IT industry - Intelligent Minds

 
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IT industry - Intelligent Minds
IT industry
IT industry - Intelligent Minds
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                                            IT INDUSTRY
IT stands as the most attractive branch of the Belarusian service sector. The country hosts more than 1,000
IT companies with over 30,000 employees. The share of IT sector in GDP is 5.1%. According to the Ministry of
Statistics of Belarus, computer and IT services is the third largest service sector in the country, following
transport and construction services. In addition, the share of IT services is the second in the total exports of
services, following transport services.

Boasting many well-educated, highly-qualified specialists who offer a very favourable cost/quality ratio, the
country provides excellent hi-tech outsourcing services for foreign enterprises. IT firms maintain close
contacts with Belarusian universities, providing special trainings for students, taking on interns, and hiring
recent graduates. These graduates constitute 11 per cent of IT employees, while one third have a 7-year working
experience. In 2017, 74.6 thousand students became graduates of Belarusian universities, including 2.2
thousand students in the field of Natural Sciences and 12.9 thousand students in Technologies. Thus, with an
average age of 28.6, young people dominate the Belarusian IT industry. About 64 percent of employees in the
industry work in outsourcing companies and 36 percent of employees work in product development
companies.

                                                                More than 1,000 IT companies
                                                                  with over 30,000 employees.
                                                           The share of IT sector in GDP - 5.1%

Belarus systematically develops ICT infrastructure and makes it affordable for the population, which creates a
favorable environment for new ICT-services and ICT-usage growth.

According to the report Measuring the Information Society 2017, published by the International
Telecommunications Union, Belarus is ranked 32nd among 176 countries on the ICT development index (IDI).
IDI is a composite index that covers access to ICTs, the use of ICT, and ICT skills. As a result, Belarus is one of
the regional leaders in ICT development while leaving behind the neighbouring EU states as well, including
Latvia (35th), Lithuania (41st), and Poland (49th).

Since 2012, Gartner has been including Belarus in the top 30 locations for offshore services. In 2016, IBA Group
submitted Belarus for the European Outsourcing Association (EOA) Awards and was announced as a finalist in
the Offshoring Destination of the Year category.

75% of the territory of Belarus covered
by 3G/4G networks
IT‐industry                                                                                                    3

                                                     ICT development index

                                               Country                 Index ranking

                                       Iceland                             1

                                       Korea (Rep)                         2

                                       Germany                             12

                                       Belarus                            32

                                       Lithuania                           41

                                       Russia                              45

                                       Poland                              49

                                       China                               80

ICT sector revenues reached almost
USD 4 billion in 2016

          Revenue from products (works, services) by ICT entities, USD billion

 6                                      5,49

 5                           4,41
                                                     5,01
                                                                4,29
                                                                                                    IT products
                                                                            3,94

 4
                 4,26
                                                                                                  and services
                                                                                                increased their
 3
                                                                                           contribution to total
 2
                                                                                           revenue in 2011-15
 1                                                                                           from 14% to 25%
 0

               2011        2012        2013        2014        2015        2016

              Source: IT-industry in Belarus: 2017 and beyond. Report by Ernst and Young
IT‐industry                                                                                                 4

High Load Systems and Big Data are the most widespread areas of software development in Belarus.

                                                       Software development areas,%

                                         0.8 1.4 1.4 2.3
                                                           4.6                          High Load Systems
                                                                                        Big Data
                                                                                        IoT
                                                         9.4                            Cloud Computing
                                   17.6
                                                           9.7                          Fintech
                                                                                        Machine Learning
                                                                                        AR/VR
                                                        14.5                            Uberfication
                                       10.3
                                                                                        Robotics
                                                                                        Blockchain

              Belarus in world trade in ICT services

Information and communication technology (ICT) services was the most dynamic sector among other
commercial services in 2016. This is due to a regular global demand for cost-efficient technologies, the
development of innovative software in various sectors such as manufacturing, finance, insurance, healthcare
and education, as well as the pressing need to address IT security concerns.

