KRAKÓW IT MARKET

REPORT

Rev 1.03

Foreword

Kraków, the second largest city in Poland, is undergoing a significant social and economic evolution. Over the last 20 years it has become an important landmark on the map of prime software engineering locations in Europe. There is a continuous flow of international technology businesses that establish their presence in Kraków.

Companies that intend to build software teams in Kraków look for resources that will let them better understand the local IT landscape. Our goal is to respond to this need and provide a comprehensive overview of the Kraków IT market: a single, reliable source of information.

This publication is structured to focus on several areas, including the ecosystem of technology businesses and communities, an update on hiring and employment, and the cost of doing business in Kraków.

We look forward to hearing your feedback. Please share your thoughts by writing to report@motifedigital.com

MOTIFE Team

2018 Kraków IT Market Report 3

750K

Population of Kraków

12M

Tourists visiting Kraków annually

6.2%

Businesses in Kraków are information and communication firms

3.2%

Unemployment rate in Kraków in 2017H1

800%

Increase in traffic at Kraków airport between 2000 and 2016

Source: krakow.pl

About Kraków

Kraków, the medieval capital of Poland, is the country’s second largest city with approximately 750 000 inhabitants.

Kraków is a visible sign of the success of a Polish transformation. Over the last 20 years the city has became the top outsourcing destination in

Europe. Global players such as ABB, Motorola, IBM, UBS, Shell, Ch4M and IAG have established their business service hubs here.

Kraków is also a vibrant city with 170 000

students at local universities and over 12M tourists visiting every year. The city has been named one of the top tourist destinations by many reviewers including CNN.

Kraków is located in the southern part of the country. The city is well connected with Europe with its new airport featuring direct flights to 50+ European capitals.

There are 70 000 computer science students in Poland, with 14 000 graduating every year, and computer science has been the most popular field of study among students since 2013. Kraków, as a university town, not only turns out new graduates every year, but, as a business hub, attracts talent from other cities and countries.

2018 Kraków IT Market Report 4

01 TECHNOLOGY ECOSYSTEM

Overview

In this chapter we provide an overview

of software businesses, communities,

and  higher-education  schools  in

Kraków.

2018 Kraków IT Market Report 5

Introduction

Over the last 15 years Kraków has become one of the most important technology centers in the Central and Eastern Europe. There are hundreds of IT companies from small (operating only in the Polish market) to large branches of foreign corporations employing more than 1000 people.

The Kraków IT scene is dominated by big, international players with ABB, Luxoft, and Motorola being among the largest. However, it also has its start-up facet. Apart from those that achieved international success like Estimote, Brainly or BASE, there are also smaller local ventures that are only beginning their growth.

This ecosystem of businesses is complemented with higher education facilities and active local communities.

20 000

Estimated number of engineers employed by large IT companies in 300+ FTEs development centers

On the picture: the new building for Computer Science Faculty of AGH University of Science and Technology.

6

Source: AGH

ThelargestITCompaniesin Kraków

The Kraków IT market is dominated by the large players. Some of these companies mainly provide IT support, however, at least 80% of the companies are software development centers focusing on software development and service delivery.

There are also some non-IT companies in Kraków then employ significant numbers of programmers, primarily financial institutions, such as UBS or HSBC.

2018 Kraków IT Market Report 7

Start-up landscape

It would be a platitude to say everything has changed in the start-up scene in Kraków in the last 10 years. From being a deserted land with only a handful of businesses that could be called start-ups, we now have a growing ecosystem of new ventures that operate internationally; there is access to funding (both private and public), business angels, advisers, etc.

$40M

Total funding received by the most

successful Kraków start-up Brainly

There are at least 100 companies that would meet the criteria of a start-up. The total funding received by Kraków start-ups exceeds $150M.

There are three very specific areas where start-ups specialize. The first one would be IoT/Bluetooth/Beacons. Firms here include Elmodis, Estimote, Kontakt.IO, and Silvair. The other group would focus on sales and marketing tools and services. The list here includes BASE, Benhauer, CallPage, SalesManago, and Synerise. There is also a third group: all game studios. Over 20% of Polish game studios are based in Kraków.

The majority of the start-ups are B2B. According to the 2017 Polish start-ups report, 76% of start-ups in Poland are B2B companies.

The following list includes 11 of the most successful start-ups from Kraków.

2018 Kraków IT Market Report 8

Table: The most successful start-ups in Kraków according to CrunchBase and OMGKRK.

2018 Kraków IT Market Report 9

Top most common technologies

The popularity of technologies in Kraków follows the global ranks as published by Tiobe or Github.

By far the most popular programming language is Java. This comes from its ubiquity: it is used in fat client applications, server side apps as well as in mobile applications.

