Trouble and talent from Tallinn

By bne IntelliNews December 11, 2006

Evan Rail in Prague -

Central Europe might not have created its own Skype yet (click here), but it soon will be home to Skype itself – or at least a small part of it.

On December 5, the internet phone service provider, which was sold only 18 months after its launch for $2.6bn, announced a new programming centre in Prague. With the doors set to open in January next year, Skype's Czech office will initially house 30 senior programmers working on the company's core software, currently used by 130m people worldwide for instant messaging, file exchange and internet telephony.

Though Skype already has "satellite" offices in Stockholm and the Estonian university town of Tartu, this is its first programming centre beyond its base in Tallinn, according to Ott Kaukver, Skype's director of engineering.

The future home of 20% of Skype's technical employees, the Czech Republic was Skype's first choice out of 12 Central and Eastern European countries the company considered.

"We chose Prague because of the availability of talent, the good infrastructure and the well-developed educational system," said Kaukver. "And the first interviews that we have done here, the results are super-good."

Shallow pool

The company is currently responsible for 5% of all long-distance calls worldwide, said Kaukver, who has close to 700 Skype contacts himself and usually "about 40" Skype conversations going on at the same time. It adds new users, he noted, at the rate of seven per second.

With such growth, the company is starting to outpace the amount of tech workers in its homeland. While Skype currently employs just 285 people in Tallinn, that number already accounts for a substantial share of the local workforce.

"Currently we have 285 people working in Tallinn, of the 350-400 we estimate we will grow to," Kaukver said. "There are perhaps 6,000-7,000 programmers in all of Estonia. If you take the number of Skype employees as a percentage, it's significant."

Other high-tech firms like Playtech, which makes software for online casinos, are also scooping up the limited amount of software developers in Estonia. The Baltic nation is home to just 1.3m inhabitants, or roughly the same population as the Czech capital.

"Our talent pool there showed that in order to grow we would have to expand abroad," Kaukver said. "Based on the data that we received, the talent pool in Prague is more than 10 times bigger."

Like most of his co-workers, Kaukver is 28, the average age of all Skype employees, something which makes party-friendly Prague an appealing second home for the youthful company. Although the centre will make local hires, several of the company's Estonian employees have already offered to move here.

Another principle reason for the move, Kaukver said, is logistics. While Bucharest and other cities might offer plenty of top-shelf talent, Prague's Ruzyne airport has direct flights to both London and Tallinn, Skype's two principal bases.

The arrival of Skype follows similar recent jumps by job website and shipping giant DHL, as well as the appearance of several smaller start-ups in Prague, all of whom cited an excellent location and a large pool of talent.

"It's a great place to develop software," said Matthew Gertner, chief technical officer for Allpeers, which makes file-sharing software for the Firefox Web browser. "I think Czech programmers are fantastic, otherwise we wouldn't be here."

But the question remains: will Prague go through the same growing pains as Tallinn, with many employers competing for a relatively small number of employees?

Google in Prague?

Beyond Skype's announcement, other large tech firms are said to be interested in Prague. And several companies which are already here, like DHL, are set to expand in the near future, creating both problems and benefits for start-ups.

"My first reaction, I was panicking," said Gertner. "Now I'm starting to think, ‘Wow.' There's going to be this amazing ecosystem here. And it's always going to be appealing to work for a smaller company like Allpeers."

One of the biggest threats to the hiring pool is the potential cannonball from another big player, Google, which has long been said to have an eye on Central and Eastern Europe, something it is unwilling to confirm.

"Google currently has several R&D centres located across Europe, including Zurich, Moscow, Haifa and others," says Google's Ema Linaker. "We are currently exploring opportunities to open additional operations in Central Eastern Europe and other locations worldwide, but we have nothing to announce at this time."

But rumours abound. One Prague-based software developer said he spoke to a recruiter about working for Google in September. And stories about the company shopping for office space in Prague are commonplace. Google's own jobs website currently lists two openings for "engineering center director", both of which describe duties of recruiting a team of engineers and creating a "world-class R&D organization" from the ground up. One such position is listed in Poland, the other is in the Czech Republic.

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