Computer services represented around 72 per cent of ICT services exports, or 353 billion USD, in 2016 growing
by 4 per cent according to the WTO Secretariat estimates.

                                  Exports of computer services in selected economies, 2016
                                                           (annual percentage change)

                                                  Israel
                                                Ukraine
                                                Belarus
                                                  Brazil
                                                 Japan
                            United States of America
                                               Sri Lanka
                                                   India
                           Argentina
                                Annual
                     percentage change
                                         -10      -5       0      5      10      15     20    25    30
              Source: ITC estimates.
IT‐industry                                                                                                                                                                    5

In 2016, Belarus ranked 16th by the export of computer services in the world.

                              The share of Belarus in the world export of computer services, %
  0.3                                                                                                                                                                   0.27

                                                                                                                                                           0.24
0.25
                                                                                                                                               0.197
  0.2                                                                                                                         0.174
                                                                                                                 0.151

0.15                                                                                 0.117
                                                                                                     0.121

                                                          0.092         0.098
                                             0.077
  0.1                        0.065
               0.059

0.05

     0
              2005           2006           2007          2008          2009         2010         2011           2012         2013          2014        2015       2016
                                                     Computer service export of Belarus, mln USD
                                                                                                                                 957.5
              1000
                                                                                                             818.3

               800                                                                           690.8

                                                                            554.9
               600
                                                           408
               400                       274.1

               200

                 0

                                     2011                 2012             2013              2014            2015                2016
Belarus managed to outrun such recognized world leaders in the IT sphere as India, the United States and Korea
in computer services exports in 2016. Thus, in 2016 the computer services exports in Belarus totaled about
$100.76 per capita, while in India the same index equaled $39.24 and in the United States – $52.84.

                                             Export of computer services in 2016 per capita, USD
              1277.82

1200

 800

                              475.19

 400
                                                 120.69      100.76
                                                                            52.84         49.85          46.25           44.48           39.24         18.58       18.39

      0
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                                                                                                                                                                  Jap
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                          t e d  a t       Can            Bel            S
                                                                     ted er            lip p i
                                                                                                            ic       Ukr                          Rusration
                       Uni Emir                                   Uni of Am        Phi                  ubl                                          e
                                                                                                  R e p                                          Fed
IT‐industry                                                                                                         6

High Technology Park (HTP)

The HTP was created in 2005 to foster development of the IT industry. The HTP is an area in the eastern
part of Minsk with a special legal regime lasting until 2049. Residents of the HTP may be companies that carry
out software development activities or other activities in the field of information technology, including:
џ design, development, maintenance, implementation, operation of software and / or firmware based on or
   with the use of the registry of transaction blocks (block chain), distributed databases;
џ creation, training of neural networks and other algorithms in specialized sections of artificial intelligence, the
   implementation of the results of this activities;
џ development, maintenance, operation and implementation of unmanned vehicle control systems;
џ development or separate stages of development of medical technologies, biotechnologies, as well as the
   implementation of the results of such developments;
џ business process outsourcing activities;
џ publication and promotion of software;
џ mining, the activity of the crypto-currency exchange, the activity of the crypto-exchange point, other
   activities using tokens;
џ activities in the field of e-sports.

This list is not closed. The Supervisory Board of the HTP is entitled to determine other types of activities that the
company will be able to become a resident of the HTP.

Within the framework of the special legal regime of the HTP, the following preferences are applied:
џ exemption from income tax and VAT (as a general rule). Instead of this HTP residents pay 1% of gross
   proceeds in favor of the HTP administration;
џ income tax payment from individuals at a reduced rate (9%), as well as contributions to the Federal Tax
   Service, calculated from the average salary in the country, and not from the actual one.

Additional benefits are provided aimed at stimulating the activities of product development IT companies:
џ exemption from VAT for foreign organizations that provide HTP residents with marketing, advertising,
  consulting and some other services (work);
џ zeroing of the tax rate on income of foreign organizations, in relation to the income from the alienation of
  shares, stakes in the statutory fund, shares in the property of HTP residents (subject to continuous
  ownership of at least 365 days), as well as royalties, advertising revenues and some other income paid to
  them by HTP residents.

