2. CROATIAN ICT CLUSTER INITIATIVE From regional ICT clusters to a national association of ICT clusters Boris Krstanović, President, cro.ict – Croatian ICT CI Rajko Porobić, USAID – ESP Project 5th SEEITA Conference Skopje, September 27, 2007

3. Contents: 1.Introduction: Increasing Competitiveness of Croatian ICT Industry 2.ICT Cluster Initiative: - Incubation: GRIT ICT Cluster Rijeka - Regional ICT Initiatives 1: Osijek, Pula, Varaždin, Čakovec, Split - Regional ICT Initiatives 2, 3, … 3. From Regional ICT Clusters to a National ICT association 4. Questions and Answers ICT Cluster Initiative

4. Source: IDC Croatian IT Market Growth 1997 - 2005 (%) -11,4 3,6 6,9 25,8 20,1 3,9 1,9 14.5 31 199719981999200020012002200320042005 IT Market Growth (Estim.) 200616,6% 2006 – 2010 Hardware 8,9% Software12,7% IT Services 12,6% Average10,6% 1. Introduction: ICT market

5. Number of Employed in ICT industry in Croatia 1999 - 2004 Source : FINA, Prepared by IDC, 2006 1. Introduction: Croatian ICT Industry: Human Resources GAP

6. Findings: Croatian SW companies should focus on new market niches and move from SW services (body-shopping) to SW products Croatian SW companies should invest in development of high-quality SW products and solutions for the global market Cluster formation is a key factor for Croatian SW companies in their SW export orientation … Source: Croatian SW Sector Analysis, 2006 (CARDS 2002 Project) 1. Introduction: ICT/SW Industry Potentials in Croatia

7. Global Competitiveness Index 2006 - 2007: 51 (125) Networked Readiness Index 2006 - 2007: 46 (122) 1. Increasing Competitiveness of the Croatian ICT industry

8. Six recommendations to increase competitiveness of Croatian information and communications technology sector (National Competitiveness Council) “Using ICT to transform Croatia into a society based on knowledge and innovation” 1. SCIENCE AND EDUCATION IN THE DEVELOPMENT OF A KNOWLEDGE SOCIETY The number of qualified ICT workers, specialized for the use and development of new technologies should be tripled within the next three years 2. TECHNOLOGY ACCESSIBLE TO EVERYONE Access to broadband Internet should be provided to everybody as soon as possible, as well as technological, social and regional inclusion 1. Increasing Competitiveness of the Croatian ICT industry

9. 3. E-ADMINISTRATION SHOULD BE DEVELOPED COMPLETELY It is necessary to conduct a consistent and comprehensive reform of public administration as soon as possible, using the e-reengineering model, both on the national and on regional and local levels. 4. MORE DECISIVE USE OF E-BUSINESS Various measures should be taken to encourage companies to conduct e-business in their work, and all existing barriers to e-business should be eliminated. Development of business capacity must be connected to the application of e-business. 5. PROMOTE FASTER DEVELOPMENT OF THE ICT INDUSTRY It is necessary to design a development strategy for the domestic ICT industry with special emphasis on export capabilities. The institutional capacity of the ICT industry must be enhanced. 6. INCREASE THE EFFICIENCY OF ADMINISTRATION AND LEGISLATION It is essential to increase the efficiency of the administration by decisive introduction of new technologies, knowledge and skills. 1. Increasing Competitiveness of the Croatian ICT industry

10. Importance of ICT to gov’t vision of the future71 (122) ICT use and government efficiency 2006 80 (122) Firm-level technology absorption200680 (122) Availability of online services64 (122) Property Rights 2006 79 (122) Quality of Scientific research institutions 200646 (122) Computer, comm., and other imports 7 (122) Networked Readiness Index 2006 - 2007: 46 (122) Global Competitiveness Index 2006 - 2007: 51 (125) 1. Increasing Competitiveness of the Croatian ICT industry

11. 2. ICT Cluster Initiative

12. The nucleus of the ICT Cluster - founded in December 2004 as an initiative of 4 successful Croatian ICT companies: More than 50 years of joint experience in implementing and managing ICT projects References in vertical markets: Finances, Telecom, Tourism and Auto More than 90 ICT experts with more than 66 industry certificates (Microsoft, Cisco, Oracle, Linux, CA, …) Experience in international projects in German, Swiss, Slovenian, Qatar markets 2. ICT Cluster Initiative: Incubation: BEAM (2004)

