The Czech ICT sector: held back by some hard-to-fix problems

The Czech ICT sector has grown very significantly over the last 10 years (see charts below). At the start of the last decade, just 1.4% of people employed in the country were working as ICT specialists. By 2019, that figure had risen to 4.0%, a fraction under the EU average but, neck-and-neck with Slovakia, this was a bigger share than the other leading economies in Central & Eastern Europe.

Over almost the same time period, the contribution of the ICT sector to Czech GDP rose to 4.71%, taking the country up to 8th place on the list of member states where the economic contribution of the ICT sector was most significant – up three places from 2010.

There were multiple factors behind this, but one of the most important was the appeal of the country to major foreign tech companies.

What attracted them to the Czech Republic?

One commonly cited reason is the perceived edge it has over other countries in the region when it comes to the local talent pool. For example, when cybersecurity leader SentinelOne launched its innovation centre in Prague in October, a €40 million investment over three years, CTO Ric Smith said that “the Czech education system produces engineers of a particularly high calibre, so we see the country as the ideal base to build industry-leading products.”

Universities are obviously at the heart of this, and two of the four universities in the V4 that the QS World University Rankings 2022 includes in its top 400 globally for Engineering & Technology are in the Czech Republic: the Czech Technical University in Prague (ranked 221=), the leading university for Engineering & Technology in the whole of CEE (if you don’t include Russia in the region), and Brno University of Technology (ranked 311=).

However, this masks the biggest barrier to the sector’s further growth – the size of the skilled labour force – because the Czech Republic also leads the EU’s rankings when it comes to the number of businesses with “hard-to-fill vacancies” for jobs requiring specialist ICT skills, and none of the obvious ways to improve that situation will be easy to implement. For example:

1. Increase the number of skilled graduates coming through the system

It’s true that a slightly higher proportion of Czech students are studying ICT-related subjects than was the case 10 years ago – 7.2% rather than 6.5% back in 2010 – and that the rate is well above the EU average. The problem is that there are fewer students in Czech universities than was the case 10 years ago so the percentage increase in ICT students still equates to a drop in real terms.

The same is true with the numbers going on to graduate in these subjects. The proportion of ICT graduates may have gone up, but 600 fewer Czech students graduated in ICT subjects in 2020 than did so in 2010.

So although increasing the number of Czech ICT graduates should be a clear policy objective, there are no quick fixes here.

2. Hire talent in from abroad

Solving the problem by recruiting from abroad is a simpler solution, and it’s true that the number of foreigners (i.e. non-Czech citizens) working in the Czech ICT sector is up 174% over the last 10 years, doubling the share of the total from 10.2% to 21.7%.

The fact that average salaries in the sector are more than 20% higher for foreigners than Czechs, a gap which has grown over the last three years, suggests that many employers are pursuing this route and are throwing money at the problem, but it won’t be a sustainable solution forever, even if the political will exists to make it happen.

3. Encourage more women into the sector

The ICT sector is male-dominated everywhere (on average across the EU, only 23% of ICT specialists are women and the proportion in managerial roles is even smaller). You might expect this to be a real problem in the Czech Republic because there is a big – and potentially widening gap between the number of men and women in the workforce across the board, but it is still a shock to see that the Czech ICT industry is the most male-dominated anywhere in Europe (see charts below).

There are myriad reasons for this. Although not only an issue in the Czech Republic, the gender pay gap in the sector is surely one. The fact that a lot of Czech mothers take longer periods of maternity leave than is common in Western Europe is potentially another given the challenge of reintegrating into an industry which doesn’t stand still for a minute.

The problem is that the gender gap isn’t improving. Back in 2004, when the Czech Republic joined the EU, 26.5% of ICT specialists in the country were women, above the EU average. It had plummeted to 10.6% by 2011 and has plateaued around that level ever since (see below).

There are signs that progress might be coming as the share of female ICT students in Czech universities is improving (see above). However, increasing the volume of ICT specialists in a meaningful way will require progress to made in other areas too. Until then, the battle for talent will remain ferocious.