Tech boom: A tale of two ex-communist countries

Katy Barnato in Bratislava, Slovakia

Not many business leaders trumpet the benefits of communism. But for some in eastern Europe, it helps explains how two small countries managed to triumph in computing.

While the joint population of Slovakia and the Czech Republic—united in Soviet days as Czechoslovakia—numbers only 16 million, the countries have spawned three of the most successful global anti-virus software companies, along with other tech brands that utilize expertise developed under communism.

Now internationally known for computer security software, AVG, avast! and ESET all started life in the free market chaos of the early 1990s, when the sudden collapse of communism spurred a wave of entrepreneurship.


Perhaps surprisingly, each company is thriving 15 years later. ESET, for instance, still makes the annual Deloitte Fast 500 EMEA list of rapidly growing I.T. companies, and averaged sales growth of 303 percent over the last five years.

When asked about the success stories, local business leaders in the Slovak capital of Bratislava cited the strong education provided under communist rule.

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"I think socialism had a couple of very good things—the health care system and the education system," said Tomas Martinec, the head of boutique asset management firm Metatron, in a statement that was echoed by others.

Luckily for aspiring programmers, I.T. and cryptography, as well as physical sciences, were strengths of Czechoslovak universities, with the Soviet Union mindful of the skills needed to the fight the Cold War.

"We have an excellent history in maths, physics and I.T.," the head of the Slovak Investment and Trade Development Agency, Robert Simoncic, told CNBC. "IBM employs more people in Slovakia than in Poland."

One beneficiary of the education system was Miroslav Trnka, who studied at the Slovak University of Technology before setting up ESET in Bratislava. His rivals at avast! meanwhile, were based at Prague's renowned Mathematical Machines Research Institute.

Or not rivals, but old friends, according to Trnka. He met avast!'s founders in Czechoslovakia's fledgling programing scene of the 1980s and 90s, when young enthusiasts attended lectures, clubs and competitions together.

"I have known both the founders of these companies, AVG and avast!, for a very long time," he told CNBC.

"I met the owners of avast! even before they established the company. They also started making programs before the revolution--we cooperated at the time."

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It was this cooperation that helped Trnka and his colleagues discover one of the world's first computer viruses, "Vienna", in 1987, and write a program for its detection.

"We (the owners of avast!, AVG and I) have never competed with each other… maybe the marketing people do, but we owners never compete," he said.

'Innovation and drive'

Martinec said the difficulties of life under communism and the disorder that followed its collapse gifted locals with problem-solving mentalities.

"There is innovation and drive here… If you have unideal conditions, you have to find cheaper and easier ways around, and that supports creativity," he told CNBC. "People have been used to problem-solving…It is not the excellent conditions of MIT (the U.S.'s Massachusetts Institute of Technology) here, so you have to be creative."

This make-do spirit even infiltrated the language of coding, according to Tom Kellermann of Japanese security software firm Trend Micro.

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"Computer scientists in the former Soviet bloc had to make do with simpler, less sophisticated computing resources, which instilled in them a discipline to make every line of code count," the vice-president of cybersecurity wrote in a report.

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Start-up… or IBM?

With big-name employers now clamoring for their expertise, it is unclear how tempted the next generation of Czech and Slovak programmers are to experiment and collaborate.

"The situation is changing a little bit," said Trnka. "In Bratislava now, we have foreign companies like IBM, Accenture and Siemens that have a huge presence. They are hiring almost anybody with some I.T. knowledge and young people are now starting to think about developing their business future more than about their knowledge."

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Nonetheless, both Slovakia and the Czech Republic have continuing spawning programming start-ups in recent years.

One example is Slovakia's Sygic, founded in 2004, which manufacturers navigation software using GPS technology, and has ranked in the Deloitte Fast 500 EMEA list every year since 2008.

The company's founder told CNBC that despite offers from Silicon Valley, he had no interest in leaving Slovakia.

"I think it is a good place to stay," said Michal Stencl—who started programming as a seven-year-old.

"I think we have a lot of I.T. skills…and there is more and more capital over here and it is quite easy (to start a company) now if you have a good business plan."

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—By CNBC's Katy Barnato in Bratislava, Slovakia