3RD

Global rank of Polish programmers according to HackerRank

75%

Estimated share of developers with experience in Java

Java

The other language that is continuously gaining popularity is JavaScript, which is used both on the client and server side. Poland has also traditionally had a significant group of Linux enthusiasts who choose languages like C, C++, Python or Perl. In addition, there is also a large group of PHP developers, including those who specialize in frameworks like Laravel or Symfony.

JavaScript

Python

C#

PHP

C++

0%  20%  40%  60% 80%

Source: HackerRank

2018 Kraków IT Market Report 10

Highereducationschools

One of the key strengths of Kraków is its endless supply of new graduates. The city is dominated by students: one in five people who live in Kraków is a student. There are well over 20 computer science courses at B. Sc. level run by various universities. They turn out over 1 500 engineers every year. The majority of CS students usually start working in their third year of school, and by the time they graduate, they already have professional experience.

science courses. 43 000 students atttend thisuniversity.

www.uj.edu.pl

AGH University of Science and Technology is thelargest Polish technical university with 15 different faculties offering 8 computer science courses. 35 000 students attend this university.

www.agh.edu.pl

Krakow University of Technology is the the secondlargest technical university in Kraków with faculties offering 3 computer science courses. 16 000 students attend this university.

www.pk.edu.pl

Table: Top universities in Kraków with computer science courses.

2018 Kraków IT Market Report 11

Communities

Krakow, as a university city, is home to many young people interested in different facets of technology. These are students and young graduates who want to explore domains they are passionate about. Several years ago they started creating community groups around specific technologies. Enthusiasts, geeks, programmers initated regular meet-ups to exchange information and educate others. Examples here include frameworks and programming languages such as Angular or Java.

Although the ecosystem originally started with technology groups, later, new communities appeared. Some of the new ones focused more on business and entrepreneurship. They would talk about start-up pitching, financing, validating product ideas, legal aspects, etc. They would put a lot of focus on networking.

There are also communities that explore the software engineering methodologies, including lean, agile, scrum, or Kanban.

Some of the communities in Kraków were formed more than 15 years ago, while others, such as Crypto @ Cracow, are relatively new. Most of the communities are very active. They organize regular meetings, presentations, and workshops.

They use social sites such us meetup.com to organize the events.

Communities may also be helpful in recruiting new employees.

2018 Kraków IT Market Report 12

Table: Selected Kraków technology communities

2018 Kraków IT Market Report 13

02 SALARIES AND EMPLOYMENT

Overview

In this chapter we provide an overview

of the employment market in Kraków.

We include salaries and the most

popular  benefits.  We  provide  the

highlights of the Polish labor law.

2018 Kraków IT Market Report 14

Salaries

The IT job market in Kraków is growing fast as the city continues to be an attractive location for software businesses. Some companies offer salaries above the market value to attract experienced engineers. This impacts the salary ranges for all roles and seniority levels.

The summary below shows the gross salary ranges for software developers for the most popular programming languages in Kraków. This is how much a new hire will expect to be paid.

Unlike general market salary averages that can be found on websites like glassdoor.com, payscale.com or the Polish website wynagrodzenia.pl, these numbers represent new hires.

Comparison of monthly gross salary for new hires

PHP

C++

Python

C#

JavaScript

Java

€ 0 € 1 000  € 2 000  € 3 000  € 4 000  € 5 000

 Regular (3+ years) Senior (5+ years) or Lead (8+ years)

2018 Kraków IT Market Report 15

2600 EUR

Average new hire gross salary for a Java Developer with 3+ years of experience

3300 EUR

Average new hire gross salary for a Senior Java Developer with 5+ years of experience

Table: Monthly salary ranges for the most popular programming languages

15-20%

Extra cost of social security paid by an employer on top of employee’s salary.

B2Bcontracts

In addition to the regular employment contracts, the trend of applying other forms of employment still continues. The most popular one is the B2B contract. It is attractive particularly for more experienced engineers.

B2B contracts offer higher income for the employee without extra cost for the employer

2018 Kraków IT Market Report 16

There are two main reasons for such a trend. First is that B2B contracts usually let the contractor be independent and allow him to work for more than one employer. Secondly, the contractor is able to earn more money without increasing the total cost for an employer due to different taxation and social insurance regulations. B2B contracts allow an employee to take home an extra 20% and use a flat tax rate. Also, during the first two years of self-employment an employee pays a preferred social insurance rate.

20%

Extra income an employee can get using a B2B contract in comparison to salaried employment while the cost for the employer stays the same

Recruitment

Recruitment projects for IT specialists usually take between two and four months. More experienced engineers who work for the same employer for more than three years have a three-month termination period.

There are a number of local and global IT recruitment agencies operating in Kraków. Their primary focus is on sourcing projects. They can accelerate the hiring process, but their fee is anywhere between 15% and 20% of the yearly salary. There is a growing trend among Kraków IT companies to build or grow in-house sourcing and recruitment teams. This scenario is often chosen when the demand for recruitment is high in the longer perspective.