Residents have the right to:
џ make transactions with electronic money without a number of restrictions;
џ open accounts with foreign banks and other credit and financial organizations without the permission of the
  National Bank, receive money into them;
џ conduct, in the notification procedure, foreign exchange transactions related to the movement of capital,
  carried out on the basis of permission of the National Bank;
џ draw up individuallyp rimary accounting documents when doing business with non-residents of the Republic
  of Belarus.

Legislation on the procedure for conducting and monitoring foreign trade operations for transactions involving
HTP residents does not apply. Investing can be carried out according to British law. Residents of HTP are
directly entitled to conclude agreements used in international business with third parties:
џ agreements on granting an option to contract and option agreements;
џ convertible loan agreements;
џ agreements on compensation for property losses;
IT‐industry                                                                                                     6

џ agreements providing for liability for enticing employees;
џ non-compete agreements with employees with payment of compensation, over the duration of non-
  compete obligations;
џ issue irrevocable powers of attorney.

As of January 2018, 192 companies operated in HTP. According to the HTP annual report, the volume of
production of computer programs in 2016 amounted to 900.2 million US dollar, providing an annual growth rate
of 142 percent.The volume of exports of the High Technologies Park in 2016 increased by 16 percent and
amounted to 820.6 million US dollars. The share of exports in the total production of the Park was 91 percent.

The software developed in the Park in 2016 was delivered to customers from 67 countries of the world, with
49.1 percent of exports accounted for Western Europe, 43.2 percent - for the United States. The share of the CIS
countries in total exports decreased from 10.7 percent to 5.3 percent due to a drop in exports to Russia by 43
percent.The main customers importing software developed in the HTP are from the US, UK, Germany, Russia,
Ireland. In 2016, the residents of the Park first entered the markets of the Philippines, Vietnam, Turkmenistan,
Mexico.

The leading areas of activity of the HTP residents are: outsourcing services (69 percent), development of
custom solutions (67 percent), custom product development (52 percent), development and support of
software for internal needs (48 percent), and development and support for proprietary software for enterprises
(43 percent).

Thanks to the High Technologies Park, in the whole country, the export of computer services became
the second most important item in shaping the positive balance of foreign trade in services. Thus, according to
the data of the NBRB for 2016, the balance of computer services in Belarus amounted to 843.7 million USA
dollars, while the share of computer services in the total volume of services increased from 12.3 to 14.1
percent. About 86 percent in the export of computer services is the export of software and services of HTP
residents.

In 2016, the High Technology Park attracted 169.2 million USA dollars of foreign direct investment, 16 percent
more than in the previous year.

                        Export and Import of computer services in Belarus and HTP share

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

    Balance      14.1    33.2    78.4   119.3 116.8 169.7 297.5         351.6 428.7 600.4 730.4 843.7

    Export       26.4    49.4    95.5   154.7 159.1 223.0 279.1         416.0 554.9      689.9 818.3 957.5

    Import       12.3    16.2    17.1    35.4   42.3    53.3    51.0     5.6     72.4    89.5    87.9   113.8

    HTP
    residents'           17.3    56.8   102.5 110.1 161.0 215.2         331.5 446.7 585.2 705.6 820.6
    export

    Share                36.1    60.0   64.5    68.7    73.9    78.5     81.6    95.6    88.0    86.2    85.7
It‐industry                                                                                                        8

              Some facts about IT industry in Belarus

According to the International Association of Outsourcing Professionals, six HTP residents companies (Bell
Integrator, Ciklum, EPAM, IBA Group, Intetics and Itransition) are included in the top 100 outsourcing companies
in the world.

10 companies from the world's largest software companies ranking Software 500 have development offices in
Belarus: EPAM (107), Bell Integrator (281), IBA (281), Itransition (368), Coherent Solution (393), SoftClub (409),
Artezio 416), Intetics (419), Oxagile (456), IHS (482).

