g. software develop- The analysis of solutions shows that and financial markets, with the highest ment tools and processes and project the industry is dominated by mobile level of competence concentrated on management tools. and web design, with the Belarusian IT the development of universal solutions 87

Map of sectoral competencies of HTP companies

132 86 82 138 78 39 ERP Hardware IoT Video/audio Machine Gamification engineering processing learning

209 195 221 300 165 254 175 Transport Automotive Industrial Technological Oil Education Media and companies companies commodities companies and gas entertainment

288 262 228 368 350 291 Project Analytics, CRM Mobile Web Software development management tools DWH, BI & Intranet tools and processes

158 184 259 399 171 245 251 Energy and utility Retail and wholesale Logistics Banks and Insurance Healthcare Telecommunication companies companies companies financial markets companies

126 162 186 114 68 194 IT service Finance e-commerce Payments, Risk Private management management digital money management cloud

Solutions Sectors Source: [2] — Results of EY’s survey among Hi-Tech Park residents THE IT INDUSTRY IN BELARUS: IT сompanies 88 2017 and Beyond

Based on analysis of new technologies, Popularity of new technologies among Belarusian HTP companies internet of things (40%), machine learning (29%) and gamification (19%) IoT 40% are the most common competencies for Belarusian companies. AI — Machine learning 29% Gamification 19% AI — Expert systems 17% Drivers of competitive Chatbots 12% performance AI — Robotics 12% Drones 10% The respondents identified and Blockchain 10% prioritized factors that help Belarusian AR/VR 10% IT companies compete on the international IT outsourcing market. The most AI — Vision 10% common drivers are measurable factors AI — NLP 10% that help clients to assess commercial 3D printing 7% proposals. The survey results show that Autonomous vehicles 5% while the number of successful projects is the most important factor (62%), RPA 5% priority is still given to expertise in the AI — Speech 5% most sought-after competencies (60%). Then come customer references and Source: [2] — Results of EY’s survey among Hi-Tech Park residents expertise in new technologies (45%).

What competitive advantages help HIGH IMPORTANCE LOW IMPORTANCE differentiate your company?

Project implementation experience 7% 14% 26% 10% 5% Expertise in competencies highly 29% 2% 5% 12% 12% demanded in the market Client 7% 12% 10% 7% 10% recommendations Expertise in emerging 2% 17% 5% 14% 7% technologies Flexibility and speed of management 5% 12% 5% 10% 5% and organizational decision-making Organization of internal 5% 2% 2% 12% 5% processes Unique services 2% 5% 5% 2% 10% and products Company brand 5% 5% 2% 2% 10% and image Existence of representative 7% 2% 2% 2% 10% offices close to customers abroad Effective recruitment processes 2% 7% 2% 0% 5% Automation of resource/ 2% 2% 5% 5% 0% project/planning management Growth dynamics and 2% 2% 5% 2% 2% potential

Substantial investment 10% 0% 0% 0% 2% in professional training Level of salaries and 0% 2% 2% 7% 0% compensations Personnel motivation 0% 0% 7% 2% 0% system Substantial investment in English 5% 0% 0% 0% 2% language training for employees Pre-sale 0% 0% 2% 2% 0% preparation

Source: [2] — Results of EY’s survey among Hi-Tech Park residents 0% 10% 20% 30% 40% 50% 60% 70% 89

Development priorities abroad. Therefore, the most important (38%) — are major functions of development priority — attraction of development centers. Business-related new customers (52%) — is typical of issues such as the development of new Key development priorities stem from outsourcing companies, while the next business lines and raising investment, the company’ business profile and two — the improvement of software as well as the transition from out- from the fact that most companies, development technologies and sourcing to the product model, including those outsourcing IT processes (43%) and development of appeared to be the least popular services, operate as development new technological competencies answers. centers with their sales offices located

What are the current development HIGH IMPORTANCE LOW IMPORTANCE priorities for your company?

Attraction of new 52% 19% 10% 0% 0% clients Improvement of software development 43% 31% 12% 5% 2% technologies and processes Development of new technology 38% 40% 10% 2% 0% competencies Human resources 29% 40% 12% 2% 0% and education Promotion of sales 21% 33% 14% 5% 10% abroad Development of new sectoral 17% 21% 31% 10% 2% competencies Development and creation 14% 31% 21% 5% 14% of new products Transition from outsourcing 12% 12% 19% 19% 19% to producing model Attraction of 5% 7% 12% 24% 29% investments Development of new 0% 24% 26% 10% 10% business lines

Source: [2] — Results of EY’s survey among Hi-Tech Park residents 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Partnerships with status. Partnership relations are of Microsoft and Oracle development driven by the demand for technologies tools. Partnerships with companies technological companies and solutions, in particular by the offering infrastructure solutions (HPE, popularity of Microsoft, Oracle, Siemens, Cisco) are far less popular, Partnership with Microsoft enjoys the Salesforce and SAP ERP/CRM solu- since such services are outside HTP highest demand, with 38% of respon- tions, Microsoft, Google and Amazon residents’ portfolios. dents having Gold or Silver partner cloud solutions, and by the popularity

Partnerships with technological companies

Microsoft 38% Oracle 17% Salesforce 10% Google 10% SAP 10% Amazon 10% 1С 7% Apple 7% IBM 7% Cisco 5% Siemens 2% HPE 2% Other 19%

Source: [2] — Results of EY’s survey among Hi-Tech Park residents THE IT INDUSTRY IN BELARUS: IT сompanies 90 2017 and Beyond

Certification have passed the most widespread ISO tenders would hardly ever have a 9001 certification and 12% have certification requirement, so it gives passed ISO 27001 certification. Most no competitive advantages and is Certification or standardization of companies are not certified and do not sought only by large companies from processes are not top priority for HTP have any certification plans. According time to time. residents. Only 29% of respondents to sector experts, procurements or

Standards for process certification, used in the companies Certified Planned

29% ISO 9001 14% 12% ISO 27001 10% 5% CMMI 5% 2% ISO 20000 2% 2% OHSAS 18001 0% 2% ISO 14001 0% 0% PCI DSS 2%

Source: [2] — Results of EY’s survey among Hi-Tech Park residents

Personnel respondents note that qualitative and on the sector, while the number of quantitative indicators of the educa- students produces a negative effect. tional system are of high priority for According to the respondents, the the sector, while the sophistication and In general, companies expect the most important factor in education is cost of education are less but not the number of graduates, their compe- the level of technical competence least important. At the same time, tences and the relevance of their (64% of companies accord a high respondents believe that the quality of knowledge to improve in the near priority to this issue). In general, the education produces a positive effect future.

