Continuing the topic we have started, where are the special conditions of the Polish IT market and B2B services outsourcing on the global market, we will try to look today at which direction the market will be heading in the next few years and develop a little bit the issue of the "economic geography" of the industry. Again, as in the first part of the entry, I would like to point out that these are subjective observations, not based on hard data, but based on many years of practice as a recruiter in the areas of IT and shared service centres and gathering opinions about the market from both candidates and clients.
For the sake of definition: Shared service centres (SSC) are internal centres (departments) located in one place geographically, to which the corporation transfers certain type(s) of activities (business processes) - accounting, purchasing, customer service, IT helpdesk. BPO centres (business process outsourcing) are centres established and operated by outsourcing companies (such as Accenture, CapGemini, HCL, Infosys), which perform specific activities (business processes) for external clients. In other words, instead of creating an SSC itself, the corporation hires a BPO company, which in one centralised location runs for the corporation and on its behalf, e.g. all activities in the area of purchasing.
Shared services centres, including BPO centres, employ over 300 thousand people in Poland today. The first centres appeared some 15 years ago, while their huge outburst occurred around 2010. Today, the centres of the largest BPO companies in Poland have teams of over 5 thousand employees (and some of them significantly exceed this number).
Over the last 10 years we have observed the evolution of the area of services outsourced to Poland: from the initial very simple ones such as multilingual customer service or accounting, through the subsequent outsourcing of purchasing processes, KYC processes (simplifying: prevention of fraud in banks), outsourcing of human resources processes, multilingual recruitment outsourcing centres on advanced analytical services in the financial area.
Many SSCs provide also IT services - application maintenance, server management, technical support in the area of infrastructure at expert level
Many people from the SSC/BPO industry and recruits serving the market have decided that the upward trend in this market will continue, if not always, at least for the rest of their professional life :)
About 5 years ago I was present at a conference of one of my clients, a global BPO company, organised for recruitment service providers. Already then, senior managers on the side of the client, operating in many countries, the so-called "emerging markets" signalled that the Polish market, due to rapidly growing salaries, will become a market of high end services. I remember the talks, that in a short time, Bulgaria will grow into a significant competition for Poland in Europe, which will take over the market of simple services.
This forecast did not come true until around autumn 2018, when we saw a significant drop in demand for new employees in the SSC/BPO area. Service centres did not start to move from Poland, but in my opinion they stopped growing at the current rate, not to mention the temporary (?) stagnation.
Around the middle of last year, we saw a weak market rebound, but this was halted by a pandemic.
What markets are capable of threatening Poland? Certainly not India. In recent years, Indian outsourcers have been moving a large part of their services from India to Europe, especially to Poland, but also to more expensive countries. The reason is the quality of services. Unofficially, many representatives of Indian outsourcers admit that with the increase in the advancement of services they are not able to serve customers from centres in India.
It is not a competitor of Russia - the country is a leader in outsourcing in the area of relatively simple web and mobile development and Russian companies work mainly for the American market. Interestingly, they try to position themselves as American companies (often companies established in the US by Russian emigrants). In the last 3-4 years I have observed a tendency for these companies to set up centres in Poland, due to the increasingly unstable political situation in Russia and the "tightening of the course" with the West by the authorities. Cooperating several times with smaller outsourcers from Russia and Belarus, I have to say that the level of expertise among developers from these countries is very high and the "recruitment screen" of the hiring managers there was really accurate...
In my opinion, the real competition for Poland in the SSC/BPO area is also not Bulgaria or Romania.
For the last year, as part of my temporary role in a large corporate recruitment company, I have worked closely with my colleagues from Bulgaria, visiting this country, which is very beautiful in nature and very nice, twice. However, in the context of SSC/BPO development and IT outsourcing, it is some 10 to 15 years behind us. The big, global BPO players have only been entering Bulgaria for about 3 years. The country's population is more than 5 times smaller than Poland's, and consequently the talent pool is much smaller. In the context of SSCs, for example, it is more difficult to find language competences in the area of Nordic or Dutch, in the area of IT it is much more difficult to find people with new technologies such as Golang. And although the Bulgarian national average is much lower than the Polish one (about double!), salaries in the "multilingual" or IT area are similar... And there is no talent pool similar to ours.
It seems that, given the geography, the only serious market competitors for Poland are the countries of North Africa - Egypt and Morocco are already large SSC/BPO centres with significantly lower wages in the industry. I have not dealt with these markets apart from working with colleagues from these countries, but when searching the Internet for wages in the industry it turns out that wages in the BPO/SSC industry are at the level of 1500-3000 PLN per month. This is a big cost advantage, and these are young societies, quite well educated. In Morocco, the knowledge of French (former colony) is common, in Egypt, good knowledge of English and quite high level of IT education at university level.
It seems that, as a country, only we can lose out to the SSC/BPO market. In terms of availability of competences and in terms of quality in relation to cost, at least in Europe, we still have a huge competitive advantage. The problem is market saturation and the high wage pressure exerted by the policy of constantly increasing the minimum wage.
Certainly in the global SSC/BPO ecosystem we are in the "high end" position. In the next entry I will try to describe in more detail what this "high end" should mean in the coming years.