13. Re-engineering of the program in July 2005 based on the BEAM experience and the experience from the industry of the neighboring countries (with USAID and GTZ program assistance) The first regional ICT Cluster: GRIT was founded in October 2005 as a bottom-up cluster initiative of the 8 leading ICT companies in the Primorje-Gorski Kotar County: - supporting member: Porin Regional Development Agency, Rijeka - partnership with the University in Rijeka 2. ICT Cluster Initiative: Incubation: GRIT (2005)

14. Objectives of the GRIT ICT Cluster (by priorities) for 2007/2008: 1.Development of ICT human resources (Cooperation with the Rijeka University and technology partners) 2.Positioning and branding, joint marketing/PR activities, networking (on regional, national and international level 3.Development of joint ICT solutions, products and services 4. Self sustainability, own financing of GRIT ICT Cluster activities + Development of quality culture (ISO9001, ISO27001, CMMI & IT-Mark...) + Support to the national ICT Cluster initiative 2. ICT Cluster Initiative: Incubation: GRIT

15. Objective: Increase ICT industry competitiveness Stage 1:Start and support the Cluster initiatives of knowledge intensive ICT companies in five Croatian regions: Varaždin, Čakovec, Osijek, Split, Pula based on the GRIT model/practice Desirable profile of the ICT cluster company/member - Innovative, knowledge intensive, successful regional ICT companies - Companies focused on SW products and/or ICT services - Income primarily from own SW products, solutions and/or ICT services (min. 65%) - SMEs (micro SMEs) up to 70 employees - Experience on the EU/global market 2. Croatian ICT Cluster Initiative: Regional initiatives 1

16. Workshops in regions with partners (regional development agencies, technology parks/centers and business incubators) and ICT companies 2. Croatian ICT Cluster Initiative: Regional initiatives 1 50 companies from 6 regions (counties) joined ICT Initiative

17. Stage 2: Foster and support the Cluster initiatives of knowledge intensive ICT companies in other (seven) Croatian regions: Zadar, Šibenik, Dubrovnik, Bjelovar, Karlovac, Krapina, Zagreb County based on the GRIT model/practice 2. Croatian ICT Cluster Initiative: Regional initiatives 2

18. Stage 3:Start and support the Cluster initiative of knowledge intensive ICT companies in other, less developed Croatian regions: Gospić, Vukovar, Sisak, Knin, Slavonski Brod, ….. 2. Croatian ICT Cluster Initiative: Regional initiatives 3 Comperissson of Net Salaries of ICT specialists according to regions – counties Source: MojPosao.hr (Job Portal), July – September, 2006 (N=7203)

19. Clusterization brings the following advantages/benefits to a region: 1.Increased productivity, through the benefits of economies of scale 2. Cost savings, through lower transaction costs, just-in-time practices… 3. Better access to information on market and technology changes 4. Enhanced image and attractiveness of the region, attracting FDI, or formation of new companies 5. Improved prospects for industrial restructuring, with a productive structure combining flexibility of small scale players with resources of large scale players; 6. Opportunities for more rapid knowledge deployment Due to cooperation between companies and knowledge institutions 7. Opportunities for joint learning, through joint search for innovative activities, exploitation of complementarities and synergies between companies 2. Croatian ICT Cluster Initiative: Regional initiatives

20. SWOT Analysis: Strengths Quality of Human Resources Quality of Technical Universities Quality of Infrastructure: Telecommunications Quality of Life ICT Environment… SWOT Analysis: Weaknesses Low Image/Recognition of Croatia as an ICT location Perceived lack of Government Priority in the ICT Sector Low Government Spending on Education (4.3% of GDP) Expensive Location (compared to other SEE countries) Low Export Orientation… Source: High Technology Study on Croatia, The World Bank, MIGA, 2005. 2. Croatian ICT Cluster Initiative: SWOT

21. 3. From Regional ICT Clusters to a National ICT Association

22. Stage 4:Establishing national association (network) of regional ICT clusters National ICT Cluster Initiative: - organic (bottom-up)! - commercially oriented self-sustainable - non-political - not technologically conditioned - flexible - open Promotes: knowledge and quality culture, business ethics and the dignity of the profession 3. From regional ICT clusters to a national ICT association

23. cro.ict - Association of Croatian ICT Clusters was founded in Rijeka, September 19, 2007 as a bottom-up cluster initiative of the 6 regional clusters, one (private) institute and two other association: 3. From regional ICT clusters to a national ICT association Founding Assembly of the Association of Croatian ICT Clusters in Rijeka, Grand Hotel Bonavia Distinguished domestic and international guests Good Media Coverage

