Since the year 2004, Outsourcing has boomed as an industry, even experiencing growth during the time of economic crisis in 2008 till now. Many companies and corporations employ outsourcing as part of their strategies to cut costs, increase efficiency, and boost quality by focusing on their core business.
An interesting fact is that the SEE region has become an incredibly successful outsourcing destination given the fact that it offers lower costs and yet quality of service unparalleled by any of the other countries (India, The Philippines, China etc.) known as outsourcing hubs. Another thing is the qualified workforce that has both the IT skills and the language proficiencies needed for delivering an exceptional service with superior quality. Countries in CEE like Bulgaria, Romania, The Czech Republic, Poland, and the Ukraine and many others have already established themselves as quite mature markets for the outsourcing industry. The fact that the IT giants HP, IBM and global outsourcing providers like Sitel and Sutherland Global Services have opened delivery centres in each of the countries speaks for itself. In the summer of 2013, Coca Cola opened a shared services centre in Sofia and the Canadian company TELLUS established its own operations by acquiring the French owned local outsourcing provider Call-point.
The other countries in the region Croatia, Slovenia, Serbia, Macedonia, and Bosnia and Herzegovina are also catching up very fast being able to offer qualified resources and advanced infrastructure that is an attractive incentive for potential investors. The economy of the region would definitely benefit, if the governments focused on outsourcing as a development strategy and make it a priority for their cabinets. The many different types of outsourcing are widely applicable in the countries from the SEE region, ranging from BPO, ITO, KPO, LPO, Customer Care Centres, Back Office Centres to even more complex solutions based on the needs of the clients, making the region a best-shore and near-shore location for potential foreign investors.
Outsourcing in itself brings both positive and negative aspects to the region. It is a well-known fact that this industry opens many new job vacancies and gives the chance to young graduates to start their careers and gain first-hand experience. It also brings in foreign capital into the economy and gives local providers the opportunity to access larger clients with their already establishes infrastructure gaining further expertise in the different types of outsourcing. Despite the advantages it brings, the negative aspect of outsourcing should also be considered namely the fact that outsourcing is never long term – the moment a company realizes that it can outsource somewhere cheaper it would terminate the projects quickly and relocate. Another disadvantage is that many people start relying on the demand for people that outsourcing puts on the HR market, and few people decide to found and establish their own businesses as a fact about this. More than 60% of all IT professional work for IT outsourcing companies and are happy with the wages they get and forget to get out of the comfort zone and make their own tech start-ups. That is why the function of the business schools in the region, the business incubators, and governments is to encourage young professionals to establish their own businesses by giving them all the support that is necessary in regards to know-how and expertise as this is the only way to ensure long term growth and innovation.
It is an important to know how companies decide on where to outsource and what are the factors that contribute to their decision.
The below list shows the most important criteria:
- Education level and access to skilled personnel with language proficiencies
- Economic and social indicators of the country and labour costs
- Level of development and infrastructure
- Cost of running the business
- Scope of activities that will be outsourced and is there a good match for the needs of the company in the respective market. Should it be outsource to a partner or insourced i.e. establish own near-shore or offshore centre
Usually, it takes a long process of research and risk analysis assessment before a company decides to outsource in a country or not. Companies also rely on local providers to support them at first before they open their own centres. The latter being the best option for every country as it predisposes long-term investment and not project based work.
The truth is that the SEE region has the potential to become a tech hub in Europe attracting investors. As per survey carried out by Gartner, more than 23% of the world investments in 2013 will be spent on IT outsourcing and that the world outsourcing market will reach 288 billion by the end of FY13.
The major functions that companies outsource are:
- Logistics – 40%
- Training – 32%
- Procurement – 17%
- HR – 16%
- Call Center – 15%
- Customer Care – 15%
- Accounting – 14%
- Marketing – 14%
- Billing – 13%
- Controlling – 8%
In terms of IT functions companies outsource mostly the below:
- Application management – 41%
- Data processing – 35%
- Helpdesk – 29%
- Infrastructure network – 25%
The market for outsourcing in SEE is developing dynamically, and has the potential to turn region into a tech hub for IT and innovation. The qualified workforce would make it possible for local outsourcing providers to even compete for more complex processes and project, which will offer new opportunities for expansion in the region.