Eastern Promise - Vahé Torossian on the Business of Innovation in Central and Eastern Europe
Central and Eastern Europe’s growth is set to outstrip China’s to 2011 - it is an economic success story powered by innovation. EMEA Press Centre talks to Vahe Torossian, regional vice president, Microsoft Central and Eastern Europe and vice president, Microsoft International, about how the company is helping to create and realise Eastern Promise.
In a clear demonstration of Microsoft’s strong and sustained commitment to Central and Eastern Europe, the company is rolling out the red carpet to regional journalists during a campus visit to Redmond, Washington, on 7 and 8 May. The journalists’ visit precedes Microsoft CEO Steve Ballmer’s first-ever extended tour of Central and Eastern Europe between 19 and 24 May. EMEA Press Centre speaks to Vahé Torossian, regional vice president of Microsoft Central and Eastern Europe and vice president, Microsoft International, about some of the fastest-growing markets on earth and the opportunities that Microsoft provides for their economies and citizens.
EMEA Press Centre: Microsoft sees Central and Eastern Europe as a key focus. What is so special about the region?
Vahé Torossian: Where to begin? Central and Eastern Europe has undergone massive change in the past 20 years. Many countries have made the leap from single-party states with stagnant command economies to vibrant democracies with dynamic businesses; they are enjoying some of the fastest growth on the planet. Growth is expected to continue at levels exceeding 5 per cent over the next few years, in stark contrast to other regions’ more sombre forecasts following recent economic uncertainty. What makes this transformation all the more impressive is that it has been enacted against the backdrop of massive social upheaval. For some the process has been a painful one, but today they are beginning to realise the rewards of their endeavour.
Microsoft has been active in Central and Eastern Europe since the early 1990s and sees itself as an important partner in accelerating these countries’ participation in the knowledge economy. The region is growing fast — I don’t think many people fully comprehend just how quickly. Understandably we hear a lot about the rapid growth of China, but Central and Eastern Europe’s GDP equals that of China, it attracts more foreign direct investment and it is estimated that it will be the fastest-growing region in the world between 1999 and 2011. This is Microsoft’s fastest-growing market and one we value and continue to invest in.
EPC: What is driving growth in Central and Eastern Europe?
Torossian: There is a combination of factors leading to the region’s renaissance. For me, the most important is innovation. For decades commercial application of innovation had not been encouraged, but governments, businesses and individuals are showing that, with help from key partners such as Microsoft, they are as entrepreneurial and forward-thinking as anyone in the world. Wherever I go and whoever I meet in Central and Eastern Europe, whether it is business professionals, government representatives or members of the public, I am always deeply impressed by the obvious desire to succeed.
Innovative talent has always been evident in Central and Eastern Europe, but now there are growing reasons for it to thrive in the region or return from overseas: artificial trade barriers have been removed; governments are increasingly business-friendly and grasping challenges in areas like education; innovation is being encouraged and ideas taken forward into competitive businesses; while non-governmental organisations and individuals are recognising the power of ICT to change people’s lives for the better.
EPC: So Central and Eastern Europe is rapidly improving and the future looks bright; are there any challenges?
Torossian: Of course. Huge progress has been made but countries need to move fast if they wish to see sustainable growth and genuine opportunities for citizens. The region is now stabilising politically, and this must continue if it is to attract ongoing foreign direct investment and provide an environment in which innovative businesses can flourish. Unemployment is still a major problem in the region as traditional heavy or low-tech industries migrate to cheaper labour markets. The region’s near-100 per cent literacy, unique in an emerging market, is a solid foundation from which to build increasing digital literacy — allowing economies to keep pace with the demands of modern business and replace old jobs with new.
Perhaps understandably, most small and medium-sized companies in the region, independent software developers for example, have so far focused on servicing the needs of western companies. What we hope to see happening soon is local economies developing sufficiently so that they will find viable markets within the region itself.
The innovation inherent within the regional work force is recognised in the fact that their skills have been sought by big corporations in Western Europe, Asia and the US. Microsoft is no exception; a Polish national was heavily involved in the successful launch of Microsoft’s ultra-low-cost PC project, many hundreds of Romanians and Russians work at our headquarters in Redmond and many more people from the region work at our EMEA development centre in Denmark.
This wanderlust has brought enormous advantages — providing a perfect training environment in some of the softer business competences, such as marketing — but countries are now retaining their talented performers and, as dynamic local software economies develop further, are tempting the diaspora home. Ultimately, this will encourage the development of ideas and stimulate additional economic benefit within the region.