Impact of education system on IT industry

Factor Impact Importance

Cost of education Negative Positive High Moderate Low

6% 20% 23% 54% 23%

Effort required to Negative Positive receive education High Moderate Low

15% 12% 23% 60% 17%

Source: [2] — Results of EY’s survey of Hi-Tech Park residents 91

Impact of education on IT industry

Factor Impact Importance

Number of students at Negative Positive technical faculties of High Moderate Low higher education establishments

17% 29% 51% 40% 9%

Technical competence of Negative Positive graduates High Moderate Low

31% 25% 75% 19% 6%

Source: [2] — Results of EY’s survey of Hi-Tech Park residents

Impact of education system on development prospects for the IT industry

Expectations

Qualitative indicators of education Quantitative indicators of education (quality and relevance of knowledge) (number of graduates)

Will improve Will stay the same Will change for the worse Will improve Will stay the same Will change for the worse

37% 37% 26% 39% 50% 11%

Source: [2] — Results of EY’s survey among Hi-Tech Park residents

IT companies interact with educational the surveyed IT companies (67%) offer courses, and 31% send staff to lecture institutions to improve competencies internship or trainee jobs for students, at universities. of their potential employees. Most of 43% organize in-house training

Recruitment and training of new hires

Internship or trainee jobs for students 67%

In-house training courses 43%

Lectures at universities 31%

University laboratories 26%

None 17%

In-house educational center 12%

Other 7%

Source: [2] — Results of EY’s survey among Hi-Tech Park residents THE IT INDUSTRY IN BELARUS: IT сompanies 92 2017 and Beyond

Companies invest in their personnel. Professional development initiatives Most respondents pursue professional development of their current person- Conferences / workshops to exchange skills 71% nel by sending them to conferences/ workshops (71%) and by organizing In-house educational courses 62% in-house educational courses (62%). Only 7% of the respondents do nothing Centers of technological competencies 12% in this respect. Centers of sectoral competencies 12% If we range various HR challenges by degree of complexity, finding qualified Research laboratories 12% experts comes first, followed by associated recruiting and hiring costs None 7% and conformity of graduates’ qualifications to the company’s requirements. Other 5% Knowledge of foreign languages is another issue, although less promi- Source: [2] — Results of EY’s survey among nent. Job hopping between Belarusian Hi-Tech Park residents companies appears to be more common than international emigration (“brain drain”).

IT human BIGGEST CONCERNS NO CONCERNS capital factors

Finding qualified experts Recruiting and hiring costs Conformity of graduates’ qualifications to the company’s requirements Proficiency in foreign languages Labor migration between Belarusian companies Staff turnover Organization of knowledge and skill sharing processes Motivation for development and professional growth “Brain drain” Access to information about job seekers on job search websites Filling vacancies with entry-level staff Maximum utilization of labor forces

Source: [2] — Results of EY’s survey among Hi-Tech Park residents 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

There are different approaches Organizational structure of IT companies towards the organization of companies’ internal structure. For example, We have administrative subdivisions (HR, accounting department, etc.) 74% 26% of companies do not have separate administrative subdivisions We have separate production subdivisions 48% (HR, accounting department, etc.) and depending on product/ solution more than 50% of the companies do We have separate production subdivisions not establish separate departments by depending on applied technologies 45% technology, product or solution. We form dedicated project teams and have no separate production subdivisions 38%

We have separate production subdivisions depending on sectoral expertise 17%

We have no separate subdivisions 2%

Source: [2] — Results of EY’s survey among Hi-Tech Park residents 93

English language skills Initiatives to improve proficiency in foreign languages

External specialists 60% Special attention in the IT industry is paid to improving English language Partial compensation for training costs 40% skills. Less than half (48%) of the respondents stated that most of their Training by in-house specialists 36% employees have a good command of foreign languages. Specialized courses 21% IT companies are working hard to In-house online courses and training 19% improve their staff’s proficiency in foreign languages. Most respondents None 7% (60%) engage external teachers, while 40% provide partial compensation for Other 7% training costs. In addition, IT companies organize online training or send Source: [2] — Results of EY’s survey their employees on specialized and among Hi-Tech Park residents in-house training courses.

Business environment influential factors are current tax Factors such as frequent legislative legislation and communication with amendments, inspections by the the HTP Administration. More than regulatory authorities, functioning of The business environment and, in half of respondents noted the great the judicial system and customs particular, the HTP special operating significance of non-fiscal regulations, legislation have a mainly negative regime, are major success drivers for which is generally assessed as positive impact on operations, though their Belarusian IT companies. According to (38% against 14%). significance is lower. the survey, the most important and

Impact of business environment factors on operations

Factor Impact Importance

Current state Negative Positive of tax legislation High Moderate Low

0% 82% 79% 16% 5%

Communication Negative Positive with the HTP High Moderate Low administration

8% 64% 75% 22% 3%

Current state Negative Positive of legislation High Moderate Low (other than tax)

14% 38% 58% 39% 3%

Source: [2] — Results of EY’s survey among Hi-Tech Park residents THE IT INDUSTRY IN BELARUS: IT сompanies 94 2017 and Beyond

Impact of business environment factors on operations

Factor Impact Importance

Frequency Negative Positive of legislative High Moderate Low amendments

42% 11% 45% 47% 8%

Inspections Negative Positive by regulatory High Moderate Low authorities

36% 6% 33% 42% 25%

Functioning Negative Positive of the judicial High Moderate Low system

33% 6% 29% 45% 26%

Customs issues Negative Positive (export/ import High Moderate Low of equipment)

26% 3% 28% 33% 39%

Source: [2] — Results of EY’s survey among Hi-Tech Park residents

According to the surveyed companies, ted activities to be expanded, while results from the fact that a significant IT development prospects depend on 45% expect they will stay the same. part of their functions is consolidated existing and additional tax benefits, as by the HTP Administration and, well as the potential expansion of The activities of business unions repre- secondly, from the fact that these permitted activities. At the same time, senting IT industry interests, as well as institutions are underdeveloped in the more than 50% of respondents do not the current infrastructure created to Republic of Belarus and business is not expect any improvements in tax support and develop entrepreneur- prone to rely on them. benefits, versus 34% who do. 50% of ship, have a relatively low impact on IT respondents expect the list of permit- companies’ operations. Firstly, this 95

Prospective changes in the business environment

Expectation

Existing tax benefits for IT companies Additional tax benefits for IT companies Changes in the HTP’s activities

Will Will stay the Will change Will Will stay the Will change Will Will stay the Will change improve same for the worse improve same for the worse improve same for the worse

34% 51% 15% 34% 61% 5% 50% 45% 5%

Source: [2] — Results of EY’s survey among Hi-Tech Park residents

Impact of business unions and entrepreneurship support infrastructure

Factor Impact Importance

Activities of business Negative Positive unions representing High Moderate Low IT sector interests

16% 19% 31% 33% 36%

Current status Negative Positive of the infrastructure High Moderate Low created to support and develop entrepreneurship

3% 37% 32% 36% 32%

Source: [2] — Results of EY’s survey among Hi-Tech Park residents THE IT INDUSTRY IN BELARUS: IT сompanies 96 2017 and Beyond

Raising finance that need financing in a large mea- resulting from high costs and limited sure. According to sector experts, availability of borrowings in the Repub- most Belarusian IT companies choose lic of Belarus due to the lack of Most HTP companies believe that organic growth through own funds available assets for collateral required finance and investments are not instead of debt financing or invest- by banks. Belarus does not have the currently of great significance for their ment. At the same time, respondents infrastructure or legal framework to operations. This is partially attribut- note that financing issues have a enable companies to attract venture able to the prevalence of service negative impact on their operations, financing. companies over product companies

Raising finance

Factor Impact Importance

Raising debt Negative Positive financing High Moderate Low

30% 9% 21% 43% 36%

Raising Negative Positive investments from High Moderate Low other sources

26% 12% 26% 39% 35%

Raising Negative Positive venture High Moderate Low financing

26% 12% 29% 39% 32%

Source: [2] — Results of EY’s survey among Hi-Tech Park residents

SOURCES

[1] Information provided by the Hi-Tech Park Administration [2] Results of EY’s survey among Hi-Tech Park residents 97

