The central Polish city of Lodz was once the textile hub of the Russian Empire, but now, with most mills long shuttered, it is making a push to attract the back office business centres that have become one of Poland’s biggest foreign investment successes.
The largest back office processes investor in the city is Infosys, an IT outsourcing company from India – the country that was in at the start of the shift to back office and call-centre outsourcing.
As the services offered by such centres have become more complex, countries with higher costs, such as Poland, have become attractive locations for investments in “business process outsourcing” – services for outside companies and shared service centres that are in-house operations for multinationals.
“We are essentially India’s back office,” says Michal Bielawski, financial controller for Infosys in Lodz.
Infosys’ Polish operations were acquired in 2007 from Philips, the Dutch conglomerate. Since then, it has branched out to attract other clients, specialising in accounting, finance and purchasing. Between them, the staff speak more than 20 languages.
The type of investment Infosys has made is increasingly common in Poland, which has 282 active service centres, according to a report prepared by the Association of Business Service Leaders (ABSL) in Poland, an industry organisation.
The government investment agency is working on attracting an additional 40 BPO investments.
In all, about 70,000 people work in the sector, and the industry expects 75,000 to be working in centres similar to the one run by Infosys by the end of this year.
Poland accounts for more than half of the business process centres in central Europe, a region that is increasingly attractive to investors because it has a lot of well-qualified university students who speak a range of European languages, are in the same timezone as western Europe, are still cheaper than their counterparts in the richer EU economies and share a common culture with west European clients.
The average monthly salary for a Polish BPO worker is 4,025 zlotys ($1,280), higher than the national average, but much lower than a German or British multilingual graduate with a master’s degree would accept.
Polish labour costs are significantly higher than in India, but the country’s other advantages make it attractive.
“The value proposition of Poland will never be that we are the cheapest,” says Jacek Levernes, vice-president of global business services for HP in Europe the Middle East and Africa and head of the ABSL. “Our strong point is the impact for your clients compared with the cost.”
The first BPO investments in Poland, made about a decade ago, were simple call-centres, but since then the lowest cost operations have migrated to cheaper countries such as Romania or the Philippines, while Poland has moved up the “value chain”.
It has the second-highest percentage of young people in post-secondary education in the EU, providing a large pool of potential employees. Youth unemployment of about 20 per cent makes new hires loyal to the companies that gave them a job.
Poland also has more than six large secondary cities – with universities and airports – that can attract such investment. The most successful are Kraków, Lodz and Wroclaw.
Hungary and the Czech Republic have only one or two cities large enough to be BPO hubs.
The secondary cities often have cheaper rents and lower wages than Warsaw, the capital, and competition for labour is less intense.
“We are the largest company in Lodz, so we don’t face a lot of competition from other employers,” says Mr Bielawski.
The cities tend to specialise. Warsaw, Lodz and Poznan are big on finance and accounting, while Kraków, Gdansk and Katowice focus on IT, and Wroclaw leads in research and development.
The sector’s impact is increasingly significant, from the jobs it offers to the buildings it uses, which account for more than 11 per cent of the occupancy of Poland’s 5.7m sq meters of office space.
However, there are still problems, particularly with bad transport infrastructure. Some of the less wealthy cities in the east have difficulty attracting investors because they lack airports.
Other cities are hurt by poor roads; there is still no highway between Lodz and Warsaw, just over 100km apart.
Despite the economic crisis, BPO investments remain popular – especially because companies are being pressed to cut spending as much as possible as fears of a double dip recession rise. Interest in Poland is still high. Jerzy Kalinowski, of KPMG, the consultancy, says he sees several potential sectoral investors a month.
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By: Jan Cienski
Source: Financial Times, Nov. 1, 2011
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