Eastern Europe Emerging As Hot Tech Market

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June 29, 2000 (5:56 AM EDT)

By Cynthia Flash,

Eight months ago, Internet pundit Esther Dyson held her 10th annual high-tech forum in Budapest, an area of the world most people wouldn't equate with cutting-edge technology.

Now she's in Stockholm meeting with the board of TrustWorks, a software security company that started in Russia. She talks up companies she's invested in elsewhere in Eastern Europe and the former Soviet Union -- companies like Estonian recruiter CVOnline; Russian-based information solutions provider IBS; and NetBeans, a Czech Republic company that last year was bought by Sun Microsystems (stock: SUNW).

"I find it tremendously exciting because you have a real impact there," said Dyson, an investor and publisher the Business1.0 technology newsletter. "They have the technology, but not the commercial culture. I can be more useful over there."

Although Dyson saw Eastern Europe as an emerging market before many others, she's no longer alone.

A June study by PricewaterhouseCoopers found that technology in 1999 attracted 25.6 percent of the total amount invested across Europe. Investment in 5,000 European technology companies reached $6.8 billion, a 70 percent increase over 1998. Most of the money went to the developed nations of the United Kingdom, Germany, and France.

Nevertheless, Marco Rochat, leader of PricewaterhouseCoopers' global technology industry group, called this the "golden age for European technology companies."

"Entrepreneurialism is flourishing; technological innovation is continuing to push back the boundaries, and investment is increasing dramatically," he said.

One company that has enjoyed the recent renaissance is Asbis, a supplier of computer components and software. The company, which started in 1990 in Minsk, Belarus, sells Intel (stock: INTC), Seagate (stock: SEG), IBM (stock: IBM), Quantum (stock: DSS), and Microsoft (stock: MSFT) products to more than 5,000 customers in 19 emerging European and former Soviet block countries.

Asbis is successful, said marketing director Mark Hayes, because it grew up in the region and knows how to work around the area's political and economic turmoil.

Hayes said Asbis has implemented tight financial controls and set up a centralized financial, logistics, and purchasing system to shield itself from the instability. And while some customers are impressed by American companies with brand names, they are more likely to turn to a homegrown firm like Asbis because it better understands the region's business playing field, he said.

Kathy Wilcox, president of the Washington Software Alliance, Seattle, recently visited Berlin on an economic development mission. She complimented the region's efforts to educate its workforce. But she questioned whether it would get the infrastructure needed to sustain technology businesses.

Dyson agreed that the infrastructure Americans have come to expect is missing throughout much of Eastern Europe. To compensate, the Europeans rely more on wireless technology to communicate and access the Internet.

The Internet is key, however, and they see it as a way to expand their businesses globally, Dyson said.

"The Net makes it easier and helps you do things on a global scale. I hope you're going to see the Internet leading to more transparency and fluid markets."

Freelance writer Cynthia Flash can be reached at cynthia@flashmediaservices.com.