DEVELOPMENT CENTERS OPENED BY INTERNATIONAL COMPANIES IN THE REPUBLIC OF BELARUS

Summary Companies are drawn to Belarus by the high quality of human resources Playtika Bel and the preferential and comfortable Drawn by the qualification level, low conditions afforded by the special Employees: 1,500 cost and availability of technical staff Hi-Tech Park regime. Captive centers in Belarus, some international of companies that develop their own Employees in Belarus: 230 technology companies have estab- products generally offer a higher level Technology staff in Belarus: 200 lished development centers (R&D and of pay than companies providing IT HQ: Herzliya, Israel captive centers) in Belarus. These services, thus enhancing their Owner: Giant Interactive, China entities have staff ranging from competitive advantage as employers. several dozen to several thousand This section provides a partial list of employees. This example of successful such companies with brief descriptions Playtika has offices in Israel, Canada, investment in the Republic of Belarus of their activities in Belarus. is proof of the advantages that Belarus the US, Belarus, Argentina, Japan, the offers to IT companies. Forty-eight Ukraine and Romania. The company’s percent of respondents to a survey of entertainment and social apps are Hi-Tech Park residents described their designed for casual and midcore business as “product development and audiences and short play sessions. The support for their company’s internal company’s most popular apps are needs (development center),” and 19% Slotomania, Bingo Blitz and Caesars indicated “Research & Development.” Casino THE IT INDUSTRY IN BELARUS: Development centers opened by international 98 2017 and Beyond companies in the Republic of Belarus

EPAM Systems Fitbit Game Stream (Wargaming)

Employees: 22,000 Employees: 1,900 Employees: 4,000 Employees in Belarus: 8,000 Employees in Belarus: 60 Employees in Belarus: 2,100 Technology staff in Belarus: 6,000 Technology staff in Belarus: 45 Technology staff in Belarus: 2,000 HQ: Newtown, Pennsylvania, USA HQ: San Francisco, CA, USA HQ: Nicosia, Cyprus Owner: EPAM Systems Inc. Owner: Fitbit, USA Owner: Wargaming Public Co. Limited, Cyprus

The EPAM Systems development Fitbit is an international company that center is the largest Hi-Tech Park develops wearable devices and accesso- Wargaming is an international game resident and Belarus’s largest compa- ries for fitness along with related developer that originated in Belarus ny in the IT products and services software. The Fitbit Minsk team has and now has its head office in Nicosia, segment. The company was founded in primary end-to-end responsibility for with development centers in Minsk the US by Belarus natives, and the the Fitbit Corporate Wellness product. (Game Stream), Kyiv, St. Petersburg, main development center was estab- Seattle, Chicago, Baltimore and lished in Belarus. Fitbit Corporate Wellness uses the Sydney. Game Stream is Wargaming’s power of market-leading activity largest development center and the EPAM is notable for its achievements trackers and technology to get second largest Hi-Tech Park resident in the financial sector and works with employees moving and make wellness after EPAM. five of the ten largest investment programs more effective. The solution banks and three of the five leading provides turnkey, easy-to-use software Wargaming.net has gained worldwide global banks as well as many manage- and services to help organizations recognition due to the success of its ment institutions, exchanges and drive engaging programs that moti- multiplayer online game World of brokerages, market data providers, vate employees and make a bot- Tanks, which has attracted millions of and insurance and technology tom-line impact. Fitbit Corporate players all over the world. It has won providers. The company provides agile Wellness works with top-performing several major game awards and is one digital banking transformation, organizations across various verticals, of the five most profitable MMO games including wealth management including over 50 of the Fortune 500. in the world with more than 140 application development, service million registered users. design and delivery, testing and automation, security and assurance, mobile strategy consulting, and user Ciklum experience services. YandexBel

Employees: 2,500 Employees in Belarus: 154 Employees: 6,000 Viber Media Technology staff in Belarus: 140 Employees in Belarus: 150 HQ: Kyiv, Ukraine Technology staff in Belarus: 135 Employees: 325 Owner: Ciklum Inc. HQ: Moscow, Russian Federation Employees in Belarus: 126 Owner: Yandex, Russian Federation Technology staff in Belarus: 116 Ciklum is an international company HQ: Luxembourg founded in 2002 that specializes in Yandex is a leading internet company Owner: Rakuten, Japan outsourced software development. in Russia, operating the most popular The company has clients in Scandina- search engine and other Internet-relat- Viber Media is an international via, Western Europe, the US and Israel. ed services and products. company that develops its own free Sales offices have been opened in instant messaging and VoIP telephony Denmark, Sweden, the UK, Germany, Employees in the Minsk office work on services. The company was purchased Switzerland, the Netherlands, the US products for Belarus and all other by Rakuten in February 2014. The and Israel, and development centers countries in which Yandex has a company’s headquarters are in have been opened in major cities in presence. They are involved in Luxembourg, with development Ukraine (Kyiv, Kharkiv, Dnipropetro- creating, developing and testing centers in Minsk, Brest and Tel Aviv. vsk, Odessa, Lviv and Vinnytsia), Yandex Search and Yandex.Browser Belarus (Minsk), Poland (Wroclaw and for computers and mobile devices, The Minsk development center is Gdansk), Spain (Malaga) and Pakistan Yandex.Maps, Yandex.Mail, Yandex. responsible for the client parts of an (Lahore, Islamabad). The company Metrica for applications, and the application for iPhone, Android and has over 2,500 developers working in mobile Music and Store apps. Develop- Windows Phone as well as for the various programming languages ers in the Minsk office use iOS and development of a desktop version and (Java, .Net, PHP, Mobile, C++, etc.) as Android as well as JavaScript, C++, billing and sticker-market web part of over 200 teams. Python and Java. development. 99

Apalon Apps NetCrackerBel Gameloft

Employees: 5,800 Employees: 5,000 Employees: 5,000 Employees in Belarus: 150 Employees in Belarus: 140 Employees in Belarus: 50 Technology staff in Belarus: 100 Technology staff in Belarus: 110 Technology staff in Belarus: 45 HQ: New York, USA HQ: Waltham, Massachusetts, USA HQ: Paris, France Owner: IAC, USA Owner: NetCracker Technology, USA Owner: Gameloft, France

The company was founded in 2007 NetCracker Technology is a Gameloft in Minsk is a production and originally specialized in the world-leading creator and implement- studio that uses iOS and Android for development of games and web er of integrated BSS/OSS solutions development in close collaboration with applications. Following the appearance for telecom providers and major the international team. As of today, the of the iPhone and the App Store in companies and state institutions, studio is also working on virtual reality 2008, the team concentrated on the founded in 1993. NetCracker technologies and Apple TV. development of iOS apps. The launch Technology has offices and represen- of Google Play, the Amazon Appstore tation in 34 countries of the world and Samsung Apps opened up new and development centers in Russia, markets for the company. Ukraine, the UK, India, the US and Juno Israel. Apalon’s portfolio includes worldwide best-selling apps such as Pimp Your The company uses Java, HTML, GWT, Employees: 200 Screen, Weather Live, Notepad+, Emoji jquery, Windows, Unix, SQL, Oracle, Keypad, My Alarm Clock, and others. etc. It has CMMI level-5 certification. Employees in Belarus: 95 Technology staff in Belarus: 90 HQ: New York, USA Owner: Juno Inc. IHS Markit MSQRD

