We hear a lot about China and other BRICS countries that lure investors, especially as a shift towards services occurs in these newly advanced economies. But what about emerging markets right in Europe’s backyard? They seem to be bypassed way too often.
I speak of course of Central and Eastern Europe. Recently investors are increasingly conscious that outsourcing business, knowledge and IT processes to Eastern Europe can be cost-effective and sustainable.
There are several reasons for that. Eastern European countries did not suffer from the global economic meltdown as badly as many of their western neighbors. One country in particular catches the eye, as an IMF report shows it to be second in the group it labeled “Emerging Europe,” as far as GDP growth in recent years goes (second only to Turkey). That country is Poland, which was the only EU country to go through most of the recent meltdown with a growing GDP. (That trend is supposed to continue through the following years, as per experts from IMF, Ernst&Young and more).
There are several theories as to reasons for Poland’s recent successes, but one expert with years of experience on the Polish IT market, Jacek Levernes, who is the 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 in 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 as the economic meltdown will not last forever, the source of long-term sustainability lies somewhere else– in the local skilled workforce and the innovation factor.
In 2009, five EU Member States reported more than 2 million tertiary students– Germany, the United Kingdom, France, Poland and Italy, according to the European Commission data. Together with Spain these countries accounted for two thirds of all the EU students. Approximately 45 percent of Poles speak at least one foreign language; 25 percent indicate English, 20 percent Russian, 12 percent German; a smaller percentage speaks Slovakian, Dutch, Spanish and other languages, according to a recent poll.
The 337 business services centers currently functioning in Poland employ a crowd aged, on average, 29, speaking on average 2.4 languages. An estimated 65 percent of these employees are women and 93 percent of all have a Master’s degree, Levernes told me. That gives a representative glimpse of the Polish work force, which tends to be highly educated and young (Poland is demographically one of the youngest EU countries).
With that, as well as a balanced economy and its focus on sustainable development, Poland has been receiving an increasing amount of attention from foreign investors; more and more often technology giants like HP, Google, Sony or IBM, all of which are already present on the market.
Here, an important factor comes in that distinguishes 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.
It is a known fact that in the age of cloud computing, data protection is key.
As a EU member, Poland meets the strict EU data-protection standards, unlike even the United States, and IP protection standards (unlike many Asian countries).
In fact, these laws, already very strong, are going to be tightened even more, as 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. 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.
The numbers and actual policies are proof that Poland is on the fast lane to sustainable development.
As far as innovation goes– and Poland does have to compete with India and China in that matter– the good reputation of Polish IT engineers comes in handy.
Poland is also creative in other innovation aspects. 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 is presently already home to IBM, and its technologically skilled workforce is expected to attract even more tech 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’s 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 which is quickly climbing the ranking of Polish cities with the best quality of living standards, has been baffling experts for the past several years.
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. Newsweek magazine ranked it as the best city to live in in Poland, and a PricewaterhouseCoopers Report on major Polish cities ranked Katowice as having the highest value of culture, according to the city data.
The key might sit in the innovative (and government-backed) strategical plan for restructuring the city’s infrastructure as well as business model, in a way.
Another aspect of Silesia’s sustainability, according to the regional government, is its 200 thousand students, who account for about 10 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. The Silesia region is known as one of Poland’s largest academic and scientific clusters, with academia profiles being predominantly economic and technical studies.