Overview
New opportunities are growing in the ICT sector as Bulgarian companies work to increase their competitiveness in the EU, and as the Bulgarian government complies with EU directives and legislation concerning its digital economy. Bulgaria’s ICT sector is characterized as stable and constantly growing, making it one of the most profitable sectors in Bulgaria.
Bulgaria has a long, rich tradition in the IT and electronics sectors (dating back to the Communist era) and is still known as the Silicon Valley of Southeastern Europe. It is home to approximately 10,000 ICT companies, 70 percent of which are only exporting, making Bulgaria a top ICT outsourcing destination. According to International Data Corporation (the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications and consumer technology markets) the Bulgarian ICT market has seen a 300 percent increase in revenue over the past seven years and has reached EUR 2.5 billion. After 16 years of EU membership, software business in Bulgaria is the best-performing sector in the ICT industry. Bulgaria’s low and flat corporate tax rates of 10 percent attract many ICT companies.
The move toward cloud services, mobility, and social business positively shaped Bulgaria’s IT landscape with an anticipated annual increase in IT expenditures of 4.2 percent in the next five years.
According to the National Statistical Institute, 87.3 percent of urban homes have high-speed broadband, but rural areas (especially the underserved areas in Northwestern Bulgaria) lack such coverage. Around 71 percent of Bulgarian homes subscribe to a fixed broadband connection.
Bulgaria needs to address a severe digital skills gap because only 41 percent of the population has basic digital skills. Bulgarian internet users are among the most intensive users of online video calls (1st place) and social networks (6th place). Over 85 percent of Bulgarians use the Internet for phone and video calls through various applications. Facebook is the most popular social network in Bulgaria. Only 20 percent of Bulgarians use Internet to interact with state administration bodies, however, as a result of the recently created Ministry of e-Government, improvements are expected.
Despite the dynamic development of information technologies in Bulgaria, 28 percent of households still do not have Internet access in their homes. More than half of them, 53.6 percent, cited lack of knowledge and skills to work with the internet as the reason for lack of Internet access. Some 48.8 percent said they do not need the Internet, find it not useful or not interesting, and, according to 27.9 percent of households, Internet equipment is expensive.
- The covid-19 pandemic proved positive for the ICT industry in Bulgaria because it triggered an acceleration in digitalization as the world turned to the Internet and virtual technologies to keep businesses open. Analysts differ in their predictions, but they share a common view that the speed of technological development is increasing.
- Lack of employees is proving to be a block to growth in the ICT industry in Bulgaria: 50% of global organizations state that they find it extremely difficult to source the IT talent they need. An unprecedented increase in demand for IT services has been accompanied by significant social pressure for accountability towards the consumer, society, and the environment. To address these demands in the long term, Bulgaria must allocate resources toward education.
- General Data Protection Regulation (GDPR): Companies have complied with data-protection directives and regulations for more than two decades. But the General Data Protection Regulation (GDPR), an overhaul of existing European Commission data protection legislation, aims to strengthen and unify those laws for EU citizens. Primary GDPR objectives are to give back control to citizens over their personal data and simplify the regulatory environment for international business.
U.S.-based hospitality, travel, software services and e-commerce companies will certainly have to take a closer look at their online marketing practices. However, any U.S. company that has identified a market in an EU country and has localized Web content should review its Web operations. For U.S. companies, EU-directed online marketing forms and interactions will have to be adjusted to obtain explicit consumer consent. In the language of the GDPR, consent must be freely given, specific, informed, and unambiguous. Once the data are collected, U.S. companies will then have to protect it under GDPR rules. For those that already follow existing data security standards (e.g., PCI DSS, ISO 27001, NIST), these new regulations should not be a burden.
The GDPR gives some leeway in weighing the risks, but a large exposure of email addresses, personal data that contains sensitive data related to medical or financial information or identifiers associated with children, would require notification to an EU regulator or supervising authority within 72 hours. Failure to report a breach to a regulator within 72 hours results in fines.
