Many of the companies operating in Portugal encouraged staff to stay at home days before the government declared a state of emergency on March 16 and the country went into full lockdown.

If employers and employees came together to anticipate the looming lockdown, the country’s digital infrastructure empowered local talent and digital services providers, enabling contingency plans to kick in and allowed new investment projects to go ahead remotely.

Infrastructure upgrade

“Our experience so far has been very smooth, the network providers really stepped up,” says Peter Villanyi, vice president for global business services with UK-based medtech company ConvaTec, which opened a new shared services centre in Lisbon providing finance and IT functions in January. So far, the company has hired 80 people locally. “Only 25 of them have met physically, the rest came onboard remotely,” Mr Villanyi adds.

Portugal has made inroads in upgrading its digital infrastructure over the past decade. More than 80% of the country’s households had access to the internet at the end of 2019, from 47.9% ten years earlier, according to OECD data.

Portugal still has ground to cover to catch up with leading OECD countries such as South Korea, the Netherlands and Norway, which grant almost universal internet access to their citizens, but the quality of its new internet infrastructure is top-notch, with fibre connections accounting for almost half of total broadband connections, against an OECD average of 26.8%.

“The country is digitally prepared, and what happened during the lockdown is the best proof of it,” says Luís Filipe de Castro Henriques, CEO of national trade and invest agency Aicep. “Companies in the services sector continued to operate. I myself kept a regular schedule, I never had the feeling that someone around us stopped and we continued to do most of our activity digitally.”

While a few global offshoring centres like India had to face major disruptions, digital services providers based in Portugal experienced relatively calm waters.

“In our services centre business continuity is fundamental,” says Luis Cardoso, who heads Nestlé’s shared services centre in Lisbon, where the food and beverage group has hired 350 people since 2017. “If things are not happening, we are losing sales, customers are unhappy and the supply chain is not efficient. Since mid-March we introduced work from home, and people adapted very well. After three months, we have seen no deterioration in the level of performance of our team, although if the situation continues longer we might lose that team spirit built around physical connections. After all, we are social animals.”

New investors onboard

Digital resilience guaranteed not only business continuity, but also kept Portoguese talent on the job market, although digitally. To the extent that seven foreign investors developing digital services and goods announced new projects in Portugal even in the midst of the pandemic, according to Aicep.

One of them is Lockwood Publishing, a UK-mobile game developer, which opened a new development studio in Lisbon in early March.

“We worked in the new studio for three days before going into remote working mode,” Karl Hilton, the company’s studios director, and Ricardo Flores, the head of the new Lisbon studio recall. “Even during Covid-19, we managed to keep hiring. We started off with four people, we are 11 now,” they say.

Accessibility to the country’s talent, even in digital mode, has been key for Lockwood, which already has development centres in the UK and Lithuania, to pick Portugal over other locations in Europe, Mr Hilton and Mr Flores say.

“It was obvious to us that we could find the right pools of talent in Lisbon. Other similar companies are setting up locally, but the city is not on the map as a boom place like Berlin or Barcelona yet. It’s clearly becoming a hotspot now, and we tried to get in early.”

Another new investor is Anchorage, a digital security engineering company that announced its first development centre outside the US in Porto in early June.

“Engineering hiring is now a global competition, and Portugal is an emerging leader in the European tech sector,” Diogo Mónica, co-founder and president said in a statement. “There’s a lot of talent, deep tech and security expertise, and a warm and vibrant culture. And though I may be slightly biased, quality of life isn’t bad, either.”

Portugal churns out about 80,000 higher education graduates per year – a third of which are in the fields of science, mathematics and engineering. Particularly in engineering, the country has one of the highest ratio of graduates of the whole continent, Aicep figures show.

Growing tech scene

Local talent is also laying the foundation for a lively tech start-up scene, which augments Portugal’s investment proposition to the eyes of foreign innovative companies.

“We can see really good infrastructure in Lisbon in terms of tech companies and its vibrant start-up environment,” says Fernando Henrique, business director at Brazilian nearshore information technology and software engineering company CI&T. “There are really good universities and technological schools, we can access a good talent pool. Besides, the country has the ability to attract people from all over Europe to move in and work in the tech environment.”

Despite being significantly lower than the European average, venture capital (VC) investment into Portuguese start-ups have been gradually growing in the last few years, according to data from the European Institute of Innovation and Technology (EIT) and accelerator BGI. Two thirds of VC investment came from foreign funds in 2019. Leading start-up destinations were Porto, which made up 36.7% of total VC investment in 2019, Lisbon (28.4%) and Coimbra (12%).

“The country’s tech scene is not as mature as Berlin, London, or Paris, but it’s growing faster than those hubs, and I see structural elements that suggest growth will continue,” says Hugo Augusto, managing director at accelerator Techstars Lisbon. “There are a lot of accelerators and incubators, co-working spaces in Lisbon, Porto and Braga are always sold out. The talent pool is strong and getting more prepared. Tech companies continue to open here. The missing piece was venture capital, but that has also started falling into place.”

Looking forward, the EIT and BGI’s report suggests there is still room for improvement for the country’s tech scene to close the gap with the rest of Europe.

“There is an obvious gap between the increase in entrepreneurial education and the perceived capabilities of entrepreneurs in Portugal,” the report states. “There is also a significant mismatch between what knowledge is needed and what is supplied. Therefore, the education programmes being provided by public and private stakeholders must be re-evaluated.”

Enabled by an improving infrastructure and ecosystem, Portugal’s talent has become a key component of the country’s story of resilience in the fight against Covid-19. If the government manages to keep it safe and healthy, its potential will survive way beyond Covid-19.