Belarus was number one in the general ranking of Google Code Jam from 2003 to 2016. On August 11, Gennady
Korotkevich won the competition once again.

Mobile applications created by HTP residents are used by more than a billion people in 150 countries. World of
Tanks, the game developed in Wargaming, is one of the five most profitable MMO-games with more than
140 million registered users. IT products and services are the fastest growing segment of the economy in terms
of revenues and exports. The export of computer services has grown 36 times in 12 years.

Technological companies of Belarus created 52 joint laboratories in 15 educational institutions of the country.
In the IT industry in Belarus, there are a large number of employees with a higher education - about 76 percent,
while on average in the economy their number is no more than 30 percent.

              IT Industry Overview 2016-2017 in Belarus

1) The main event of 2016 for Belarusian IT became the purchase of the technological startup Masquerade by
the technological giant Facebook. The team led by Belarusians Evgeny Nevgen, Sergey Gonchar and Russian
Evgeny Zatepyakin developed mobile application MSQRD, which made it possible to superimpose graphic
effects on the video and photo images of the users' face. By the end of the year MSQRD was among the best
applications of the year on Google Play and the App Store.

2) In 2016, successful IT entrepreneur in Belarus Yury Melnychek launched several projects to create "new
MSQRDs" - the Varaig platform, a mentoring project for scientific and engineering start-ups and the venture fund
Haxus, investing up to $ 2 million in teams with developments in AI , AR and VR. In the fund's starting portfolio
there is the already well-known Prisma, the Fabby application for replacing the background of the selfie with the
help of neural networks and the "woman's monthly and ovulation calendar" Flo, developed in Minsk by the team
of Dmitry Gursky.

3) Startup founders of Viber Igor Magazinik and Talmon Marco announced in 2016 that they were developing
the service of online taxi Juno, which could press Uber due to the "human" approach to drivers (half of the
company's shares for them). Starting on the roads of New York, Juno attracted $ 30 million of investment
quickly gaining speed: a closed test drive began in the winter, the service started working at full capacity in late
summer - and soon reported the first million rides. Now the startup is negotiating to raise $ 50 million to go
beyond New York.

4) In 2016, EPAM ranked 7th in the top 25 fastest growing technology companies in the world by Forbes.
3IT‐industry                                                                                                     9

5) On December 22, 2017 the long-awaited document - Decree No. 8 "On the development of the digital
economy" was signed, which would create comfortable conditions for the work of investors in the
Belarusian start-up environment.

The document not only prolongs benefits for HTP members, but also introduces a number of revolutionary
measures, including elements of English law, legalization of block-technologies and crypto-currency.

6) In 2017, Google bought AIMatter. The application developed by the company Fabby, changing the
background or hair color in the photo, is a demonstration of the technology of playing neural networks on the
phone.

This is the first time that a large IT company completely acquires a company from Belarus, rather than an
intellectual property or an affiliated company in another jurisdiction.

7) In 2017, Wargaming launched the Wargaming Forge educational program for those wishing to learn the Data
Scientist specialty. The program was devoted to software engineering and data analysis.

8) Dmitry Birulya is the first Belarusian startuppers that have managed to get into the "most influential in the
world" start-up accelerator Y Combinator. His project IQBoxy is a program for automation of business expenses
management, digitizing documents based on machine learning.

9) In 2017, the PULSE robot was developed from the Belarusian startup Rozum Robotics. The Belarusian
development costs about 15 thousand dollars depending on the model, by one-third cheaper than solutions of
competitors. Almost all the spare parts for the collaborative robot the startup also produces by itself.

10) The FriendlyData start-up created by the Belarusians got into one of the world's largest accelerators 500
Startups. In May 2017, the project received the support of Google, becoming a participant in the program Grow
with Google. And a few months after the release, the Belarusians were selected for the prestigious Plug and
Play technology center, the leader in the Silicon Valley venture capital market. One of the world's most important
sources of news about API ProgrammableWeb recognized the FriendlyData REST API created by
the Belarusians as one of the most interesting projects of 2017.
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