2-4 months

Time to hire an experienced IT

specialist

15-20%

Share of employee’s yearly salary paid as a fee to a recruitment agency

2018 Kraków IT Market Report 17

Flexibleworkingtime

Similarly to other European cities, Kraków struggles with heavy traffic during rush hour. Despite continuous investments, the road infrastructure is not able to handle the ever-growing number of cars. Students, tourists, visitors – they all add up to the problem.

Although Kraków is well-known for its well organized public transport, and cycling is becoming more important as a mode of transport, the time spent on commuting is increasing year by year.

Due to this, the flexible work time and home office have become important and attractive benefits employers in Kraków offer. Around 80% of employers offer employees the opportunity to work from home part time and 83% of them offer flexible working hours

Source: AGH

2018 Kraków IT Market Report 18

Benefits

Employers attract developers with rich benefits packages. The most popular ones are paid gym and fitness cards, professional training, and private healthcare with 96%, 92%, and 91% of employers offering them respectively.

80EUR

Monthly estimate of per-employee cost of non-wage benefits

Most popular benefits

48%

36%

96%

92%

91%

77%

Source: Sedlak & Sedlak payroll report for the IT industry - 2017

Source: AGH

2018 Kraków IT Market Report 19

Labor law highlights

40 hours / week

8 hours per day, 40 hours per week

working time

251 working days

13 days of public holidays annually

20or 26 days of vacation

vacation entitlement depending on experience

1or 3 months’ notice

One or three months is the typical termination period depending on the contract duration

50-100% overtime pay

50% regular overtime pay, 100% overtime pay for working nights, Sundays and bank holidays

2018 Kraków IT Market Report 20

03 COST OF DOING

BUSINESS IN

KRAKÓW

Overview

In this chapter we provide an overview

of the costs of running a business in

Kraków. Also, we include a summary of

the cost of travel to Kraków.

2018 Kraków IT Market Report 21

Introduction

Despite being a top tourist destination, Kraków continues to be an affordable location. Unlike many large European cities, the city manages to keep the cost of doing business here competitive. The office space lease, professional business services, accommodation and dining provide amazing value with the greate price to quality ratio.

Kraków has excellent offices, hotels, restaurants and it has managed to not become as crowded, rushed and pricey as the capital, Warsaw.

The last 15 years saw a significant boom in office building construction, new modern hotels, and restaurants.

12600 EUR

Average gross annual salary in the business sector in Poland.

.

3.9%

GDP growth in 2017 (forecast)

.

PLN POLISH ZŁOTY

Currency of Poland

.

1 PLN= 0.28 USD= 0.24 EUR

Stable exchange rate

.

8th

Largest economy in the European Union

.

55.5%

Combined GDP growth since 2004according to Eurostat

2018 Kraków IT Market Report 22

Officespacein Kraków

There are dozens of new office buildings in Kraków. Some of them are large, with a capacity of 2000+ people, built by large construction firms like SKANSKA. Others are smaller buildings offering a unique vibe and a more private, low-key experience. In this section we present an overview of the office market in Kraków with different options for office space lease and the associated costs.

200 000 m²

Office buildings completed or under construction in 2017

Source: krakow.pl

Officespace

In 2017 Kraków became the first regional market with modern office space exceeding 1 million square meters. It is projected that an additional 200 000 m2 will be completed in 2018.

Office stock evolution (m2)

1 400 000

1 200 000

1 000 000

800 000

600 000

400 000

200 000

Source: f-forecast; Colliers International, September 2017

1 000 000 m²

Modern office space in Kraków

In addition to the modern, A-class office space there is also a significant supply of office space in old, often historic, buildings. Some firms are looking for space with character and a specific environment. They choose office space in old buildings or in post-industrial areas.

Source: AGH

2018 Kraków IT Market Report 24

Lease costs

13.2 – 15.6 EUR

Lease per 1 m² of office space in an

A-class building

10 – 13 EUR

Lease per 1 m² of office space in a B-class building

Lease costs for A- and B-class space should not record any significant changes in the upcoming quarters.

Usual rental period for A-class office spaces is 5 years. Sometimes it is possible to negotiate shorter terms.

Source: AGH

2018 Kraków IT Market Report 25

Flexibleofficespace

A growing number of start-ups and high-tech companies in Kraków accelerated the development of co-working spaces as well as serviced offices. Serviced offices provide fully equipped office space shared among multiple companies, with administrative and maintenance services. The undisputed advantage of such an office solution is that it can provide a flexible rental period, from days to months, while providing privacy and separation from other companies.

