A Moderate Pace, a Clear Direction – How Can Latvia’s IT Sector Grow Sustainably?

For many, the IT sector is associated with high salaries and fierce competition for talent. Yet data shows that in recent years the industry’s “heat” has cooled, shifting to a more moderate pace. Salary studies reveal the lowest wage growth in five years, a more pragmatic focus on results, and changes in workforce dynamics. Still, this is not a sign of stagnation — quite the opposite. It shows that IT in Latvia has moved from a sprint to a marathon, where long-term success depends on identifying and leveraging our strengths on the international stage.

According to the latest study by compensation research and management consultancy “Figure Baltic Advisory,” the monthly base salary in IT grew by 6.1% this year — the lowest increase in five years. Total annual compensation grew slightly faster (8.4%), largely due to a bigger share of variable pay. This signals a more performance-driven approach: pay is increasingly tied to results, not expectations. The sector’s cooling could already be felt last year, when the financial industry outpaced IT in salary growth.

More targeted vacancies

Looking ahead, workforce trends also tell an important story. The same study shows that 71% of companies plan to increase staff by year’s end, 17% expect no changes, and 12% plan reductions. In a sector long defined by a battle for talent, this marks a shift. It doesn’t mean IT no longer needs talent, but that vacancies are becoming more targeted.

The right time to strengthen IT exports

What does a more moderate pay environment mean for the industry and the economy? A lower cost base can be attractive for investors seeking locations to develop business and establish high-value centers. It also gives Latvian companies a competitive edge abroad. Countries like Germany already value the expertise and efficiency of Baltic IT firms, and our leadership in digitalization further demonstrates our capacity. For Western European organizations, working with Latvian providers is cost-effective without compromising quality. That’s why now is the right moment to look beyond Latvia’s borders and strengthen IT exports.

Future talent challenges

Of course, broader economic caution — driven by geopolitics and external pressures — is also reflected in IT, with more measured and individualized salary increases. Companies are less focused on junior roles, while demand for experienced professionals remains strong. This raises future risks: if young specialists today don’t get enough opportunities to build experience, the sector may face shortages of mid-level and later senior professionals in the coming years. Similar trends can already be seen in manufacturing, where demand is growing for workers skilled in automation and programming, not just manual labor. In IT, this is even more pronounced: the demand is for experts who can work with AI tools, deliver secure and meaningful solutions, and add value beyond service delivery — including client education, which is also a guiding principle at Helmes Latvia.

A shift to steady growth

This year is not a crisis for IT but a shift from rapid acceleration to steady growth — with more deliberate salary reviews, targeted hiring, and a sharper focus on productivity. Mergers and acquisitions also play a crucial role. In the tech sector, M&A activity is rising, helping local players expand into new markets, add competencies, and respond more effectively to volatility. By maintaining partner autonomy while sharing support functions, companies achieve scale and resilience that is difficult to reach through organic growth alone.

While salaries in Latvia remain lower than in many parts of Europe, this is also an opportunity. A lower cost base can drive productivity, innovation, and export growth, provided we use it wisely. Workforce sustainability, meanwhile, depends on retaining experience while developing new talent and giving them real opportunities. With moderated wage growth, targeted recruitment, and a clearer view on productivity, the IT industry is evolving. Lower costs can be our advantage — if paired with smart strategy — and M&A can accelerate our path to scale and expertise.