After 10 years of operating in Lithuania and Estonia through its partner companies, information technology giant Microsoft has decided to open subsidiaries in Vilnius and Tallinn.
"This is part of a natural development process," said Torben Andersen, head of Microsoft Baltic in Riga. "Microsoft has seen 300 percent growth in the Baltic states over four years, so we feel its time to be closer to our customers in the region."
Andersen said that Microsoft Baltic chose Riga for its regional office in 1999 "purely for logistical reasons" and that customers in Lithuania and Estonia had been asking for a closer relationship with the company ever since. "These new offices are a big commitment for us, one that we can't go back on very easily," he said.
While worldwide IT growth continues crawling, Andersen anticipates 30 percent revenue growth from the Baltic states in 2004 and said that this number would likely remain "in the double digits" over the next few years.
"Lithuania is the largest IT market in the Baltic states and the one with the largest potential," said Martynas Bieliunas, a Microsoft sales representative in Lithuania .
"We are a bit further ahead in terms of market penetration in Lithuania right now than in Estonia," said Andersen.
This is partly due to Microsoft's July 2002 takeover of the Danish business software company Navision, which had focused greater attention on Lithuania than the other two Baltic states.
The Vilnius and Tallinn offices have already begun hiring staff and will eventually have about 20 full-time employees in each. Microsoft Baltic in Riga presently employs 30 people. Microsoft's relationships with its partners are not expected to change - the new subsidiaries will be focused on marketing, public and government relations.
Government sales of its software have been a large source of revenue for Microsoft in Lithuania. The revenue agency's ambitious project to implement electronic tax declarations makes extensive use of the company's software, including warehousing of data, development kits as well as front- and back-end software.
When it finally rolls out, the system is expected to result in large time savings for companies, as VAT forms and balance sheets will be able to be filed electronically. "People won't be wasting as much time in frustrating lineups at government offices," said Bieliunas. The system will also be available when Lithuania introduces personal income tax returns in the near future.
According to Arvydas Sekmokas, who heads Microsoft Business Solutions in Vilnius, companies in Lithuania are now at the stage where they are investing heavily in software solutions that go beyond accounting and finance.
"They've reached the stage where they need an integrated solution that also plugs in to production, supply-chain management and marketing," he said.
This trend contrasts greatly with the worldwide picture, as large corporations continue to look for ways to cut software costs rather than invest in large-scale solutions.
Software piracy remains a thorn in the company's side. Riga's Andersen said that the 56 percent rate of business software piracy in Lithuania was one of the highest in Europe, though he expects this to begin changing rapidly when the country formally joins the EU. He estimates consumer piracy at between 95 percent and 99 percent.
"It's blatant. You can still see illegal gaming software in major stores," he said.