When it comes to investments in software, IT services and information and communications technology (ICT), the equation is simple. A young, trainable and relatively cheap workforce plus an IT infrastructure equals an attractive investment proposition. That is why central and eastern Europe has became a 'go to' location for these types of projects in the past decade.

The problem is, the more popular a country becomes with investors, the more wages increase and the labour pool shrinks. It is for this reason that Macedonia – with an average monthly wage that is 49% lower than in Hungary and 91% lower than in Czech Republic, and almost half of its population under 30 – is fast establishing itself as an attractive destination for ICT projects.

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Attracting attention

According to Antoni Peshev, the founder of Macedonia-based IT company Ultra Computer, the Macedonian workforce is becoming increasingly skilled in ICT. "Over the past 10 years, Macedonia has invested in the education of new ICT experts by supplying a computer for every student and offering subsidies to those buying new computer equipment. These efforts have increased the level of IT literacy, especially among the younger population,” he says.

The skilled workforce is attracting foreign investment in the sector. According to data from greenfield investment monitor fDi Markets, the communications and IT sector was the third most popular sector for investment in the country in 2012, behind food and tobacco, and textiles.

UK-based call recording company Retell is among the foreign companies that launched a project in the Macedonian communications and IT sector in 2012. "We started looking for a nearshoring location at the beginning of 2011. One year later, our operations in Macedonia were up and running,” says Richard Herman, the chairman of Retell. In this time, Retell managed to find a local partner, office space within Skopje’s Youth Entrepreneurial Service incubator and seven full-time employees.

"The country is well run and the government seems to be more business friendly than in the UK. So far, so good,” says Mr Herman.

Flicking the switch

One of the most significant investors in the Macedonian ICT sector has been German telecommunications firm Deutsche Telekom, the holding company of mobile communications firm T-Mobile. In 2001, Deutsche Telekom acquired majority ownership of the Macedonian state-owned telecoms company Makedonski Telekom through its Hungarian subsidiary Magyar Telekom.

"It was Magyar Telekom’s first international venture and with an investment of €360m, the company certainly took some risks,” says Daniel Szasz, CEO of Makedonski Telekom. As well as being a landmark deal for the company, it was also the biggest privatisation deal in Macedonia’s history.

More than a decade on, the company remains one of the most significant players in the Macedonian IT sector. "Macedonia has been chosen by Deutsche Telekom as the first country to switch from the circuit-board telephone network to the internet-based network," says Mr Szasz. "The project is expected to be completed by the end of 2013, and is [reliant on] significant investments. It would not have happened if Macedonia was not considered as a good place for investment in that sector.”