Krešo Troha (Setcor): Digitalization in Croatia Lags as Companies Cannot Afford Expensive Software Development or IT Specialists

The Croatian ICT company Setcor, a cloud service provider, celebrated thirty-three years of operation this year, during which it has helped many companies from various industries with digitalization. Over the past four years, it has recorded an annual growth rate of fifteen percent, as well as an increase in exports. Setcor’s owner Krešo Troha shared with us how they achieved this, what their biggest challenges have been during their long-standing business, and touched on the current state of the ICT scene in Croatia.

When you look back 33 years, which Setcor successes would you particularly highlight?

– Setcor has undergone significant changes over the years: it has changed both its ownership and management structure, and even changed its strategy throughout its history. The focus on new technologies, development, and creating a team of people dedicated to creating their own products has always remained the same. I would highlight that over all these years, a team of people capable of further building new young professionals has been created. The knowledge we need cannot be narrowly specialized like in companies that represent individual traders. In other words, we do not want to create people who will only ‘turn left or only right screws’. We want to give them a broader perspective, and I think we are succeeding in that.

And the challenges? What have been your biggest challenges during your long-standing business?

– The services we provide are very complex and require extremely large and expensive infrastructure. We can freely say that after all these years, we are the only cloud service provider at this level and in this way. I remember one of the first presentations when we presented the vision of the cloud. At that time, there were not so many large service providers, and they did not have solutions suitable for use in high-security or regulated environments as required by the financial industry or other areas, such as energy. The question was: ‘How do you intend to deal with large systems, whether they are telecoms or international cloud operators?’ I jokingly replied with a question: ‘Well, I thought that you who work in large organizations would help with your great knowledge to establish something domestic.’

However, they were right; that was the biggest challenge, and the key was to persevere. We were small and unknown, with small marketing budgets and investments in infrastructure. Many domestic large operators gave up further investments, some only provide targeted infrastructure as a service, which is not cloud, and international operators were killing the market with low prices and various marketing perks. Today, after all that time, everything is significantly different. The era of low prices is behind us; we are more competitive than ever, and in addition, we have built every segment of the system ourselves, and everything is owned by us, so we do not depend on anyone.

Has Setcor been affected by the crisis in the IT sector that we are witnessing? If so, how?

– The crisis affects everyone, and there is particularly pressure from rising energy costs, which is a significant expense for us. On the other hand, Setcor sees an opportunity in this because all capital investments are being postponed or canceled. Our company has a perfect solution because it offers a pay-as-you-go system, meaning you pay monthly for what you use. They do not need any capital expenditures, and companies can start automation and digitalization with us, which will bring them new savings in response to rising other costs.

What are the biggest problems Setcor faces in the IT industry in Croatia, and how do you overcome them?

– We see two major problems. The first is the centralization of procurement by large corporations operating in Croatia. Corporations are trying to centralize procurement in their home countries, which can cause problems for all IT companies, including us. Often, this consolidation has no effect on savings; it can even be significantly more expensive.

The second problem is labor costs. We all know that IT specialists are very well paid, on average they have the highest average salaries. However, this needs to be well distinguished because it can lead to misconceptions that young people do not understand. An IT specialist is both a programmer and a systems engineer, as it is known. There are at least five levels of programmers based on their experience and knowledge. A programmer can work anywhere in the world and receive an exceptionally high salary. This is also contributed to by our companies that resell them by the hour to foreign companies. So, there is no own product. All this creates an imbalance in pay grades in Croatia. This will adjust and balance out, but it takes time. Currently, we are in the greatest discrepancy.

Certainly, because of this, digitalization in Croatia lags as Croatian companies cannot afford such expensive software development and cannot hire IT specialists because they have no way to pay them. Salaries of IT specialists can be up to three times higher than those for other professions, and without that, there is no digitalization. If there is no digitalization, there is less need for cloud services.

What advantages do you see in the development of the IT industry in Croatia compared to other countries?

– The IT industry in Croatia is certainly a sector with great potential. First, Croatia boasts a very educated and talented workforce. Second, our proximity to major European markets allows us to operate quickly and efficiently with partners and clients from different parts of the continent. In any case, there is fertile ground for the growth and expansion of the IT industry in Croatia.

You can read the entire interview in the new issue of the printed and digital edition of Lider.