HCL Tech is the latest among leading IT outsourcing service providers to set up a center in Poland. Set up in July, its software-development center in Krakow will initially have 100 staff that would rise to 250 by December, 2007.
For the metropolises of Krakow and Warsaw, such activity is nothing new. IT majors such as Accenture, IBM and Capgemini have had delivery centers there for several years.
What is new in Poland, and in fact in most of East Europe, is the emergence of smaller cities as outsourcing hubs. The Polish cities of Wroclaw, Katowice and Gdansk are eyeing business from global IT majors: In June, Transcom Worldwide set up a contact center, and Zensar, an Indian IT-services firm, set up an IT center, in the city of Gdansk.
These cities are more competitive than Warsaw and Krakow, and see lesser attrition. Not just in Poland but also in most parts of Eastern Europe, larger cities are giving way to the smaller ones for outsourcing centers. “Many cheaper Tier-2 cities such as Bratislava and Brno are emerging as viable outsourcing destinations,” says H. Karthik, Research Director, Everest Research Institute.
Just as in Poland, smaller cities in other former communist countries of East Europe are gearing up to join the race for outsourcing business. Bratislavia (Slovakia), Brno (Czech Republic) and Timisoara (Romania) are just some of them.
The Polish IT-services market is expected to touch $3.5 billion by 2010, according to IDC, as compared to $1.7 billion in 2005. Systems integration, hardware, software support are the three largest IT-services areas that have seen growth in Poland over the last few years.
Poland also figures as one of the top emerging shared-services outsourcing (SSO) destinations for technology companies, as estimated by Frost & Sullivan in their 2007 Global SSO study. Other three European countries as SSO destinations on top are the Czech Republic, Hungary and Ireland.
The reason for IT and BPO service providers foray into these Tier-2 cities remains cost competitiveness and proximity to European-language skills to be able to serve the expanding West European market. For Indian companies specifically, there is the added need to mitigate the risk of a rising rupee against the U.S. dollar.
“Indian BPOs are setting up operations in Europe as they are wary of the rupee appreciating against the dollar, which has affected the revenues of many companies. It provides them an option to mitigate the risk of being dependent only on the U.S. for earnings,” says Sabyasachi S. Satyaprasad, Research Director, neoIT.
