Business Services drive Eastern European economy

Poland as the largest employer in region

Offshoring of business services to Eastern Europe grew by 15% in 2010, surpassing expectations. More than 33,000 additional jobs were moved to the EE region which now employs more than 250,000 jobs according to the latest McKinsey & Company Report . The undisputed leader is Poland, with over 300 business services centres, employing over 50,000 highly qualified specialists . The investment potential of the EE region, especially with regard to business process centres, both captive and vendors, has recently been acknowledged by the world largest community of shared services and outsourcing professionals, SSON. The 2011 Excellence Award went to Hewlett-Packard Global Business Services, which manages business centres in both Poland and Romania.

The Central and Eastern Europe region experienced a five-fold increase in foreign direct investments (FDI) inflows between 2003 and 2008, rising from US$30 billion to US$155 billion, according to the PwC Report (2010) . The largest beneficiaries of these investments have been Russia (29%) and Poland (around 17%). According to the Polish Information and Foreign Investment Agency (PAlilZ), the total FDI in Poland reached around 10 billion euro in 2010.

The quality provided by CEE is confirmed by new investors, who decide to locate their strategic processes in Poland, Romania, Bulgaria or Hungary (the snowball effect) and recommendations given by the world’s leading trade and national organizations. One of them is the Shared Services & Outsourcing Network (SSON), which awards organizations in different parts of the world that demonstrate best practices. In 2011 one of the 4 winners in Europe was HP GBS (EMEA), which was awarded for value creation. Last year, another company which delivers services from the region – UBS Poland Services Centre – was awarded in the European category as the Best New Captive Services Delivery.

Poland – the European nearshore Centre of Business Services

According to the FTSE Group (2010), Poland is one of the leading “advanced emerging markets” in the world. Foreign investments, especially in the business services sector , are a key factor in the development of the country. The McKinsey & Company Report underlines that Poland is now a leading location for outsourcing and offshoring investments in Eastern Europe, with the highest absolute growth. The Association of Business Service Leaders in Poland (ABSL ) estimates that in 2010 the sector itself grew by 20-25%.The forecast for 2011 looks even more promising, especially given the fact that the CEE region is the third most attractive place for investment in the world after India and China . July 1st 2011 marks the beginning of the Polish Presidency of the EU – this is an excellent opportunity to further examine one of the most dynamic economies in Europe.

The large internal market, broad HR pool and investment potential have attracted such corporations as HP, P&G, IBM, Infosys, McKinsey, Google,  Sony, Shell, Xerox, and UBS and convinced many more to develop their global and regional business services centres in this part of Europe. In Poland, there are over 300 foreign and national business centres which service internal  and external  clients from all over the world.

“What attracts top investors to Poland and the CEE region is the host of highly skilled specialists” says Jacek Levernes, Vice-President of HP Global Business Services in the EMEA region, and President of ABSL. “In 2005 we decided to locate our business centre in Poland because of the broad access to students, graduates and specialists, fluently speaking foreign languages, including less popular languages.

Poland has one of the highest university enrolment rates in Europe. According to the Central Statistical Office of Poland (GUS), the number of universities has grown from 310 in 2000 to 467 in 2010. Currently, one in five Poles has a university degree. According to the OECD (2010), Poland produces more university graduates than both the U.S and U.K. Additionally, Poles are more willing to learn foreign languages. 39% of Poles between the age of 25 and 64 speak at least one foreign language and 24% are proficient in two or more languages . Experts predict that these numbers will increase dynamically. Currently, around 80% of Polish secondary school students are being educated in two languages.

According to the Association of Business Service Leaders in Poland (ABSL) the business services sector is expected to grow by 15% this year. The development of the sector contributes to the creation of new jobs associated with it due to the procurement essential for service centres, increased consumption of employees and as a result of the development of business tourism. The fruitful development of the business services sector is also a result of the close cooperation between SSC and BPO companies in Poland.

“What is unique in Poland is that companies in the sector do not aggressively compete, but cooperate in benefit of their origin corporations while at the same time preserving long-term growth of the branch” says Jacek Levernes.

ABSL (2010) estimates that the business services sector employs 30,000 specialists in the Czech Republic, 25,000 in Hungary and over 15,000 in Romania. The McKinsey & Company Report  (2011) points out that only Poland can advance with such dynamic growth, while, for instance, Ukraine and Russia remain almost at a standstill.

Shared Services Centres Boom

According to the McKinsey & Company Report, in 2010 32 new centers (both vendor and captive) were opened in the Eastern region and more than 33,000 jobs were offshored to this location (3,000 to new centres and 30,000 to existing ones). The leaders in the region, apart from Poland, are the Czech Republic, Romania and Hungary. The English Institute of Chartered Accountants estimates that outsourcing and service centres can reduce costs by as much as 46%.

One of the more interesting examples of the development of service networks is Hewlett-Packard, which in the 1990’s opened the Hewlett-Packard Global Business Services branch. Today, the GBS network comprises 11 centres around the world employing almost 18,000 specialists. Thanks to GBS, HP was able to increase the quality of its services and reduce operational costs by 30%. HP GBS EMEA – HP’s European business unit – currently provides services to internal customers in the HP group through two leading services centres in the EMEA region, located in Poland and Romania.

“In a world of intense economic competition and globalization, companies should focus on quality and cost factors. One of the most effective ways to optimize business operations is to develop the SSC model in countries which have different resources to offer” says Jacek Levernes. “Each business unit should do what it does best. Therefore, a company can be more competitive, offer higher quality services and achieve better financial results. The beneficiary is also the country where the capital is being invested”. 

Even more interesting is the fact that the Shared Services Centres in the region evolve into advanced business units handling strategic processes based on knowledge and requiring highly skilled specialists (this type of service is closer to Research & Development activity than the transactional scope of typical shared services). International companies which have their centres in the region are satisfied with the quality of the services provided in a host of different languages, based on innovative ideas, tools and the highest standards of cooperation. The McKinsey & Company Report states that 70% of foreign investors when asked what the most important reason for outsourcing and offshoring to this part of the world was, indicated language skills, cultural proximity and access to a talent pool. Compared to similar research a year before, there is a visible growth in importance of those factors (in 2010 only 56% indicated language skills and cultural proximity and 53% access to a talent pool).

The growth of the sector in Poland and the region has created thousands of employment opportunities, and implemented new technologies, knowledge, best practices and management strategies in local enterprises and the Polish economy. Thus, the development of the business services sector has become one of the most important sources of innovational growth for the economy of Poland and CEE countries.

It is Poland’s big time. Starting on July 1st, Poland will be the centre of attention in Europe. In the last Harvard Business Review (2011) ranking of investment attractiveness, Poland ranked 5th in the world. The report notes that Poland could still climb in the rankings if its government implements its market-oriented reforms. Will Poland be able to seize this opportunity and sustain its economic growth and high level of foreign investment?

More information:
Tomasz Podolak
mobile: +48 501 151 553


    Popular posts

    Related posts