Bulgaria: Looking to Boost the Back OfficeViews on BG | September 26, 2012, Wednesday // 19:53| views
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From The Financial Times
By Andrew MacDowall
The outsourcing sector may not be particularly glamorous – and the words "contact centre" may be loaded with associations of irritating unsolicited telephone calls – but it's certainly a big earner for many emerging markets. India and the Philippines are two of the better-known outsourcing destinations.
Some eastern European countries have also found outsourcing niches for themselves, capitalising on their location, low overheads and a workforce of technically-able graduates. The business process outsourcing sector has become something of a success story for Bulgaria, where it employs around 15,000 people and generates revenues of €200m, according to the official Invest Bulgaria Agency.
On September 21, Telus, a Canadian outsourcing company, announced that it was acquiring a minority share in Bulgarian contact centre and outsourcing company CallPoint New Europe from the European Bank of Reconstruction and Development. No financial details were disclosed. The EBRD took a €3m stake in CallPoint in 2009, "a time when alternative sources of investor financing were scarce," according to Daniel Berg, the EBRD's Bulgaria director. CallPoint was founded in 2004, and had a turnover of €2.6m in 2011. Telus hopes to add 2,000 jobs to CallPoint's workforce, which currently numbers 700 in Bulgaria and 300 in Romania.
The Canadian company thus becomes the latest big international to establish a presence in the Balkan country, which had almost no outsourcing industry to speak of just fifteen years ago. In 1999, local company All Data Processing was founded, with ten employees indexing information and providing editorial services for Reuters business products. It has since been followed by the likes of Coca-Cola, which opened an outsourcing centre serving 26 countries in 2005; Hewlett-Packard, which chose Bulgaria from among 14 countries for its global delivery centre in 2006 and chose the country as one of its six "delivery hubs" in 2010; and IBM and outsourcing giant Sutherland.
Successive governments and the IBA have been keen to promote the sector, with tax breaks, training and infrastructure subsidies, and logistical support, says Elena Kozhuharova, the agency's outsourcing and IT expert. Companies can also buy municipal property at low prices. The agency has proposed further measures specifically intended to support outsourcing for the government's forthcoming Investment Promotion Act, including employment incentives and tax write-offs on R&D expenditure.
Costs, particularly of labour, are significantly lower than in western Europe, and while they may be higher than those in some Asian countries, Bulgaria can draw on other competitive advantages.
"Being an EU member diminishes political risk and secures a stable economic environment for investments," says Iskra Yovkova, a outsourcing expert and co-founder of Sofica, Bulgaria's largest home-grown outsourcing company. "Bulgaria is physically closer to western Europe and the US than major Asian competitors in BPO it is also culturally closer."
While some outsourcing destinations largely provide low-value back office and contact centre functions, Yovkova notes that Bulgaria's outsourcing industry is "mature" and that there is potential to develop "more sophisticated services" including R&D, recruitment process and finance and accounting outsourcing.
But she adds that to do so will require greater investment in workforce development and training, as well as higher salaries. Despite IBA's estimate that 30,000 Bulgarians graduating from local universities with suitable qualifications every year, finding talent for the top jobs can be tough.
In 2011, consultancy AT Kearney ranked Bulgaria fifth in Europe as an outsourcing destination – a decent showing, but a slide from first in 2009. In an intensively competitive and geographically mobile sector, Bulgaria cannot afford to rest on its laurels.