Emerging Europe’s Business-Friendly City Perception Index supports nearshore location preferences of enterprise buyers
As businesses look to outsource non-core functions to cut costs, mitigate risk and enable continuity of business amid the pandemic, the Global Business Services (GBS) industry has been one of the few sectors on a growth trajectory. Enterprise buyers have also started to shift and spread outsourced projects among the traditional markets – such as India, Philippines and Malaysia – and emerging GBS delivery locations, including those in Europe.
Emerging Europe recently released the results of the 2021 Business-Friendly City Perception Index, which ranks Emerging European cities according to their levels of business conduciveness. The primary aim of the report is to showcase the Emerging Europe region as an investment destination and the changing business perceptions of the region. From a GBS perspective, it was no surprise that the Polish city of Łódź was rated as the most business-friendly city in the region, with Prague, Budapest, Belgrade and Kyiv also taking top spots across various individual categories.
The perception-based index supports the desirability of Emerging Europe as a GBS region of growth with relevant and insightful location analyses and city rankings.
Economic potential is one of the categories in the report, which covers cities in the region that have capabilities to produce goods and services and can create surplus value but have not yet been fully tapped into or developed. The Serbian city of Belgrade is the leader in this category, followed by Kyiv (Ukraine), Debrecen (Hungary), Bucharest (Romania) and Łódź (Poland).
The countries that these cities represent are capable of being strong GBS delivery points, particularly in IT-enabling services (ITES) and customer service delivery. In fact, Poland tied third place with traditional GBS giants Malaysia and Philippines in the 2021 Global Front Office BPO Omnibus Survey by Ryan Strategic Advisory. Its stable economy, high number of specialists (especially in software development), compliance in U.S. and EU standards and a growing IT market, position Poland as a favourable GBS destination.
Ukraine, Serbia, and Romania share similar traits that highlight their potential as preferred GBS delivery points. These countries are known to be technology hubs in the region with sophisticated, rapidly growing IT sectors and, like Poland, are popular nearshore software development outsourcing locations. The skills pipeline is more than sufficient to support scaled growth in ITES operations, as over 51,000 ICT graduates are added to the talent pool per year between these countries, most of which come from Ukraine.
This category in the index looked at regulations that allow for businesses to thrive in the cities. The level of red tape, corruption, and positive sentiments towards business activity of stakeholders were additional factors in this category.
Emerging European countries all offer a list of investment incentives that are attractive for potential GBS investors. The table below provides a summary of investment incentives offered by a sample of Emerging European countries:
Source: Polish Agency for Information and Foreign Investment, 2020
Almost all Emerging European countries provide a cash and employment grant, as well as tax relief or exemption, which can be attractive for GBS ventures. Some Emerging European countries offer GBS-specific incentives. For instance, the Polish government offer a grant through their Multi-Annual Support Programme (MASP) to certain priority sectors, including Business Process Outsourcing (BPO) and IT centres. Serbia offers a ‘’Golden Visa’’ for investors that allocate a minimum of €100,000 to BPO projects, amongst other priority sectors. The Georgian government provides salary subsidising and training co-financing tools for certain BPO ventures. More Emerging European countries are about to implement BPO-centric incentives, such as Bulgaria.
The conducive business environment made possible by investment incentives, reduction in red tape and general business stability have attracted a range of globally renowned brands to the region. Below is a list of just some of the global brands that outsource to the region:
- Kodak Alaris
- Philip Morris
Łódź was rated as having the best business climate in the perception-index and hosts some of the biggest global brands, such as Accenture and Deloitte. Tbilisi (Georgia), Vilnius (Lithuania), Ljubljana (Slovenia) and Prague (Czech Republic) are among the top 5 cities in terms of business climate, where ICON, Genesys, KPMG, Western Union and SAP have established BPO or technology centres. Although not listed in the top 10 cities for business climate, the Serbian capital of Belgrade is a delivery point for numerous global outsourcers, including Sitel, Contact Service and Trizma.
Pool of Talent:
The talent pool in Emerging Europe offers a fertile ground for the set up of a GBS operation. This category in the perception-index focuses on the top cities that offer the best access to a sufficient supply of highly skilled labour and where academic institutions collaborate with industry to ensure a flow of skilled graduates. The city of Kyiv, Ukraine, was ranked as the best city for pool of talent, followed by Wroclaw in Poland and Bucharest in Romania.
One of the key attributes of the Emerging European GBS workforce is that they have multilingual capabilities, particularly in English, along with other continental European languages, such as German, Italian or French. In terms of English-speaking capabilities, Croatia ranks 13th out of 100 countries in the 2019 English Proficiency Index, while Hungary ranks 14th, Serbia 15th, Czech Republic 19th, and Bosnia and Herzegovina 20th. Therefore, the region is fast becoming a base to service English-speaking source markets, including the U.K., North America, and Australia.
GBS Service Quality
Data provided by Knowledge Executive’s 2021 Global CX and Back Office Buyers Report provides insights into the GBS service quality of certain Emerging Europe countries. The report surveyed over 360 enterprise executives of organisations from key source markets that outsource to offshore regions, including Emerging Europe. The respondents were asked to rank and rate each Emerging European country, including service level delivery across various key business process areas. As a result, the top 10 countries were ranked according to their final scores and placed within three categories: High Performer, Proficient and Capable.
The two graphs below show the performance levels of contact centre voice services and digital contact centre services.
Source: Knowledge Executive Global CX and Back Office Buyers Report, 2021
Poland and Czech Republic are consistently rated as the top two high performers for both contact centre voice services and digital contact centre services, with Poland topping the rankings in both service categories. Regarding proficient performers for both these services, Belarus is consistently noted as a proficient destination, although the top spot for digital contact services is shared with Romania. Croatia and Hungary also feature as proficient in their service delivery for both contact centre voice and digital contact centre services. Bulgaria is consistently rated as capable for both outsourced services.
Ultimately, Emerging European cities have conquered the challenges left over from the remnants of the Soviet era and are perfectly poised for a GBS revolution. And it is likely that ITES will remain a prominent service line in the GBS sector due to the current level of ICT sophistication, talent and future sector growth in the region.