Juno is a US startup company founded Employees: 13,000 Employees: 38 by the creators of Viber VoIP messen- Employees in Belarus: 100 Employees in Belarus: 11 ger, Igor Magazinik and Talmon Marco. The development center, established in Technology staff in Belarus: 90 HQ: London, UK 2015 in Minsk, develops the compa- HQ: London, UK Owner: Facebook, USA ny’s core product: a new online taxi Owner: IHS Markit, UK service. In June 2015, it became a Hi-Tech Park resident. Masquerade, Inc. develops its own IHS Markit provides information and graphic information processing analysis for decision-making in various products. These include Masquerade areas of the economy. For 15 years Face Tracking and 3D Effects Render- the Minsk Development Center has ing SDK, the MSQRD (Mask) mobile Workfusion been responsible for developing the application, Masquerade Editor and a company’s own Goldfire and IHS catalog of effects. The MSQRD app Connect products. allows animated masks to be laid over Employees: 100 users’ faces in real time. The develop- Employees in Belarus: 70 The Minsk team’s latest project is ment center is in Minsk. The company HQ: New York, USA based on a new data-retrieval model, was founded in 2015 in Minsk and was analytics and semantic search powered purchased by Facebook in March Owner: WorkFusion, Inc. by Big Data that will link over 7.2 2016. million engineers around the globe. WorkFusion develops software for robotics process automation and data processing, making use of artificial intelligence. The company specializes in developing products that make use SOURCES of crowdsourcing and machine learning to help corporations auto-

This section is based primarily on the information about the companies from their own web-sites, mate the mechanical labor of office companies’ description from http://companies.dev.by/ and HTP information http://www.park.by/it/ employees. WorkFusion’s offices are in enterprises/type-search/ the US, Europe and India. The Compa- ny was founded in December 2010. THE IT INDUSTRY IN BELARUS: Recent landmark transactions 100 2017 and Beyond and events

RECENT LANDMARK TRANSACTIONS AND EVENTS 101 THE IT INDUSTRY IN BELARUS: Recent landmark transactions 102 2017 and Beyond and events

Belarus has not yet gained a reputation 8-22 January 2016 — The number of Viber Media as a hotbed for startups, however, high MSQRD users reached one million. It profile transactions involving Belaru- was among the most popular apps on sian startups have taken place almost the App Store in Russia, Belarus, Founders: Talmon Marco, Igor every year over the past 5-6 years. Kazakhstan, and other countries. Magazinnik Examples include Viber, Maps.me, MSQRD, and Juno. Successful Belaru- 26 February 2016 — The app raised sian startups are usually taken over by over one million US dollars as seed Viber Media is an international foreign companies but carry on with funding, while its value was estimated company that became famous for its their development projects in Belarus, at ‘dozens of millions’ of US dollars, cross-platform instant messaging and thus becoming captive centers. according to the founders. No details of voice over IP (VoIP) application. the transaction or the private investor were disclosed. Idea

MSQRD (Masquerade) 28 February 2016 — The app had 10 To create a high-quality communication million downloads globally. app that people from across the globe will use to connect with anyone. Founders: Eugene Nevgen, Sergey Transaction Gonchar, Eugene Zatepyakin Brief history A week after the first release, the MSQRD team was contacted by the 2 December 2010 — The first version Masquerade is a startup that was set up major IT companies from the US, Asia of Viber was launched for iOS. By the in Minsk and became globally recog- and Russia. The higher the app’s end of the first day, the app had gained nized for its mobile app that allows ranking on the App Store, the more 18,000 users. users to change their appearance companies became interested in it. during video-chats in real time by December 2011 — 40 million users. creating animated masks and laying 9 March 2016 — it was announced them over human faces. that the Belarusian startup was July 2012 — The Android version was acquired by IT giant Facebook. The released. Idea transaction amount was not disclosed. A similar project — the Looksery startup 2012 — Release of Viber for WinPhone “We believe that video chats are the founded in Odessa — was purchased for 7; 125 million users, 2 billion messages future of social networking. However, USD 150 million by Snapchat in 2015 and 1.5 billion minutes of conversation; unlike text messaging, where smileys [3]. Experts believe that the acquisition the company became a resident of the and stickers are common, video of MSQRD will help Facebook to Hi-Tech Park. chatting lacks options for expressing compete with Snapchat in this area. 2013 — Release of Viber for WinPhone, positive emotions. It is the gap we tried Viber Desktop for Windows and OS X, to address,” says Masquerade co-found- MSQRD developers Eugene Nevgen and Android tablet; launch of the Viber OUT er Eugene Nevgen [1]. Sergey Gonchar were included by Forbes in the list of 30 Under 30 Most feature. Brilliant Young Entrepreneurs. At the Brief history December 2013 — 280 million users, end of 2016, MSQRD was one of the with 700,000 new users signing up Best Apps of the Year on Google Play 2010 — Eugene Nevgen and his team every day. start developing face tracking technolo- and App Store [4]. gy [2]. January 2014 — Viber version for Plans for the future Windows 8 metro. 27-29 November 2015 — The team took part in the GARAGE48 MINSK MSQRD will continue as a separate February 2014 — Acquisition of Viber 2015 Hackathon, where it developed product. The team is enhancing the by Japanese company Rakuten. the app within 48 hours. app by adding new masks and functions. Facebook acquired the entire November 2014 — Launch of Public 17 December 2015 — The first version company: the product, roadmap, Chats. of the app was available for iOS. technology and team. The technology has been integrated into core Facebook December 2014 — Almost 495 million 22 December 2015 — MSQRD was for products and is available to billions of users in 193 countries worldwide. the first time included in the top 50 users. The team’s main product — December 2015 — Launch of the Viber apps on the App Store in Belarus. The SDK — is a program package that WINK feature, 711 million users. same day, the app was featured on integrates video filters into any mobile Product Hunt, the popular aggregation app for video chats, live streaming, or site for startups, where it received February 2016 — Launch of Viber photo and video processing. The team Wallet [6] many five-star reviews. is developing tools with which any person or company can create their own mask [5]. 103

Transaction April 2017 — The acquisition of Juno Brief history by global online taxi service Gett for In February 2014, major Japanese USD 200 million was announced [9]. 2007 — The company was founded on retailer Rakuten reached an agreement the basis of a small Internet company to acquire Viber for USD 900 million. Transaction MoveYourWeb. The acquisition of Viber was consistent with Rakuten’s strategy to diversify its TechCrunch experts believe that, by By 2014, the company had released a offering of digital services via its joining forces, Gett and Juno can number of applications that made it e-commerce site [7]. compete with Lyft for the second successful and determined its develop- position on the ride-on-demand market, ment as a product company. The best Hiroshi Mikitani, Rakuten’s Chairman primarily in New York City and then known products include Pimp Your and CEO, noted when commenting on across the US; Uber operating in 579 Screen, Weather Live, My Alarm Clock, the deal that Viber still had “a huge cities and having estimated capitaliza- Calculator Pro for iPad, and many potential as a gaming platform”. tion of over USD 60 billion will remain others. The company is the 8th The app’s development continues in number one. worldwide publisher by iOS app the captive center in Belarus. downloads according to the App Annie Gett was founded in Israel and is now index, after Google, Facebook, Micro- Plans for the future operating in more than 100 cities soft, Baidu, Apple, and Alibaba group. worldwide, including London, Moscow, As a product, Viber is planning to devel- and New York City. Its on-demand November 2014 — Apalon was op the Public Chats social space that business mobility solution, Gett for acquired by US-based media and celebrities and companies can use to Business, is used by more than 6,000 Internet company IAC, with the connect to a wider audience. The corporations. Gett has raised USD 640 subsequent establishment of Apalon second development area is to turn the million in venture financing, including Apps [6]. app into a stable and small-size tool USD 300 million from Volkswagen that can be easily enhanced with new Group, and was ranked by Forbes Transaction functionality but does not consume lots among the 15 Fastest Growing of computer resources and traffic. Still Companies [8]. According to the co-founder Peter another area for development is to Skoromnyi, their original intention was make it open for other apps and release The deal covers all of Juno’s existing not to sell the business. By 2014, the an open SDK, that is, turn the app into business, from its network of licensed company had passed a number of an open social platform [6]. drivers through to its employees and milestones in its development, and the founding team of Talmon Marco, Igor merger with IAC was the step that took Magazinnik, Ofer Samocha, and Sunny it to the next level. The transaction Marueli. The four of them will remain amount was not disclosed. Juno based in New York to lead the combined companies’ operations in the US, which The deal gave Apalon access to the for now are in New York City only. Juno leading experts interested in developing Founders: Talmon Marco, Igor is planning to expand to other markets the company and promoting its digital Magazinnik to complement Gett’s footprint in products. Mindspark Interactive Europe covering 100 cities [9]. Network, an operating business of IAC, has large experience promoting digital Idea products.

