Riding the IT wave

Economic News

22 Jul 2010
Text size +-
A recent report shows that Bulgaria has now vaulted into the ranks of the top 40 most attractive destinations in the world for outsourcing.

Operations such as IT services, call centres and business processors are honoured in AT Kearney's annual Global Services Location Index - with Bulgaria gaining 15th place globally in the index this year, on its maiden foray.

"Bulgaria is attractive because of the availability of highly educated and highly motivated professionals, the price, the ability to speak English and other languages as well as sharing a common European culture," Microsoft of Bulgaria general manager, Teodor Milev, explained to OBG recently.

Other south-eastern European newcomers to the list included Slovakia, ranked 16th, and Romania, ranked 24th.

At the same time, more established Central European countries slipped in the rankings, with the Czech Republic falling from 4th to 7th place and Poland and Hungary each dropping one position from 10th to 11th, and 19th to 20th, respectively.

These trends reflect the increasing costs in Central European countries as their wages and standards of living move closer to those of Western Europe. This has pushed companies to take their business east in their continuous quest for cheaper, more competitive outsourcing locations.

The Global Services Location Index (previously known as the Offshore Location Attractiveness Index) measures the desirability of countries by a weighted combination of three factors: financial structure (40%); people skills and availability (30%); and business environment (30%).

While this may be Bulgaria's first trip into the indices rankings, the country that has been called "the Silicon Valley of Eastern Europe" has enjoyed a reputation for producing highly qualified IT technicians for decades.

Unfortunately for companies based in Bulgaria, the difficulty was not in finding trained personnel, but in trying to keep them from accepting more lucrative jobs in Western countries. The so called "brain drain" migration of the country's best and brightest was a very real problem for many companies as they invested time and money in training only to see their investments fly away.

However, most in the industry today feel that this trend has slowed and even reversed over the last few years.

Although there are many factors contributing to this turnaround, one reason for this has been attributed to the increased efforts of many companies to be on the cutting edge of this rapidly developing field, thus providing the same opportunities locally that are available in other countries. This renewed commitment by employers to keep their workforce highly trained and certified with the latest technology is evident in the high certification rates of Bulgarians.

Although Bulgaria has a wealth of skilled labour, this is not the only factor in realising the country's outsourcing attractiveness. Relatively low labour costs are one of the strongest selling points for companies looking to open new operations in the country, as are language and common culture.

Another factor that is often overlooked in the age of telecommuting and globalisation is location. Geographically, Bulgaria is much closer to Western Europe, where many parent companies and corporate headquarters are based. This "near-shoring" concept has the advantages of being not only a short flight away, but also makes communication easier because of similar time zones.

Despite all of these highly regarded outsourcing qualities, there are indicators that suggest the current boom will be short lived, as Bulgaria follows the path rife with growing pains that all emerging markets must go through.

Upon EU accession - slated for 2007 - wages and living standards are likely to increase for many, pushing up labour costs and making the country less competitive when compared to the markets of Asia and the Indian subcontinent.

"Ten years from now, there will be no [low quality] outsourcing here. Markets such as China and India will kill all this business," one industry source recently told OBG. "It was good for some period of time, but now it is time we shift into other areas."

Numerous leaders in the Bulgarian IT field are preparing for these changes and adopting strategies that take these trends into account.

Lubomir Minchev, executive director of IT company Telelink, recently told OBG that "It's a question of what's being outsourced - low quality and low cost, or high quality with more management responsibility. [The latter] is what Bulgaria can and should target."

Specialisation, high levels of training and certification, and value-added services are some of the areas which many see as the future of Bulgaria's IT sector. Many Bulgarian companies are already investing heavily in training and certification programmes that include bringing in highly qualified guest lecturers to universities, sending employees abroad for specialised certification, and the development of in-house training programmes.

The Bulgarian IT market is therefore riding a wave of outsourcing success that has long been building. But even while the sector is enjoying its current prosperity, the dynamic position of both the country and the IT industry leave prospects for the future wide open.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart

Read Next:

In Bulgaria

Counting Down

Approval of Bulgaria's handling of its economic reform programme this week by the International Monetary Fund (IMF) was welcome news for the country's leaders, as they square up for next month's...


Myanmar: Open for business

A new foreign investment law that offers investors broader access to Myanmar’s economy, as well as useful tax breaks, is expected to add new impetus to the country’s development and is a landmark...