Elena Marinova and her partners have successfully transformed Musala Soft from a small company operating in an apartment within an old socialist block to a thriving business with an annual revenue of over 30 million euros. Following the acquisition by the Czech holding Aricoma of KKCG Group, Elena sees global growth opportunities and philanthropic prospects in the field of education for herself.
It has been almost four months since the M&A deal of Musala Soft was closed, and Elena Marinova is now preparing for another trip to Latin America. The purpose of her visit is to assess the potential opportunities for establishing a Musala Soft development center in the region. Although most of the Bulgarian headquartered company’s clients are in Western Europe and the USA, the aspirations, under the new ownership, are global and that includes the delivery bases.
In 2022, the Czech Aricoma acquired Musala Soft in a deal that Elena Marinova describes as “time travel”. Marinova, who is the co-founder and president of Musala Soft, states, “We skipped several developmental stages – from a game involving hundreds of people, we moved to a game with thousands of people and are planning to jump to tens of thousands.” The acquisition consolidated annual revenues of over €400 million, creating a tech company with more than 4,000 employees. For Marinova, who will retain her position as president until at least 2024, this represents a significant change of scale.
Musala Soft has been growing annually around 20% as an independent company in recent years. In 2022, the company’s revenue reached around 31 million euros and is expected to increase further to close to 40 million euros in 2023. Musala Soft’s main business is providing software services and products for international companies in the fields of information technology, telecommunications, finance, and the automotive industry.
After years of steady growth, Elena Marinova and her partners Delyan Lilov, who is her co-founder and CEO, Stanislav Ovcharov, and Angel Denchev decided to sell the company founded in 2000. The main reason for the sale was the trend towards consolidation in the IT services sector and their desire to turn Musala Soft into a “global company”. And of course, the security that comes with a strong financial backing. Marinova stated that “if it weren’t for the deal, some things would have happened much more slowly or not at all,” for example it would have been quite challenging to achieve 9 billion euros independently. (The new owner of Musala Soft is part of the investment company KKCG’s portfolio, which has assets valued at over 9 billion euros.)
The Czech originating company has made several large acquisitions in recent years, demonstrating its appetite to expand its business in Europe and globally. In 2020, it purchased the Swedish company Seavus, followed in 2021 by the acquisitions of the Czech Komix, the Swedish Stratiteq, and the Polish Clearcode. In August 2022, the acquisition of Musala Soft was announced.
The Bulgarian company looks like a valuable addition to this growing group of technology firms. Musala Soft prides itself on creating long-term partnerships with its clients. Marinova notes that Musala Soft’s top ten clients have been with the company for more than a decade on average, some of them for more than 20 years. “We believe the right thing to do is to build a portfolio of clients with whom we can have a long-term partnership,” says Marinova.
Marinova and Lilov founded Musala Soft in 2000 after being introduced by mutual friends. Lilov wanted to start a software services business but had never created a business plan before. Marinova, who was completing her bachelor’s degree at the Faculty of Economics and Business Administration at Sofia University, had written business plans as part of her education. They registered a company with the idea of selling software written in Bulgaria to Silicon Valley clients, and their first ones were startups from the USA that Lilov approached through mutual acquaintances.
Musala Soft encountered its first crisis just a year after its inception. In 2001, the dot-com bubble had already burst and the tech startups, which comprised most of Musala Soft’s client base, began to vanish. “It was stressful time for us,” Elena Marinova recollects. “We were left with only one small client in Norway, and for the first and only time in the company’s history, we had to lay off programmers because there was no work for them.”
Musala Soft survived by creating a poker website for a former American senator (who was introduced through her contacts). The company also managed to retain its tiny Norwegian client – a start-up called Metamerge, with about twenty employees. This company turned out to be the cornerstone of Musala Soft’s success story.
In 2002, IBM was on the lookout for middleware developers to acquire. The American corporation already had around 50 such firms in its portfolio but aimed to double that number to at least 100. One of the firms it acquired was Metamerge. This acquisition made Musala Soft a supplier to IBM. “Suddenly, instead of dealing with unstable start-ups and very small clients, we began working with one of the giants in the world,” says Marinova. “And the rest is history.” IBM opened the door to big business for Musala Soft. From am SME operating out of an apartment in Darvenitsa, the Bulgarian company began to expand its revenues, which reached BGN 5 million in 2007. Apart from IBM, Musala Soft began working for other significant names such as HP, SAP, OMV, and DHL.
Musala Soft’s business continued to grow during the bank crisis, with its turnover more than doubling to BGN 11 million by 2011. Over the first 10 years of its existence, the company reported an average revenue growth of 70%. Musala Soft expanded beyond Bulgaria opening offices in other countries and exploring new markets such as the Middle East.
