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The sectoral study examined future occupational and skills needs in ICT services that are defined as NACE 64.2 (telecommunications), NACE 72 (computer and related services), and ICT occupations in customer segments (which account for a predominating portion of employment in ICT). The sector of ICT services has undergone dynamic changes over the last 15 years. While the Czech gross national product increased by 3-7% in the past 5 years, revenues in ICT services scored an annual growth of 12-26%. The proportion of ICT services in GDP is constantly rising and this trend is expected to continue in years to come.

The sector is characterised by a high level of wages, labour productivity and international openness. Demand for ICT services is increasing both in the Czech Republic and in global markets. There is also stiffening competition among companies – particularly in the telecommunications market, which is highly developed in the CR even in comparison with advanced countries. A large number of major investors entered the CR in recent years and created thousands of jobs. The main market growth factors were low costs, sufficient supply of skilled labour and investment incentives. However, growing demand for ICT services has exhausted the labour market supply in ICT. This will result in a number of major problems in the future.

Most ICT occupations can be currently found in so-called “customer companies” – those that use ICT services for their operations. ICT occupations in these companies are responsible particularly for the development, modification and operation of information systems, administration of ICT and development of special applications to meet the company needs and to be used in the software-based products that the companies manufacture (electronics). The actual estimated ratio is 60:40 in favour of customer companies. Experts agree that the proportion of employees ICT supplying companies will grow in years to come. The reasons for this are analysed in the following chapters.

According to a study carried out by the Research Institute of Labour and Social Affairs (RILSA) approximately 27.5% of ICT workers have tertiary education degrees. The same study has revealed that some 47% of ICT workers have technical qualifications. However, the data of the Czech Statistical Office show that only 8% of ICT specialists with tertiary education have a degree in informatics and computer technology. In order to satisfy their demand for employees (particularly those with tertiary degrees) companies must very often hire both graduates and workers with experience in other fields. Their retraining is often very costly.

ICT services constitute a relatively “young” sector in which the 25-34 age cohort predominates. The ICT sector need not be so much concerned about demographic problems that will affect other sectors in the near future due to a high average age level. The total number of retiring employees should increase by one third next year – from 3,000 to some 4,000. This trend will also influence the situation in the labour market.

The ICT labour market is currently facing problems that are similar to those faced by other technology and knowledge intensive sectors of the Czech economy. The dynamic development of ICT services in the CR (influenced, above all, by the inflow of foreign investment) has exhausted nearly the entire labour market capacity. In certain occupations this has even resulted in “salary inflation” – companies overpay employees in occupations that are of key importance for their development and competitiveness. At present the education system fails to “supply” a sufficient number of graduates. In the short term this may be offset by active support aimed at attracting ICT specialists from other countries and by retraining. In the long term, however, more radical changes and reforms in the academic sector must be implemented in order to ensure that supply responds to demand in a flexible manner – not only in terms of numbers, but also in terms of the structure of the required knowledge and skills. The third possibility consists in optimising the occupational and qualification structure of employees, for which it is necessary to define future labour market needs.

In the CR there is a particularly large demand for experts in the newest technologies, workers with various narrow specialisations and database experts. Research has identified a major shortage of experts capable of combining specific technical knowledge with an overall systemic solution, and specialists capable of communicating both with technicians and users. 

A specific feature of ICT services is the pace of development of new technologies to which schools and educational institutions in the CR are not able to respond in a flexible manner. Some programmes are entirely lacking in the provision of Czech schools, and companies are forced to deliver courses for their staff that are run by foreign trainers and are very costly. Adoption of appropriate measures in the education system is an absolute necessity if employment in this area is to be maintained.

The importance of the CR in the global ICT services market is low and this situation is not likely to change. Global developments may only be influenced in a major way by large countries with a high potential in terms of human resources. The CR has a good chance to assume an important position within the Central European region (Poland, Hungary, Slovakia, Germany, Austria, Baltic countries and the Balkan). In the near future the Czech Republic will tend to be more of a supplier and exporter – thanks to investments by foreign companies and continuing globalisation.

However, basic research in the CR is of low importance and the capacity of the labour market is limited. Interesting solutions do emerge, but their development and importance equal the size of the country. The taking over of foreign technologies will continue, the CR will only develop applications based on these technologies. Some experts mention the threat of Asian software development – the quality and capacity of Asian development companies guarantee a potential to deliver globally successful solutions across all segments. The cost of labour will converge to that in Western Europe and the cost advantage will slowly disappear. Focus on products and services with higher value added – particularly in development and trade – will be of key importance for the CR.