15 000 m²

Flexible office space in

Kraków

800 – 1 200 EUR

Monthly rental cost of a serviced

office for 5 persons

Source: AGH

2018 Kraków IT Market Report 26

Business services

Small- and medium-sized IT companies in Kraków often choose to outsource

most of their supporting functions. Kraków offers competitive pricing for

these types of services, which minimizes the overhead costs of running a business here. Many business service providers provide tailored solutions, including familiarity with specific foreign legal and tax laws.

250 EUR

Monthly cost of accounting services for a small limited liability company

100 EUR

Monthly cost of payroll services for

up to 10 employees

50 EUR

Hourly fee for legal services

Source: AGH

2018 Kraków IT Market Report 27

Travel

As a one of the top tourist destinations in Central Europe, Krakow attracts approximately 12 million domestic and foreign tourists each year. Thanks to its cultural wealth, Krakow has been listed as one of 12 sites on the UNESCO World Heritage List. Krakow is also a thriving business center, playing a leading role

based on the total number of meetings and events held there. It is one of the most important economic hubs in the country, focusing on professional services for business, new technologies, finance, IT and telecommunications.

150

Hotels with 3* or higher rating

5EUR

Basic lunchtime menu or two cups of cappucino in the old town

Quality of travel

Being the most visited Polish city, Kraków offers connections and facilities that make travel easy and enjoyable. There are direct flights to over 50 cities across Europe as well as direct connections to the US and Israel. Also, Kraków is conveniently connected with major European air hubs, including multiple daily flights to Munich, Frankfurt, Vienna, Zurich, Oslo, or London.

4EUR

Taxi trip on a business day, 5 km

5EUR

A cocktail in an old town club

Kraków hotels offer amazing value for

the money. With locations both by theold town and near business centers, there is always a nearby facility according to your needs. The majority of hotels are brand new and built within the last 7 years. They are clean and modern, offering a high-quality environment for doing business.

15EUR

Dinner with drinks at a good restaurant in the center

50EUR

Dinner for two at a city center restaurant, including appetizers, main course, wine and dessert

Long forgotten are times when Kraków cuisine was limited to traditional Polish food. With 500+ restaurants, Kraków has a lot to offer, and dining can be part of a great experience during a stay in the city. From Michelin or Gault&Millau recommended restaurants to new affordable eateries offering international and fusion tastes from Japanese ramen and Middle East specials to vegan burgers and Argentinian steaks.

2018 Kraków IT Market Report 29

Cost of travel

Airfares from European capitals start at 100 EUR and from the US start at 500 EUR. A 4-star hotel starts at 200 EUR for a four-day stay. You will not spend more than 30 EUR per day for food (this amount will get you an excellent lunch and dinner) and 50 EUR for a 5-day stay for local transport by taxi.

600EUR

Estimated total cost of a 5-day trip to Kraków from a European capital including airfare, a stay in a 4* hotel, food and local transport

1000 EUR

Estimated total cost of a 5-day trip to Kraków from a European capital with coach class airfare, a stay in a 5* hotel and fine dining and drinks every evening

* For tickets purchased at least 2 weeks before the planned travel date

Cost of 4 nights in a hotel in EUR - Monday through Friday:

2018 Kraków IT Market Report 30

50+

Direct connections to European cities from Kraków

150EUR

Average airfare for a return flight from a European city to Kraków

18%

YOY passenger growth at Kraków Airport in 2016

20min.

Taxi ride from the city center to the airport

Source: Kraków Airport

Summary

Kraków is a city steeped in rich historical tradition which harmoniously blends in with all the modern day challenges. Here’s where a natural reverence for age-old heritage walks hand in hand with the dynamic development of modern technologies and the creative ingenuity of all those who live and work here.

Kraków is a city of tremendous growth, evolving economy, flourishing IT ecosystem, and strong business competitiveness where domestic and foreign tech businesses continue to find excellent talent and a fine environment.

Kraków is a city that makes one feel this is just the right place to work, live, and

simply enjoy yourself...

In the pictures: the new Kraków Airport terminal and the new ICE conference center

MOTIFE

WE BUILD DEDICATED SOFTWARE TEAMS IN POLAND

ABOUT MOTIFE

MOTIFE is an offshoring advisory and management firm. We help technology firms scale up with technology talent in Kraków, Poland. We specialize in setting up and managing long-term tech teams.

We provide end-to-end service: we help evaluate nearshoring options, then kick-start a team, set up an office and support local operations.

2018 Kraków IT Market Report 33

HIRING AND BUILDING TEAMS

We build dedicated teams of software engineers. They can be hired by our firm or by your new entity in Poland.

All engineers are hired specifically for you from the market and you can influence the hiring process. In addition, we offer temporary outsourced teams.

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We provide a variety of options for establishing operations in Poland. From using our office and our organization as your representation in Poland to setting up your own office and legal entity.

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31-123 Kraków

Poland

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