24. cro.ict - Association of Croatian ICT Clusters 3. From regional ICT clusters to a national ICT association Signed Tecnical Assistance Partnering Agreement Between USAID and cro.ict- The Associatio of Croatian ICT Clusters Recieved: - Letter of Support from GTZ – Deutsche Geselshaft fuer Technische Zusammenarbeit - Letter of Support from European Software Institute for Eastern Europe, Center Bulgaria - Letter of Support from Croatian Government, e-Croatia Office

25. The goal of the cro.ict – Croatian ICT Cluster Initiative: to increase competitiveness of the Croatian ICT industry through: More efficient lobbying and receiving public support for the ICT industry Development of human resources and optimal allocation of resources Exchange of different business and technology competencies, knowledge and practices with an aim of –implementing larger and more complex (software) projects –joint applied R&D and development of ICT products and solutions –applying for international tenders (EU, World Bank…) –development of quality culture Fostering collaboration within regional clusters, EU/SEE ICT clusters, cross-sector collaboration; collaboration with academia Encouraging joint applied R&D of innovative ICT solution, products and services Cost savings (joint procurement, resource sharing…) Positioning and branding Croatian ICT industry on international markets, joint marketing activities Increasing exports (opening new markets and new business opportunities) & FDI Promoting ethical business standards and protecting the dignity of the profession… Enabling access to capital… 3. From regional ICT clusters to a national ICT association

26. Services of the national ICT federation: - For members - regional ICT clusters: knowledge management and information networking, resource allocation and sharing, on the job training and staff qualification, access to capital, lobbying, supporting exports, branding, joint marketing, introducing quality standards (ISO, IT Mark, CMMI,..), (technical, legal,…) support. - For clients (on the domestic and international market): One-Stop-Shop, networking, supporting FDI… Marketing&PRExport Promotion Tender Information Training&QualificationApplied R&D Cooperation Projects Policy ActionAccess to Capital One Stop Shop Cluster Managing Office Cluster Service System Client Membet 3. From regional ICT clusters to a national ICT association

27. cro.ict - Croatian ICT Cluster Initiative will encourage its members to: - create: - various specialized ICT networks - ad-hoc consortiums (FP7, Boost-IT, CIP …) - technological and user associations (TT)… - cooperate with other sectors (with other industry clusters) - cooperate with ICT clusters in EU & SEE countries (SEE-IT Brand), create and join trans-national (virtual) ICT Clusters - cooperate with the academic community (HR and TT development, joint applied R&D, work on projects … alumni development) - cooperate with regional development stakeholders (PPP projects, incubation of new ICT business ventures …) 3. From regional ICT clusters to a national ICT association

28. Partners in the Croatian ICT Cluster Initiative (so far): Regional partners: RDAs, technology centers/parks, business incubators - Institutional support in regions Ministry of Economy, Labor, and Entrepreneurship - Institutional support, incentives APIU (Trade and Investment Promotion Agency) - International marketing, branding USAID - ESP Project - Technical and financial support, managing the CI project, lobbying… Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH - Technical support (training and qualification, consulting), networking, lobbying 3. From regional ICT clusters to a national ICT association

29. Formation of clusters in necessary to increase competitiveness (or for further development/survival?!) of Croatian ICT industry. Experience from EU (but also from transition economies) shows the necessity of institutional support in the creation and start up of (horizontal and vertical) clusters. Clusters (regardless of globalization and de-materialization of production) are linked to regional resources - regional organization. Cooperation with development agencies, technology centers, business incubators and the local university is essential. Regional partners (RDAs/Centers/Incubators) - flagships of regional initiatives and activities; technical and financial support is crucial: USAID, GTZ, MELE… ICT Cluster initiative - approach proven in practice, verified concept and scenario for creating links between the knowledge-intensive portion of Croatian ICT industry Croatian ICT Cluster Initiative Summary:

30. Questions and Answers

31. cro.ict – Croatian ICT Cluster Initiative Association of Croatian ICT Clusters c/o Porin, PIU Torpedo 51000 Rijeka; Croatia Phone: + 385 98 210 105 www.cro-ict.net Boris Krstanović e-mail: boris@multilink.hr USAID ESP Project Florijana Andrašeca 14 10000 Zagreb Phone: +385 1 3845 777 www.ph.com.hr Rajko Porobić e-mail: rajko_porobic@ph.com.hr Contacts: