We hear a lot about China and other BRICS countries luring investors, especially as a shift towards services occurs in these booming economies. But what about emerging markets right in Europe’s backyard? Way too often, they seem to be bypassed.
Of course, I am speaking of central and Eastern Europe. Investors are increasingly conscious that outsourcing business, knowledge and IT processes to Eastern Europe can be both cost-effective and sustainable.
Unlike its western European neighbors, overall the Eastern European countries did not suffer as badly from the global economic meltdown. Only one EU country in the “Emerging Europe” group, according to the IMF, went through most of the most recent financial meltdown with a growth GDP. That country is Poland. And this trend should continue through the following years, as per experts from IMF, Ernst & Young and more. (http://www.emergentsky.com/pdf/news.pdf)
There are several theories why Poland has been so successful. But one expert with years of experience on the Polish IT market, Jacek Levernes, VP of Hewlett-Packard’s Global Business Services (GBS) in Europe, Middle East and Africa and president of the Association of Business Service Leaders (ABSL), told me in a recent interview he believes that Poland’s success is attributable to three major factors– structural changes applied by Polish economics-savvy politicians in the 1990s, Poland’s absence from the Eurozone, and “really highly-skilled labour force, both in production as well as services.”
Cost-effectiveness and sustainability
The weakness of the Polish currency, zloty, means the country is cost-effective for foreign investors, especially those coming from the Dollar and Euro markets, Levernes said.
But while the economic meltdown will eventually be ameliorated, the source of long-term sustainability lies somewhere else– in the local skilled workforce and the innovation factor.
In 2009, according to the European Commission data, five EU member states reported more than two million tertiary students– Germany, the United Kingdom, France, Poland and Italy. (http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Tertiary_education_statistics ). Together with Spain, these countries accounted for two thirds of all EU students. According to a recent pole, approximately 45 percent of Poles speak at least one foreign language: 25 percent speak English, 20 percent Russian, 12 percent German with a smaller percentage speaking Slovakian, Dutch, Spanish and other languages.
Polish employees in the 337 business services centers are on average 29 years old and speak on average 2.4 languages. An estimated 65 percent of these employees are women; 93 percent have a Master’s degree, according to Levernes. That gives a representative glimpse of the Polish work force, which tends to be highly educated and young, reflecting that Poland is demographically one of the youngest EU countries.
With this demographic profile, as well as a balanced economy and its focus on sustainable development, Poland has been receiving an increasing amount of attention from foreign investors including its existing base such as HP, Google, Sony and IBM.
Here, there is one important factor distinguishing Eastern European countries that are EU members, like Poland, from countries like China or India, which are currently popular outsourcing destinations. That factor is data protection laws.
While the data protection has always been important, with the advent of cloud computing, data protection is key. As an EU member, Poland meets the strict EU data and IP protection standards, unlike many Asian countries as well as even the United States.
These laws, already very strong, are going to be tightened up even more. For example, in January 2012, the EU Commission proposed a reform of the EU legal framework on the protection of personal data, which will strengthen individual rights and tackle the challenges of globalisation and new technologies. (http://ec.europa.eu/justice/newsroom/data-protection/news/120125_en.htm ) As a high-ranking European Commission official expressed recently, the policies’ goal is to make the rules of data protection safe but user-friendly for both consumers and businesses.http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/12/26&format=HTML&aged=0&language=EN&guiLanguage=en . The numbers and actual policies are proof that Poland is on the fast lane to sustainable development.
As far as innovation goes– and Poland, of course, has to compete with India and China — — Polish IT engineers have a very good reputation. And, Poland is creative in other aspects of innovation. As a case study, one can look at the Silesia region in southern Poland, with its capital in Katowice, once a stronghold of heavy industry, now one of the greenest cities in the country oriented increasingly towards services.
Katowice (http://en.invest.katowice.eu/) is presently home to IBM. The city’s technologically skilled workforce is expected to attract even more technology giants to southern Poland, as the city is known for its university of technology graduates as well as appropriate infrastructure, like the Katowice Technology Park, already home to multiple international corporations.
The city has had a graceful shift from a heavy-industry capital to a clean and innovative place where 45 percent of the surface is now covered by forests and parks. And baffling experts for the past several years, it has quickly climbed the ranking of Polish cities with the best quality of living standards. The ABSL released a new report recently naming the city and the Silesia region one of the fastest growing destinations for business service centers and foreign direct investment in Poland. (http://outsourcingkatowice2012.wordpress.com/2012/05/16/business-research-company-names-katowice-3rd-most-attractive-investment-destination-in-poland/ ) Newsweek magazine ranked it as the best city to live in while a PricewaterhouseCoopers Report on major Polish cities ranked Katowice as having the highest value of culture, according to city data.
As for answers to this change, they seem to relate to sustainability, education and planning. A partial answer to this rapid change might be in the innovative and government-backed strategic plan for restructuring the city’s infrastructure as well as its business model. And the Silesia region is known as one of Poland’s largest academic and scientific clusters, with academia profiles being predominantly economic and technical studies.
Another aspect of Silesia’s sustainability is its 200,000 students, accounting for about ten percent of the total number of students in Poland. There are on average 80 thousand university students in Katowice alone, according to the city’s most recent data. (http://en.invest.katowice.eu/people/28/education.html.) □
Luiza Oleszczuk is a newspaper journalist, a freelance business reporter and a marketing expert. She holds a Master’s degree in English form University of St. Andrews in Scotland. Among her interests are international politics and business, the role of technology in social innovation, globalization , women in business and politics, new media and culture. She contributed to multiple publications, including The Economist. Her email is email@example.com.