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Europe certainly can’t compete with offshore destinations like India and Philippines on the cost front, but when it comes to innovation and high-end technology solutions, it is very often seen as the best bet.
Major Strengths That Define Europe
Europe has a vast talent pool, engineering expertise, and high standard of education. Dmitry Loschinin, President and CEO, says “Confidence is quickly rebuilding and more and more companies are turning to Eastern Europe in particular for technology services expertise. Reason: The region’s talent pool has never been stronger.”
Multiple language capabilities differentiate the European market from most other destinations. There is probably no other such destination that can support six to seven languages at one place. This has enabled the growth of BPO operations and has attracted numerous service providers to the region.
ITO or BPO- Which is Hotter?
According to Forrester report Market Overview: European IT Infrastructure Outsourcing (2011), cloud-based services are dominating the infrastructure outsourcing market. As concerns over security issues prevail, private dedicated clouds and hybrid solutions are being offered by service providers. Forrester expects that resistance will change as more business professionals push for the flexible capabilities that cloud enables.
Western Europe and UK are gradually, yet confidently gaining the dominant share in the global ITO market, catching up with the United States. The Forrester report states that Ukraine is the lowest-cost nearshore ITO destination. The IT Sourcing Europe Survey discovered these countries as the most attractive locations for the outsourced nearshore IT development- Ukraine, Poland, Romania, Hungary, Belarus and the Russian Federation.
The BPO space is seeing lot of momentum in both voice and non-voice operations. Driven by multilingual capabilities, call center activities are on the rise. Other BPO processes like F&A are also seeing lot of activity. Hungary, Romania, Slovenia are the major markets for voice operations, while Poland is the most desired location in the non-voice space.
Key Country Profiles
Most attractive destination for nearshore software development.
Low IT salaries, Strong R&D, high tech education, innovation and abundance of IT resources.
Ukraine can offer Western European enterprises a cost saving of 40-60 per cent on their inhouse IT spending.
Demonstrates maturity of BPO markets.
The place for Business analytics, HRO, multilingual contact center operations and F&A.
Attractive location for outsourced nearshore IT development.
Mature BPO market with strong focus on HRO.
The country’s capital, Budapest, specializes in software development and testing and is 7th of 25 safest cities for offshore/nearshore outsourcing.
ITO market value higher than other three countries.
Russia is in Gartner’s List of Top 30 Outsourcing locations.
Specialized skills in engineering design and R&D services.
(Source: European IT Outsourcing Intelligence Report 2010)
Emerging locations in Europe are capturing lot of attention from service providers in different parts of the world. Good infrastructure, abundant labor, language capabilities and huge unexplored resources make these locations attractive investment options. Sitel has expanded its European operations by opening a new call center location in Serbia.
Indian service providers are also targeting the market for establishing a nearshore presence. Mphasis, which has set up operations in Poland this year, is one of them. Gopinathan Padmanabhan, Head Global delivery Unit, Mphasis, commented about the move in one of its recent press releases, “Poland offers ability to service clients in most continental European languages and is well connected with other Western European business centers. The availability of talent, language skills and an established business infrastructure in Poland made it a natural choice for us.”
Eastern Europe will hold its position as the most attractive location for sophisticated IT solutions.“In the next couple of years demand is likely to increase with countries coming out of debt crisis. Eastern Europe will continue to see demand for high order IT skills and niche capabilities, though the overall scale of operations would be lower than that in India and Philippines” says, Salil Dani, Research Director, Global Sourcing, Everest Group.
Different locations within Europe have specific characteristics, advantages and limitations. So, service providers will have to employ a combination of strategies to expand within the region.
There exist difficulties in scaling up. The operations in many of the top locations are much lower in scale compared to that of destinations like India and Philippines. “The providers tend to be of a smaller scale, and can put together large teams slower than competitors from other locations. However, for traditional R&D projects that’s not a problem, as big teams are rarely needed” says, General Manager, Andrei Pronin, Auriga.
Currency fluctuations and uncertainty in the economic outlook is posing another challenge.