Portugal as a strategic tech-hub: Why is it so popular?
Located at the intersection between Europe and USA, with a compatible time zone, Portugal has been increasing its competitiveness as a nearshore location. The Portuguese ICT Sector is a highly innovative and dynamic sector and represents approx. 10% of the Portuguese GDP, reaching almost €17 billion in total turnover as mentioned in the new report by the International Trade Center.
The choice of Portugal as a strategic location for development and operation is not something new. The number of service centres in Portugal has increased significantly since 2015, following years of moderate growth before that. In recent years, major international players have begun exploring opportunities in the country or already opened new facilities in Lisbon and Porto. Lisbon is represented by a staggering 61% according to a report by IDC and AICEP in collaboration with NOVA IMS.
The interest is mainly dictated by the availability of qualified human resources, basic services provided by the government and low operational costs. But what really drives companies to the country?
Government supported digitalisation
The reports above covered interesting aspects to common opinions regarding Portugal as a location for operation. For example, several high-profile companies noted in their report feedback that Portugal was not chosen for its low-cost environment, as other locations fulfilled that criterion. Instead, it was mainly value-for-money; that the quality of delivery was significantly higher compared to the money spent for the same service or product in other countries.
The Government of Portugal (The Ministry of Economy and Digital Transition) has implemented measures to promote digital competencies and the digitalisation of the economy as part of the second phase of the Indústria 4.0 in addition to launching artificial intelligence and advance computing strategies with €600 million in total funding.
Portugal, infrastructure and cybersecurity
A key area naturally in focus when deciding on a possible nearshore location is infrastructure. Portugal is at the very top based on internationally recognised indicators.
These include areas such as communication technology, internet bandwidth and speed, access to the latest technologies, general investments in technology, IP legislation, quality of general infrastructure and more. In fact, Portugal is on a par with many other Western and Northern European countries and ahead of most traditional nearshore and offshoring countries. According to the Global Cybersecurity Index (GCI), Portugal is ranked position 14 between 182 countries in the survey. When compared with the European overall scoring, Portugal is ranked number 8. The result reflects the positive efforts and mentioned investments the Portuguese government has adopted in recent years to improve cybersecurity as well.
How do service centres attract and retain talents?
Infrastructure is not enough, if you want your tech-hub to succeed. It has to be managed and provided by people, and preferably highly qualified people. When it comes to general labour market rules, the quality of the education system, access to academic graduates and engineers, language skills (e.g. English TOEFL test level), public investment in the country’s education system etc., Portugal has understood that the country must be favourable if it is to attract foreign companies. This is the rationale why the country has focused specifically on ensuring that the above is ranked at the very top in relation to comparable countries.
According to the reports, recruiting talent is a key factor in nearshoring to Portugal. Service centres mainly invest in two factors when it comes to talent:
- recruiting directly from universities
- developing strategies for attracting, training, and retaining the best employees.
The profile of employees shows that there is a significant predominance of people with higher education, representing 85%. This figure confirms that Portugal has qualified professionals. The number of female workers in tech is also increasing. Many of the offices have more than 40% female employees, some even more than 60%, which is a significant number, and for many an important criterion when choosing a location.
No difficulty finding talent
So, there seems to be no difficulty finding qualified talent and most companies referred to the availability of qualified people as a key factor. According to the report, others also referred to factors such as flight connections, time zone and quality of telecommunications.
However, easy is not done! The European software development tech market is overheated post-covid, and you need good local expert savvy recruitment strategies to attract the right talent for your business. You need to be ready to reduce your own time-to-market. A well-implemented company culture, with solid HR processes that focus on value creation, autonomy and responsibility can move beyond the scarcity of the market and outdated micromanage practises.
Is going remote not the solution?
A lot of pundits will say yes. But beware of the hype. Even though remote seems to be the easiest option to broaden your talent pool, it is challenging to create and maintain company culture across fully remote teams. It is very different to be remote-first, where everyone, including the founders, are remote. To have the initial core team on-site with a few second-level contributors remote who cannot actively participate in informal ‘water cooler’ reunions and discussions or even effectively execute innovation. Moreover, several studies, although developers seek flexibility, 60+% still prefer to have an office where they can work from. This is also the case in Portugal. Talent retention is one of the main challenges, so you or your HR partner better be ready to comply.