For two weeks now, the world has witnessed the horrors of the Russian invasion of Ukraine unfold on their screens. No matter how long it lasts, the human tragedy of this invasion must remain the first thing that comes to mind.
A second-order concern is the impact that this will have on the outsourcing industry. Sadly, the repercussions may be extensive. Outsourcers and their clients that count on Central & Eastern Europe as a destination for supporting end-users could face disruption.
Enterprise executives will likely become wary of BPO destinations that border Ukraine, Belarus or Russia. The last Ryan Strategic Advisory Front Office Omnibus Survey shows that political stability and public security are key factors for decision-makers when choosing an offshore location. Even the most established of CEE nearshore destinations such as Poland, Romania or Hungary, will face more scrutiny as this crisis continues to play out.
Increasingly, investors will prioritize locations that are more fully integrated into Western blocs, notably NATO and the EU. While Ukraine suffers, NATO members in central Europe benefit from the status that goes with the emphatic US, British and French commitment that an attack on one is an attack against all.
EU status matters, too. Hence, at the outset of the invasion, President Volodymyr Zelensky quickly signed a petition for Ukraine to be admitted to the EU. Normally such a move would be greeted with a years’ long bureaucratic smile. But Ukraine’s duress has jarred Brussels into action. On Monday, the EU agreed to assess the candidacy of Ukraine, Moldova and Georgia as EU members, marking symbolic progress for these countries.
Unfortunately, Central European nations that do not enjoy full membership in these institutions face a potential stall in foreign investment. Over the past year Georgia, for example, has emerged as one of the most talked-about destinations for multilingual contact centers. But, given Russia’s 2008 invasion it may appear too risky for Western outsourcing clients. Serbia could also lose favor given the country’s lack of membership in NATO and long-stalled EU application.
Going forward, investment promotion authorities in the region will have to redouble efforts to gain the attention of BPO investors. Outreach must highlight market stability. Doing so may require a degree of business continuity planning/execution for those enterprises that want their third-party partners to shift at least some workstations to other delivery points. BPOs that have other geographic capacity options should be well served in this regard; those that do not will be pressured to find CX delivery alternatives. Absent strong business continuity plans, outsourcing in the region may shift from upstart locations in favor of Albania, Bulgaria, Romania or Turkey, all of which are NATO members.
More generally, the jolt of geopolitical volatility spells increasing prices for oil, nickel, sunflower oil and a host of other goods, emptying the consumer purse. Already the initial analyses are negative. Both the IMF and World Bank forecast that Russia’s actions will result in higher commodity prices and greater economic uncertainty, sapping discretionary spending.
This will reduce the need for end-user support services. Such a phenomenon occurred during the global financial crisis of 2008 / 2009, and led to a fall in CX BPO activity. While it is too soon to say if current global instability will cause similar drops in consumer buying, it is not too early for outsourcers to anticipate at least some disruption in what was supposed to be a post-COVID economic bull market.
Finally, Russian meddling in the region of former Soviet states that Moscow regards as its “near abroad” will likely continue in the form of cyberattacks. A looming threat since Russia’s 2007 cyberwar against Estonia, the threat to contact centers in the region may only grow. In mid-2021, Microsoft warned that contact centers were being used as part of a ploy to trick individuals into downloading malware. Outsourcers across Europe must counter this vulnerability with robust security systems and safeguards that are continually updated.
The bottom line is Ukraine needs help. Its military, civilians and government have surprised the world with their defiant resistance so far. As the incursion drags on, the toll is sure to mount. Human suffering is the paramount concern. But in numerous ways BPO operations in Central Europe could also be snared by the reckless Russian invasion. Business contingency planning cannot wait, it must be underway.
Ryan Strategic Advisory encourages all readers to donate to the following worthy causes designed to assist those working in the BPO / CX / IT community in Ukraine, who’s lives have been adversely impacted by the current crisis. Links can be found here and here.
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