Lithuanian IT: Coming of age?

VILNIUS - Lithuania's IT industry has thus far lacked two things: entrepreneurial spirit and a regulatory infrastructure to assist the country in the information age. This could all be changing now, as the country is starting to see its first IT companies gather strength.

One nine-month-old firm, Gaumina, recently made headlines when it attracted an Estonian firm, Osta, to invest in its Internet auction site, auction.centras.lt. In just a few months of existence, the Lithuanian site boasts 800 regular users a month - a relatively impressive number for a country with such a brief background in e-commerce. To compare, per day Osta attracts 10,000 users with an estimated 1,200 deals done.

Osta will invest 250,000 litas ($62,500) in Gaumina and the two will merge the Web site auction.centras.lt and Osta's Lithuanian Web site, www.pirk.lt.

Darius Bagdziunas, Gaumina's head of finance, reports that the Estonian firm was a little surprised to see a Lithuanian auction site operating successfully.

"They were expanding to Latvia and thinking of expanding to Lithuania," he says.

"They were thinking that it would go much more slowly in Lithuania. When they saw that we have already something and there was competition. In Latvia there is no auction site."

The auction site, which resembles a digital classifieds section, offers 135 categories of items, the most popular being mobile phones, computer, hardware, audio and video equipment. Users simply click on the items they are interested and bid on them. The highest bidder then makes contact with the seller and the two do the transaction privately.

Gaumina isn't involved only with the auction site. The company is also a Web design shop, that boasts high quality and the highest prices in Lithuania.

"We are the most expensive brand name in Lithuania and we are still at the top because some people understand style and design and why it's good for them," says Bagdziunas. However, the company may eventually spin-off the Internet portal company. "We are now deciding how to split the services of Gaumina and the Centras portal. Actually the services are very different."

Gaumina's Internet portal www.centras.lt claims 7,000 users a day and is used to convey many kinds of informational services, from news to Internet-based e-mail. In the future, separate sites for health and legal information will also be started, says Bagdziunas.

"What we have done is created something for Lithuania."

Expect to see more companies from the Baltic region to make investments in the Lithuanian IT sector. Compared to Estonia and Latvia, much of Lithuania's virtual territory is virgin.

"Estonians have somewhere around 400,000 users, the Latvians have 300,000 users, and we have somewhere around 140,000 Internet users," Bagdziunas reports. "It is believed the number will grow to 200,000 this year."

The Baltic Internet markets are very different indeed. Estonians and Latvians, Badgziunas explains, are more likely to visit international (dot com) sites instead of sites from their native soil.

"Lithuanian users are targeting the .lt zone more," he says. "We have more portals, we have more visits etc. And according to my work watching the market in Latvia, I have found only one serious active portal operator, Delphi.lv. The others are either weak or very specific."

One hurdle for Lithuanian e-commerce is that purchases can't yet be made online.

"Internet banking in Lithuania is not active because of the shortcomings of the law in electronic signatures," Bagdziunas says.

However Lithuanian banks have already announced that Internet banking protocols will be developed within a year.

"Almost every bank and our Parliament have awarded the concession of the electronics law," he says. "We hope that in a half-year period we will have the legal basis to start e-commerce and I would say that Internet banking will start earlier."

"The law is not accepted yet," explains Vilma Misiukoniene, director of InfoBalt, an association for IT companies. "It's only a draft. "I know of three or four [e-commerce] solutions developed in Lithuania. They look quite professional, but because the infrastructure is not built these solutions are only partially working because we can't do money transfers via the Internet."

Connected to the e-commerce issue, says Misiukoniene, is intellectual property rights, which have yet to be covered by Lithuanian law.

"If goods are going to be transferred via the Internet, it is an intellectual property matter," she said.

On March 29 InfoBalt launched a software registration program to deal with the problem of intellectual property protection.

"For the creator who develops one or another solution, sometimes it is quite difficult to protect his creation, not only because of the lack of a legal structure but also because software products are an issue of copyrights," Misiukoniene says. "There is a difference between copyright and patents. If you patent your invention you can prohibit others from using your work without permission."

But with copyrights, especially with digital products, the situation is less clear-cut.

"According to the EU system, which is reflected in Lithuanian law, you automatically obtain a copyright when you announce your product. The problem is software piracy - because of the incomplete legal system. Sometimes it is quite difficult to prove that you are the author of that work."

The biggest problem with Lithuania's IT industry, Misiukoniene says, is the backburner status imposed on it by the government.

"Some officials think that IT issues are technological, but society is changing, so IT issues are becoming management issues. We are wasting our budget money because the IT infrastructure isn't good now. And that is only the tip of the iceberg. I'm more than sure that in 10 years skilled IT professionals in Lithuania will be able to change the minds of state officials so that IT issues will have the same priority as oil, or energy, or nuclear power. If I listen to the news in Lithuania, the first stories are about these industries. If I listen to CNN, the first stories are about IT."