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10 Questions

with Adam Bager
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By František Bouc
Staff Writer, The Prague Post
February 21st, 2007 issue

Jan Přerovský/THE PRAGUE POST
Bager says he doesn't believe government incentives are necessary to lure information technology investors to the Czech Republic.
In early February, the leading Czech manufacturer, Škoda Auto, caused market jitters by admitting it could move its manufacturing abroad because of increased production costs that may result from a European Commission ruling on emissions limits. With labor costs on the rise and the expected departure of other industrial manufacturers to cheaper regions, the government wants to attract new investors to information technology and research and development sectors. Adam Bager, chairman of the software company LLP Group, talks to The Prague Post about whether it’s too late to begin eyeing such investors and whether they’re likely to come without substantial incentives. He also talks about the ramifications of the recent European Union expansion.
➊ There aren’t too many international software companies headquartered in Prague such as the LLP Group. When launching the company back in 1992, did you plan to expand across the region as you eventually did?
No. In 1992 I never imagined that LLP would become an international company. But our first international clients expanded across the region, so we followed them.
The Bager File
  • Job title: Chairman, LLP Group
  • Age: 49
  • Nationality: British
  • Education: Bachelor's degrees in philosophy and psychology, Balliol College, Oxford University
  • Previous job: Consultant, Hoskyns plc
  • Family: None
➋ Having lured dozens of international manufacturers over the past decade, the government would now like to bring in more information technology investors. Is it too late?
It isn’t too late. Employment and overhead costs have increased, but the Czech Republic is still competitive at the “intellectual” end of the export market, where demand is still strong. The only problem is that for companies [such as] LLP who sell domestically as well as internationally employment costs also rise. It becomes harder and harder to find programmers at affordable prices.
➌ The government wants to reduce investment incentives for foreign investors. How important do you think those incentives are for technology investors?
I can’t speak for “major” technology investors whose capital investments are high, but in the IT service sector I don’t believe that incentives are necessary, however attractive. Demand is still high across the whole of Europe and beyond for IT skills. And, while Czech costs remain relatively attractive, skills in the Czech IT sector are excellent and very attractive indeed. But, if the Czech government wants to build a high-end service economy, why not use any means to attract investors? I won’t be complaining if the tax burden eases.
➍ Many investors who have come to the region to capitalize on cheap labor costs are now considering moves farther east. Is there anything that would make you consider this option as well?
Well, for those who manufacture, I fully understand the urge to move on. But in the IT sector, where experience and proximity to markets are important factors, there’s still no need to hasten eastward. You’d be surprised by the upward pressures on costs in Romania and Bulgaria, too. What would make me move eastward? I suppose if all our staff was to leave us for lucrative jobs in London, I wouldn’t have much choice.
➎ What could make foreign technology investors prefer the Czech Republic to more cost-
effective regions?
Many factors. Experience, skills, ease of travel, relatively low costs, stable infrastructure, stable economic conditions, a good education system, a growing economy, the prospect of lower taxes, and a delightful city and country. Let’s not mention the wine.
➏ LLP Group opened a development center in Bulgaria. Is it a sign that you yourself are refocusing eastward?
Well, yes, in a sense, but not because we needed to transfer capacity to reduce our costs. Rather, because we needed to increase it, especially in software development, and the lower costs of the Balkans made Bulgaria attractive. Since that decision, however, we’ve seen costs in Bulgaria rise dramatically, especially since accession to the EU. It seems that everyone had the same idea.
➐ Actually, many companies are increasingly worried that the ­recent accession of Bulgaria and Romania to the EU could bring an influx of cheap workers from the Balkans. From you perspective, are those fears justified?
Well, why would an influx of cheap labor be something to worry about? I would welcome it. Look at the demographics. The Czech Republic’s working population is falling. We all need new labor. But, as for whether it’s actually happening here, I think you’ll find more Bulgarian and Romanian being spoken on the streets of London than in Prague.
➑ Why do you think people think first of business threats rather than opportunities?
Do they? I wasn’t aware of that. Perhaps, even now, they still don’t feel they’re in control of their own destinies.
➒ How does an English graduate of psychology and philosophy from Oxford come to launching a software company in the Czech Republic?
I couldn’t earn a living from pure philosophy — why would anyone want to pay philosophers? — and I loathed “experimental psychology.” Music was my second choice, but earning a living from music requires greater skills and more determination than I possessed. So, attracted by the logic of computer programming — logic had been a branch of the philosophy I studied — I trained first as a programmer and then moved toward system design, consulting and project management. Finally, entirely by accident, here I am in Prague.
➓ You are apparently a keen oboe player. Did you know more about Czech music or Czech business before starting business here?
I still know more about Czech music than Czech business. Perhaps that’s my problem. Zelenka, Smetana, Dvořák, Martinů and particularly Janáček were then, and remain now, more attractive heroes to me than anyone in business.

František Bouc can be reached at fbouc@praguepost.com


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