Article: 7th December, 2006

Thinking Offshore? Think “near shore”, think Malta!

The world now seems to be a very small place as globalisation takes effect. Countries such as China, India, the Philippines & South Africa are fast becoming processing centres for work originally undertaken in the western world.

Operations find their way offshore mostly because companies wish to manage cost and all of these countries offer a lower cost option than in the UK for work which is often undertaken to a higher standard. Managing the business when it is being undertaken by a vendor is difficult enough but when there are huge distances between the strategy makers and the implementers the difficulty can be overwhelming. Add to this the problems which can be caused by cultural differences, spoken English having different meanings and problematical accents it’s not surprising that some companies considering outsourcing work offshore are looking at more “near shore” locations.

Last month we learned about the opportunities and problems caused by moving work to “near shore” locations such as the Czech Republic but there are other locations close to the UK and offering sunshine, even at this time of the year; Malta!!

Why Malta?

People are amazed at what Malta has managed to accomplish with just 400,000

people living on its islands.  From a tourist destination to a financial services hotspot to an outsourcing hub, Malta is fast becoming a regional centre of excellence in the Mediterranean.  Flexibility, innovation, competitiveness and adaptability have been key to Malta’s liberalised entrepreneurial environment, which today boasts a diversified and strong business base.  In fact, due to a national effort spanning the past three years, Malta is increasingly becoming known as “the knowledge isle.

Business Environment

Malta – an EU member since 2004, is a stable, safe and secure country, which together with pro-business Government policies and a private sector-led economy, make it the ideal location to do business with.  Apart from its Western culture and political democracy, Malta also has its privacy and security legislation in line with the EU and legal institutions, accounting standards and trade practices similar to the UK.  Moreover, English is one of its official languages and is spoken with  accent-free diction.

Telecommunications

The islands have a sophisticated telecommunications infrastructure with large bandwidth networks providing high capacity communications to and from the island.  Networks are completely digital and international connections have been significantly expanded through satellite technology and high capacity fibre-optics linking Malta with Europe.  The infrastructure also boasts two main international gateways via submarine optic fibre cables, additional gateways via satellite links and digital microwave link, VOIP, broadband connectivity, 24/7 operations and 3G.  All this you will find in Malta, within just 316 sq kms!

With the huge advances in telecommunications, Malta has already taken the lead, transporting itself into an advanced knowledge-based society and an economy with huge investments in ICT that has enabled the forging of strategic alliances with global giants Microsoft, HP, IBM, Oracle, CISCO and SAP, to mention a few.  In fact, in a study conducted among EU acceding and candidate countries in 2006, Malta ranked second for best e-government services among the EU25.

Human Resources

Malta’s most valued resource is without doubt its workforce.  The people are well-educated, intelligent, hard-working, multi-lingual, motivated and highly productive, with a strong work ethic.  They are easily trained, and eager to master new skills and to adapt to new work practices.  They have developed into an experienced and highly valued national asset, giving Malta a tremendous and formidable competitive advantage.   

A superior level of education is the backbone of this workforce. Malta has invested heavily in education at all levels, including at tertiary, secondary and technical levels. ICT is taught in schools from primary age level and forms an integral part of today’s curriculum.  The island’s vocational and technical education systems offer a number of learning programmes and opportunities that complement the academic set-up and these are all attuned to industry requirements. 

When coupled with a very low attrition rate, lower labour costs than Western Europe contribute to the lower costs for companies seek when outsourcing activities to near shore locations.   Moreover, Malta registers as having one of the lowest percentage increases on salaries worldwide so cost containment at least for the time being can be achieved making the accountants in our lives happy!!. And then to this can be added the fact that up to 20% of call centre operators are UK ex pats that have chosen to live on the Island, a major advantage when introducing unfamiliar processes.

Location

Malta’s competitive advantage is worth serious consideration, and the country offers some specific advantages. It’s pleasant to visit and to live there, and it’s safe. It offers a high standard of living at comparatively low cost with very well developed health and educational services, which are certainly on a par with those of other European countries. 

The geographical vicinity also allows businesses easy access to the island’s outsourcing companies. Malta has good air connections to most European, North African and Middle East destinations. Due to the Island’s location, getting to and from Malta couldn’t be easier since these destinations are easily accessible within short flying hours. The Islands are +1 hour BST and flying time from the UK is around 2.5 hours. The majority of the outsourcing companies are situated in and around Valetta, the capital, but as the Island is so small nothing is much more than 20 minutes from the airport and it is possible to have a meeting with a vendor & return back to London in the same day.

Outsourcing Services

With Malta’s combination of people and infrastructure, it can cost-effectively support many of an organisation’s direct customer interface processes.  Its multi-channel ready contact centres provide bespoke services with intelligent solutions on a 24x7 basis for a company’s outsourcing requirements. 

Apart from customer service contact centres, other forms of outsourcing business processes are also available.  These include financial and accounting processes, routine administrative and clerical service, insurance or fund administration processes, as well as the outsourcing of software development and application support. As evidence of this, a major UK financial institution has only recently established a 500 seat call centre which is UK facing with other BPO companies operating on behalf of a major European mail order catalogue company and famous high street brands. Outbound calling is a significant part of current telephony activity.

Malta’s reputation as an attractive destination for ICT operations is demonstrated by the presence of a significant number of local and foreign ICT companies already established on the island.  Indeed, Malta can lay claim to some stunning success stories in the development of software, tailor-made to clients’ requirements and the subsequent provision of second and third level support.  After a relatively short time Malta has achieved an ICT cluster which is versatile and mature – as evident from the ICT directory in www.ict-malta.com and it is a perfect candidate for the outsourcing of specialist ICT services. 

Why not Malta?

The primary reason is “experience”.

For those who have enjoyed the “Indian” model it will come as a bit of a shock when visiting the BPO providers in Malta as on the surface they appear to be less professional, perhaps even naïve. A little like India was 5/7 years ago, maybe! But dig under the surface and there are some real positives. The potential is significant but because of the immaturity of the operations there appear to be risks.

Because many of the BPO companies are only recently established they have no need to be structured as “big” businesses just yet but do have the capacity to develop in line with their business growth. Some, such as 24 –CC, are already recruiting talent to help develop their business as they recognize they need to operate at a higher level. Transition managers are in short supply as are process engineers plus it’s too early to judge if there is sufficient management talent to lead big teams of people.

Infrastructure is satisfactory as is resilience and whilst the IT expertise is high it may not be as experienced in call centre operations.

These issues are generally recognized by the businesses on Malta. Malta Enterprise, part of Government, responsible for developing business on the Island, are however very aware of the challenges ahead and are very supportive of businesses wishing to move work “near shore” . Through financial support, information and advice they are vigorously trying to develop BPO, not as competition to say India but as an alternative for companies who want to outsource niche activities, start ups or overflow activities. After all Malta will only ever have circa 5000 seats in the BPO space and many Indian companies have that on one contract!! 

Summary

Malta as a destination for BPO operations is not perfect, the industry is new but growing. It, however, has potential, plus being in at the start of something and developing it in partnership with both the vendor and Government could be attractive to some companies thinking of offshoring, perhaps on cost alone. India will continue to be the standard with companies such as 24/7Customer & One Source leading the way and in many cases is still the best location to place activities such as voice but have a look at Malta …… you’ll be surprised & maybe even delighted at what you see.

 John Davison

Managing Director

Lion & Tiger Consultancy

(+44) 01943 862256

 

 

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