BPO Voice talked to Mr. Andrew Hallam, founding member and President of Aspire – the Association of IT and Business Process Services Companies in Poland about his views and opinion on the various trends and challenges for Poland as one of the upcoming destination for the outsourcing industry.
What is ASPIRE? What are its objectives?
ASPIRE is the first representative body for the IT and Business Process Services in Poland. It is a collaboration between my own organisation South Poland Business Link and the largest BPO and SSC companies in Krakow in the South of Poland. Since 2004, Krakow has established itself as the primary location for global outsourcing and offshoring in Central and Eastern Europe. Approximately 40% of companies operating in the sector in Poland are located in Krakow.
Our objective is to take the lead in creating an environment supportive to the industry, which we regard as the region’s best opportunity to compete in the global market place, now and in the future. This means information sharing among ASPIRE members and with local stakeholders; vigourous promotion of the sector and strong representation.
Outsourcing has landed in Poland over the last four to five years since European Union Accession, but government, universities and other stakeholders have been slow to grasp the potential of the sector or to realise its value to the economy.
The comparison with India is instructive. Whereas India has embraced the sector and worked to establish an environment in which the sector can expand, Poland has by and large been a passive recipient. There are many reasons for this – a certain lack of joined up thinking in investment promotion, a certain bias towards goods rather than services, and perhaps also a sense that the jobs on offer in outsourcing are not really the kind of work we want our graduates to be doing. This is what we want to change.
The underlying reason for these attitudes is that Poland, like other countries in CEE, is still going through post-Communist transformation and different sectors of society are moving at a different pace. Aspire aims to play a pivotal role in leading the society into the future, towards an understanding of globalisation and a dismantling of the Berlin Wall of the mind.
I suppose our objectives are not dissimilar to NASSCOM, and if we are half as effective as NASSCOM we will have done Poland a great service. It is worth noting that, unlike India, IT and Business
Process Services in Poland is being driven by global companies. Domestic players are few and far between.
Whats your take on the new trend wherein the business shift is now towards the EU?
The shift I think is in filling in the quality gaps that are being observed in serving European clients from Asia.
The centres in CEE serve mainly European clients. Locations such as Krakow offer proximity. Geographical proximity is important – although we tend to think of global services as a virtual business, in fact, there is a real need for partners, customers and providers to meet face to face, and from Krakow you can be with the client anywhere in Europe within 2 to 3 hours. And then there is cultural proximity – I think this can be a little overplayed, but on the other hand, if the requirement is native or near native speakers in Dutch, Portuguese or Finnish you will find these in Krakow.
In terms of SSCs, I think the trend is for multiple centres, with centres in Asia Pacific or South America serving the US business and centres in Europe serving the European business. I don’t see this so much as a shift towards the EU, but an application of the Indian model, if we can call it that, in Europe.
What are the factors responsible for turning Poland into the next hot destination?
The key factor was Poland’s accession to the European Union in 2004. It is from this time that outsourcing and offshoring has really taken off in Poland and in other CEE accession countries. The key to this, of course, was political stability and legal and fiscal standardisation with Western European economies.
EU accession was also accompanied by adoption of an open sky policy and an explosion in direct, budget flights across European destinations, thereby opening up a number of Polish cities with international airports to European business. The opening of these routes was rather motivated by Poles migrating to other parts of Europe and inward tourism (especially to Kraków) but clearly the outsourcing sector was also a beneficiary.
Why Poland? Well, initially investment was spread equally across capital cities such as Budapest, Prague and Warsaw, but Kraków, which is Poland’s second city was able to move ahead of these other cities because of a lower cost base (approximately 40% cheaper).
Poland is also much larger than the other accession countries; in fact its 40 million population is greater than all the other 2004 accession countries combined. Compared to other CEE countries, Poland has multiple urban centres, which is attractive to BPOs which may plan multiple centres. In terms of SSC, the first wave of investments were often by companies that had existing manufacturing operations.
There are seven or so Tier 1 cities with populations ranging between 500,000 and 2 million mark and another 10 or so Tier 2 cities with populations between 200,000 and 500,000 people. There are also a very high number of students in higher education, who provide a ready pool of human resource capital, and are particularly important because they are the only significant group in Poland which has English and other foreign language capability.
These factors specifically work for Krakow, which has a 10 million population within a 100 km radius (equal to the entire population of Hungary). The city also has 170,000+ students and neighbouring Katowice – 65 km along the highway – a further 150,000+ students. As Poland’s historic capital and acknowledged cultural centre, Krakow is considered the most attractive place to live in Poland. This applies also to foreigners: in some senses, BPO is the new TEFL – Teaching English as a Foreign Language – meaning young people from across the continent are happy to work in BPO for a couple of years providing them the opportunity to live in a beautiful, historic and vibrant old European city.
What is ASPIRE academy?
Well, I’ve said that graduates are the life blood of the outsourcing/offshoring sector in Poland.
Research among Aspire members shows over 90% of employees are graduates, most of the rest are still students and the average age within the centres is 28. So there is a clear synergy between the universities with their claim to be centres of learning and excellence and the BPO and SSC centres which can also claim to be centres of learning and excellence.
Our aims with the Aspire Academy are short, medium and long term, which is just as well in the current climate. Centres are still in expansion mode, but obviously some of the pressure has been relieved in terms of entry level recruitment.
