Collaboration Over Competition: The New Era of Cluster Culture

12/14/2017 11:00 am ET

Competition is no buzzword in an insanely crowded industry as ICT (Information and Communications Technology) where rapidly changing standards and customer IT spending habits are the constant drivers of fluctuating market share division. To compete in this environment successfully, companies must make constant changes in their product, marketing and pricing strategies. However, more and more companies are now pursing the path of complementing each other’s strengths and working seamlessly together to provide services, based on their individual competencies and advantages. Hence, IT clusters – a group of companies generating IT related products and services – are now becoming of a solution to increase the market share in a saturated market. This is especially valid in an industry that is set to be worth more than 4.4 trillion euros by the year of 2019 and in the market with increased demand for faster, more reliable and more functional devices and solutions.

Global information and communication technology (ICT) revenue from 2005 to 2019 (in billion euros)
© Statista 2017
Global information and communication technology (ICT) revenue from 2005 to 2019 (in billion euros)

Outsharing Boosts the Cluster Culture in the CEE region

ICT services are unarguably one of the key products to be exported in largest economies. As stated in the OECD’s Digital Economy Outlook, 10 countries together account for two-thirds of total exports of global ICT services.

Top 10 world exporters of ICT services, OECD Digital Economy Outlook 2017
OCED
Top 10 world exporters of ICT services, OECD Digital Economy Outlook 2017

With no exception, the CEE (Central Eastern Europe) region is highly dependent on the exports of IT services and is also known for the top notch software development. With many stakeholders in the technology and information ecosystem and a high number of qualified professionals, it is getting more and more difficult to secure deals with biggest international companies as it is then down to two main factors: price and the speed of service delivery. Countries, such as: Ukraine, Lithuania, Hungary or Poland, are often worshiped for their outsourcing services in the field of IT. With outsourcing having relatively negative meaning when implying on the production of software development (relatively low cost of production; often miscommunication and slightly lower quality), there are activists promoting a rather better solution and truly a replacement to outsourcing. The term outsharing was first introduced by Tomas Pagirys, lead Project coordinator at Waynord Cluster and B2B outsourcing platform Aciety.

“I considered each collaboration within software development field as an evolved type of collaboration of a client and a supplier-as-a-partner. The perception of the CEE region as a low cost IT services provider did not seem to me as a good value proposition. Replacing the commonly known outsourcing term with outsharing concept presented the new approach to development solutions: companies are motivated by trust, solid responsibility and decision making. It’s about partners who are valuable and influential business case participants, as they are acting as remote CPOs (Chief Product Owners) or CTOs (Chief Technology Officers). Taking that concept further, we are capable of solving complex problems and developing scalable solutions.”, claims entrepreneur Tomas Pagirys.

Digital Solutions with Nordic Values

With changing mentality of how companies and individuals operate inside markets, clusters are the solution to providing numerous clients with goal oriented development performed by a number of IT companies seamlessly working together and combining their core specialties. Just taking an example of Waynord Cluster who is one of the first clusters in Baltic region and has successfully secured highly valued clients, such as Expedia, McDonalds or SEB bank, much can be understood about the phenomena of cluster culture. Whilst Waynord cluster is a group of 7 specialized software development companies, it has already managed to reach more than 4 million euro turnover by applying Agile and Waterfall methodologies in their daily tasks. When considering the success behind clusters as such, it is important to take into account factors that ensure the likelihood of companies signing up to be a part of a development group. In this case, location plays a crucial role and, more importantly, it is about curious, well-rounded, initiative and educated people. Tomas Navadaurskas, who is country sales manager at Waynord, claims that these days partnering with a Lithuanian company, or companies located in the Baltic region, represents stability in terms of politics and economy: the political scene is calm, with laws and regulations taking place with much thought and logic. He also states that when being one of the fastest growing economies in the EU, a wide pool of specialists in IT, engineering, medicine, education, agriculture, energy, telecommunications and finance is offered. There is no speculation that clients truly value the clear regulatory mechanism and the fact that when changes are implemented, they are within the reasoning to increase value for people and businesses.

The scope of competencies that clusters are capable of
Waynord Cluster 2017
The scope of competencies that clusters are capable of

How Do Things Really Work?

It is natural that some clients in need for software development services, may ask why should they work with clusters as opposed to separate individual companies. The first thing that comes to mind is that clients eventually save their resources by using one selected cluster. However, the decreased cost of production doesn’t mean the lower quality: you get consulting from companies which have access to deeper knowledge about your market by combining different strengths that each cluster member posseses. You can also think of cluster in this way: each company that joins cluster, carries complete responsibility for the project and its successful implementation. Hence, the success factor is increased as each company gives their own specialists and is dedicated until the project is finished, reviewed by a satisfied client. Clusters are generally flexible with their engagement models: they can work with fixed pricing projects, projects based on time and materials consumed or even body-leasing and dedicated teams with relocation, if needed. It should not be forgotten that clusters are especially appealing to startups since some of the clusters decide to take part in partially equity financed projects. In the end, it is not only about the better quality or lower cost: the story is actually about the new era where collaboration wins over competition. That already is a huge step forward.

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