To create an ethical, socially responsi- Apalon Apps Plans for the future ble ride-sharing service that treats drivers right. No dramatic changes are expected in Founders: Peter Skoromnyi, Matvey Apalon Apps’s operations. The compa- Brief history Timoshenko ny’s priority remains to develop rather than change. Matvey Timoshenko and 2015 — The company was founded, Peter Skoromnyi will continue as with an office in Belarus. Apalon Apps is a leading developer of leaders of Apalon’s operations; new mobile applications and is now part of additions to the product portfolio are May 2016 — The online taxi service the global media and Internet company expected [10] [14]. Juno was launched in New York City in IAC (NASDAQ: IAC). test mode. Idea February 2017 — Juno has grown to 28,500 rides a day. “We are not trying to form people’s needs or force new needs upon Summer 2016 — The startup raised people — we just make their day slightly Series A investment from the venture better, every day” (Peter Skoromnyi) fund Empire Angels, of nearly USD 30 [10]. million according to TechCrunch [8]. THE IT INDUSTRY IN BELARUS: Recent landmark transactions 104 2017 and Beyond and events

Plans for the future 2007 — The company becomes a EPAM Systems resident of the Hi-Tech Park. According to Arkadiy Dobkin, EPAM is looking to become a company that 2009 — New business line Viaden Founders: Arkadiy Dobkin, Leo Lozner delivers best-in-class IT and software Mobile is established to develop mobile engineering solutions combined with applications for the new iOS and later innovative strategy, consulting and for Android. Co-shareholder Yuriy EPAM Systems — a leading global design capabilities. EPAM has adopted Gursky takes the lead in the subdivi- software services company — was a global growth strategy that is based sion. founded by Belarus natives. Currently, on several principles: think and act as a the company employs more than startup; work in multidisciplinary 2011 — The company is sold to Israeli 22,000 and has grown by over ten teams; achieve specific results [17]. entrepreneur Teddy Sagi. times since 2006, showing a CAGR (compound annual growth rate) of 30% When speaking about market trends, since its foundation. Arkadiy Dobkin points out that different Transaction market segments are now starting to Idea overlap. Their key players become By 2011, the company had become a competitors in completely new areas. major CIS developer of mobile soft- “To build a large multinational company Google, Facebook, Microsoft, Apple, ware, with particularly strong positions and compete on the global market. and Amazon keep competing with each in the online gaming and health Probably, we just wanted to prove to other and, at the same time, they are tracking segments. In-house products everybody that we can do serious competing with banks, retail chains, include applications such as All-in work.” Arkadiy Dobkin [6]. and media/information companies. Fitness, Texas Holdem Poker Free, etc. EPAM can respond to these market developments by bringing together In 2011-2012, the company was sold Brief history ‘hybrid teams’ and providing sophisti- to Israeli entrepreneur Teddy Sagi, the cated ‘hybrid’ solutions. The company founder of gambling software develop- 1993 — EPAM was registered in has achieved this advantage as a result ment company Playtech. According to Princeton, New Jersey, with a captive of new competencies and diverse press reports, Viaden Media was valued center in Belarus. experience it gained from customers, at EUR 95 million. and can now benefit from the synergy 2004 — EPAM acquired a Hungarian Despite the change in ownership, the of expertise in various technologies and company Fathom Technology. company maintained its captive center sectors [6]. in Minsk. Subsequently, Viaden Media September 2006 — EPAM merged with was split into two companies: VDI, a software outsourcing vendor Sport.com, a major developer of fitness based in Russia; the combined compa- Viaden Media applications and the owner of the ny started operating under the EPAM sport.com and yoga.com websites, and Systems name and employed over Skywind Group, specializing in mobile 2,200 software professionals [11]. Founders: Victor Prokopenya and social games. The founder Victor Prokopenya has focused on new 8 February 2012 — EPAM Systems projects, including his new company was the first company from Belarus Viaden Media is a software developer, exp(сapital), which develops solutions [12] to be listed on the New York Stock one of the major CIS developers of for algo trading in financial instru- Exchange (NYSE). This was the first custom written applications for the ments, and other projects [18]. IPO that came from the outsourcing iPhone and iPad. industry in Eastern Europe [13].

Starting 2012, the company experi- MAPS.ME enced a period of aggressive growth, Brief history taking over technology companies 2001 — Viaden Media is established as across the globe, in the USA, Canada, Founder: Yuriy Melnichek the UK, and other countries (Thought- an outsourced software product corp, Empathy Lab, Netsoft USA, developer. Jointech, GGA Software Services, Great 2006 — The company changes its Idea Fridays, NavigationArts, Alliance Global focus and starts releasing in-house Services, Dextrys) [11]. software products for the online Develop offline maps able to compete with online services such as Google 2016 — EPAM’s revenue in 2016 entertainment sector. Maps. exceeded USD 1 billion [16].

As of 15 May 2017, the company has market capitalization of USD 4.18 billion, or USD 80.91 per share, amounting to a 5.8 times increase in its share price since the IPO [16]. 105

Brief history Transaction Yuriy Melnichek selected AI technologies for the mobile segment as a new 2010 — MapsWithMe is established in The Company considered selling the business line. Recent research demon- Zurich with a captive center in Minsk. application to Yandex or Google. strates the considerable progress of AI However, they chose Mail.ru Group as technologies in the scientific communi- April 2011 — The first application the Holding intended to continue ty, however, there are still very few AI version is released for iOS. developing the service and to maintain products that can be used in everyday the startup’s autonomy within its life. Yuriy Melnichek’s team is now February 2012 — MapsWithMe structure. The transaction was closed working to integrate the most recent AI appears in the Android application in November 2014. and computer vision developments into store. mobile applications. They are set to July 2014 — The company name is Plans for the future develop mobile applications based on changed to MAPS.ME. neural networks. The team is looking According to Yuriy Melnichek, MAPS. for a method to launch neural networks November 2014 — MAPS.ME. is ME is working to personalize maps. on smartphones to edit video content purchased by Mail.Ru Group. Generally, there are far more points of in real time. In 2016, the team interest than those shown on the map, proceeded to creating a prototype [20]. September 2015 — A pedestrian and each time the user has to select route-mapping feature is added which points to show / hide. Personal- followed by a new map design for iOS ization suggests that the selection will and Android. The Company opens the be made not merely based on the source code. points’ significance but also based on users’ preferences: e.g., priority will be April 2016 — OpenStreetMap becomes given to places already visited. accessible for editing by users whose number exceeds 40 million [19].

