Eastern Europe is one of the favorite outsourcing destinations for IT services across the globe. It’s also been counted among the toppers for a while now. But when evaluating the region to source from, outsourcing services such as Business Process Outsourcing (BPO) is something to watch out for. Especially, for the Western European companies’ BPO services requirements, the region throws up good options in terms of cost savings, cultural affinity, language skills, talent availability and more. However, it is the price rise in some Eastern European countries that is drawing concerns.
With a full-time employee base of 20,000 to 30,000, the $1 billion BPO industry in Eastern Europe is expected to grow at a rate of approximately 35 percent or more per annum. This is according to a recently released research report, BPO Delivery from Eastern Europe, conducted by Technology Business Research, a Hampton-headquartered high-tech market research and consulting firm.
Since there are several opportunities for the BPO service provider in the region, many global companies, especially Indians, are fast setting up their BPO delivery centers there. The region houses several captives of many MNCs. Companies such as Proctor & Gamble (P&G), UPS, Volve, Lufthansa have their captive setups in Poland, DHL, ExxonMobil, Siemens, Johnson & Johnson, Honeywell, InBev, Lufthansa, SAP in the Czech Republic, Dell, Kone, BASF, Checkpoint, KraftFoods, Checkpoint, Austrian Airlines, AT&T, Allianz in Slovak Republic, Avis, GE, Morgan Stanley, Nokia in Hungary, and Intel, Freescale, Microsoft, GE in Romania. Third-party providers such as Accenture (Czech Republic, Hungary, Poland and Romania), Genpact (Hungary and Romania), HP (Poland and Romania), IBM (Hungary and Poland), Infosys (Czech Republic and Poland), TCS (Hungary) and Wipro (Romania) also have their operations in the region.
In high-demand countries such as Czech republic and Hungary, many providers including EDS, Capgemini are setting up small centers with less than 500 employees to avoid the risk associated with the maintenance of a large workforce. “Additionally, smaller workforces are more aligned to the smaller labor supply in tier-2 cities, which has the added benefits of lower labor and facilities costs that can more than offset any benefits of scale in capital cities. EDS, for example, maintains operations in both the capital city and secondary cities in Hungary. Budapest is leveraged for higher-value work, while lower-level processing is accomplished in secondary locations that offer much lower costs and extremely lower attrition,” cites TBR's study.
Interestingly, all these providers give multilingual BPO services. Typical operations can cover 10 to 15 different languages, according to the study. For example, Ariba provides BPO services in 19 languages, ExxonMobil, Icon and Infosys in 16 languages each, Accentrue and Symbol in 14 languages each, and Lufthansa and Schneider Logistics in 12 languages each.
The study points out that Poland and Hungary have the highest number of BPO employees working for third-party providers followed by the Czech and Slovak Republics. “Romania is seeing fair amount of growth, and is likely to have levels similar to other countries within a short time,” says the research report.
The study also reveals that the Eastern European region is a good source of finance and accounting outsourcing services such as accounts, payable, accounts receivable, credit and collections, general ledger and payroll. Besides these servicese, human resource, procurement, customer-care and business-support services are in high demand.
Even lower salaries are the main driver for global BPOs to establish and expand their services in the region of Eastern Europe. The salaries in the region are 40 to 60 percent lower than the Western Europe continent. The study finds that Hungary, the Czech Republic and Poland have the highest average salaries while, Romania and Slovak Republic have relatively lower average salary levels.
Other findings of the study also reveal that even though outsourcing players have realized the benefits of delivering nearshore BPO services from Eastern Europe, many companies have also established their captive setups, which are known to be better paymasters in the region. Captives pay 50 percent higher salaries than the third-party providers. “As a result, there are captive groups for sale in the region that were not able to deliver the expected benefits. Failed captives are likely to be consolidated through acquisitions and / or the taking over of contracts and employees by third-party providers. Thus, all the findings of the study indicate that the BPO industry is gearing up fast in Eastern Europe.
