Eastern Europe Raising Fast as Offshore Hub
Sep 13, 2004
As India and China come under increasing public attention in the US due to concerns regarding job losses, and as the outsourcing debate gathers steam, some US companies have begun shifting operations to the formerly communist countries of Central and Eastern Europe. The new locations, which include countries like Hungry, the Czech Republic, Romania and Slovakia, are also seen as favorable destinations among companies having geographical and infrastructural concerns about the two offshore giants.
According to analysts, much of the movement is in the form of 'offshoring', where the companies are opening proprietary facilities, rather than 'outsourcing' to a local company.
As per Simon Bell, Principal and Director Global Business Policy Council, AT Kearney, what started with IT services now includes a full spectrum of services including IT, business processes and manufacturing. Instead of tapping into cheaper labor in Asia, companies found Eastern Europe offering distinct advantages not found in East Asia. Many of the region's countries offer more engineers and scientists than in low-cost parts of Asia, particularly attracting US companies operating in the Western European region.
Many firms are discovering that besides the advantages of a 4-to-1 labor-cost differential and educated workforce, a more established infrastructure than other popular outsourcing destinations and European cultural and linguistic ties makes it possible to manage an offshore operation in Eastern Europe than that in the Asian region.
However, the lack of viable local companies to provide related expertise comes as a limitation. That means the largest growth areas are likely to come from sectors, in which companies tend to set up their own operations, rather than in IT or call centers, where companies often use local contractors.
Reported by Dow Jones Newswires
According to analysts, much of the movement is in the form of 'offshoring', where the companies are opening proprietary facilities, rather than 'outsourcing' to a local company.
As per Simon Bell, Principal and Director Global Business Policy Council, AT Kearney, what started with IT services now includes a full spectrum of services including IT, business processes and manufacturing. Instead of tapping into cheaper labor in Asia, companies found Eastern Europe offering distinct advantages not found in East Asia. Many of the region's countries offer more engineers and scientists than in low-cost parts of Asia, particularly attracting US companies operating in the Western European region.
Many firms are discovering that besides the advantages of a 4-to-1 labor-cost differential and educated workforce, a more established infrastructure than other popular outsourcing destinations and European cultural and linguistic ties makes it possible to manage an offshore operation in Eastern Europe than that in the Asian region.
However, the lack of viable local companies to provide related expertise comes as a limitation. That means the largest growth areas are likely to come from sectors, in which companies tend to set up their own operations, rather than in IT or call centers, where companies often use local contractors.
Reported by Dow Jones Newswires