Some demand for Czech ICT services originates in the USA, Germany and other developed countries. Many forecasts mention a large potential growth in demand on the part of German companies that may move some ICT administrative and servicing activities to the CR in years to come. The Czech Republic’s competitive advantage as compared to countries such as India, Malaysia, the Philippines and China is not only the same time zone and cultural and social proximity – it is also the language. In attending to German customers ICT suppliers normally cannot do just with English. Competitors for the CR are, again, neighbouring countries. In new EU member countries up to three quarters of students learn English. However, the proportion of students learning German is over one third and will further grow.

Can the Czech Republic become the “Silicon Valley” of Central Europe?

Experts agree that this development is very unlikely. The main reasons for this are as follows: 

  • Lack of labour force in the region. The CR has a limited demographic potential and the prospects are not favourable. Admitting workers from countries outside the EU entails a very complex procedure. The pay level in the period until 2018 will be lower in absolute terms than in other EU countries. This is the reason why potential workers from Eastern Europe will tend to “skip” the CR and try to find employment in the EU-15.
  • The business environment and the tax system. The tax burden is currently higher than in other Central European countries. The cost of labour is increased by high social and health contributions.
  • Economic prospects. The Czech Republic lacks a clear definition of priorities for the development of some sectors and skilled labour.
  • Co-operation between tertiary institutions and the business sector. At present educational institutions only operate as “factories producing labour” for companies. A good link between research, science and the business sector is still an exception
  • Factors 3 and 4 are closely linked to the issue of quality in education. As in other sectors (including industry) educational institutions fall short of meeting industry requirements.
  • Marketing and trade “spirit” of Czech ICT companies and developers. One of the most severe “ailments” of Czech specialists and scientists is their poor sense of the potential application of ideas in business and the poor capacity to think in market terms.

Following major trends will influence the ICT sector and occupations in the following years:

  • Technologies in general

It is a general trend in technologies and processes that technologies will be increasingly accessible (cheaper) and powerful, applied systems will be increasingly complex and instruments for the development and administration of applications will be increasingly simple and efficient. The proportion of ICT knowledge in the scope of knowledge required from graduates is estimated to be 59-85%. Experts agree that this proportion will drop in favour of inter-disciplinary and soft skills in the following years. At present we witness technological progress particularly in the area of business information systems. Less attention is devoted to applications that change our society – e-government, transport control, e-health, emergency handling systems, integrated systems for financial, banking and insurance services, etc. These systems will require far more profound analytical knowledge, since their inter-linking nature (complexity) will tend to increase.

Technological progress will have a major impact on the knowledge of people who design extensive systems for millions of users (transport control, healthcare, banking, e-commerce), as well as on the knowledge of those who develop software applications for transport vehicles, military technology, etc. Failure of such systems would have disastrous consequences. This is why their design and operation will require increasingly thorough knowledge and a relatively small (but growing) number of specialists. There are technological changes in ICT that may be revolutionary in terms of labour requirements. These include, for example, SOA (system oriented architecture) or new web technologies. In the event of these changes the way of thinking will have to be changed. However, not all IT specialists are capable of this and will have to undergo further retraining. It is even possible that these technologies will change the entire ICT occupational structure – some occupations will be eliminated. Transformation of technicians and developers into consultants and analysts will be the most important result of these changes. 

  • Invisible ICT and commodisation

As the number of ICT users grows, there are increasing requirements for comfort, intuitiveness, user-friendliness and security of these technologies. ICT will become an integral part of the lives of most ICT users. This will entail a great emphasis on user-friendly and intuitive operation, an overall stability of all systems and their automation. The “easy”, “user-friendly” and “invisible” IT qualities are major factors that ICT suppliers and developers may pursue to attract numerous groups of users who have not yet been seen as a target group. In terms of occupational requirements this trend will be reflected particularly in the growing importance of designers and testers (“ICT ergonomics), who will have the task of building a “bridge between technology and users”.

  • Product standardisation

Products and services will increasingly be seen as a commodity. Their price and quality will be specifiable, products will be more standardised and easy to compare. This will result in increased market transparency, stiffer competition and reduced priced. There will be fewer “tailor made” solutions. Commodisation always exerts pressure on the price of the final product and forces companies either to change the target segment (focus on products and customers where the price margin is higher), or to save money (most frequently by means of outsourcing). Globally operating companies are particularly threatened. 

  • Trends related to process changes

ICT occupations will also be affected by trends in processes and organisation. In particular, developments in the following areas will be important:
Sourcing / Outsourcing / Offshore outsourcing – the essence is management of relationships between customers and suppliers that will be increasingly complex and demanding in terms of co-ordination. There are no longer any dividing lines and there may be several dozen companies from across the world co-operating in implementation of one project. New jobs will appear on both sides that will deal with sourcing (seeking new resources, suppliers) and co-ordination of projects within or outside a company. They will require the capacity to negotiate quickly and flexibly with suppliers or internal clients, to identify requirements and co-ordinate projects.
Centralisation and concentration of companies will have a similar effect. There will be increasing demands for co-ordination within larger entities. These trends will affect the requirements for knowledge and skills in other ICT occupations including management, analytical and technical ones. 

