By Sean Goforth, Director of Syndicated Research at Ryan Strategic Advisory

Military tension between Kosovo and its larger neighbor Serbia flared up again recently, the latest sign of instability in the Western Balkans. In late September, police in a town in northern Kosovo engaged in a shootout with dozens of armed Serbs, killing three and arresting one.

What makes the situation all the more tragic is that the two countries have grown into promising BPO destinations over the past decade. At its core, Serbia’s robust talent pool offers outsourcers the chance to enjoy scalable volumes of multilingual services. Young Serbs also boast an array of in-demand tech skills. As a result, a slew of homegrown outsourcers has emerged in the capital of Belgrade, as well as Novi Sad, many specializing in customer service, technical support, and back-office functions ranging from accounting and finance to human resources.

Other Central European players have also taken note. Romania’s Valoris opened a new center in Belgrade a few years ago. M+ Grupa acquired Serb-grown Trizma.  And last year, UK-based DDC Group launched a multilingual hub in Serbia.

While smaller, Kosovo’s BPO sector has also emerged as a cost-effective, high-quality destination for a range of services for English-speaking consumers worldwide, as well as those in Germany and the lucrative Swiss market. Webhelp’s Kosovo center helped anchor the market, and in the past year Fusion BPO opened a center in the capital of Pristina.

Serbia’s clashes with Kosovo undermine the global BPO positioning of both countries. Anecdotally, while global BPO investors want to expand the set of locations for services delivery, they also shun countries where instabilities linger. This sentiment is backed up hard data. According to the Ryan Strategic Advisory 2023 Front Office CX Omnibus Survey, which polled over 700 enterprise contact center decision-makers, stability-related factors are among the most important considerations when choosing an offshore location to support end users.

Moreover, some of the demand markets on which Serbia and Kosovo depend are those that are the most risk averse. Consider Germany, Europe’s largest economy. When asked of the 50 destinations where they would most like to outsource business services, CX decision-makers in Germany chose 46 of them over Serbia and Kosovo. That’s an especially bad sign for the BPO industries in these two countries, as each counts German-language delivery as a pillar of its value proposition.

The latest skirmish will come as little surprise to anyone familiar Balkans, much less the seasoned BPO hands operating in the region. But it bears mention that international context could easily change, and do so in a way that would vest both Serbia and Kosovo with tremendous commercial benefit.

On October 6, EU leaders will meet in Spain to lay out plans for expansion of the 27-nation bloc to add up to nine new members—including Serbia and Kosovo.

Certainly the carrot of EU membership has been dangled to countries before, only to rot on the vine amid “enlargement fatigue” in Brussels. This time may be different, as top officials now view the offer of expansion as one that extends EU-style benefits to candidate nations even before full they realize full membership.

The latest news indicates that the number of Serb troops massed along the Kosovan border has shrunk, down by nearly half from the buildup seen in the days after the September shootout. That’s a welcome sign.

Although it would be naive to expect deep-seated resentments to quickly disappear, now is an especially bad time for hostilities. Both Serb and Kosovan societies, and the BPO industry in the Western Balkans, need de-escalation. If the two sides could allow for cooler heads to prevail, they each stand poised to welcome a rising tide of foreign investment (including that of BPO) as EU enlargement gains steam.