What is meant by
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
What are the
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
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
Prague, Czech Republic
However, the figures
looking very different when comparing the ability of languages especially
German where Polish cities score very highly.
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
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.
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