Egzakta - innovations

Ljiljana Milić

Director

While scrolling through LinkedIn, I saw a comment that made me pause and reflect. It describes a familiar narrative: the owner of an IT company lands a significant client, hires thousands of developers, purchases luxury cars, yachts, and private jets, and builds an image of a successful company—until one day, the client ends the partnership. Developers lose their jobs, families are left without income, and everything concludes with a LinkedIn post accompanied by pats on the back and moral support. Is this story true? – Maybe. Is it false? – Maybe. However, the line between reality and fiction is often blurred in a world where LinkedIn is flooded with success stories, luxurious lifestyles, and massive projects.

LinkedIn is no longer just a professional networking platform—it has become a stage for promotion, often idealization. Amid the sea of posts oscillating between expertise and mere marketing, it's increasingly challenging to discern the essence. However, no matter how simplified, isn't that comment far from the reality behind the scenes of Serbia's IT industry?

If we start with the bright side, Serbia has, in recent years, become synonymous with talent in the IT industry, attracting the attention of the world's largest companies and investors. Cities like Belgrade, Novi Sad, and Niš dominate as IT hubs, while the rest of the country slowly embraces digital transformation.

The domestic IT market grows at about 10% annually, almost half the average growth rate of Serbia's IT exports. In the first six months of 2024 alone, exports increased by over 18% compared to the same period in the record-setting year of 2023, with projections indicating that exports will reach as much as €4 billion by the end of the year. Between 2012 and 2023, revenue from IT exports grew tenfold, and it's expected to reach €10 billion by 2027.

The number of employees in the IT industry has surpassed 100,000, and the number of active companies increased from 6,717 in 2022 to 7,236 in 2023. By 2026, the workforce in the sector is predicted to exceed 120,000. These impressive statistics highlight the industry's vitality for Serbia's economy, contributing approximately 7% of the country's GDP.

However, behind these impressive figures lie significant challenges. Around 70% of revenue comes from outsourcing—a model that provides stability but limits growth. Domestic companies often operate as subcontractors for foreign clients, raising questions about sustainability. Where is the room for innovation? Have we become a "code factory" producing to others' specifications while the true potential of the IT industry remains untapped?

According to investment data from The State of Adria Tech report, investments in Serbian startups during 2021-2022 exceeded €320 million, representing a threefold increase compared to previous years. However, in comparison to other countries in the Adriatic region, Serbia lags behind.

Croatia leads with €1.86 billion across 88 investments, Slovenia with €1.25 billion from 209 investments, and Serbia secured €325 million across 24 investments.

Future growth is expected in fields like artificial intelligence and blockchain technology, marking a significant step toward diversifying the IT sector and transitioning to higher-value business models. Such a shift also increases regional competition. Croatia, Slovenia, and Romania have already attracted significant foreign investments. While Serbia remains appealing due to low operating costs and favorable tax rates (15% corporate tax), it risks falling behind in the innovation race.

Serbia's freelancers and small IT entrepreneurs have long benefited from the flat-rate tax system. However, the 2023 Freelancing Law introduced new levies, sparking protests within the community. While significant players enjoy low taxes, smaller businesses face growing burdens.

This raises the question of how attractive Serbia is for small and medium-sized enterprises, which often form the core of innovation. On the global stage, competitiveness is measured by taxes and support for research, development, and the creation of high-value-added products; according to a Startit survey from a few years ago, around 35% of IT professionals in Serbia plan to move abroad within the next five years, citing higher salaries and better working environments as the main reasons.

The IT sector in Serbia is known for high salaries, but the reality is far from the myth. Junior developers earn an average of €1,200 per month, while senior developers can reach up to €4,000. Although impressive compared to other sectors, these figures pale in comparison to Western Europe, where IT professionals can earn up to €8,000 monthly. However, money isn't the only factor. Young professionals increasingly seek flexibility, challenging projects, and opportunities for development. Serbia often falls short in these areas, focusing on rapid growth and quantitative metrics rather than quality work environments and opportunities for advancement.

The media often portrays Serbia as the "Silicon Valley of the Balkans." Still, this comparison can be burdensome, raising questions about whether we're truly keeping up with global innovations or merely living off marketing slogans.

For Serbia to realize its potential, systemic changes are essential. Investments in education are critical, and collaboration between academic institutions and industry must become more intensive to develop skills aligned with global trends. The government also plays a key role through subsidies for innovative projects, such as those provided by the Innovation Fund, which could stimulate the development of high-value-added products and reduce reliance on outsourcing. This is the path to creating an IT industry that doesn't depend solely on foreign clients but becomes a leader in innovation.

Serbia has talent and potential, but we need a clear vision to avoid remaining in the shadow of foreign investors and clients.

The comment at the beginning of this text perfectly encapsulates the core issue—while LinkedIn can showcase success, the real picture lies behind the numbers and viral posts. Will Serbia's IT sector become a global leader or retain the title of a regional outsourcing hub? The challenges are great, but the opportunities are even greater. The key is to stop being mere spectators on LinkedIn and build genuine success stories.

The glimmers and shadows of Serbia's IT industry