SOURCES

[1] Website dev.by IT in Belarus — https://dev. [9] TC Crunch — https://techcrunch. [16] https://finance.yahoo.com/quote/ by/lenta/main/belorusskoe-prilozhe com/2017/04/26/on-demand-ride-service- EPAM?p=EPAM nie-msqrd-privleklo-bolee-1-mln-investitsiy gett-confirms-acquisition-of-juno-for-200m/ [17] What issues EPAM is solving now — the story [2] Project ibusiness — http://ibusiness.ru/blog/ [10] Probusiness. — https://probusiness.by/ of Arkadiy Dobkin — https://probusiness.by/ future/41600 strategy/247-soosnova- experience/2606-kakie-zadachi-seychas-re tel-apalon-petr-skoromnyy-sekret-uspekha- shaet-epam-istoriya-ot-arkadiya-dobkina. [3] Belarusian news portal tut.by — https://42. v-upornoy-rabote-24-7.html html tut.by/487853 [11] EPAM Systems — https://en.wikipedia.org/ [18] Viaden Media — https://ru.wikipedia.org/ [4] Eugene Nevgen and Sergey Gonchar are wiki/EPAM_Systems wiki/Viaden_Media included in the list of 30 Under 30 Most Brilliant Young Entrepreneurs by Forbes — [12] IPO EPAM Systems: Belarusian flag on the [19] Maps.me — https://ru.wikipedia.org/wiki/ https://dev.by/lenta/main/forbes-vkly New York Stock Exchange (NYSE) — Maps.me uchil-belorusov-nevgenya-i-gonchara-v- https://news.tut.by/economics/273156. mirovoy-top-30-biznesmenov-do-30-let html [20] Founder of Maps.Me: I would like Belarusians to launch neural networks on [5] vc.ru — https://vc.ru/p/msqrd-history [13] First IPO of outsourcing industry in Eastern smartphones — https://tech.onliner. Europe — http://goaleurope. by/2016/06/21/osnovatel-maps-me [6] HTP — 10 years of development, V. V. com/2012/01/24/outsourcing-eastern-eu Lebedev. — Minsk: Register, 2016. ISBN rope-it-is-official-epam-is-going-public/ 978-985-7097-56-2 [14] https://news.tut.by/economics/422435. [7] Forbes — http://www.forbes.ru/ html news/250899-yaponskii-onlain-riteiler-ra kuten-kupit-messendzher-viber-za-900-mln [15] Why even successful companies need IPO. Example of EPAM Systems — https://dev.by/ [8] Organiser — https://ej.by/news/ lenta/main/pochemu-dazhe-uspeshno-razvi it/2017/04/26/taxi-servis-juno-sozdayus vayuschimsya-kompaniyam-nuzh- chiysya-v-minske-prodayut-za-250-million no-ipo-primer-epam-systems ov.html THE IT INDUSTRY IN BELARUS: Belarus in international 106 2017 and Beyond IT rankings

BELARUS IN INTERNATIONAL IT RANKINGS

Since 2006, Belarusian IT companies These lists include companies of varying Changes in the lists show that the have regularly appeared in the interna- sizes from different countries and Belarusian IT industry began an upward tionally recognized Global Outsourcing sectors of the outsourcing industry — trend in 2006, with the number of com- 100 and Software 500 lists. for example, outsourcing of information panies included in the lists and the technologies, business processes, number of leaders among them both The growth of the IT industry in infrastructure services, real estate, increasing. 2006-16 can be judged from the design, testing, manufacturing and number of companies with captive logistics. Membership in the IAOP is not For the 2006 listing, companies were centers in Belarus and by their chang- a prerequisite and is not taken into evaluated based on the following ing positions in the lists. consideration in compiling the final lists. criteria: general information on the service provider, data on the company’s Belarus also occupies a rather favor- The Global Outsourcing 100 list clients, the company’s level of compe- able position in Everest Group’s MAP includes highly recognized transnation- tence and its management capabilities. (Maturity, Arbitrage, Potential) Matrix™ al firms, known as “leaders,” as well as for IT Applications, which contains fast-growing firms with an annual The study ultimately included over comparative analysis of different cities turnover of less than USD 50 million 1,000 service providers in the areas of as places for global IT in-house or and/or a staff of less than 5,000, IT, HR and business-process outsourcing captive centers. known as “rising stars.” The listing around the world. Two Hi-Tech Park process begins with the identification of residents were in the top 100. The IBA leaders and rising stars, after which Group (59th place) was listed as a Global Outsourcing 100 companies are evaluated in other leader, and EPAM (79th place) was categories [1]. among the rising stars. The list included a total of 65 leaders and 35 rising stars The International Association of The expert evaluation is based on a [2]. Outsourcing Professionals (IAOP) methodology that includes an indepen- conducts the following annual studies dent assessment by a committee of The 2011 listees demonstrated to assist companies with outsourcing association clients with extensive achievements in areas such as compa- solutions: experience in selecting outsourcing ny size and growth rate, global service providers and advisors for their presence, industry awards and success- 1. The Global Outsourcing 100, a list of organizations. es, certifications, client references, HR the world’s best outsourcing service management, leaders’ successes and providers, has been published since Belarusian and foreign companies that outsourcing experience. 2006 have captive centers in Belarus appear 2. The World’s Best Outsourcing on the list every year. Advisors, a list of the best outsourcing advisors and experts, has been published since 2009 107

Six Hi-Tech Park residents were listed in and corporate social responsibility. Software 500 2011 — two (EPAM and IBA Group) in the category of leaders and four Six Hi-Tech Park residents were listed in (Intetics, Itransition, Artezio, and 2016: Bell Integrator, EPAM Systems, Software Magazine is an international Ericpol Telecom) in the category of IBA Group, Ciklum, Intetics and high-tech publication, owned and rising stars [3]. Itransition [4]. The number of leaders published by Rockport Custom increased to 4 (Bell Integrator, EPAM Publishing in Beverly, Massachusetts, In 2016 and 2017, companies were Systems, IBA Group and Ciklum) [5]. USA [9]. The first Software 500 list was judged on five criteria: size and growth, published in 2003. customer references, awards and The same Belarusian companies were certifications, programs for innovation, listed in 2017. Categories and positions were not assigned.