Digital Divide: Bulgaria performs slightly better than the EU average when it comes to coverage of high-speed broadband in urban areas. Networks capable of providing at least 30 Mbps are available to more than two-thirds of Bulgarians (72 percent of Bulgarian homes, slightly above the EU average of 71 percent). However, rural areas are not well covered, with only 17 percent having high-speed broadband network available.
Labor: Bulgaria has a respected, highly qualified and inexpensive pool of IT specialists meeting the business needs of this Silicon Valley of Southeast Europe. However, the Bulgarian education system has not kept up with demand and the number of available IT jobs will soon exceed the number of IT graduates, estimated at three times greater than what educational institutions can supply. On the positive side, the number of STEM (science, technology, engineering, and mathematics) graduates has slightly increased.
According to Eurostat, 70,000 people are employed in the ICT sector in Bulgaria, which is 2.3 percent of the total number of employees in the country. This is below the EU average of 3.5 percent. A highly qualified IT specialist in Bulgaria earns USD 20,000 per year, which is two to three times more than the wages earned by the average Bulgarian.
Use of Internet/On-line Activities: Bulgaria ranks 17th among the EU’s 28 countries 82 percent)) using voice or video calls, and 74 percent participating in social networks. However, Bulgarians are reluctant to engage in on-line transactions, with only 7 percent of Bulgarians using online banking and only 31 percent shopping online.
Digital Public Services: Improved online/e-government public services will enable Bulgarians to interact more with public authorities. Bulgaria is the second lowest in the EU in terms of using e-government services, though this is expected to improve thanks to the new Ministry of e-Government.
Business Process Outsourcing: International ICT companies find Bulgaria attractive because of the 0 percent export tax, low operating costs, and skilled local workforce. More foreign companies are opening global call- and service-centers in Bulgaria as they move their operations from India, for example. The four main pillars of Bulgaria’s large outsourcing sector are:
- Geographic proximity to large European countries with no time zone challenges
- Availability of highly talented, multi-lingual workers
- Low labor costs
- Favorable macroeconomic and political environment
Technology Sub-Sector Best Prospects
Cloud technologies, Big Data, Internet of Things, and social media are growing technology segments. Emerging sub-sectors include cybersecurity, e-health, e-education, e-justice, automotive electronics, intelligent transportation, and smart city technologies.
Prospects for U.S. companies include broadband internet access technologies, consumer electronics (mainly smart phones and tablets), educational software, software for the financial services sector, analytical software, MES and Production management software, telecommunications equipment, innovation center set-up services, and cybersecurity solutions.
Opportunities
- Government tender opportunities exist for EU-mandated IT solutions: computers, peripherals, data centers, Security Operation Centers; automation; 5G technologies/IoT; software, servers and other hardware technologies, and integration services.
- IT infrastructure of the National Revenue Agency
- Major cybersecurity projects throughout government agencies and in businesses
- Integrated IT system of Bulgarian courts
- Machine voting project
- National e-health system
- National e-identification project of the Ministry of E-Government.
- Government and private companies’ information and communication initiatives
- EU funding under the Program for Rural Development and the EU Operational Program for Good Governance will provide funding for broadband access throughout Bulgaria, and other ICT projects.
Trade Events in 2024
September 2024 - InfoSecurity – cybersecurity forum – https://www.infosecworldusa.com/
Resources
Bulgarian Association of Software Companies (BASSCOM)
Bulgarian Outsourcing Association
Bulgarian Association of Information Technologies
ICT Cluster Bulgaria
ICT Media Events Portal in Bulgaria
IDC Bulgaria
U.S. Commercial Service Sofia Contact Information
Name: Stanislava Dimitrova
Position: Senior Commercial Specialist
Email: stanislava.dimitrova@trade.gov
Phone: +359-2-939-5740