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Taking the plunge

Author: Alex Bivol Date: Fri, Nov 12 2010 1 Comment, 3015 Views
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Estonia gave the world Skype and Kazaa, while Russian programmers have over the years developed a reputation for being able to deliver the impossible. Other Eastern European countries are teeming with software companies offering to take work off your hands and do it well at a fraction of your costs.

In such an environment, does Bulgaria stand a chance to make a name for itself in the outsourcing and off-shoring business? For Dr Peter Peters, senior partner at McKinsey and Company's Business Technology Office in Dusseldorf, the answer is 'yes', provided it stands ready to make the best of its chances.

"There are some things you can always do. There is a history, a legacy - in a positive sense - in Bulgaria of being intellectually strong and solving tough problems," Dr Peters told The Sofia Echo on the sidelines of a conference on outsourcing in Sofia on November 11, hosted by the American Chamber of Commerce in Bulgaria (AmCham), the InvestBulgaria Agency and Colliers International. "Leverage the history, leverage the branding you had before to establish a new one."

"As a government, be ready when the opportunity arrives and do not drag on for years, have a pot money to dedicate to support these types of initiatives. I know it is very tough to avoid talking about the potential for corruption, but maybe it can be done in a non-company-specific way," he says.

Entrepreneurship is needed both on the side of the government and the private business, while those who have already been successful should attempt to encourage others to follow in their footsteps and seize the opportunities when they arrive.

The advice rolls from Dr Peters in a manner that makes it obvious that it is not the first time he is delivering it. With 10 years of consulting experience in the outsourcing and off-shoring sector, he has also been involved in McKinsey's Eastern European Services and Technology Community (EESTCom) conference since the initiative was launched to emulate the success of NASSCOM, the industry group that promotes India's IT outsourcing sector.

There is no reason why the region, and Bulgaria in particular, could not follow in India's footsteps, he says. Demographic trends have left a much slimmer talent pool in developed countries to deal with the increasing amount of work coming the industry's way, which is why even during the recent economic crisis, the industry has seen an increase, albeit at a slower pace, of outsourcing.

"India has a talent problem as well when it comes to the jobs that originally went there, the talent pools are depleted in the sense that they've [skimmed] the cream from the milk, they are all gone," he says. "And now you say, 'where do I find the next level of talent' and companies are really searching still for a lot of geographies at the moment."

It helps that the idea of outsourcing is not as controversial as it used to be. 

"I have the feeling that a lot of the emotion is out of the discussion. Off-shoring has always been a very emotional topic, that emotion is a little bit out of the picture, it is a more rational debate from the financial aspect," he says.

"Obviously, for the [trade] unions it is very emotional, but from a managerial perspective, everyone is thinking globally, so we are actually thinking of dropping the term off-shoring because where is off-shore these days? It is rather [building a] global footprint than off-shoring."

After years of talking about it, the support structure is much better prepared to deal with the challenges raised by outsourcing, including human resource companies, consultants and even local administration. 

And even local companies, which might have chafed in the past at being the recipients of outsourcing contracts, have come around to see it as an opportunity. "They understand that it is not just an Indian sweatshop type of work, but really highly skilled labour that is coming in, it is not just the low-cost production stuff and that turned the notion a little bit around, so now they want to be part of this global network and are more positive towards the discussion," Dr Peters says.

What Bulgaria lacks is a well-known success story instantly recognisable by the industry, such as Skype in Estonia or Luxoft in Russia, which helped build the reputation of Russian programmers being able to accomplish the impossible. 

"When it comes to the multinationals, they really dilute this value proposition because they probably do not immediately come with the high added-value business. Secondly, the brand is IBM, location doesn't really matter, whether it comes from Bulgaria or elsewhere. That is where a local brand could actually help. I am not saying that it is a key driver for success there, but it would certainly help to have some good start-ups," he says.

When it is put to him that part of the reason could be insufficient funding, Dr Peters disagrees: "When I look at the requests that I'm getting, the discussions that I'm having, I think every year I have two or three or four requests from private equity firms who want to acquire something in Eastern Europe."

But private equity only comes into play when companies reach a certain critical mass and there is room for improvement in earlier stages. "If there could really be a community that could foster that kind of entrepreneurship, there would be ways, I am sure. It is a matter of focus, this kind of conference provides a kind of lense on the economy, look at this pool of talent and suddenly people start thinking differently about what could be achieved. If you don't look through the lense, you don't see the opportunity."

Asked about the prospects of the outsourcing industry in general after the global financial crisis, Dr Peters is upbeat. "My personal hypothesis is that it will help because for the next ten years, people will have the mindset that this is the age of volatility. We don't know whether the economy going up or it's going down, so we need to be ready for the winter. I think more people will therefore think more structurally where they put the eggs in the basket and how to reduce cost from a structural perspective."

"I would say that the 20 per cent growth that we forecast in our presentation is at the lower end. I am very optimistic about that."

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    • Anonymous
      David Rating:
      neutral
      #1 10, 29, Sat, Nov 13 2010

      Oh this is so true but the government must work to get rid of the situation that an article of a week or so back hi-lited, that the Bulgarian workforce is getting less skilled and less educated.

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