Coming of Age

From its humble beginnings, the IT sector in Poland is now set to take off over the coming years. WBJ Observer takes a look at the history of information technology in the country and where it’s headed

by John Beauchamp

It’s a cold winter evening in Warsaw and the shriek of the modem on my friend’s IBM 486 is going into overdrive. We had just booted up a simple terminal program on DOS – an operating system known all too well to pubescent youths such as ourselves, who were growing up with what was to become a revolution in communications – and now came the moment of truth. Will we manage to achieve a connection?
We sit there in anticipation.

ranking polandThe modem’s screeching comes abruptly to a deafening halt, and as we draw a deep breath a menu appears. We’re in!
But this wasn’t a connection to the internet as we now know it. This was BBS – the bulletin board system, a precursor of peer-to-peer file sharing, as well as a destination where like-minded geeks could trade information on the latest tech wizardry. After all, this was 1995. But a revolution was on the horizon.
The introduction by then Poland’s only telecoms operator, Telekomunikacja Polska, of its nationwide access number in April 1996 heralded a new era for the internet in Poland. Many Poles still remember the number – 020-2122 – which gave mind-boggling speeds up to 56 kbps hitherto unparalleled, with many opting to set up their first e-mail addresses with Poland’s first free provider, Polbox, or the Kraków-based
And so, with this new era of technology, every weekend hundreds of tech geeks in Warsaw would flock to the computer markets on ul. Grzybowska, as well as its bigger brother on ul. Batorego, which still exists to this day.

Rich history
Yet while the internet came to be marked as a turning point for bringing IT to the masses, computers and computer science have been around in Poland for a lot longer. In fact, the first experimental computer – the GAM-1 – was constructed in 1950, and by 1958 Poland had its first universal computer, the XYZ. Much like their counterparts across the world at the time, these machines were the size of a walk-in closet.
A year later in 1959, the Elwro plant in Wrocław was opened by ministerial decree, and it went on to become one of Poland’s major computer producers, including the series of Odra machines. Meanwhile, computer science became more widespread across technical universities across Poland. The 1960s and 1970s ushered in a whole new era in computer science, with technical universities opening up specialized departments. One of the most renowned of these was the creation of Cyfronet in Kraków in 1973, which still provides supercomputing and networking capabilities for academics across southern Poland, as well as hosting Zeus, the country’s fastest supercomputer.

Back to the future
Spring forward to modern-day Poland, and the story has developed beyond recognition. According to figures from Poland’s Central Statistical Office, in 2012, 73 percent of Polish households had one computer or more, while 70.5 percent of Polish homes had access to the internet, with the number of households able to connect to broadband internet at 67 percent. In Great Britain, by comparison, 80 percent of homes had internet access in 2012, figures from the UK’s Office for National Statistics reveal.
So where is all this IT that’s going on in Poland? After all, the value of the IT market in Poland grew by 6.3 percent year-on-year to land at PLN 29.6 billion in 2012. All this money couldn’t have been generated by a bunch of tech geeks, surely.
You’d be surprised. From the public sector to the private sector, from big corporations to small start-ups, IT is everywhere, and it is not just prevalent in the IT sector per se, but across all spheres of industry.

From small beginnings…
For many 30-somethings working in IT up and down the Vistula, it all began with small-scale operations. “When I started university, I set up an ISP [Internet Service Provider] with a friend for people living in small towns, and by the end of the 1990s we had built one of the largest radio-driven networks in Poland,” said Andrzej Targosz, who now heads Proidea, an independent non-profit based in Kraków which provides training courses and organizes IT conferences across the country.
The story is similar for Jakub Rutkowski, a team leader at Asseco, ranked Europe’s sixth-largest IT firm in 2012, according to Truffle 100, a ranking of European software vendors. “You could say I’ve been involved with IT since 2000,” he said, adding that “As a student, I would earn extra cash as a system administrator at a small company.
“My first full-time job came in 2005, when I was with ABG – then part of the Prokom capital group – and then with Asseco when the companies merged in 2008,” Rutkowski said.
And he is probably not alone in his career path among the many thousands of people working in IT across Poland today.

