Guest writer Adina Bigas talks about the business services sector, generically named the outsourcing business, with Alexander Weigl, president of the Association of Business Service Leaders in Romania, and head of marketing transformation with HP.
Weigl speaks about opportunities and threats for Shared Service Centers (SSC), Information Technology Outsourcing (ITO) and Business Process Outsourcing (BPO) in Romania.
What is the brief history of shared service centers and business process outsourcing in Romania and what is their contribution to the labor market?
Genpact was the first company to break the ice back in 2005, and the industry increased each year, as new companies launched operations locally. Big names such as Adobe, HP, Intel, IBM, Oracle or Accenture have opened at least one business center in Romania, employing from 100 to 500 and there are companies with a headcount of 3,000 employees.
Our figures show that the local BPO industry generated more than 25,000 jobs so far, and the number is expected to increase. Of course, we continue to see new openings but at a slower pace than 3-4 years ago. The most important thing, in my opinion, is that there is room for growth because cities such as Targu Mures, Sibiu or Craiova are well-established university centers, with a high untapped potential in terms of the labor force we are looking for.
There are many companies that have opened business centers in Romania. Is there any potential for new comers, or has the ‘mirage’ vanished?
There are companies assessing to enter Romania and we have some recent “newcomers”. Especially the banking sector is expanding in the shared service center environment but there are also new entries from other industries such as retail and the energy sector.
I believe “the mirage”, as you call it, is far from over. Important elements such as people skills, their availability, language proficiency, cultural compatibility and the overall business environment are backed up by the financial attractiveness of Romania.
We should look at this potential from two points of view. Firstly, many of the companies that initially entered the market limited themselves to single-function units and as they started to trust and develop in the local business environment, there is a strong potential for them to add new services. Secondly, there is room for the acquisition of local companies and newcomers could use this lever to enter the SSC/BPO market. So there is room for new entries, yet at a slower pace then what we have seen in the years of economic boom.
How attractive does Romania look from the BPO / SSC global perspective?
From the BPO industry point of view, Romania remains a top destination, as it offers a competitive business environment and highly skilled force at low costs. In this respect, I should mention that financial remuneration is still decisive, yet professionals are also interested in non-monetary benefits and rewards, such as career development opportunities, relocation options or medical packages. The adequate quality of the Romanian education system and sound knowledge of foreign languages continues to act as a strong trigger for the companies in the SSC/BPO area.
Various studies place Romania among the top 5 European destinations for all types of global services activities so, as SSC/ BPO locations become more and more popular and competition for skilled labor intensifies, Romania will continue to hold a seat at the global services table.
According to the latest data provided by Jones Lang LaSalle Romania, over the past few years, Romania has been steadily growing in popularity for the business services sector and increasingly continues to attract new interest compared to its peers in some of the more developed markets in CEE such as Poland, the Czech Republic and Hungary. Romania has also broadened its appeal from a pure call centre location, into a higher value add destination for the business services sector. Consequently, both demand and supply have undergone significant changes over the last 5-7 years.
Are there any threats that this particular industry is facing in Romania? Do the main players search for business and cost optimization in other places?
The investment incentives offered by the Government in the past years to attract foreign direct investments, including real estate tax exemptions, as well as preferential tax deductions for the purchase of new technology and R&D centers continue to catch the eye of any investor who keeps Romania on his radar. Nevertheless, there is room for improvement. We believe that a reduction of the administrative burden together with the further support of innovation and research would be a major plus for the overall SSC/BPO industry. Also, the ongoing improvement of the education system will contribute to Romania’s medium and long-term economic development and will continue to keep Romania on the foreign investor’s map.
Which are the weak points perceived by companies that have already invested in this business in Romania? What about those seen by potential new investors that are in the feasibility study stage?
Apart from what I have mentioned already, I believe Romania continues to over regulate the business sector, which represents a threat for all those who want to invest here. There is a specific need within the SSC/BPO industry for the Government to improve the quality of regulations through the use of impact assessments and systematic evaluations. As this issue translates in high costs for all the companies in this area and one should not forget that cost cutting is on everybody’s lips these days.
By Adina Bigas, guest writer