Slovakia is a pretty small country with 5.4 million inhabitants, but it has an enormous competitive advantage: Bratislava, its capital is located within an hour’s drive from the magnificent Vienna. One would think that the proximity to this established economy as well as its membership in the Euro zone would result in high standards of living, and, correspondingly, salary levels. Yet, even in the IT industry, where skills of software developers are in high demand, this is clearly not the case.

I have spoken to Matej Valuch, the executive director at New Generation Recruitment to learn more about Slovak IT labor market. This is what he told me.

Apparently, as anywhere in eastern Europe talented IT engineers are in high demand. Local branches of multinationals such as IBM, Logica, Microsoft to name but a few, recruit the best students straight out of the university. More experienced software development professionals has their phone ringing every day with the jobs on offer.

Curiously though, IT salaries remain at a reasonable level. For example .NET developers with 3-5 years experience earn on average 1390 Euros (gross monthly salary), although expectations may be 30 per cent higher, which as Valuch puts it, “is a phenomenon of high expectations because of unrealistic ideas of Western IT salaries are like”.

To arrive to a total cost of employment one must add 35 per cent of payroll taxes and social security payments, but still a total monthly cost of an experienced .Net developer of under 2000 Euros is reasonable, compared to Silicon Valley. This is why Rastislav Turek, the founder of a movie rating startup, which employs 14 people, chose Bratislava as a location for his company. During our brief meeting in Bratislava last summer he said that Slovakia compares favorably to Silicon Valley, where any developer would cost at least $100 000 per year.

Smaller companies, especially from Austria and Germany also recruit IT specialists for their local branches, typically no more than teams of 5 to 6 people. But the understanding of the market dynamics, according to Valuch is not always there. For example, many companies expect to publish a job ad and expect CVs of prospective candidates to flow in.

Head-hunting is still the most effective way to build a software development team in Slovakia, as probably anywhere in eastern Europe. But in terms of its location (direct flights to Vienna are numerous), and Euro as its currency Slovakia is a convenient outsourcing destination for the western project managers looking to set up their software development team in eastern Europe. For Austrian businesses it also offers proximity to the nearshore software development team.

Alternatively one might want to work with a local supplier, which, according to GoalEurope research, add up to over 100 outsourcing companies.