Poland feels the outsourcing heat as Romania, Ukraine step up the competition

Summary:Poland remains Europe's undisputed outsourcing leader, but it's seeing Romania and Ukraine growing their presence in IT offshoring thanks to lower wage costs and an increasing range of services.

The outsourcing market in Eastern Central Europe keeps growing, thanks to the rise of new markets for BPO (business process outsourcing) and KPO (knowledge process outsourcing). While growth in outsourcing's traditional powerhouses has flattened a little, countries in the region with lower wages are stepping in to pick up the slack.

Poland remains the biggest outsourcing destination in Easter Central Europe; however, according to a series of reports published recently by real estate services company Jones Lang LaSalle, it's facing new competition.

bucharest-romania-thumb
Companies are now looking outside the Romanian capital Bucharest for outsourcing sites. Image: Shutterstock

Thanks to its lower wages, Romania's outsourcing industry is growing quickly, especially in BPO and KPO.

Romania is now ranked as the ninth among offshoring locations by the number of jobs created, according to Jones Lang LaSalle, and the country is nearing regional leader Poland in terms of growth. Between 2008 and 2012, 11,438 jobs were created in Romania as a result of outsourcing 40 projects, the reports said — that's only 2,000 less than in Poland, a country that is almost twice as large in terms of population.

"Most major [outsourcing] players have opened at least one centre in Romania," the report said (PDF), with companies including Adobe and Intel already setting up R&D centres in the country.

Emerging destinations

The growth in Romania's outsourcing market has had a knock-on effect on the industry's location: companies are no longer clinging exclusively to the capital Bucharest, but are now looking towards university towns including Targu Mures and Craiova in order to get easy access to an educated workforce.

"These emerging destinations are often shortlisted by numerous companies, with either new or existing operations elsewhere in Romania," the report added.

While the raw growth rate in Romania's outsourcing slowed over the last three to four years, the country is moving up the outsourcing stack, shifting from just providing call centre services to delivering a wider range of IT outsourcing.

(Romania may be learning from its bigger neighbour — similar transitions are afoot in Poland, which is moving from providing purely basic outsourcing services to delivering more advanced ones , along with using more provincial centres where costs are lower.)

For companies with cost arbitrage on their minds, Poland is facing competition from not just Romania, but Ukraine too — the value of its IT outsourcing market hit $1bn in 2011, the Financial Times reported earlier this month, up tenfold in the last decade. Among those setting up shop in the former Soviet republic, according to Kyiv Post, is Nestle, which recently opened a service centre — right across the border in the former Polish town of Lviv.

For the moment, however, Poland remains Europe's outsourcing leader, according to Jones Lang Lasalle (PDF).

"There are 370 BPO/ITO [IT outsourcing], SSC [shared service centres] and R&D centres with foreign capital active in Poland employing more than 90,000 people," the report says. "There is also a strong presence of local centres providing services to Polish corporates. Annual employment in this sector is growing at a steady rate of about 20 percent (between 2008 and 2011) and the share of Polish employment in relation to the entire CEE region is increasing, reaching 38 percent at the end of 2011."

Other countries in Central Europe, including the Czech Republic, Slovakia and Hungary, remain stable in terms of outsourcing developments.

Topics: Outsourcing, EU, IT Employment, Tech Industry

About

Michiel van Blommestein is a Dutch journalist who has been living in Poland since 2010. He worked as a technology journalist in the Netherlands before moving to Poland to work as a regular correspondent for various news outlets. He still loves the bits and bytes though.

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