To discuss nearshoring call centre activity to Eastern Europe, call Rob O'Malley on 077400 96598 within The UK.  He will be only too happy to assist you.

With the negative association with the word "offshoring", outsourcers in certain locations are increasingly using the term "nearshoring".  For The UK market, this usually means Eastern Europe.  We take a closer look at what is happening in the nearshore call centre market.

What is meant by Nearshore?

Nearshoring is about trading risk for price.  A nearshore option is considered lower risk and higher priced than the typical offshore locations but higher risk and lower cost than an onshore location.  For British companies, this used to mean The Republic of Ireland.  However, Ireland's booming economy means that the cost of operating centres there is now comparable to England.  Unemployment rates are low and there are plenty of opportunities for Ireland's population.  Even Irish companies are now "nearshoring"  their own work to cheaper locations in Northern Ireland. 

A number of the new EU entrants now have call centres servicing the English speaking market.  Poland has the largest market but there are also "nearshore" centres in The Czech Republic, Slovakia, Lithuania and elsewhere.  There are also centres operating out of Romania and Bulgaria, both of which are due to join the EU next year.  At the recent Call Centre Expo, a number of companies from these countries had stands but is this more to do with the fact that they have large pots of EU cash to spend on marketing or is Eastern Europe a serious option for call centres?

What are the advantages?

One key advantage with nearshore is the pure geography. It is much simpler for a client to have positive input into a call centre when it is only a 2 hour flight away to address any problems quickly.

If stereotypes are to believed, the Eastern Europeans who have come to work in The UK are renowned for their strong work ethic and without evidence to the contrary, we can only assume that this is the same for their call centre agents. 

One of the limited number of positive legacies from the Communist era is that the education system in Eastern is and always has been very strong.

While Eastern Europe does not have the same widespread English language skills of India or The Philippines, it does have other language abilities.  Many Eastern Europeans were taught Russian to a high-level in school.  With the Russian economy booming from "energy wealth" and Moscow quickly becoming one of Europe's most expensive cities, companies are looking at Eastern Europe to be a low-risk option to service the Russian market compared with the potentially volatile business climate in Russia.  Eastern Europe also has a high proficiency in other languages including German and in some places Italian.

It's also important to note that "nearshoring"  isn't just about "outsourcing".  As fellow EU members, it is comparatively easier to incorporate and operate a business in these countries.

What are the disadvantages?

We need to be realistic about the English language skills in Eastern Europe.  Despite the fact there are 100's of 1000's of Eastern Europeans working in The UK and Ireland, very few are working in call centres despite the large number of vacancies in British call centres because of their level of English.  However, since the fall of the Berlin Wall, young Eastern Europeans have been quick to embrace learning English and many have now worked in English speaking countries and are now returning home with new language skills.

The economies of Eastern Europe are growing faster that the West and wage inflation is on the rise.  Once they adopt The Euro as their collective currency, it is likely that this will accelerate in the short-term.  The European Minimum Wage does not apply for the new EU entrants and wages are still considerably lower than the UK but the differential is diminishing.

The most recent report on the competitiveness of certain cities around the world, the Indian centres came out far more competitive than any city in Eastern Europe. With New Delhi ranked as 100%, this is how other offshore destinations stacked up.

Krakow, Poland                     70.6%

Warsaw, Poland                    71.1%

Prague, Czech Republic      72.8%

Budapest, Hungary               73.3%

Manila, Philippines               87.7%

Mumbai, India                        92.6%

Bangalore                              97.8%

New Delhi                              100%

However, the figures looking very different when comparing the ability of languages especially German where Polish cities score very highly.

Northern Ireland.

Northern Ireland still represents a cost-effective solution for companies looking for a solution closer to home.  In an unusual twist, ICICI One Source and 247 Customer (2 of India's largest outsourced providers) have established operations in Northern Ireland.  Despite economic growth spurned by relative stability in the province, unemployment is still relatively high and Northern Ireland has a high percentage of "20-somethings" in its population.   Wages are still lower and Government grants are still available in Northern Ireland making it a low-risk, good-value solution.  Northern Ireland now has the highest house price inflation in the UK with property increasing by 35% last year and wages are bound to grow over recent years diminishing its competitive advantage.  However, it looks set to continue its expansion servicing the British and Irish markets.

Canada as a near-shore option

In the same way that Ireland has always been an attractive destination for UK companies, US based companies have traditionally turned to Canada because of its capacity to provide high quality lower cost alternatives to onshore outsourcing. Interestingly, UK companies are now taking notice of Canada too. ICT Europe, who has been operating in Canada since 1996 and maintains 3000 agents positions there has begun to see significant levels of interest from clients who are considering Canada in earnest.  In certain areas of Canada, wages are substantially lower and unemployment significantly higher than the UK.  Education is of a similar standard to the UK and Canadians are unlikely to receive the "negative backlash" from customers so often associated with lower cost destinations.  There are currently 450 outsourced call centres in Canada with this number set to grow to 600 by 2007. With English as the 1st language in much of Canada, it has a distinctive advantage over India and The Philippines.  Canada is more expensive than many other offshore destinations but in the KPMS survey entitled "Competitive Alternative", it ranked as having the lowest costs of any of the G-7 countries far below the UK.  Canada has other advantages including the fact that its abundance of "native" French speakers and high immigration means that it is suitable for companies looking to service non-English speaking markets.  Canada also ranks highly in terms of stability and data security.  In 2001, The EU recognised Canada's PIPED (Personal Information Protection and Electronic Documents) Act meaning that EU companies are free to Canada without requiring additional safeguards.

Conclusion

The lack of available English speakers, the high cost and increasing employment opportunities in Eastern Europe means that it is unlikely to ever compete directly with India or The Philippines.  However, as the industry continually looks to source good quality agents, these "nearshore" location will act as a niche player for smaller centres, companies wishing to centralise European operations or for companies wanting to have greater control over the call centre.

The theory remains the same for nearshoring as for offshoring or domestic call centres.  A customer or prospect has the same level of expectation from a call as they do with a UK call-centre!

For more information on ICT's services in Canada, please visit www.call-centres.com/articles/ictcanada.pdf

 

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