Bulgarian outsourcing companies will move ahead to more value added services in the medium term as the business matures and conditions improve, officials said.

“Some time ago Bulgaria was a destination for outsourcing of processes with low value added and the value added of the processes is now increasing. I think we everyone benefits from that,” Anton Gavrailov, business development manager at information technology company Bulgarian Sirma Group Corp., told SeeNews on the sidelines of a conference on the outsourcing of IT services organised by IT publisher IDG Bulgaria.

The country of 7.6 million people, which joined the European Union in 2007, was among the top 10 most preferred outsourcing destinations in 2007, according to the government’s Agency for Information Technology and Communications.

Outsourcing of services such as consulting, implementation of systems such as SAP, Oracle Financials and specialised banking systems will develop at the speed of an avalanche, Gavrailov said.

Bulgaria is still at the stage of outsourcing of basic processes and moving ahead to outsourcing of integral business and IT processes, said Ivaylo Slavov, general manager of Swiss human resources company Adecco’s Bulgarian unit.

“Outsourcing of procurement processes, IT processes, accounting – account payable, account receivable, credit control, such things – will be coming to Bulgaria ever more often,” he said.

Low taxes and skilled labour force provide good conditions for the development of the outsourcing business but the sector is still unprepared to support more complex processes such as outsourcing of whole financial departments, Slavov added.

The outsourcing market will benefit from the fact that more managers are beginning to realize the advantages of outsourcing certain processes, Gavrailov said. An increasing number of Bulgarian companies outsource IT processes to local companies and this will further boost the market, he added.

Services such as desktop management, system administration, helpdesk centres and outsourcing of business processes like accounting, logistics and human resources will gain popularity in the medium term, S&T Bulgaria CEO Lyubomir Cholakov told SeeNews in a statement.

Their volume will grow helped by the growth of business in the country and pressure from competition, which stimulates companies to focus on their core operations and outsource auxiliary activities, he added.

Gavrailov estimated the 2007 outsorcing market in Bulgaria at 10 to 50 million euro and believes the figure is likely to grow by some 15% in 2008.

The outsourcing environment in Bulgaria has improved in the past year due to the development of the companies’ IT departments and the pressure on the management side for optimising expenses, Cholakov said. He added that the shortage of qualified workforce further is pushing demand for outsourcing of activities even higher.

Bulgaria’s outsourcing market has a strong potential to grow and attract new clients but still, it is facing severe competition from neighbouring Romania, Gavrailov and Slavov said.

Bulgaria has the advantage of labour costs which are still lower than in most of Europe and its proximity to older EU-member countries but Romania does better in many cases, Gavrailov said.

He added: “Romania has a much bigger resource than us and a bigger support by its government for the development of the IT market.”

Bulgaria’s workforce is better educated but businessed are more likely to choose to outsource its operations in Romania because it offers more employees, Slavov said.

“We have huge chances to outrun them by stressing on quality rather than quantity, if we can specialise in certain types of processes where we’ll be leaders,” he added.

The smaller number of workers Bulgaria can offer is one of the main threats for the country’s positioning in Southeast Europe, Cholakov agreed.

“If we succeed in solving the problems of resource growth and lack of language skills, our country will continue to be an attractive outsourcing destination in the next five-year period,” Cholakov said.

“Work needs to be done at a networking and lobbying level to change Bulgaria’s image as an outsourcing destination abroad, which is not so positive. Positive practices should be highlighted,” Gavrailov said.

Bulgaria has attracted global IT players in the past few years. IBM last year opened a customer support centre in the country to serve customers from central and eastern Europe, America and Asia and Hewlett-Packard Co. opened in 2006 a customer support centre to service clients from Europe, the Middle East and Africa.