Central, Eastern Europe Gain From Outsourcing
 Central and Eastern Europe and Northern Africa are set to become the next favoured locations for outsourcing centres, especially for companies based in Europe, asurvey said.
Central and Eastern Europe and North Africa are set to become the next favored locations for outsourcing centers, especially for companies based in Europe, a survey said.
India is becoming too expensive and European firms want a closer cultural fit, a study by the Economist Intelligence Unit (EIU), a research and advisory firm, said on Wednesday.
Outsourcing, or offshoring, refers to activities like back-office support, call centers, software development and technical activities which companies move to lower-wage countries. Companies typically save 15 percent on their costs, according to a separate survey from outsourcing advisory firm TPI.
"Demand is increasing for more complex capabilities and a closer linguistic and cultural fit with customers. That makes lower-cost European locations very competitive," said senior EIU consultant Delia Meth-Cohn. Hewlett-Packard, one of the biggest IT services companies, has opened offices in eastern European cities Bucharest, Sofia and Bratislava where it expects staff to increase to 4,000 by the end of 2007 from 1,500.
"In Bucharest we plan to serve all European languages," said Jan Zadak, who is in charge of HP's activities in Central and Eastern Europe, Middle East & Africa.
The global offshoring market is worth between $40 billion to $50 billion a year, and it is growing by around 30 percent annually, the EIU survey found. It may be as much as $100 billion by 2008 and has caused concern in some countries about jobs being moved abroad.
By 2004, when there was a public outcry in the United States about white-collar jobs being moved to India, 700,000 such jobs had already been created there. Another 250,000 jobs followed in 2005. However, even in the Indian cities of Bangalore and Chennai, there is a limit to the number of skilled people available. Indian giants like Tata Consultancy Services are recruiting aggressively and U.S. rivals like IBM and Accenture are competing for the same staff. As a result, labor costs are starting to rise.
With Central European locations still at least half the cost of the cheapest western European locations, many European companies are willing to pay a small premium over Indian centres to get a service in their local language.
Romania, Egypt and Jordan are some of the new locations for the offshore IT industry, the survey said.
Source: CRN
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