Belarusian IT Companies in Global Outsourcing 100

Company, year 2017 2016 2011 2006

Bell Integrator + Leader

EPAM Systems + Leader 57 Leader 79 Rising star

IBA Group + Leader 59 Leader 59 Leader

Ciklum + Leader

Intetics + Rising star 76 Rising star

Itransition + Rising star 92 Rising star

Artezio 94 Rising star

Ericpol Telecom 95 Rising star

Source: [5, 6, 7, 8]

Ranking and income of Belarusian Hi-Tech Park residents in the Software 500

2016 2011 2006

Position Income, USD Position Income, USD Position Income, USD million million million

IHS Inc. 63 2,184.34 74 898.00 — —

EPAM Systems 107 904.70 181 222.00 272 40.00

Bell Integrator 213 234.25 — — — —

IBA Group 281 110.85 278 76.00 — —

Itransition 368 40.30 398 17.00 472 3.5

Coherent Solutions 393 25.32 — — — —

SoftClub Ltd. 409 18.80 447 10.00 — —

Artezio 416 15.80 462 8.00 — —

Intetics Co. 419 14.15 465 8.00 — —

Oxagile 456 6.80 — — — —

Ericpol Telecom — — 310 51.00 — —

Source: [10] Software 500 THE IT INDUSTRY IN BELARUS: Belarus in international 108 2017 and Beyond IT rankings

The list is based on a voluntary survey Ten companies were included in the list The matrix presents comparative of companies and doesn’t cover all IT in 2016 — IHS. Inc., EPAM systems, Bell analysis of various cities considered as companies that could potentially be Integrator, IBA Group, Itransition, destinations for global in-house and included. Companies’ positions in the Coherent Solutions, SoftClub Ltd., captive centers for IT services. The list are based on data on revenue Artezio, Intetics Co. and Oxagile — and chart considers 3 dimensions: operat- earned directly from sales of software all but the IBA Group improved their ing cost (fully-loaded, ongoing operat- or services in that area, headcount and positions. ing cost including compensation, R&D potential. The list makes use of facilities, and technology expenses), data for the previous financial year. availability of relevant entry-level and Everest Group experienced talent, and general risk Of companies with roots and represen- profile. tation in Belarus, only EPAM Systems MAP Matrix™ and Itransition were listed in 2006. for IT applications In 2006, these companies recorded income of USD 40 million and Everest Group, a research firm focused USD 3.5 million, respectively. on global services, classifies Belarus as Eight major international software one of the front-runners among the developers with subsidiaries and Major Contenders category in their captive centers registered as Hi-Tech MAP Matrix™ for IT Applications. The Park residents were included in the assessment covers only a representa- Software 500 list in 2011. Their tive list of locations. positions in the list ranged from 310th (Ericpol Telecom) to 74th (IHS Inc.).

SOURCES

[1] IBA Group in the Leader category of The [5] The Global Outsourcing 100 ranking [9] Software Magazine — 2016 Global Outsourcing 100 ranking- 2016 — https://www.iaop.org/Con- https://en.wikipedia.org/wiki/Software_ http://iba.by/news/16-02-2016.html tent/19/165/4454/ Magazine

[2] IBA Group in the The Global [6] The Global Outsourcing 100 ranking [10] Software 500 rankings for 2016, 2015, Outsourcing 100 ranking — 2017 — http://iba.by/news/15-06-2017. 2011 and 2006 — http://iba.by/news/a7065a7e684a85d2. html http://www.rcpbuyersguide.com/ html top-companies.php [7] The Global Outsourcing 100 ranking [3] Belarusian IT companies appeared in The 2011— https://www.iaop.org/con- [11] Everest Group, 2017 — 2011 Global Outsourcing 100 tent/19/165/2040/ http://www.everestgrp.com ranking — https://42.tut.by/227107 [8] The Global Outsourcing 100 ranking [4] Belarusian IT companies — top-100 World 2006 — https://www.iaop.org/con- Outsourcing Companies — https://dev.by/ tent/19/165/1281 lenta/main/belorusskie-kompanii-v-top- 100-luchshih-autsorserov-mira 109

Minsk vs other destinations in the Everest Group MAP Matrix™ for IT applications

Risk profile

Highly favorable Favorable, but some concerns Significant challenge Star Performer

Low Aspirants Major Contenders Leaders

India tier-2 (Kochi) India tier-1 Ho Chi Minh City Cairo (Bengaluru)

Philippines tier-1 (Manila) Bogota Buenos Aires Bucharest Poland tier-2 Kuala Lumpur (Lodz) Sofia Minsk Kiev City

Riga Moscow Guadalajara Poland tier-1 Budapest (Krakow) Vilnius China tier-1 Mexico City (Shanghai) Lisbon Prague Operating San Jose cost Santiago Sao Paulo Talinn Singapore

Belfast

Dublin

Tel Aviv

High

Low Availability of talent High

Note: Representative cities were used to depict typical talent-cost positioning Source: [11] – Everest Group, 2017 for tier-1 and tier-2 cities for some countries (e.g., Bengaluru as a tier-1 city and Kochi as a tier-2 city in India); there could be other cities in the country that also offer propositions that are comparable to these cities THE IT INDUSTRY IN BELARUS: Recent mentions of the Belarussian technology 110 2017 and Beyond sector in the international media

RECENT MENTIONS OF THE BELARUSIAN TECHNOLOGY SECTOR IN THE INTERNATIONAL MEDIA

This section provides references to Reuters Emerging Europe various mentions of the Belarusian IT industry in prominent international media. World of Tanks shows Belarus Belarus finalist among European potential beyond Soviet-era Outsourcing Destinations of the farms Year Financial Times http://www.reuters.com/article/ http://emerging-europe.com/regions/ us-belarus-tech-insight-idUSKCN belarus/belarus-one-of-top-outsourc Belarus tech dream is a walk in 0WX0DM ing-destinations-2016/ the park Young Well-Paid IT Specialists https://www.ft.com/content/48f The Wall Street Journal Are Making Belarus Known 3b14a-f81e-11e6-9516- Internationally 2d969e0d3b65 Belarus Is Emerging as the http://emerging-europe.com/regions/ Silicon Valley of Eastern Europe belarus/young-well-paid-it-special ists-are-making-belarus-known-inter https://www.wsj.com/articles/ nationally/ belarus-is-emerging-as-the-silicon-val ley-of-eastern-europe-1481032802 Why Is Belarus Tech Booming?

http://emerging-europe.com/regions/ belarus/why-is-belarus-tech-booming/ 111

METHODOLOGY

This report was prepared by EY with product-oriented companies and Residents (survey respondents) the assistance of the Hi-Tech Park development centers. by length of operation Administration. We set ourselves the in the Hi-Tech Park goal of compiling key statistics and The most important source of informa- information to give readers an tion for the study was the statistical understanding of various aspects of data we processed. For the sections on 1-2 years the IT industry in Belarus. the Republic of Belarus, the IT 21% industry and the education system, we We gathered and prepared information used official statistics collected and 21% in the following categories: published by the National Statistics 10-12 years Committee of the Republic of Belarus 8% 3-4 years • The Republic of Belarus as well as data of the World Bank and the World Trade Organization. Since • The IT industry 8% 5-6 years most of Belarus’s official statistics are • The education system in the national currency, data was • The labor market in the IT industry converted into US dollars at the 21% • Infrastructure appropriate average annual exchange rates of the National Bank of the 21% • The business environment for IT Republic of Belarus (http://www.nbrb. 7-8 years 8-10 years companies by/engl/statistics/Rates/AvgRate/). • Companies specializing in IT products and services The section on the labor market in the IT industry makes use of information • Development centers opened by from jobs.tut.by, Belarus’s top job Resident companies by length international technology companies search website, as well as the findings of operation in the Republic in Belarus of an annual survey of IT specialists by of Belarus • Landmark transactions and events the Belarusian Internet portal dev.by. in the IT industry In 2016 the survey had 1,542 respondents. For the purpose of Above • Analysis of the rankings of Belaru- 1-5 years benchmarking with world trends, 20 years sian IT companies these results are compared with the 24% 10% • Coverage of the Belarusian IT findings of a survey carried out by industry in the international media Stack Overflow, a major Internet portal for IT specialists. Their 2016 survey 16-20 years 10% To gain a better understanding of the had over 55,000 respondents around current state of the IT industry in the world. Statistical information on Belarus, we held 15 interviews with Hi-Tech Park residents was prepared industry experts from top manage- using data provided by the Hi-Tech 24% 6-10 years ment of leading IT companies and the Park Administration. Hi-Tech Park Administration. In our 32% interviews with Hi-Tech Park officials, EY also carried out a survey of HTP 11-15 years we discussed strategy and develop- resident companies, using a question- ment as well as the outlook and naire specially designed for our study. economic indicators of the IT industry Forty-two companies took part in the and the Hi-Tech Park itself. Our talks survey, representing around 70% of Source: EY Survey 2017 with industry experts focused on how the total headcount of all Hi-Tech Park they view the sector: we discussed the residents. The respondents included business environment in Belarus, young companies that are relatively companies’ prospects in terms of new residents, as well as long-term growth and staff increases, the quality residents and companies of widely of education in Belarus, key aspects of varying sizes and business models. We providing IT services (in respect of thus believe that our sample is companies involved in outsourcing) representative of companies in the and of developing new products and Belarusian IT industry as a whole. marketing them internationally for THE IT INDUSTRY IN BELARUS: Methodology 112 2017 and Beyond

