In the fast–paced world we live in, where every part is somehow connected to IT, we are witnessing that for the last decade the face of typical outsourcing has changed. More and more companies are now inclined to invest in nearshoring in the geographically closer countries of Eastern Europe than in more distant countries such as India.
Whatever the reasons to outsource are, this is not a decision to be taken easily. When you outsource, you also share your confidential information with the vendor and your expertise. Of course, the vendor will have a business–critical information and, at least in the beginning, you will always be concerned if the vendor will use this critical information for its purposes and not with good care. That means that a mutual trust has to be built. There are some risks that are quite common and that every company that is going to outsource should be aware of, such as unpredicted hidden costs, sensitive data exposure and loss of management control. However, there are even more reasons to take the leap.
Outsourcing is being embraced by organizations of all sizes and domains. From start-ups to large enterprises, outsourcing continues to be a tool of choice to gain competitive advantage in the business scenario. Businesses are moving over to multiple platforms – cloud, social, mobile, etc., stakeholders are getting geographically distributed; in such a disparate environment, outsourcing has been able to conveniently adapt to rapidly changing business environments.
Nowadays, outsourcing relations are more standardized and process and people driven, rather than price driven. This change is believed to level the playing field for outsourcing service providers in the future.
What can be identified as a major benefit of outsourcing in general is that the right outsourcing provider can introduce successful products/services, differentiated approaches, higher revenues, unparalleled experience and streamlined operations. However, the process of identifying a partner like this is definitely not an easy task. It requires a comprehensive and objective assessment of the provider's outsourcing potential.
Of course, each company takes the decision to outsource based on its objectives and due to different reasons. Sometimes, the factors that influence highly the decision to outsource are just cost savings and nothing more.
Sometimes, it is the desire of the company to gain additional knowledge and make sure that the product it delivers is of great quality. Other times, it is due to lack of internal resources and etc.
What might the future hold?
One can never be 100% sure how outsourcing will develop, but based on our experience and expertise, we can make some assumptions.
Cost pressures will pave the way for custom outsourcing contracts that are flexible in their SLAs (Service Level Agreements) and the scope of delivery.
Small businesses, startups and SOHOs (small office/home office) will witness a higher adoption of outsourcing in order to reduce the operational inefficiencies to increase their time to market.
Rising raw material, transportation and oil costs will make it very important for companies to look at outsourcing in order to try to keep their operating costs low or at a reasonable level.
More high-end critical business functions will be outsourced in the next decade, while outsourcing of low-end services will stabilize and become a common practice.
Latin America and Eastern Europe will provide stiff competition to India as the favored outsourced destination. They will even become the preferred outsourcing destinations and maybe half of the business developed in those countries will be due to the outsourcing.
But why Eastern Europe?
The educational system in the region is largely focused on the engineering majors. The workforce is quite skilled and eager to prove itself as professionals. As a rule, a lot of attention in Eastern Europe is paid to learning English and other European languages. There are very small differences in the time zone – may be one or two hours. And maybe the biggest advantage is that companies in Eastern Europe really tend to engage with the business model of their client.
Additionally, East European countries are nearshore providers and that is definitely a preferred model of outsourcing nowadays. And, for the countries in the EU, another advantage is the VAT system that is pretty synchronized and the clear rules and regulations of EU that apply to all members.
Bulgaria – Cost Effective Quality
Bulgaria is definitely gaining popularity as an outsourcing center since 2007, due to the low labor costs and the population that is quite knowledgeable in foreign languages. The country also competes with Slovakia, Hungary, Poland, Russia and Ukraine, as the costs of outsourcing there are comparatively lower. It has a relatively good educational system that focuses on technical subjects. Its membership in the EU is also a major advantage, as Bulgaria adheres to the same rules that apply to all members. Besides Sofia, emerging IT centers in the country turn out to be Plovdiv, Varna, and further in the future Ruse, Veliko Tarnovo, Blagoevgrad and Burgas. Also, a great advantage of the country is the flat corporate tax and the desire of the educational system to be in partnership with the business.
Of course, whether to outsource or not is a very serious decision and needs a lot of consideration and analysis put into it. But if you decide to take that leap, the Eastern European region is definitely one of the best places to start.
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