Outsourcing in Romania is Heating Up
Outsourcing to Romania may be one of your business major positive turn. Even amid these uncertain last two years the A.T. Kearney “Global Services Location Index” 2011 places Romania on the 25th rank in the world top of IT outsourcing and BPO locations, specifying that “…the nearshoring story in Europe still shows a shift to (…), Romania (…)”.
Yes, the global IT&C rankings do change fast and the battle is harsh, however, the outsourcing activity and the existing potential in Romania still boosted the country in the top seven preferred outsourcing destinations in Europe. People skills, their availability and the business environment are backed up by financial attractiveness of the IT&C industry in Romania. These three characteristics are decisive when choosing the region to outsource the IT&C activities.
Romania is known to be one of the most interesting markets in Europe for technology investment and a praised partner for the world’s most exigent customers in IT services outsourcing, BPO (business process outsourcing), service support and product development.
Documented positive effects as a result of outsourcing IT&C processes to Romania strategy
After gathering information from multiple studies issued by some of the worldwide best known research agencies, the following business areas were noted as being directly influenced by the outsourcing strategy to Romania: process efficiency, cost reduction, process quality, data visibility, improved service levels, platform for growth, and focus on core business, legal compliance, cross comparability, working capital, talent development and tax benefits. Many know these facts but few know the key drivers for such effects, against the results observed in Bulgaria, Ukraine or Russia, for example.
Key factors motivating investors to set up IT&C business in Romania
In order to fulfill the outsourcing promise, a set of critical factors have been identified as attractive for companies opening development centers and contracting in Romania: labor quality, proximity to operations, labor availability, labor cost, proximity to headquarters, language skills, risk profile, regulatory factors, tax impact.
ROMANIA’S OUTSOURCING SPECIFIC INDICATORS
You also should be acknowledged that there are specific indicators that support the rationale of outsourcing to Romania. In the following lines you will find a set of A.T. Kearney’s indicators, especially developed for the IT&C outsourcing industry in order to build an effective comparison and strategic options tool.
Romania A.T. Kearney’s Global Services Location Index Rank* based on 2010 results: 25th in the world, 7th in Europe:
A. Financial attractiveness (40%) score: 2.54
B. People skills and availability (30%) score: 1.03
C. Business environment (30%) score: 1.65
Romania outsourcing financial attractiveness: 24th in the world
a) Compensation costs score: 5.23 – including metrics related to average wages (515 USD /month in 2010) and to median compensation costs for relevant outsourcing activities;
b) Infrastructure costs score: 0.49 – including rental costs, commercial electricity rates, international telecom costs, travel to major customer destinations;
c) Tax and regulatory costs score: 0.62 – including relative tax burden, corruption perception, currency appreciation or depreciation;
Romania outsourcing people skills and availability: 32nd in the world
a) Experience score: 0.75 – including metrics related to the size of IT and BPO sectors, contact center and IT centers quality certifications, quality ratings of management schools and IT ratings
b) Availability score: < 0.20 – including total workforce, university educated workforce, workforce flexibility;
c) Education score: 1.14 – scores of standardized education;
d) Language capabilities score: 1.29 – scores at language tests;
Romania outsourcing business environment: 23rd in the world
a) Country risk score: 3.34 – including investors and analyst ratings of overall business and political environment, A.T. Kearney Foreign Direct Investment Confidence Index, security risk and unemployment rigidity, the Government support for the ITC sector;
b) Infrastructure score: 1.27 – including overall infrastructure quality, telecom, internet and electricity infrastructure;
c) Cultural exposure score: 0.44 – personal interaction score from A.T. Kearney Globalization index;
d) Security of intellectual property (IP) score: 0.44 – IP protection and ITC laws, software piracy rates and information security certification;
The quest for the best fit
Romania’s outsourcing community is aware of the pressure bearing down on the managers which have to point and justify the choice for one destination or another. In the competition for the position of attractive outsourcing destination, it is important to stick to the real facts and continuingly struggle to deliver outstanding results. It is also mandatory that corporate customers request more in depth information about their future providers and the environment they are currently working in. Both parties are responsible for the future junction of resources.