From school to start-up
What has visibly boomed in Poland over the past few years, however, is the rising number of small-scale start-ups across the country. This has been commonly attributed to the quality of education graduates obtain from leading technological universities.
“We still have a very high standard of scientific education, and are taught how to tackle all sorts of problems – this really does help,” Targosz said. Furthermore, “we shouldn’t talk about talent, as it only makes up a few percent of what is needed to achieve success as a programmer: it is a good education, diligence and the will to widen your competences,” said Rutkowski.
Many cities across Poland now host at least one academic institution which caters to budding IT workers. “I believe we have a group of very good universities at a world-class level,” said Rutkowski, adding that “academic establishments in Warsaw take the lead, but also Wrocław, Kraków, Gdańsk, Poznań and Łódź have very good technical universities, and you can see that cooperation with local business also spurs the development of academic centers.”

Targosz concurs. “The internet now breaks down localization barriers,” he said, noting that centers which were once avoided, such as Białystok on Poland’s eastern frontier, now also have a burgeoning IT scene as a result of increased connectivity.

However, “there are numerous outstanding research centers in Poland but characterizing the best is comparing apples to oranges. Each one has specializations which makes them unique unto themselves,” said Ramon Tancinco, Senior Manager, Strategy, IT, Operations and Business Development in the CEE region and Russia at Cisco Systems.
The model which sees business partnering with academic institutions is one which is championed across the board. “It goes without saying that development is very important for academic establishments, although it is important to be able to apply the knowledge to business,” said Rutkowski. “A number of instruments come into play here, from local entrepreneurship incubators, which allow capable and ambitious students to start getting their first commercial ideas, to working with leading Polish and foreign companies.”
Kraków in particular has taken an entrepreneurial leap since the first start-ups started cropping up in the city towards the end of the previous decade.

“The start-up scene in Poland is explosive right now,” said Tancinco, “and what is amazing is the combination of both grass-roots with organized initiatives. On the grass-roots side, every year I learn about more start-ups who go to Silicon Valley to immerse themselves in the entrepreneurial culture and many of them are even returning with venture capital funding, never easy when the market of ideas is global.”
“The pace of development is quite fast, as should be expected from a community with such a high caliber of tech talent,” said Paul Chen, a technical English teacher at AGH University and a blogger on the start-up scene in Kraków, although he has his reservations on purely tech start-ups, lamenting the fact that other sectors aren’t incorporated so easily.

“I am worried about the fact that so much attention is focused on the tech side of the market. I would like to see a more diversified portfolio of start-ups in terms of sectors. I would like to see [a greater] spotlight on biotech, food, environmental protection, social promotion, and community service-based start-ups,” Chen said.
Nevertheless, there have already been some major success stories to come out of Kraków. In 2013, the start-up Estimote, which found an innovative application for retail tagging, managed to receive $3.1 million in funding “from some of the most well-known VCs in [Silicon] Valley,” Tancinco said, adding that “they are adding jobs in Poland and in the US, a huge win-win across two continents.”

The support doesn’t just come in the form of the private sector. Public initiatives also play an important role. “On the organized initiative side, the Top 500 innovators program sends top Polish scientists to Stanford University, [while] the US Consulate in Krakow recently sponsored the Polish-American Innovation Bridge,” Tancinco said, adding that the “government is starting to realize that collaboration with grass roots initiatives, like the TEDx phenomenon [the rapidly rising number of independent conferences linked to TED on technology and design] truly pays dividends in connecting with Poland’s next generation of leaders.”
Other cities are also getting a piece of the action. The first Polish cloud computing service, Poznań-based e24cloud, has been on the Polish market for more than two years. The service has seen dynamic growth in a sub-sector that is now the fastest growing segment of the industry, holding a market value of over PLN 216 million. Furthermore, just in 2012, the company saw 39 percent growth.

