A hidden engine of recovery

By October 10, 2018News

In the midst of crisis, the tourism industry has done well, as we all know, as well as some export-oriented manufacturers, which are known to those who follow the financial press. Yet few people know that information technology products and services have also grown a lot. Statistical data shows an increase in employment in software and electronic equipment from 18,000 workers in 2013 to 28,000 in 2017 (+ 55%). The increase is much higher than that of total employment in Greece (+6%) as well as much higher than that of total employment in corresponding sectors across the EU (+13%).

Growth was not mainly driven by local companies that create their own products, produce on their premises and sell with their own salesforce, as is the case in other industries. New employment in information technology is more as part of international production chains for businesses based elsewhere. I have noticed six models for the expansion of the sector.

First, businesses that are founded here and grow on the basis of innovation or the quality of their product. These are the better known cases. Some are startups, i.e. they have a fast-growth business model with an innovative and standardized product that can be made available internationally. Others have grown gradually but steadily, starting before the crisis, and continuing afterwards.

Second, local companies of the first category, acquired by large international companies, whose new owners increase employment in the Greek unit because they believe that it has a good quality of technical know-how with a competitive cost. Third, multinationals or smaller foreign companies that have decided to establish a product development or customer service center in Greece for the international market. In some cases, these centers employ hundreds of highly qualified workers. Fourth, local companies that provide product development services for foreign customers from developed countries, with comparatively low cost and good quality (outsourcing). Fifth, spin-offs of the local companies of the previous category, with a specialized offering, that are sold by the parent company to leading global players.

Finally, there are many engineers that work from home for clients in the US or Europe. Many work full-time for one employer. Some of them manage teams that are scattered across three continents. Others are freelancers who serve two or three customers in parallel. Hours are flexible for some, while for others hours are defined by the customer, which means that they work at night.

The sector is booming because of it is outward-looking and not dependent on domestic consumption. Because it does not need special facilities that require permits, it only needs office buildings, and and in some cases not even that. Because it does not require a large initial investment in equipment and infrastructure, but invests only in people, who are recruited gradually. Because Greek tax on profits does not matter if your headquarters and sales are out of the country. Because there are still quite a few young people who have strived hard to get educated more than what the ordinary degree of a public university requires them to do, and want to stay here. Because of the good quality of life in beautiful Greece if one has a decent salary and does not have a big family.

This model of light investment with good salaries could become a major pillar of the economy if three things change: the excessive taxation on incomes exceeding 30,000 per year, which drives away the most skilled employees. The situation in schools, which drives away those who want good education for their children. And the situation in universities, which drives away professors and researchers.

Two ministries, three laws and five years of persistent implementation can make a big difference.

*Mr. Aristos Doxiadis is partner in Big Pi Ventures, a fund for technology startups in Greece.