Special commentary by Sean Goforth, Director of Syndicated Research at Ryan Strategic Advisory
About a month ago, a leading business service advisory hosted a webinar where analysts cautioned that BPO investment was moving westward across Europe. The conclusion they reached was that Lisbon was fast becoming a go-to locale for outsourcers looking to position for European service delivery.
Yet, despite such forecasts, what is remarkable about the business services landscape six months after Russia’s invasion of Ukraine is how delivery hubs across Central and Eastern Europe appear both robust and resilient in the face of this ongoing incursion.
Poland remains a BPO heavyweight with operators continuing to do business as usual from nearly two dozen cities across the country. Indeed, as noted in the Ryan Strategic Advisory report “Europe and the Nearshore,” the Tri-city region of Gdańsk, Gdynia and Sopot (which most recently held the highly successful BSS summit by Pro Progressio) is possibly the fastest-growing zone for BPO activity in the country, perhaps even all of Central Europe.
Just next door to Poland, Prague continues to be a veritable hive for high-quality CX functions, especially multilingual services that include hard-to-find languages due to its vibrant ex-pat community. Investor sentiment is holding up well when it comes to Georgia, a country that suffered its own invasion from Russia in 2008 and which — unlike Poland or the Czech Republic — does not enjoy NATO membership.
CX decision-makers remain confident that the impact of the war in Ukraine is contained and that immense value exists by operating out of Central and Eastern Europe. Yet, when the 2022 Ryan Strategic Advisory Front Office CX Omnibus Survey, which ranks Poland in a tie for second place among 50+ offshore countries where offshoring CX BPO delivery is viable, was first published some readers were skeptical.
Since then, the overall thrust of the news supports this positive, optimistic view of Central and Eastern Europe’s business services environment. In July, The New York Times published an exposé detailing how companies that do business with Ukrainian partners, particularly IT outsourcers, were maintaining their ties.
And, most recently, Emerging Europe, a growth hub focused on the Central and Eastern Europe region, published a report canvassing the region’s most business-friendly cities. The list features a wide selection of Polish and Romanian urban centers, as well as more than a few communities in Ukraine. Kyiv ranks seventh on Emerging Europe’s business-friendly perception index, which pools business climate with other indicators such as infrastructure, talent pool, and connectivity. While a slight drop (from 5th place) over the past year, Kyiv’s ranking is still significantly higher than it was two years ago and is far from the erosion in business confidence that many predicted shortly after the invasion.
None of this is to say that an investor does not need to be cautious when considering setting up a BPO in the region. For example, Belgrade is clearly a great location for service delivery to Western Europe (and to other parts of the globe), but it depends on what type and scale of the functions are envisioned. The same logic could apply to other communities within the region. And while much of Central and Eastern Europe is proving resilient to a loss in investor confidence due to the war in Ukraine, sentiment could change, especially if the reality on the ground changes. Monitoring the region closely is why the latest report from Emerging Europe is so valuable.
But, it is clear that Central and Eastern Europe remains open for business and many places offers a compelling value proposition to BPO investors and their clients.