Foreign capital
Poland is fast becoming a destination for foreign IT investments. Cisco is one of the major players, but a number of global tech firms are firmly positioned in the country. Google is a big player in three cities across Poland – Warsaw, Wrocław and Kraków – while HP, Microsoft, Dell, Motorola and many other big corporations prop Poland up as a major destination.
“In addition to hosting such companies as Cisco, Google, IBM, Akamai, and Oracle, in 2013 Kraków also welcomed a GE Healthcare IT and a Samsung R&D center,” said Tancinco.
“Foreign investors are beginning to spend money in Poland, and we are providing wide-ranging schooling on the matter,” said Targosz. “This process is ongoing, but you can already see the positive effects. We have a lot of firms in Poland, but their quality is not up to scratch yet. What is interesting is that the most promising companies are SMEs which have not been tainted by ʻconservative business,’” he added.

Elbow room
There is always room for more activity, however. “I think that investments in the IT market in Poland by foreign companies are still lagging. There are big foreign players present which have branch offices scattered worldwide, and there’s no possibility to leave out the biggest country in the CEE region,” said Rutkowski, who laments that “foreign companies prefer to pick up the best programming talent and ship them off to head office instead of setting up shop in Poland.”
Rutkowski blames barriers, such as red tape, as a major reason foreign companies put off investing in Poland.
Nevertheless, “it is not simply a question of multinationals but the development of the entire ecosystem,” said Cisco’s Tancinco.
As such, most cities in Poland now host tech parks, which try to foster innovation, although these centers complain that they’re not getting the visibility they need in order to attract funding and talent.
The country still lags far behind the rest of the EU. In 2013, the European Commission’s Innovation Union Scoreboard placed Poland 24th out of the EU’s then 27 countries, beating only Latvia, Romania and Bulgaria.
According to the EC, Poland’s “relative strengths are in human resources,” while “relative weaknesses are in linkages and entrepreneurship and innovators,” stated the report, which was released in March 2013.
Furthermore, an article in Foreign Affairs wrote that Poland should concentrate on developing its high-tech market.
“At the moment, Poland does not invest much in research and development relative to its more developed neighbors – only 0.7 percent of GDP, compared with about 2.0 percent in the EU as a whole,” the policy journal wrote.

What next?
There is no doubt that IT in Poland is becoming a huge market, but what of the future? If the synergy between academia and business is going so well, and the climate is becoming better for entrepreneurial start-ups, where do we go from here?
“The Polish market is at a stage of construction through acquisitions, with dominating companies buying out smaller firms in order to get more market traction and new clients, and this can be clearly seen since 2000,” Rutkowski said.
“However, we are approaching the next stage, which will see the incorporation of companies dependent on the [market] dominators in each capital group,” he added, saying that, “in order to survive as independent entities, Polish companies must cut operating costs and raise the bar on productivity through unifying internal processes.”
“Consolidation is unavoidable,” said Andrzej Targosz. “It will happen first across certain sectors, and then we’ll see the merging of companies working in different areas. In five years’ time we’ll have large firms and a whole array of satellites, which will be bought up at the moment they mature.”
“I will admit that I am bullish on Polish IT over the next two decades, but my bullishness is founded on a steely eyed focus on several fundamentals,” said Tancinco.
“First of all, the fact that multinationals continue to flock to Poland despite the fact that there are cheaper places in the world to operate means that Poland is regarded as a location where quality trumps cost.”
“Secondly, if I look at both the number of start-ups and venture capital funds which have emerged like proverbial mushrooms after the rain in the last four years, I believe that it is simply a matter of a few years before Poland experiences its first Skype moment,” said Tancinco, referring to when Estonia was put on the map after the success of Skype, an internet communicator.
Poland’s IT industry may still have to wait to see a global breakthrough, but with the right climate in place and certain barriers which will eventually be crossed, the future is bright, even if for some it is something of an unknown.
“There is no point in predicting anything for the next one or two decades,” said Targosz. “10 years ago not many people had mobile phones, and 20 years ago most of us were still using IBM 386 machines.” To log on to the BBS services, no doubt.


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