The sector's remarkable success turned the country into an European leader
When good examples in Bulgarian economy pop up as conversational topic, the outsourcing sector is among the first to come to mind. And rightfully so.
The Bulgarian market of outsourced services overcame successfully the challenges of globalisation and digital transformation, and is no longer about outsourcing services like call centres. In Bulgaria were developed outsourcing activities asking for high specialisation and providing high added value for the client – outsourcing of business processes (BPO), which dominates the local market for outsourced services, and IT outsourcing (ITO). Marketing, sales, fin-tech, accounting, management of human resources are already standard services offered by Bulgarian outsourcing companies.
In 2018 the sector provided 2.1 billion euro, or 4.8% of GDP, marking a 18.2% increase since the year before. According to prognoses, it will double in 2021. A little more than half of the companies (52%) have Bulgarian ownership and foreign companies are mostly from the UK, USA, Germany and the Netherlands. Client companies are mainly from Western Europe, the UK and USA.
The sector is among the best employers in Bulgaria. According to data from July 2019, outsourcing industry in Bulgaria employs about 67,300 people, or 2.4% of the labour market, but generates disproportionately high percentage of wage expenses – 7.9%.
Which factors stand behind this success? Bulgaria has a number of advantages – qualified labour force, excellent infrastructure, good business climate, desire for development and implementation of new ideas. The labour costs and other expenses are still relatively low, regardless of the fact that the salaries in the sector are significantly higher than the average for Bulgaria.
"There are several economic and demographic reasons for our clients to choose Bulgaria as an outsourcing destination," says Gergana Pavlova, managing partner in Sb Accounting & Consulting, a leading company for outsourced services (Sofia, 30-32 General Totleben Blvd, floor 2, phone + 359 2 439 41 40, National Toll Number 0700 31 016, www.sb-bg.com). "These are the low operative costs, the well developed digital infrastructure, the strategic geographical location. Some business analysts are sceptical towards the outsourcing boom in Bulgaria because of the current demographic crisis and the serious deficit of professionals in the country, but we at Sb Accounting & Consulting rely on experts with rich experience and knowledge. A well built team presents not only its company, but also our country as a desired destination for outsourced services," explains Gergana Pavlova.
The demographic situation naturally stands out as a problem for development of outsourcing – and other industries – in Bulgaria. The Bulgarian population is ageing and this trend will not change in the next 20 years. The qualification of the employees is also crucial. Until recently speaking foreign languages was enough, but the arrival of services with high added value requires people with technical, engineering, business qualifications.
"One of the biggest challenges is the talent scarcity," says Rumen Manev, Director Solutions and Presales at Modis (www.modis.com). "An increasing number of companies compete for the same profiles of resources, which explains the noticeable shortage of workforce in the sector. Therefore, businesses realize the need for more investments in talent development, upskilling, employee's engagement, motivation and retention initiatives, close cooperation with educational institutions and workflow transformation. Modis Bulgaria is among the top employers in the country because we apply all these best practices and aim for offering attractive conditions to our employees and career development in our company."
Indeed, companies in the branch apply systematic policies for employee satisfaction and stimulation – additional social packages, opportunities for sport activities, trainings and courses for improvement of qualification. This makes the outsourcing sector attractive to young people. Tellingly, regardless of the pessimistic prognoses, the growth of the employed in the field is expected to continue and to reach 79,000 people in 2021.
Companies also look for other solutions to deal with shortage of workforce. Some decide to venture out of Sofia's natural gravitational pull and to open offices and branches in other big cities in the country in order to use the local demographical potential.
"It is not a surprise that most of the sourcing companies are in Sofia where more than 80% of the outsourcing activities are hosted. Around 70,000 people are employed in the outsourcing industry in Bulgaria, of which around 60,000 are in Sofia," says Rumen Manev from Modis. "Our biggest delivery center in the country is also located in Sofia, but we note the potential for business development in Varna, Burgas and, of course, Plovdiv where we recently opened our third office. In fact, our services are technology and process enabled for delivery from various and multiple locations, thus achieving geographical diversification and business sustainability though reaching to the wider labor market in Bulgaria. Our strategy includes partnering with universities from all around the country in order to help young talents to grow, develop and find a career opportunity with us in the preferred location."
Automatisation of processes is another way to partially overcome the problem. It has other advantages, too – it saves money, decreases the risk of mistakes, frees employees for activities that require thinking and imagination, and creates product with high added value.
Modern life is dynamic and it can be foreseen that the role of automatisation will only grow, that machines will become more intelligent, call centres will become obsolete, and the importance of security and cloud services will increase. Some of these transformations are already present. India, a country which is the embodiment of call centres, started to attract the global banking elite as a place for outsourcing key activities such as statistics, data management, cloud-based activities.
What trends can be set apart for the outsourcing sector in Bulgaria in the following years?
"Being in the EU with a workforce skilled in languages and different technologies, the country has a very good prospect of receiving more and more BPO business in the years to come and the outsourcing sector will continue to grow," says Blagovest Kirilov, CEO of OutsourceBG Services (Sofia, 23 Andrey Saharov Blvd, phone: 00359 888 010 888, www.outsource.bg). "Cost is still one of the main deciding factors, but the relationship between client and vendors steps ever more in the foreground, especially with process automation and a requirement for working as partners on each assignment. Quality as a goal will require new relationships, where a higher number of core businesses could be outsourced, providing also new contract models for multi-vendor outsourcing and cooperation. Trust will be a keyword for upcoming relationships, as more of the processes will be merged into a single automated ecosystem. Providers as well as internal company processes will need to focus towards security and proactive monitoring. Workforce will shift from repeating tasks to value-add services which require specific skillsets with ever more automation models being implemented, and skilled workforce shortage will continue. Retention of skilled workers and training the remaining workforce will be key for each company that wants to remain active in the outsourcing market. Recruitment will also need to adapt to the changing environment. Turnover will be harder to cover if the average workforce needs a higher base skill level to perform their assigned tasks," explains Blagovest Kirilov.
Outsourcing companies in Bulgaria already showed that they are able to adapt, develop and thrive in the conditions of changing environment. That is why the perspectives for the future of the sector remain bright and optimistic.