EPC: Innovation is a defining characteristic of Central and Eastern Europe’s economic success. How is Microsoft helping to encourage it?
Torossian: Central and Eastern Europe’s students are a fundamental innovation resource — one that the region is rich in. Central and Eastern Europe makes up 8 per cent of the global population, but it has 13 per cent of the 108 million global student population. Microsoft is partnering with academic institutions to ensure that innovative and forward-thinking minds can access innovative and forward-thinking technologies. Microsoft Innovation Centres (MICs) provide environments where academic research can meet real-world challenges and we currently have 14 in the region. One of our newest MICs opened in the Czech city of Brno in February, with a core objective of identifying and incubating fledgling IT companies. In addition, Microsoft IT Academies provide students with relevant technology skills and we have developed a network of more than 300 academies across the region, including 96 in Russia, 120 in Slovakia, 30 in Poland and 19 in Bulgaria. We plan to open a further 70 in 2008.
We are working with a talented, enthusiastic and committed student base with a proud record of achievement in Microsoft’s international student innovation competition — Imagine Cup. In 2007 around a quarter of the teams participating in the final stages of the competition were from Central and Eastern Europe. Poland, for example, claimed all three prizes in the Algorithm category in the 2006 finals in Delhi; another team of finalists from Malta was subsequently offered a traineeship in our India research labs. The Polish team ‘Input’ has taken the next logical step, working to transform its Imagine Cup entry, a programme that allows collaborative working at a single PC, into a viable and innovative new business. They are doing this with Microsoft assistance through the Imagine Cup Innovation Accelerator programme. Steve Ballmer’s visit this month coincides with the Central and Eastern European Imagine Cup Regional Finals.
Microsoft is also making significant investments in the region. We have established a global development centre in Serbia, joining the very select group of countries to host such a facility, including Ireland, India and China. The development centre is focusing on Tablet PC and Microsoft SQL Server engine technologies. In Bucharest we have opened the Global Technical Support Centre, where Romanian engineers support European enterprise and developer customers, playing an important role in ensuring our customers’ needs are addressed in future versions of Microsoft products. These and other global investments act as an important catalyst, encouraging education systems, stimulating employment, and injecting direct and indirect finance into software economies. As we grow our regional subsidiaries and headquarters in Munich, where 120 staff represent 47 different nationalities, we continue to recruit some of Central and Eastern Europe’s brightest and best talents.
EPC: What are the technology opportunities available to Central and eastern European economies?
Torossian: Countries are eager to build their own self-sufficient software economies — something that we are committed to help bring about. Microsoft understands that the knowledge economy knows no borders; high-technology economies can only take root, grow and become robust if they operate and compete in the global marketplace. A fundamental opportunity and vital spur to innovation will be outsourcing, the interchange between regional and global companies in a two-way process, with innovation, expertise and experience enriching both local economies and multinationals.
Particularly important to the fostering of innovation in Central and Eastern Europe will be the subscription computing model. Small to medium-sized enterprises and individuals must have access to ICT if they are to fully embrace and benefit from it and yet, for many, the costs of access remain prohibitive. Microsoft is developing relationships with national and regional telecommunications companies to provide affordable access through its Subscription Computing Program. In essence, this offers Microsoft-equipped PCs with internet access that can be paid for over time — expanding the number of businesses, organisations and individuals who can tap the potential of the knowledge economy.
Another major opportunity will be in the provision of mobile computing services. Central and Eastern Europe is still poorly served in ICT; the World Economic Forum’s networked readiness index assesses Estonia as the highest-ranked country in the region in 20th place, with countries such as Slovenia, Hungary and Russia some way behind. An explosion in mobile devices, however, is circumventing this disadvantage; in Russia sales of smartphones and PDAs leapt by 250 per cent in 2007 alone. This evolution will be as important as previous platform transformations: from the mainframe to the minicomputer; from the minicomputer to the PC. It offers a real opportunity to expand access, provide new services and develop innovative applications that work on the Windows Mobile platform.
EPC: What is Steve Ballmer’s visit hoping to achieve?
Torossian: Steve’s visit is aimed at turning the spotlight on Central and Eastern Europe and, in turn, focusing the region on the opportunities of knowledge and software economies. We are taking journalists on a tour of the Microsoft Campus at our US headquarters to show them the benefits that Microsoft can deliver to their home countries and the region as a whole.
Microsoft wants to show the world Central and Eastern Europe’s economic and innovative potential, the entrepreneurial spirit inherent in its people and, frankly, what a great place it is to live and do business in