AgencyO4, a Zagreb IT company, was founded in 2014 and will soon celebrate six years of operations marked by constant growth in exports, the number of clients, and employees. For the past month and a half, instead of tourists, it has been counting trucks for export, and perhaps we are being unfair to IT companies, whose exports are also continuously growing, and as the CEO of this company claims, their figures this year can be compared to the export of about 200 smaller city cars.
Deloitte has recognized this as well, ranking Agency04 among the 500 fastest-growing IT companies in the EMEA region, which encompasses a wide area of Europe, the Middle East, and Africa, with the company taking a high 247th place. Only two companies from Croatia are ahead of it. This was also the reason for a conversation with CEO Mihael Sedmak, who was recently appointed to this position from the role of Chief Operating Officer. The goal of Sedmak’s appointment, as well as the expansion of the Management Board to a total of five members, was to strengthen the Management Board for upcoming business opportunities. Sedmak says that the pandemic has also left its mark on them, he does not hide it, but they have fought for both clients and employees.
Agency04 did not lay off employees during the quarantine, nor did it lower salaries, although some larger IT companies did. You are strengthening the Management Board, moving to new premises… What is your ‘quarantine’ recipe?
– That’s right. We are extremely happy that even in such circumstances we did not react with unpopular measures such as layoffs or salary reductions for our employees. On the contrary, even during the crisis, we continued to give regular raises. Likewise, at the end of July, we paid bonuses to all employees. The first blow of the crisis did not affect our employees in any way, although the company felt the consequences. We used this crisis caused by the coronavirus to better organize ourselves for the future. We democratized the Management Board, which we expanded by two members. Since we are growing and have about 100 employees, our office of 660 square meters has become cramped, so in September we are moving to new, almost twice as large premises in the city center, which will certainly help us provide even better conditions for our employees when they are not working from home, but also to create conditions for even greater growth that we expect in the next period. Our recipe is that we managed the crisis, rather than surrendering to it. In the first week, we implemented our crisis management program and fulfilled all the goals from it. The goals were to prevent impact on employees, maintain delivery efficiency, and not lose a single customer.
For several weeks now, annoyed by the traditional, but this year particularly irritating counting of tourists, the leader counts trucks for export. But Agency04 is also an export company, how can you help us put your product in the context of exports? What is the value of your export product, what could we compare it to in numbers? For example, in the context of the value of something (Pelješac Bridge).
– Agency04 generates as much as 80 percent of its revenue from exports, which numerically means about 14.5 million kuna in export revenue last year. This year, in the first six months, we generated about 8.6 million kuna from exports and expect growth in the second half. If we were to put that in some context, it might be simplest to compare it to car exports, which would mean that we will export the equivalent of about 200 small city cars this year. How many that is in trucks, we do not know.
How do you assess the business climate in Croatia, have you ever thought it would be better to operate from another country with less complicated bureaucracy? Do you have offices in other countries, I read somewhere that this is only considered when the repercussions of tax reform are seen?
– For now, we are not considering relocating the company from Croatia, but we are in the process of opening offices in the USA and London. Objective macroeconomic institutes, such as the Doing Business initiative, should better speak about the assessment of the business climate. Looking from within the country, it is hard to be objective, as every entrepreneur always wants to have more flexibility, regardless of where the organization is located. However, our industry is one of the fastest-growing in the world, and many countries have special tax frameworks for it to stimulate growth and benefit from higher employment and consumption. We are not satisfied because such frameworks do not exist in Croatia, which puts us at a disadvantage in the global market. For example, Belarus and Ukraine have almost zero tax rates for the high-tech industry, while Romania has had a very low rate for several decades. According to Eurostat data for 2019, which was published recently, Croatia is at the very top in terms of digital literacy among youth. As much as 97 percent of them are digitally literate, so for that reason, we believe it would be great if the state invested more, i.e., relieved the IT sector through tax reform so that these young people would stay here.