One aim is to transform the recruitment process. Any shortening of the transition period between university and employment is clearly a benefit to companies and our aim is to work with students over the period of their study in diverse ways to enthuse them about opportunities working in the sector – we aim to run soft skills workshops, establish enterprise cubs, monitor internships, promote outsourcing and offshoring courses and so on, basically strengthening communication between universities and companies in the sector.
Why is this important? First, universities are one of those sectors lagging behind in terms of post-Communist transformation; at the very least, we can say universities are not yet quite in alignment with international business needs. Second, the future of BPO in Kraków is in higher value processes, those that are not transactional. As processes are automated so they will migrate away from Krakow. As we all know, to develop a knowledge economy requires partnership between business and academia. We are focussing on the universities as institutions but equally on the students themselves. We also need to learn from them.
Tell us more about I commuter project?
Transport is the next key issue for the sector. Sorry to hark on about it, but post-Communist transformation has not given us the best planning environment. The market has responded to the need for Class A office space but centres have gone up around cities rather than concentrated in a central business district. This creates a challenge which is now being seen in terms of how people get to and from work.
“I commuter�? is a dialogue with the municipality of Krakow to help them understand the transport issues for the sector. As I say, government has been slow to recognise the sector and transport strategy is based around the idea of supplies going into the factory and goods coming out. So we are raising awareness of the commuter challenge and awareness of how this challenge will grow. Our main path to achieving this is through data collection, surveying companies on their transport challenges and how these effect the business and also capturing and measuring the market, demonstrating the value it delivers to the local economy.
But “I commuter�? goes further than that. Clearly we want to engage in the decision making process – made all the more important because of the transportation infrastructure projects planned ahead of Poland’s hosting of the Euro 2012 Football Tournament – but we also want to do is demonstrate the economic opportunities that come from 16,000+ people travelling to and from work daily. For this reason, I commuter will also survey all employees working in the sector, basically asking the question how can you best be served during the 45-90 minutes you spend commuting daily. The municipality has no such data and yet it is a resource we can provide with relatively little effort.
Long-term we are looking at establishing Transport Management Associations in and around the main business centres and because the situation is dynamic, of course, we want to find an IT solution to manipulating data.
Ultimately, we are looking to drive forward an integrated aproach to transport strategy, one which includes business needs. The irony is that those companies located in and around manufacturing sites built during the Communist period don’t experience the same transport challenges.
I should add, if we are talking about Krakow, that Forbes listed the city as the seventh best commute globally, so it is not a bleak picture by any means. Our concern, however, is about building the future.
What are the current challenges for the outsourcing industry in Poland?
Immediate challenges are around winning new business. Companies are in expansion mode, but like everyone under pressure to control costs. Growth has inevitably slowed over the first half of 2009 and this may mean companies have spare capacity.
On the other hand the slow down has taken some of the heat out of the market; attrition rates have fallen and rents can be renegotiated as a great deal of new space comes online.
There are other challenges around employee expectations. The industry has grown so strongly in such a short space of time that promotions have come to be expected. There are definitely new HR challenges.
Medium term the challenges are largely as I have already described. As business picks up there will be pressure on left of field languages for which new solutions need to be found.
The ultimate challenge is to build capability which we believe will only be achieved by establishing a shared vision for the industry which stakeholders will buy into and change their behaviour accordingly.
Where do you see business mainly coming from EU / USA or UK
It depends what business we’re talking about. Most of the business is about serving European clients. For the SSCs they begin by standardising processes and adding new countries to the portfolio, then adding new processes and so on.
Its fair to say a lot of the business has come from the UK, meaning processes are migrating from centres in the UK to centres in Poland, but the business logic is pan-European.
Some manufacturing companies, present across CEE, are looking after processes just for CEE, but the logic is the same.
In higher value processes, in software development and R&D, the business can equally come from the US – in fact, in this area I see the business stretching across time zones taking in, for example, US, Bangalore and Krakow.
What we also see is an emerging trend of Indian captives globalising.
Is Poland more suited for high end, research like campaigns something on the lines of KPO (Because of its highly educated workforce – rather than simple customer care processes which require dynamic scalability which Poland might not be able to offer.
I think as I have said the future is in higher value processes. Poland has a window of twenty years before costs catch up with Western Europe and countries further East catch up with Poland’s capability.
About Andrew Hallam
Andrew is a founding member and President of Aspire – the Association of IT and Business Process Services Companies in Poland.
Born in the UK, Andrew first visited Poland in 1988 before the fall of Communism, returning several times in his capacity as a television journalist, before finally settling in Poland with his family in 1995 to participate in the challenge of the post-Communist transformation.
He is a former director of the British-Polish Chamber of Commerce in South Poland (1998-2006), and former Chair of the Advisory Board of the British International School. In 2006, he set up his own company South Poland Business Link, initially to network international businesses in the region, now with the burning mission to encourage a partnership approach to economic and social development. He is a strong advocate of the the view that globalisation is not about trading places but making places, and that the world is not flat but spiky. Andrew is a graduate of St. Catherine’s College, University of Oxford, where he studied English and an alumnus of the Cambridge University Business and Environment programme. He is married with two children and is a fanatical Manchester United supporter