Meanwhile, in the global market, there is a growing need for digitization. Companies are adopting various software solutions and require consultants to handle tasks such as coding, analysis, design, implementation, and support. The term “digital transformation” encompasses fields such as the Internet of Things, automation, cloud services, and artificial intelligence. The market size for digital transformation is estimated to be around $285 billion as of the end of 2019, according to Grand View Research.
The global pandemic has ushered in a new era in the development of digital transformation, as more companies require cloud services and internet connectivity to function effectively. The pandemic has also changed the way office work is done and boosted the popularity of hybrid office spaces, hastening the process of digitization of many business processes. According to research by the Boston Consulting Group, businesses’ interest in implementing technological solutions has been growing, despite the economic instability in early 2022, and has become even more pronounced in 2023. Despite expectations of economic turbulence, 60% of the 2,600 study participants have stated that they will continue to invest in digital transformation. This means more business for companies such as Musala Soft. “We are positioned exactly in the segments that current and future IT investments are focused on: cloud integration, big data and analysis, artificial intelligence, and the IoT,” says Elena Marinova. “From a business perspective, things are looking very optimistic.”
One of the upcoming objectives for the new Musala Soft owner is to list the holding company on a major stock market in Western Europe or the United States. Elena Marinova anticipates that this will happen between 2025 and 2027, but the plan could be altered depending on the state of the financial markets.
Elena Marinova says, despite the challenges, she has never considered giving up on the company. Not during the pandemic when the company had to shift to remote work and send all employees home overnight; not after the M&A deal which also brings stress with its new structure and integration process following the acquisition. “I am not one to quit easily. Integrity, loyalty, and people are important to me,” states Marinova. “Breaking promises is not acceptable. I believe that when people or causes depend on you, you have the moral right to step back or withdraw only if you are certain that what you are leaving behind is stable and capable of moving forward.”
Elena Marinova’s current main focus is on the operational management of Musala Soft, and she is committed to this role until at least the end of 2024. Additionally, she is actively involved in philanthropy, primarily in the field of education. “I have always supported these causes, both as part of CSR initiatives at Musala and through NGOs,” she explains.
Musala Soft is dedicated to education initiatives for young people in the field of information and technology and supports this goal through various projects. For example, the company is the organizer of CodeIT.bg, a programming competition with participants from over 20 countries. Additionally, Musala Soft supports and adds on in various forms the IT education of young people, sponsors academic and sports events, helps universities create undergraduate and graduate programs, and donates equipment to educational institutions.
“I have a lot of dreams and plans in the field of philanthropy and education,” says Marinova who served on many educational boards, including for the American University in Bulgaria. “I strive to achieve long-term sustainability for every cause I create or support, regardless of who is involved.”
The topic of education is closely linked to the challenge of finding qualified talent in the IT sector. According to the Bulgarian National Statistical Institute (NSI), at least 2,000 graduates with an ICT specialization enter the workforce every year. However, the Bulgarian Association of Software Companies predicts that the shortage of skilled employees could reach 34,000 in the coming years. As a result, some IT companies are establishing their own academies and partnering with universities in an effort to attract new engineering talent. “Years ago, when we predicted a chronic talent shortage, the response was that we will increase the university enrollment but shortly after the ”fashion” will go away,” says Elena Marinova. “Obviously, the shortage continued in the IT sector, but it has also spread to other industries in recent years.”
What can the companies do in the face of increasing labor costs and talent shortage? One option is automation – replacing employees with machines. Another is utilization of freelance workers, or attracting talent from abroad. However, these only redistribute resources and do not create new ones. “Education is the only solution,” says Elena Marinova. “Education does not redistribute resources; it generates them. That is the visionary, long-term solution.”
According to Marinova, the education deficit could lead to another problem. Technology could lead to the stratification of the middle class because mid-level employees may have to move to higher value add, higher expertise positions or drop entirely. “This would be a scary development from a socio-economic perspective because it would mean the disappearance of the middle class,” says Marinova. “And the world relies on the middle class.” At Musala Soft, the talent pool is being expanded by hiring people from over 10 nationalities and enriching continuously the career development programs. Of course, the acquisition puts the future of the Musala Soft in a new perspective. “Playing a bigger game is an exciting challenge, especially during a global uncertainly,” says Elena Marinova. “On the one hand, the financial back is reassuring; on the other hand, the scale entails much greater challenges.”
Note: The original interview is available in Bulgarian here: https://forbesbulgaria.com/2023/04/28/elena-marinova-climbing-to-the-top/