Acknowledgments We would additionally like to thank the portal dev.by for its cooperation and for the information it provided.

EY is grateful to the Hi-Tech Park Administration for its EY is also grateful to the Hi-Tech Park residents that accept- generous assistance in all organizational matters involved in ed our invitation to take part in the survey. the preparation of our report.

Apalon Apps Game Stream Melsoft Stark Games

Applied Systems Generation P Consulting Nextsoft SumatoSoft

ARTOX lab IBA Group Oxagile SWAY

BELabat IHS Playtika Bel System Technologies

Belitsoft international InSoft Engineering Qulix Systems Targetprocess

CIB software Intetics Bel SaM Solutions Technoton Engineering

CTDev ISsoft Solutions SAMPAD LTD Wimix

Economy-soft iTechArt Group ScienceSoft Inc. Andrey Bogomolov, S.P.

EPAM Systems Itransition SENSOTRONICA Mapsoft

Exadel Jet BI Softarex Technologies

FordeConsulting JUNO LAB SproIT

Limitations

Any use of materials from this report must include an active hyperlink to ey.com/Belarus. 113

EY IN THE CIS

Belarus Kazakhstan St. Petersburg Rostov-on-Don White Nights Business League of Nations Business Minsk Almaty Center Center Malaya Morskaya st. 23 Suvorova st. 91 Klary Tsetkin st. 51A, Esentai Tower St. Petersburg, 190000 Rostov-on-Don, 344022 15th floor, Al-Farabi ave. 77/7 Tel.: +7 812 703 7800 Tel: +7 863 261 8400 Minsk, 220004 Almaty, 050060 Fax: +7 812 703 7810 Fax: +7 863 261 8401 Tel.: +375 17 240 4242 Tel: +7 727 258 5960 Fax: +375 17 240 4241 Fax: +7 727 258 5961 Vladivostok Togliatti Astana Okeanskiy ave. 17, Kvadrat Business Center Azerbaijan office 606 Frunze st. 14B, office 413 Kaskad Business Center Vladivostok, 690091 Togliatti, 445037 Kabanbai Batyr ave. 6/1 Baku Tel: +7 423 265 8383 Tel: +7 8482 99 9777 Astana, 010000 Fax: +7 423 265 8384 Fax: +7 8482 99 9700 Port Baku Towers Tel: +7 7172 58 0400 Ekaterinburg Business Centre Fax: +7 7172 58 0410 Yuzhno-Sakhalinsk South Tower, Neftchilar ave. Palladium Business Center 153, 9th floor, Atyrau Militseiskaya st. 8B, Khokhryakov st. 10 office 105A Baku, AZ1010 Atyrau Plaza Business Ekaterinburg, 620014 Yuzhno-Sakhalinsk, 693000 Tel: +994 12 490 7020 Center Tel: +7 343 378 4900 Tel: +7 4242 49 9090 Fax: +994 12 490 7017 Satpaev st. 19 Fax: +7 343 378 4901 Fax: +7 4242 49 9411 Atyrau, 060000 Armenia Tel: +7 7122 55 2100 Kazan Ukraine Fax: +7 7122 55 2101 Suvar Plaza Business Center Yerevan Spartakovskaya st. 6, Kyrgyzstan office 1214 Kyiv Nord Business Center Kazan, Republic of Ta- Khreshchatyk st. 19A Northern ave. 1, office 27 tarstan, 420107 Bishkek Kyiv, 01001 Yerevan, 0001 Tel: +7 843 567 3333 Tel: +380 44 490 3000 Tel: +374 10 500 790 Abdrakhmanov st. 191 Fax: +7 843 567 3337 Fax: +380 44 490 3030 +374 10 500 705 Bishkek, 720011 Krasnodar Fax: +374 10 500 706 Tel.: +996 312 623 096 Sovetskaya st. 30, offices Uzbekistan 1106 and 1108 Georgia Russia Krasnodar, 350063 Tashkent Tel: +7 861 210 1212 Tbilisi Moscow Fax: +7 861 210 1211 Inconel Business Center Mustaqillik ave. 75, 3rd floor Kote Abkhazi st., 44 Sadovnicheskaya nab. 77, Novosibirsk Tashkent, 100000 Tbilisi, 0105 bld. 1 Kronos Business Center Tel.: +998 71 140 6482 Tel: +995 32 215 8811 Moscow, 115035 Sovetskaya st. 5, 10th floor Fax: +998 71 140 6483 Fax: +995 32 215 8822 Tel: +7 495 755 9700 Novosibirsk, 630102 Fax: +7 495 755 9701 Tel: +7 383 211 9007 Fax: +7 383 211 9008 THE IT INDUSTRY IN BELARUS: Key contacts 114 2017 and Beyond in EY’s Belarus office

KEY CONTACTS IN EY’S BELARUS OFFICE

Pavel Laschenko, FCCA Vadim Ilyin Country Managing Partner Partner, Head of Tax for Belarus and Law in Belarus [email protected] Mob.: +7 905 543 0721 [email protected]

Ivan Stankevich, FCCA Svetlana Gritsouk Director, Assurance Director, Tax and Law Mob.: +375 29 700 3012 Mob.: +375 29 623 0274 [email protected] [email protected]

Kiryl Domnitch, CISA, CISM Vasily Babariko Manager, Advisory Manager, Tax and Law Mob.: +375 29 700 3001 Mob.: +375 29 700 3025 [email protected] [email protected]

EY | Assurance | Tax | Transactions | Advisory

About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY works together with companies across the CIS and assists them in realizing their business goals. 4,500 professionals work at 20 CIS offices (in Moscow, St. Petersburg, Novosibirsk, Ekaterinburg, Kazan, Krasnodar, Rostov-on-Don, Togliatti, Vladivostok, Yuzhno-Sakhalinsk, Almaty, Astana, Atyrau, Bishkek, Baku, Kyiv, Tashkent, Tbilisi, Yerevan and Minsk). EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgement. EY disclaims all responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.

The IT Industry in Belarus: 2017 and Beyond THIS REPORT CONTAINS INFORMATION AS of 30 APRIL 2017 the IT INDUSTRY in BELARUS: ﻿ 01 2017 and Beyond

The IT Industry in Belarus: 2017 and Beyond THIS REPORT CONTAINS INFORMATION AS of 30 APRIL 2017 the IT INDUSTRY in BELARUS: 01 2017 and Beyond