There are various aspects that push IT companies to relocate their complete team or a part of their business to another country. Sergejs Kartasovs, the CEO of Generation Partners, explains various reasons for the relocation of IT companies in 2020. He recently took part in organizing a conference, Re.Locate.IT, together with Generation Partners. On the conference, the speakers talked about some of the best countries for relocating IT businesses and their important characteristics.
The suitable locations for relocating IT businesses
Before moving on to the best locations, we need to talk about why does a company decide to relocate. The main reason in this regard is to protect its intellectual property (IP). However, it is not the only reason as there are many more. Some companies relocate to get viable tax benefits. Accommodation costs are also an important factor. “Companies are moving to places where their work will be protected first of all and where the project team can comfortably find accommodations,” explains Sergejs Kartasovs. Similarly, some companies decide to relocate to get a better business infrastructure. IT companies cannot stay in a country that has tight financial and economic regulations. There are also some subjective factors that are considered by them including venture funds and angel investors. The cultural aspects also play a crucial role in this regard.
After knowing why does an IT company decide to relocate, let us discuss some of the best countries for relocating IT businesses. The United States of America, the Netherlands, Germany, Cyprus, Poland, Estonia, and Lithuania are the best countries in terms of IP protection. Poland, the Czech Republic, and Portugal also provide good IP protection. Cyprus is one of the most suitable countries for game developers as it has a strong game development community. Berlin is having a strong community of machine-learning experts. Estonia is attracting IT companies through a simple company registration process. A new IT company can get registered and open a bank account in Estonia very quickly and easily.
Some locations that were once most suitable
There are some countries that are losing their position as the best locations for IT development. These countries include Latvia, Malta, and Israel. Latvia is losing its position as it has implemented tightened AML (Anti-Money Laundering) regulations. “Today, non-residents who come to Latvia to create a company there cannot open bank accounts,” notes Sergejs Kartasovs. Israel has become an expensive country to live in as compared to countries like Cyprus or Malta. The relocated IT companies are finding it tough to operate their businesses in Israel due to the rising accommodation costs. There are intensely political and economic crises in Malta. It is on the verge of entering the grey zone for failing to comply with the EU regulations. Thus, Malta has also lost its position as the best option for relocation.
Sergejs Kartasovs also notes, “Dividing a team between two countries is also a common situation.” For example, a company can keep its production team in the home country while moving 20% of its workers to another country for the protection of IP. Relocating the whole business with a huge team is an expensive and unfavorable option. Therefore, the relocated companies should focus on hiring as much local talent as possible. They should take an experienced HR manager to find the best local talent.