  • Globalisation – pressure for Czech mindset change

Czech ICT services are part of a wider globalised market. The internal Czech market ceases to be a priority for companies operating in the CR. The Czech Republic is a major (in view of its size) exporter of ICT products and services. However, it is no longer possible to give a quantified answer to the question of what part of ICT will be designed for export and what will go on the internal market. The reason is that regional perception of ICT services is becoming pointless. Suppliers of SW solutions in developed European countries may face the threat of this very openness of the ICT market and of the simplification of development instruments. As a result, the market may be exposed to competition from Asian software developers who may beat European companies in terms of creativity and productivity, and who will have the potential to attract a portion of Czech as well as foreign customers. English speaking countries are already tackling this trend, and in the near future the same situation may occur in smaller, language-specific countries.

  • Growing cost of labour and its convergence to EU levels

Although most economists agree that the CR will catch up with developed countries in terms of wage levels as late as within several decades, the projections should be more careful with ICT services. The average wage in ICT services is around a double the national average and it is growing at an increasing pace. Qualified occupations could reach up to West European pay levels within 10 to 15 years. At first sight, wages can be considered as a major factor. However, generally speaking, if an ICT specialist is productive enough and has appropriate knowledge and skills, the cost of his/her labour need not play the key role.  

The ICT market will undergo several major changes in the following years

  • In business services, which is the largest segment in terms of the number of employees, there is a suggested shift towards lower levels of product complexity as a result of technological progress and easier development of applications, and also towards increased uncertainty: changes in business patterns, competition in the form of web applications and foreign-located SW, and the necessity of co-operating internationally – all this will outweigh the trend towards expansion of the customer group. As regards human resources, this will lead to a growth in demand for analytical, trade and management occupations, and to stagnation or even decline in demand for technical occupations.  
  • ICT administration will be affected, above all, by technological trends that will cause a decrease in demand for the services provided by these companies. At the same time, there will be a change in occupational requirements – repairs will be replaced by a simple replacement of components, and servicing activities will tend to shift from hardware toward applications.
  • As concerns strategic ICT services the implementing team suggests a shift towards larger uncertainty. This will be caused, above all, by cost considerations, lack of skilled workers and cheaper competition from other countries in the same time zone. Some companies may stand up to this by expanding the range of services to include those with higher value added (e.g. development). This trend is in line with a slight shift towards higher levels of complexity. In technical occupations there may be a slight decrease in overall demand on the part of companies. The structure of requirements may change significantly – workers will have to handle a wider range of activities. Demand for consultants and analysts will grow slightly as a consequence of new types of services.
  • The implementing team expects a major change in the segment of application (user) software – much higher uncertainty in the segment will be caused by stiff external competition in the form of Internet applications, the potential of foreign competition and, again, a change in business patterns (customers will be increasingly less willing to upgrade to new versions of software). A slight decrease in the level of complexity is, as we mentioned above, the result of technological progress that makes the development of applications easier. As regards the impact on human resources, there might by a decrease in overall employment and outflow of technical occupations to other segments (particularly embedded software) and to the entertainment sector where these people will need a different knowledge structure. Conversely, trade and marketing occupations will be increasingly significant. The knowledge of the market and market trends will be more and more important for the survival of suppliers of application software. High flexibility, a broad scope of knowledge and combination of trade, marketing and technical skills will be increasingly valued. It is not easy to identify trends in the demand for occupations in this segment – there will be frequent fluctuations.  
  • Telecommunications services should experience an increase in complexity and, partially also, uncertainty levels. On the one hand companies will try to retain customers by offering ever more comprehensive services that will require a larger input from both developers and “inventors” (as in entertainment, news….). On the other hand there should be a large proportion of “customer facing” occupations – competition will grow along with uncertainty – and customer care will play a big role in terms of competitiveness. „Customer facing“ occupations need not necessarily require IT specialisation. As in banking, telecommunications will attract workers due to high pay levels, and people in these jobs will get on well with communication and language skills and a good (not excellent) knowledge of IT. 
  • The entertainment, news and Internet segment will be characterised by a shift towards higher product complexity levels and a major increase in demand. Segment 3 as well as Segment 2 will undergo robust globalisation and concentration processes, and the chances of Czech companies will depend on the availability and quality of copywriters, creative professionals and traders.
  • The embedded software segment will be influenced by a steep increase in demand. Thanks to an expansion of market opportunities the level of uncertainty will not increase significantly. The level of SW complexity will increase and SW will be a more and more important factor of hardware functionality. As regards demand for human resources, companies will require, above all, development and analytical occupations with inter-disciplinary knowledge and very good language skills – so that they can operate in trans-national development teams of global brands. 


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